New Orleans survived the hurricane itself. It's the fact that it should be underwater that was the problem when the dirt that they'd used to hold the water back gave out.
It was fine when it was built, but it's no longer a place for a major city. Keep the port, the industry as neccessary and enough city to run it, and let everything else move inland and higher.
I believe that quite a few of these displaced people will settle somewhere else, probably in the town where they are being relocated. If they find jobs, as Houston is planning to help with, adjust to schools and they have lost everything in NO, it makes sense.