"I think we can retain the soul of New Orleans and in fact enhance it by going through this process," said David Gilmore, a HUD housing expert leading the planning effort.
Many residents see a chance to save neighborhoods that have fallen prey to drugs, poverty and blight.
"We're happy if someone moves down the street into a blighted property," said Jennifer Jones, the self-styled "queen of the second-line" and member of a Treme family of musicians. "No one's angry about whites moving in. When we grew up, there was a lot of mixing going on," Jones said.
But others are apprehensive.
"Maybe they've got their reason," said Lionel Glenn, a 69-year-old retired laborer who ended up at Iberville after another project he was in was torn down after Katrina. "I'd like to stay, but I've got to move."
A recent article in a black community newspaper, The New Orleans Tribune, blared: "They're here" in referring to whites looking to buy up inner-city property. The headline read: "Gentrification: The New Segregation."
Unlike the other redevelopments after Katrina, HUD promises to find housing for all the 440 families at Iberville within about 1 mile of the project.
After Katrina, most of the city's projects were torn down quickly and families were dispersed across the nation. Advocates charged that policy forced poor families out of New Orleans. Public housing units were cut in half at those complexes.
"What has happened is exactly what many people predicted would happen," said Lance Hill, who runs the Southern Institute for Education and Research, a race relations center at Tulane University. "Blacks have ended up in apartments ringing the city."
Mayor Mitch Landrieu says there is no reason to fear the redevelopment.
"We're building it back better than it ever was before and the way it always should have been."
In Treme, there are about 200 more white households than before Katrina, Census data shows. Newcomers and old-timers have clashed, even at times over the noise from the impromptu second-lines, the cherished musical parades, which routinely break out. Also, longtime residents worry about the closing of neighborhood bars.
"They are looking for a French Quarter look-a-alike but with a bedroom community feel," said Al Jackson, a Treme resident and historian.
One newcomer is David Williams, a 49-year-old school administrator. He bought an historic home that for now he rents out. The last batch he rented to was a group of young people with Americorps.
Once their son leaves home, he and his wife have talked about moving into the city and living in the house they've bought.
"In 10 years (this neighborhood) is going to look like Treme does a block away from the French Quarter," he said.
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