Despite opposition, the courts are on the side of the developers. In her August ruling, U.S. District Judge Helen Berrigan said that the parish had used “stall and delay tactics” to prevent Dallas-based Provident Realty Advisors from building 288 mixed-income units in the parish.

HUD's deep pockets

While lower price points are prevalent, not all multifamily developers are building mixed-income and affordable housing. Iarocci, for instance, is taking on one of the few market-rate projects in the city — the National Rice Mill Lofts, a 69-unit rehab slated to open in December 2010. Rents for the project will be $1.35 per sq. ft. compared with $1 per sq. ft. for tax-credit funded housing.

The Rice Mill Lofts are being funded with one of the U.S. Department of Housing and Urban Development's (HUD) 221(d)(4) loans, a funding source that is drying up due in large part to waning demand for apartments. There are currently about 42,000 apartment units in New Orleans, according to Schedler.

“Right now we have roughly 2,556 units coming on line, and that doesn't count the product that was under way,” he says. “Each year since Katrina we probably added to our inventory almost 20%.”

The HUD loans have been appealing to market-rate multifamily developers because they offer a 40-year term and amortization, a locked-in interest rate, and up to 90% of the loan is non-recourse, meaning there is no personal liability on the part of the borrower.

To qualify, developers must show economic feasibility — largely ascertained through a market study and a limited appraisal by a licensed appraiser — and secure site approval from the city. The developer must also present a layout of unit mix, rents and expenses, and architectural plans to receive an application invitation from HUD. The process takes about six months, according to Iarocci.

“Once you get the invitation, you can proceed to your loan closing, which is another six months because you've got to pull all of our documents, partnership agreements, construction documents and be fully inspected by HUD and its third-party appraisers,” he says.

Another rare market-rate project that has utilized HUD funding is the 21-story high-rise 930 Poydras, located in the city's central business district. The $65 million project, currently under development by Brian Gibbs Development, is slated for completion at the end of this year and will feature 250 market-rate apartment units, 8,700 sq. ft. of retail space and a 500-space parking garage.

Like the Rice Mill Lofts, the apartment portion of 930 Poydras is being funded with a HUD 221(d)(4) loan. Federal and state new-market tax credits have been tapped to finance the garage.

Affordability factor

In this past year, population growth in New Orleans has gathered steam, with 76.4% of the pre-Katrina residences actively receiving mail, a 4.3% increase from August 2008. In addition to locals, still returning four years after the storm, there has been an influx of newcomers, including Latinos, young professionals and entrepreneurs.

“Folks are coming here because it's so much worse everywhere else,” says Plyer. Anecdotally, she says, 25% of the people at the community meetings that she attends are from other areas of the country. “They have a relative in New Orleans, some friends and they're looking for work because they know they're not going to find it in Cleveland.”

Companies like HRI Properties have been focused on housing the growing population. Josh Collens, vice president of development for HRI Properties, describes his company as a “for-profit developer with a non-profit mission.”

One exception to HRI's mission was the redevelopment of the Rex Garment Factory, which opened in the 1930s and sat vacant for decades after the factory closed.

The building is located two neighborhoods downstream from the French Quarter in a community called Bywater. “It's an area where a lot of artists live but rental housing is not affordable,” Collens explains. “Market-rate rents went up quite a bit after the storm.”

The renovation of the old garment factory began in December 2007 and the project opened as Bywater Art Lofts a year later. By March 2009, all 37 apartments were occupied and the once-derelict building is now a thriving artist community. HRI Properties funded the $10 million Bywater Art Lofts using a $2.4 million historic tax credit and an $8 million low-income tax credit.

Because the project focused on affordable housing for artists only, it is being used as a neighborhood revitalization tool. Residents display their art in a public exhibition space in the building.

Shifting the economy

The New Orleans unemployment rate of 7.4% in July was dwarfed by the national average of 9.4% for the same month, according to the U.S. Bureau of Labor Statistics. New Orleans ranked as the 15th strongest of the 100 largest metros because of its low unemployment rate.

The million-dollar question remains: Will the city be able to use its respite from recession to diversify its economy? There are opportunities to move away from low-wage tourism jobs and take advantage of New Orleans' status as a port city, perhaps with a medical corridor that could create as many as 20,000 high-paying jobs.

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