Two years after Hurricane Sandy, billions of dollars in federal aid remains unpaid as thousands of households in New York and New Jersey struggle to repair the homes, businesses and lives the storm destroyed.

Some homeowners are still juggling both rents and mortgages while they wait for the wheels of the federal bureaucracy to gather momentum and start doling out property rehabilitation and rebuilding assistance. Many complain of excessive bureaucratic procedures, lost aid applications and government-hired contractors that never show up. The slow pace of emergency recovery funding has many wondering what's taking so long.

“Things are picking up now, but given that we’re two years out, it’s been awful. I was just on the phone this morning with a woman who’s squatting in her own home,” Margaret Becker, director of disaster recovery and community development for Legal Services NYC, says. 

Since the federal government began disbursing taxpayer money from a $48 billion storm recovery fund in March 2013, just 23 percent, or $11.09 billion, had been paid out as of September 2014, according to the latest data from the U.S. Recovery Accountability and Transparency Office.

More than half of the distributed funds -- about $6.5 billion -- has passed through the Department of Homeland Security’s Federal Emergency Management Administration to cover immediate expenses, such as reimbursing local government for the cost of cleanup crew overtime and housing assistance to those washed out of their homes with nowhere to stay.

But the aid for rebuilding these homes has largely remained untapped. Local nonprofits and state officials blame Washington for creating a complicated process of authorizing and approving disbursements, despite the “no bureaucracy, no red tape” promise from President Barack Obama.

$14 BILLION IN UNTAPPED HUD MONEY

The Department of Housing And Urban Development, which received a $15.2 billion budget -- the largest share of the recovery fund -- has paid out only $1.75 billion, leaving nearly $14 billion untapped as the region heads into the third year of recovery.

The process of applying for and receiving HUD assistance, which is distributed to the states and New York City in the form of so-called Community Development Block Grants, has been so frustrating to homeowners that some have given up completely.

New York City’s Department of Investigation, which examined the city’s HUD-funded Build It Back program, found that a staggering 90 percent of 14,000 approved rebuilding assistance applicants have yet to see a single dollar of aid. An additional 6,000 applications have fallen silent as homeowners give up on government help. In a report published earlier this month, the investigation's department said “a confusing, multi-layered application process, among other issues, have caused bottlenecks that delayed the application process and critical assistance from reaching homeowners.”

While these block grants are beneficial -- because they allow local flexibility in the way funds are allocated -- the process can take a long time, says Susannah Dyen, coordinator for Alliance for a Just Rebuilding, a New York City-based organization that advocates for more equitable distribution of Hurricane Sandy recovery funds.

“The municipality or state has to write an action plan, which has a three to six month timeline with a lot of back and forth,” Dyen says. “This shapes the speed at which the money can get to the community.”

KATRINA’S LESSON: LESSEN FEMA’S ROLE

The current system of flood relief was set up in the wake Hurricane Katrina, which decimated the Gulf Coast in and around New Orleans in 2005.  That storm is the nation’s costliest on record, and in its aftermath FEMA was by far the main administrator of aid disbursement. The agency received $50.55 billion but was wracked with egregious examples of corruption and waste, including hotels that fraudulently charged the government for flood victims they didn’t house and the renovation of an Army base that ended up costing $416,000 for each evacuee it sheltered.

Since then, disaster relief funds have been doled out in more equal chunks to the four major recipients: FEMA, for immediate aid assistance; HUD, for property repair and resilience projects (to protect from future floods); the Department of Transportation, to fix roads and public transport systems; and the U.S. Army Corps of Engineers, to bolster flood protection infrastructure. The restructuring aims to increase the participation of states through block grants rather than force a top-down federal approach.

“These grants give states and cities flexibility in how they spend their money, but the grants also introduce delays and can make it difficult to understand exactly how relief money is being spent,” Kate Donahue said in a Harvard Political Review article published in September. “Understanding the strengths and weaknesses of our current relief system is all the more important because, with climate change, large-scale disasters are likely to happen more frequently -- and we’re still learning how to pick up the pieces afterwards.”

THE AID SPIGOT FLOWS, BUT SLOWLY

During the first anniversary of Hurricane Sandy’s U.S. landfall, lawmakers seemed contrite, acknowledging the slow pace of relief funds. After all, it took Congress and the White House nearly three months to hammer out the Disaster Relief Appropriations Act and the first allotment to disaster relief began three months after that.

“In year one, we all agree the aid flowed too slowly. There was red tape,” Sen. Chuck Schumer said during an Oct. 28, 2013 event announcing New York City would receive additional community development block grant funds. “The second year will be a whole lot better … The aid spigot is now open.”

Schumer was referring to $5 billion in HUD housing recovery money allocated to five Sandy-afflicted states. It took months after Schumer’s statement for local government to cope with their own bureaucracies and red tape to distribute assistance to the homeowners.

For example, according to data from New Jersey’s Department of Community Affairs, the state’s homeowner reconstruction fund, only $8.4 million was distributed to the state’s flood victims for housing reconstruction by September 2013. Money began flowing more freely to New Jersey homeowners after HUD’s $5 billion disbursement in the fourth quarter of 2013, but it was a slow process, especially for people who had been coping with damaged properties for more than a year.

Today, the flow of HUD recovery funds is picking up pace. New Jersey’s federally funded homeowner reconstruction program, known as RREM, disbursed nearly $104 million in the three months ended Sept. 30, up from the $8.4 billion disbursed in the same period last year. From the third quarter of 2013 to the three months ending September, the New Jersey housing reconstruction program distributed $285 million of its $1.1 billion in available funds.

Lisa Ryan, a spokeswoman for New Jersey’s consumer affairs department, says the waiting list for homeowners who’ve applied and were authorized for housing reconstruction assistance has dropped to 2,100, down from about 8,500 this time last year.

“We understand the frustration of New Jersey homeowners that were affected by the storm have. There are still some people who are still not back in their homes,” Ryan says. “But what we’re trying to express to people is the program has been launched and it’s running its course, and every week we’re getting better at disbursing funds.”

One solution that might help speed up aid distribution -- implement a system in which block grants to local communities are set up as contingencies before a natural disaster hits, says Becker, the lawyer who’s helping New York City residents get flood assistance.



“The problem is there isn’t something off-the-shelf for communities to start implementing more quickly,” she says. “The idea that FEMA comes in to meet immediate short-term needs and then HUD comes in later, that’s been problematic.”