I agree with his attack on government housing and welfare in general, but it seems like he's putting all the blame for the disaster on New Orleans local government and citizens...which I don't agree with.
This is how I see it as a simpleton economist:
1) People have various wants and needs. We live in a consumer society. People consume goods and services to satisfy their wants and needs. In order to participate in this consumption, we need a suitable medium of exchange: money.
2) People would love to have free money, but this creates hyperinflation. People would love to steal other people's money, but our legal/social structure (government) has outlawed this to protect people's property rights. So people must work for money, providing their own labor, their own goods, or their own services to add value to the economy and earn their money. In other words, people need to work to consume.
3) If someone cannot find work, they cannot earn money. They must find work in order to earn. During the Depression, when people could not find work, what did they do? Did they scream for government handouts (The New Deal came much later.) No. Even though they had no money, no cars, nothing--they found a way out West. We saw a mass migration the likes of which the country has not seen since. Caravans of people went west to find work.
4) What happens when you give an unemployed citizen free housing? They don't move. They don't get off their asses to find work. In fact, oftentimes they are DISCOURAGED from finding work because they might then lose their home! Free food and free clothing just exacerbate the issue. This is what we have in New Orleans (and every other major city across the US.) Given time, people used to the handouts no longer follow the fundamental rules of economics--they do not look for work, they do not wish to earn. They still want to consume, but their most basic wants and needs are satisfied for free.
5) Sudden removal of the welfare structure around said persons causes massive panic, shock. They do not know what to do. They do not want to leave their [free] homes. They will use any means necessary to satisfy basic wants/needs, and not lawful means.