RENEE MONTAGNE, host:

This is Morning Edition from NPR News. I'm Renee Montagne.

Since Hurricane Katrina two and a half years ago, more than ten billion dollars has been allocated to help homeowners rebuild in New Orleans and elsewhere along the Gulf Coast. Before the storm in New Orleans, most of the residents weren't homeowners, but renters. Since Katrina, there's been an affordable housing crisis in the city and it's pushed rents beyond the means of many people who used to live there. In our series, People Who Are Making a Difference, NPR's Greg Allen reports on a group that's developed a plan for turning many of New Orleans' renters into homeowners.

GREG ALLEN: Sherman Shelton drives his black Cadillac Escalade through Gentilly, one of the New Orleans neighborhoods hard hit by the flooding that inundated the city after Hurricane Katrina. As he drives down Gentilly Boulevard, he points out the many vacant houses where there's no sign that anyone plans to rebuild.

Pastor SHERMAN SHELTON (Pastor, Firehouse Family Ministries in New Orleans): Some of these areas people took the buyout really, really early. Some of these people sold their property. If you look down here, very few houses left. Over here this - even no activity. They're just still boarded up.

ALLEN: On nearly every block nestled among the freshly planted gardens and newly painted rehabbed homes, there are two or three derelict houses. In recent months it's become clear that at least 7500 homeowners in Gentilly, Lake View, the Lower Ninth Ward, and other neighborhoods don't plan to ever return. Instead, they're taking a buyout from the Louisiana Recovery Authority's Road Home program and turning their houses over to the state. Shelton, who's pastor of Firehouse Family Ministries turns his Escalade onto Paris Avenue.

Pastor SHELTON: There's going to be a lot of activity in here. Right up our hill there's those trailers up there. It's one of my most prominent parochial schools that moved from the Lower Ninth Ward. They just totally relocated and they put their campus over here. And that's an indication that this area is really gonna do good.

ALLEN: A problem here and elsewhere in New Orleans is the so called jack-o-lantern effect, where new and rebuilt homes are scattered among derelicts and empty lots. But out of this problem, Shelton and others in New Orleans see a great opportunity. Shelton is one of at least three dozen religious leaders who are part of something called the Jeremiah Group. It was founded nearly 15 years ago, part of the Industrial Areas Foundation, a national group started by community organizer Saul Alinsky. Nell Bolton of the Episcopal Dioceses of Louisiana, says the group in New Orleans took its name from a passage in the book of Jeremiah.

Ms. NELL BOLTON (Episcopal Diocese of Louisiana): The prophet Jeremiah is telling the Israelites who are in exile in Babylon to see the welfare of the city for in its welfare, you will find your own. And that's the motto of the Jeremiah Group locally.

ALLEN: Long before Katrina, the Jeremiah Group was active in New Orleans on grass roots issues, fighting for better bathrooms in the schools, and advocating for safer neighborhoods. But after Katrina, Jaime Oviedo of Christ Temple Church says the Jeremiah Group found a new focus as people returned to the city and tried to pick up their lives.

Mr. JAIME OVIEDO (Christ Temple Church): We started to hear that rent was doubling and tripling in some cases and we started to hear this and there was nobody fighting against it and so we started to have public meetings and we started to hear this cry of the rent, the rent, the rent, and we said we need to get into the fight.

ALLEN: Renters in large part have been all but forgotten in the rebuilding process. The LRA does have a small program to help landlords rebuild, but after the storm, rents in New Orleans have shot up, in some cases nearly doubling. In small house meetings across the city, Jeremiah Group leaders heard from citizens who felt that the government had let them down. Member Janet Barnwell says for many it was natural that they turn to their churches and people they trusted to share their tragedies.

Ms. JANET BARNWELL (Jeremiah Group member): When Jeremiah was available to churches and to community organizations, people spoke up and perhaps people who had never spoken before, who never wanted to be political activists spoke up.

ALLEN: Out of those stories, the Jeremiah Group developed a plan. To help renters, the group drew on an idea used by its sister organizations elsewhere in the country, something called a soft second mortgage. It would help families with low incomes, under $46,000 a year, transform themselves from renters into homebuyers. As much as $50,000 would be available in the form of a second mortgage and it could be forgiven if the buyer stays in the home for ten years. Robert Steinfeld, Jeremiah Group member, says the plan creates a new market of potential homebuyers in New Orleans, renters who can now turn their monthly lease payments of $800 or $1200 into a mortgage payment.

Mr. ROBERT STEINFELD (Jeremiah Group member): And I think you could afford, with the help of the soft second, $100 to $150,000 house in that same price range. I mean I think we're supporting the market and in fact, we're probably pushing it up because there's not this jack-o-lantern effect, there's not these holes in every block.

ALLEN: And here's perhaps the most surprising part of Jeremiah Group's story. When the community group took their proposal, first to the New Orleans Redevelopment Authority and then to the Louisiana Recovery Authority, both government agencies embraced it.

Officials with the LRA have agreed to set aside $75 million of the soft second mortgages. They're now working on details of how the program will be administered.

In the meantime the Jeremiah Group has begun working to identify people who, with a little help and a soft second mortgage, may be ready to move into home ownership. People, like Jacklyn(ph) Marie Jackson. Jackson's a retired bus driver with an income of $38,000 a year. Since Katrina she says she's seen her rent climb from $550 to 895 a month.

Ms. JACKLYN MARIE JACKSON (Retired Bus Driver): If I can pay 895 in rent I can pay 895 to be a homeowner. So now, you know, I'm a proud peacock. You know, my feathers are out, you know, I'm living in a neighborhood, you know, and when a person is a part of something they have pride about themselves.

ALLEN: The LRA has agreed to set aside half of the abandoned homes it acquires in New Orleans, somewhere between three and four thousand for the soft second mortgage program. Members of the Jeremiah Group see that as a start of a movement that they hope could eventually transform New Orleans's housing market.

Nell Bolton of the Episcopal diocese says while it's ambitious it's not unprecedented.

Ms. BOLTON: This may be an unprecedented disaster but when you look at the GI bill post-World War II, that created a housing boom in the country because it created opportunity for first-time buyers wherein before there had been none. So we see this as an opportunity to look at our city and say, okay, we're facing unprecedented times, let's try something creative and large-scale.

ALLEN: While they're active in planning and promoting policies they believe are important to the city's future, the Jeremiah Group says it won't be involved directly in the selection of homebuyers or other aspects of the soft second mortgage program. Members see Jeremiah's role most of all as that of a listener, one that hears what people in the community are saying. And Katrina, they say, has been a transforming experience.

Sherman Shelton says before the hurricane, he had been focused on the needs of his congregation and immediate neighborhood.

Mr. SHELTON: After the storm all that perspective has changed. And Jeremiah has given us an opportunity to not only take care of our backyard but to assist everybody's backyard. It's not enough for us to do well and succeed. We have to get everybody to succeed, and Jeremiah gave that platform.

ALLEN: There are still lots of hurdles before the soft second mortgage program. The New Orleans Redevelopment Authority is negotiating with the state about how and when it will take possession of properties abandoned after Hurricane Katrina.

And the LRA still has to allocate funding, but all parties have signed on. And it's hoped by next year some of New Orleans's former renters may begin to move into rehabbed homes that once were abandoned.

Greg Allen, NPR News, New Orleans.

MONTAGNE: And you can find profiles of others making a difference in New Orleans and the Gulf Coast at NPR.org.

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