Make Disaster Recovery a Success: Local entrepreneurs are better suited to drive recovery efforts after natural disasters

By Virgil Henry Storr and Stefanie Haeffele-Balch writing for USA Today. They are both with Mercatus.

"Frontline and NPR recently aired a special on the "Business of Disaster" which investigated issues with flood insurance and aid distribution after Hurricane Sandy. In it they find disaster victims have been systematically underpaid on flood insurance claims, aid programs have been slow to distribute funds and homeowners have spent years dealing with regulatory red tape just to get back to the homes and communities they love.

The main takeaway from the special was that the public-private partnerships tasked with implementing disaster recovery programs failed to provide the resources and support communities needed to rebuild after the storm. For instance, the companies who were selected to handle flood insurance found ways to increase their profits and limit payouts. Additionally, the Federal Emergency Management Agency failed to adequately oversee the actions of their partners in the flood insurance program and to enforce best practices. Similarly, the NYC "Build It Back" program has failed to effectively distribute funds to homeowners in need and had several issues with unqualified contractors.

The entangled relationship between public and private entities results in high administrative and overhead costs with little relief to those who need it the most. As Brad Gair, a New York City disaster recovery manager, said during the special, "Did we put a bunch of money out? Yes. Is everybody mad? Yes. Did people get what they needed to get back into a home? No."

Such major issues, however, are not new. The aftermath of Hurricane Katrina, Hurricane Andrew and other disasters were equally troubled with errors, ranging from major mistakes in distributing funds to outright fraud. While FEMA, the U.S. Department of Housing and Urban Development and NYC Build It Back have all implemented reforms and promised improvements, these issues will most likely persist. Gair concluded, "You can't expect any government large or small to create a $2 billion corporation and expect them to roll that out in any short period of time and not have a chaotic mess. You can't build this thing on the fly and expect it to work."

While top-down efforts often fail to distribute funds quickly and effectively, local efforts driven by entrepreneurs and community leaders can initiate disaster recovery faster.

After Hurricanes Katrina and Sandy, we interviewed hundreds of residents working to rebuild their homes, reopen their businesses and revive their communities. For instance, in the Orthodox Jewish community in Rockaway, New York, a group of rabbis and residents were able to provide disaster relief and recovery in the weeks following Hurricane Sandy. Under the direction of Rabbi Bender (founder of Achiezer, a community resource center in Rockaway) and the Davis Memorial Fund, these religious and community leaders initiated the Community Assistance Fund as a way to collect donations and distribute resources to residents in need.

The Community Assistance Fund was essentially a bank account that was overseen by volunteer lawyers and accountants. Residents applied for funds through their local rabbi, and decisions were made quickly about what level of assistance was needed. Residents could receive funds through three avenues: (1) $2,000-3,000 to purchase immediate needs, such as generators; (2) around $10,000 for quick repairs, such as pumping water out of their basement and replacing drywall and appliances; and (3) major financial assistance to rebuild their homes.

Through the Community Assistance Fund, the community raised over $11 million and helped over 1,000 families – all within months of the storm. In the summer after Sandy, Rabbi Bender noted, "The staggering fact from this, which I am extremely proud of, and I want you to watch the media and the Attorney General speaking about the fact that a lot of places who raised money for Sandy, but it still didn't [get] out. We raised it, $11 million, and we gave out $11 million and there was no overhead cost."

The community in Rockaway did not wait for FEMA, HUD or another agency to come to them but instead forged ahead and found ways to obtain resources on their own. Their success was tied to their knowledge of each other's needs and finding creative ways to overcome adversity.

While they acted quickly, finding unique ways to circumvent the red tape typically associated with disaster relief efforts, other communities have not been so fortunate. In the lessons of recent disasters, both the failure of major government programs and the success of small, community-driven initiatives, policymakers should seek to give local residents and entrepreneurs the space to drive recovery rather than throwing more funding at failing programs. The more barriers we eliminate to disaster victims the faster they can get the resources they need, the faster disaster victims will return and rebuild, and the community becomes more resilient.

Top-down bureaucratic benevolence usually leads to stifling red tape and delayed recovery, just as the Frontline and NPR special showed us. We should recognize the inherent limitations of top-down recovery programs and should encourage the people who know the affected area the best, the local entrepreneurs and community leaders, to lead change from the bottom up."