NEW ORLEANS — The house that Kevin Hargrove built with the help of Habitat for Humanity volunteers had everything he wanted for his family: It was in the same New Orleans neighborhood where he’d grown up, with plenty of space for his daughters. A charity had donated furnishings, so as soon as the construction was finished, they stepped inside and it felt like home.
But another aspect felt even more important: The $550 he owed every month was not rent but a mortgage payment. The house would truly be his, something he could hand down to his daughters. “Building generational blessings,” as he put it.
More than a decade later, though, the pistachio-green house with the shutters and big front porch that Hargrave believed would be his legacy is now in danger of being taken away. A blizzard of letters remind him of what he already knows: He is behind enough in his payments to be eligible for foreclosure.
The cost of the property insurance that his mortgage agreement with Habitat requires has soared in the past couple of years. That, in turn, has pumped up his payments significantly — to $1,735 a month. He can’t afford that, he said, no matter how many extra shifts he picks up at the warehouse where he works.
“I shouldn’t be having to do this,” Hargrove, 55, said of the juggling act his finances have become as he asks for extensions for some bills and does not pay the full amount for others. “What more do I need to do?”
The situation has been held up as a dire warning for other homeowners across the state: Insurance premiums will most likely keep rising as a changing climate threatens more frequent and intense natural disasters in Louisiana, which is particularly vulnerable, and many other states.
Of all the anxieties stirred by hurricane season — particularly this year’s, which forecasters say could break records — the possibility of higher insurance costs has become one of the most pervasive. Beyond the premiums, homeowners have been daunted by the high deductibles they have to pay for repairs before their coverage kicks in.
More than 120 owners of homes built by Habitat for Humanity in New Orleans are in the same bind as Hargrove, behind on payments and facing an imminent threat of foreclosure, officials with the nonprofit said.
On Thursday, the New Orleans City Council provided a temporary fix, routing $2 million in federal pandemic funds to Habitat for Humanity to help stave off foreclosures for now. But it does not solve the broader dilemma, especially as more and more families fall behind.
The promise of Habitat for Humanity has long been its ability to offer homeownership to low-income families who almost certainly could not attain it otherwise. The application process can be lengthy. The financial review is thorough, and instead of a down payment, a home requires 250 hours of “sweat equity,” or volunteering for the organization.
Yet as Habitat saw it, families who met such standards showed that they were ready to take on the responsibility. At one point, Habitat’s leaders said it was one of the busiest homebuilders in the city, having constructed hundreds of homes in the New Orleans area since Hurricane Katrina ravaged much of the affordable housing stock in 2005.
Now, what seemed a dream outcome for many of the homeowners has been upended, becoming yet another casualty of Louisiana’s property insurance crisis. Habitat has already started foreclosure proceedings against 15 homeowners over the past year.
The turbulence started after a series of natural disasters, including destructive hurricanes in 2020 and 2021. Facing a sea of costly claims, many property insurance providers either went bankrupt or fled the state. The companies that remained started charging much more.
Some lower-income homeowners have abandoned coverage entirely. But for those who are required to have property insurance as a condition of their mortgage, it has turned homes that inspired pride and relief into sources of frustration and terrifying uncertainty.
“They’re making very difficult choices and hoping against hope that insurance rates will go down,” said Marguerite Oestreicher, the executive director of Habitat for Humanity in New Orleans, an affiliate of the global organization. “If we get a big hurricane this year, all bets are off.”
In New Orleans, rising insurance prices have been only one piece of a patchwork of troubles related to housing in the city, residents said. Rents have been skyrocketing, too, and affordable housing has been scarce.
Skeptics had expressed reservations about the city providing emergency financial support to Habitat for Humanity, singling out one group to help when so many residents are facing some version of the same predicament. Even supporters of the plan acknowledged that it is a stopgap measure, and that far more needs to be done to find a lasting solution.
Some believe that one answer could be a housing trust fund. A ballot initiative to create one will go before New Orleans voters this fall. If passed, at least 2% of the city’s yearly general operations budget would be diverted to the fund, which could help struggling homeowners and affordable housing development. The proposal could provide up to $20 million a year without adding new taxes, supporters said. (In 2024, the city’s operating budget was more than $1.5 billion.)
“I think it’s one of the best things we can do for right now,” said Lesli Harris, a City Council member and leading proponent of the trust fund. “I don’t think this is the last we’re going to see of people being in crisis because of insurance costs.”
Yolanda Penny, a Habitat homeowner, fears that foreclosure would take her home and fling her into the unforgiving wildness that the New Orleans rental market can be.
Some days, Penny, a hotel housekeeping manager, and a co-worker with the same housing plight can talk only about how concerned they are, which can send Penny into a spiral. Several times recently, her blood pressure jumped so much that she became dizzy and needed to go to the hospital.
“I love my home,” she said. “I was just saying, ‘This is mine.’ I was overwhelmed.”
The concept behind Habitat for Humanity is often misconstrued as giving volunteer-built homes to needy families, Oestreicher said. In reality, she said, “It’s a hand up, not a handout.”
The houses — which now cost about $180,000 for a three-bedroom, two bath — are typically built from a standard plan (most are about 1,100 square feet), but families can make some choices, like the colors of the siding and trim, the countertops in the kitchen and bathroom, and the flooring.
The homeowners make a monthly payment to Habitat that includes the principal on an interest-free loan, real estate taxes, property insurance and termite extermination, but the single biggest driver of the increased payments has been insurance, nonprofit officials said.
Penny, who moved into her home in 2011, heard about the possibility when Habitat for Humanity gave a presentation at her workplace. She was approved and was able to move into a newly built four-bedroom house with her three daughters and son. The monthly payment then was about $585. “I couldn’t beat that,” she said.
After Hurricane Ida in 2021, her insurance company left the state and she wound up with Louisiana Citizens, the so-called insurer of last resort, which is backed by the state and charges a significantly higher rate in order to encourage homeowners to use other providers if at all possible.
Her monthly payment shot up from $661 to $1,282. She said she tried to pay what she could, about $900 a month, hoping it is enough to delay foreclosure. It has not helped that her supervisor position at the hotel was cut during the pandemic, which left her in a reduced role with fewer hours.
“I’m just trying to catch up,” Penny, 59, said. “It’s going to take years and years to catch up. I don’t want to lose my house. It’s killing me.”
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