Effect of Hurricane Katrina on New Orleans

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Much of New Orleans is below sea level. The Mississippi river is on one side of the city, and Lake Pontchartrain on another - and both are higher than sea level.

I don’t get it. Why build any part of a city below the level of nearby bodies of water? Apparently there is a shortage of higher ground? Is it responsible for the local authorities to allow new construction?

Are they planning on re-building the flooded areas? Are we going to spend federal money to do this?

Why?