The few rebuilt homes on this Gentilly block are surrounded by debris-dotted and weed-choked empty lots, or houses abandoned after Hurricane Katrina.

WWL

Volunteers paint a jungle gym at the Mirabeau play spot in Gentilly.

In Gentilly and many neighborhoods, uncertainty hangs like a thick fog nearly 28 months after the storm flooded 80 percent of New Orleans. "It could go one way or the other," Karran Harper Royal says as she pulls up to her rebuilt home in Gentilly's Oak Park. "I try to go the optimistic way."

Mayor Ray Nagin and other city officials share her concern, and consider 2008 a make-or-break year for the recovery.

A turning point could hinge on affordable housing and homeownership. A lack of affordable housing, coupled with limited economic opportunity, could drive middle- and lower-income families closer to a decision to leave. While there has not been an influx of high-paying jobs since Katrina, rents have soared. A two-bedroom is expected to cost about $990 this year, according to the U.S. Department of Housing and Urban Development. That compares to $676 before the storm.

"Is there a fight for survival? Yeah, there sure is," said Ivan Miestchovich, a University of New Orleans economics and real estate analyst. "And it's just begun."

On Tuesday, the Louisiana Recovery Authority will consider a plan to dispose of properties homeowners elected to sell to the state rather than rebuild after Katrina. That could be the first step toward making homeowners of people who now struggle to find a place to live.

By one estimate, more than 22,000 rundown, empty or tax delinquent properties blight New Orleans, including about 7,000 the city could get from the state in 2008 through the Katrina buyouts.

Moving them back into commerce quickly is vital, said Miestchovich. It's a rare chance to rebuild neighborhoods, some of which were distressed years before Katrina, and to raise homeownership rates in a city long dominated by renters.

"We have one opportunity to do this correctly and have the effect we want," said Joseph Williams, who leads the New Orleans Redevelopment Authority.

The task is daunting. Neighborhoods must be mapped and titles must be cleared on properties offered for development. The cost is huge.

NORA estimates it could need an initial $15 million to $25 million a year just to cut grass and otherwise maintain hurricane-surrendered properties it gets from the state. Meeting homeownership goals for lower- to moderate-income residents will require heavy subsidies which, like maintenance costs, haven't been secured.

The advocacy organization Jeremiah Group estimates at least $50 million will be needed to subsidize mortgages or help with downpayments to make homes affordable for up to 1,400 families; it would like to see that dollar figure at least doubled to help people statewide.

"As a homeowner you have pride of ownership," the Rev. Sherman Shelton, a Jeremiah Group leader, said. "And when you have that, the neighborhood starts growing."

Working out all of this will be a major test of NORA, created long before Katrina to fight blight in New Orleans and criticized as largely ineffective.

Since Katrina, NORA has emerged, with new leadership, as a key player in the rebuilding effort. Despite months of tension with city officials over NORA's role and funding, the agency has added staff and tapped foundation dollars. Last week, NORA and the city signed three agreements, including one funding NORA's operations for 2007.

Can NORA shed its past reputation and be effective?

Newly elected City Councilwoman Jacquelyn Brechtel Clarkson is taking a wait-and-see approach. Clarkson, who said residents are "living in fear" because of NORA's track record, has threatened to withhold funding, or move to abolish NORA, if it doesn't deliver.

The LRA is expected to consider NORA's plan for the state-transferred properties on Tuesday. The properties are supposed to come with clear title, saving NORA the time and legal fees associated with other problem properties it will likely have to help bundle together into redevelopment packages.

The Jeremiah Group believes the state-transferred properties, coming through the Road Home program, should be kept separate, as to avoid possibly further bogging down the rebuilding process.

It could be April before NORA gets the first property from the state. NORA officials say they must be careful not to flood the overall housing market. Also a worry: Speculators could get blocks of property and sit on them.

NORA plans to write into contracts clauses allowing property to be seized if the lots aren't improved or built-upon within a set period.

Some housing advocates and real estate experts believe the sooner NORA metes out the properties, the better. Miestchovich urges an "urban homesteading" program, in which properties would sell for $1.

"They just have to face reality: there's all this inventory out there; a lot of people need housing. Let's do the right thing," he said. "Lower the price."

NORA says that even if it gave land away, a household would need annual income of more than $60,000 a year to afford a typical 1,000-1,200-square-foot-home, currently running about $150,000. It supports mortgage subsidies and other housing aid for working-class families.

While subsidy sources have yet to be firmly identified, NORA and others hope neighborhood improvements that emerge in 2008 will have a snowball effect.

Without that momentum, the city's recovery will likely continue at a sluggish pace.

(Copyright 2007 by The Associated Press. All Rights Reserved.)