High cost of rent coming down because of MDA program

Published 2:13 am Sunday, September 27, 2009

Anyone who tried to rent a home in Pearl River County after Hurricane Katrina was probably met with the soaring cost of rent, but recent efforts by the Mississippi Development Authority are starting to reverse that trend.

Rental prices are still not back to the level they were before Katrina, but it appears that the introduction of recently constructed duplexes and renovated homes under the MDA’s Small Rental Assistance Program have caused some landowners to lower their rent.

Local investor Wayne Gouguet agrees that the increase in rental homes created as part of the program are driving down the cost of rent.

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Gouguet is on one on a long list of investors who have taken advantage of the program and have built some multi-family homes in the city limits of Picayune. Those homes offer potential renters affordable housing based on their income.

Local Realtor and investor Corey Smith said he has constructed seven duplexes through the program, two off of Read Road and four off of Daniels Road. Gouguet said he built two duplexes, one triplex and has made renovations to two single family homes under the program. Gouguet’s rental properties were built on Bay Street, South Haugh Avenue and Carter Street.

“Basically they… subsidized us and allowed us to reduce our rent,” Gouguet said.

Under the program, the investor can apply to receive up to $40,000. Smith said he received about $73,000 per duplex, and estimates it cost him about twice that to build them.

Lee Youngblood, MDA communication director for the Disaster Recovery Division said that between the two rounds of funding that were available for Pearl River County he expects between 200 and 250 homes, or units, to be built after all the applications are approved. One duplex would equal two units.

Even though the application process has closed, there still are applications awaiting a decision from the MDA, Youngblood said. So far in this county there have been about 66 units built as a result of the first round of funding, and 131 units built as a result of the second round, he said.

The program is part of a state-wide effort to rebuild after the storm. About $5.4 billion was set aside for the effort, which actually focuses on not only housing but also infrastructure improvement and economic development. Youngblood said that about 60 percent of the $5.4 billion will be used for housing state-wide.

Smith said the introduction of the additional homes for rent has forced down rental prices. Just before Katrina, a three bedroom home in Picayune would have cost an average of $675 a month in rent. Right after Katrina, that same home costs between $900 and $1,000 to rent. Now, with the additional places to rent, the cost of rent has come down to about $750 a month, Smith said.

Among the requirements to build the homes financed by MDA involves making them energy efficient and abiding by environmental concerns during construction, Smith said.

Initially, surrounding residents expressed concern about the multifamily homes coming into the area, but now that they are there, Smith said he has received nothing but compliments from those same people.

Filling those units with occupants was not hard to do. Both Smith and Gouguet said all of the rentals they have built under the program are full. Smith added that he has a waiting list. Gouguet said when one of his tenants moved out recently, he had another moving in two days later.

Before any of the prospective renters can move in, they must apply with the Mississippi Development Authority to certify their income is within the specified amount. Smith said all of the tenants in the units were approved by the MDA.

For five years the investors must abide by the regulations set forth by the MDA. Those requirements state that the units can be rented only to people of low to middle income and must be kept in a state of good repair, said Youngblood.

“We have to verify the people are needy of the unit,” Youngblood said.

After that five year period is up, the money that was loaned to the investor will be forgiven, effectively making it a grant. After that time, the investors will have full ownership of the homes and will be able to charge their own rates for rent.

Not only does the new property help reduce rental costs, the units also generate tax money for the city, county and school district. Gouguet estimates he pays about $2,500 per year in ad valorem taxes on each of his new properties. Also, construction of the homes kept workers in the construction business working during a hard economic time, Gouguet said.

Pearl River County Planning and Development Director Ed Pinero said the majority of the building in the county in the first three months of the year was from homes being constructed under this program.