U.S. to Spend Up to $50 Million to Rebuild Low-Cost Bay Area Housing : Quake relief: A Federal Emergency Management Agency settlement will help replace rental units lost in October’s temblor.

Federal Emergency Management Agency officials agreed Friday to spend as much as $50 million to rebuild low-cost housing destroyed by the earthquake last October and to assist people who were displaced.

The agreement stemmed from a class-action lawsuit filed against FEMA last month by legal aid groups representing some of the poorest victims of the earthquake in Alameda, San Francisco and Santa Cruz counties. U.S. District Judge Eugene Lynch tentatively approved the settlement Friday.

In settling the suit, FEMA committed itself to spending between $10 million and $50 million more on housing and other benefits, said Lori Jean, deputy director for FEMA in the Western region. The agency already has spent $20 million on temporary housing since the Oct. 17 quake, but it has denied about 60% of the requests made for housing assistance.

Stephen E. Ronfeldt of the Legal Aid Society of Alameda County, one of the groups that brought the suit, called the settlement “tremendous” and said it represents the first time FEMA has agreed to replace rental housing.

“To its great credit, FEMA is committing to make unlimited funds available for housing,” Ronfeldt said.

With the settlement, FEMA agreed to let as many as 10,000 people who were denied benefits appeal for reconsideration. Many of those who were denied could not meet the FEMA requirement of proving they had lived in the same place for at least 30 days.

In addition to reconsidering assistance, the agency also agreed to allocate money to help repair or rebuild as many as 1,800 units of low-cost housing damaged in the quake.

The settlement comes three days after the Red Cross agreed to spend all $52 million it raised for earthquake relief in the quake-damaged area. San Francisco Mayor Art Agnos had criticized the group over its initial plan to spend only $22 million on quake-related problems and withhold the remainder for future disasters.

FEMA authorities said the controversy over the way in which FEMA and the Red Cross operated after the earthquake stemmed from their lack of experience in confronting major disasters in large urban areas. In the Bay Area, pensioners and transients who are well below the poverty line were particularly hard hit.

“We’ve never dealt with a major disaster in a major metropolitan area before. We learned a lot,” said Jean, the FEMA official.

As a result of problems, she added, she is considering recommending changes in the way FEMA distributes its money.

“I’ll be recommending a lot of rule changes and will be asking for a concrete policy for dealing with transient populations,” she said.

Ronfeldt estimated that the FEMA settlement, coupled with the Red Cross decision, means that up to $100 million could become available to rebuild low-cost housing.

“There is no excuse not to get the job done,” Ronfeldt added.

The settlement calls on local governments and nonprofit agencies to come up with proposals for providing housing by April 1. Building could begin as early as July 15.

In Alameda County and San Francisco, the quake damaged several residential hotels built of unreinforced masonry, and building officials have required that they be demolished. In Santa Cruz County, the quake struck especially hard at older homes, many of which housed more than one family.

FEMA’s rule that residents prove they had lived in the same place for 30 days worked against poor people because they often run out of funds and cannot remain in residential hotels for an entire month. The regulation also worked against tenants who shared housing but whose names were not on rental agreements.

Pressing the suit along with the Legal Aid Society of Alameda County were the Legal Aid Society of Santa Cruz County, the Homeless Advocacy Project of the San Francisco Bar Assn. and McCutchen, Doyle, Brown & Enersen, a San Francisco law firm.