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Louisiana Chinese Drywall Compensation Program Approved, But Launch Delayed

Oct 22, 2009 | Parker Waichman Alonso LLP

A plan to help Chinese drywall homeowners in Louisiana is a step closer to becoming a reality, but it could be some time before funds start flowing to drywall victims.  While The Louisiana Recovery Authority (LRA)  approved a $5 million compensation program mandated by the Louisiana legislature, it will not be launched until federal officials agree to spend funds allocated for  hurricane recovery on the Chinese drywall program.

The Consumer Products Safety Commission (CPSC) has received over 1,500 complaints regarding Chinese drywall from homeowners across the country.  According to the Commission's Web site, 249 such complaints have come from homeowners in Louisiana, making it the second hardest hit state after Florida.  Gases emitted from Chinese drywall are being blamed for significant property damage, including damage to HVAC systems, smoke detectors, electrical wiring, metal plumbing components, and other household appliances. These gases also produce a sulfurous odor that permeates homes, and cause metals, including air conditioning coils and even jewelry, to corrode. People living with Chinese drywall have also suffered eye, respiratory and sinus problems that may be linked to the gases.

The LRA was established in 2005 following hurricanes Katrina and Rita, and provided funds to residents for rebuilding. Earlier this summer, the Louisiana legislature had mandated that the LRA create a $5 million initiative to help drywall victims.  In September, the LRA set aside that amount of federal Community Development Block Grant disaster recovery money to compensate hurricane victims whose homes were built with Chinese drywall.  Yesterday, the LRA approved Action Plan Amendment No. 37, which creates the initiative.

But according to the New Orleans Times-Picayune, the compensation program won't start until the LRA receives more answers from the U.S. Department of Housing and Urban Development (HUD), the CPSC and the Centers for Disease Control and Prevention.  The use of Community Development Block Grant Funds requires HUD approval, and the LRA is awaiting the completion of the CPSC's drywall investigation before formulating standards of eligibility and implementation.  No drywall compensation program will be launched in Louisiana until a "nationally recognized testing and remediation protocol is approved," the Times-Picayune said.  

The drywall compensation program approved by  the LRA yesterday limits eligibility to applicants to the Road Home program, which has provided grants to more than 125,000 households for Katrina and Hurricane Rita recovery, the Times-Picayune said.  Many hurricane-damaged homes in the state were renovated with defective Chinese drywall.

Final approval of the Chinese drywall compensation program will occur at a later meeting.  The LRA is posting the Action Plan Amendment to its Web Site, and according to the Times-Picayune, has invited public comment.