This article is intended for homeowners with non-flood compliant houses, who may be considering raising their home or performing a major addition or renovation. The requirements surrounding these practices are complex and this article is not a substitute for professional advice. We urge homeowners to start this process with a firm that has comprehensive knowledge of both FEMA, Environmental, and Site Planning regulations. Part 1 covers FEMA processes and Part 2 CRMC.
Many years ago, I advised a client that they should strongly consider raising their house at least 3′ to 5′ above the Base Flood Elevation during their renovation process. I spent quite some time walking them through their practical risk, as opposed to the risk that the FEMA maps show. This particular house was under-evaluated in my opinion, the risk of storm surge and flooding was much greater than was presently mapped; based on my knowledge of potential flood heights and storm surges. I believed, what was mapped as an “A” zone, aka a Stillwater zone, where a flood would occur, but with waves of less than 3′ height, and lower velocity flow, was now, in reality, a “V” zone, e.g. a velocity zone with waves heights, often well in excess of 3′ and high-velocity flood waters during a storm. If they built simply what they were required by code, I explained, there was of course, a risk of loss from flooding and storm surges, but a long-term risk of substantially increased insurance costs, as the flood mapping evaluations were only going to be more severe in the coming years. FEMA maps have remained largely the same for decades, despite known risks from climate change, including sea level rise, increased rainfall, stronger hurricanes, etc. This vestige is political, not scientific.
This was information the client did not want to hear, I can only speculate why, but nevertheless, I did not get the contract and, at the time, was flummoxed. These folks essentially rebuilt their house, at a six-figure cost, but placed the structure only to the minimum code requirements.
In retrospect, while I am not happy about the situation, I’m relieved that’s a design that I don’t “own”; as time goes on, we’ve become more aware that building strictly to code minimums, codes that we as professionals know are outdated, is a risky proposition and that a tort may occur if design professionals don’t properly consider climate change as a condition in engineering designs (as an example, the Levee heights in New Orleans after Katrina). I’m not aware of a case of an individual homeowner suing their consultants, yet. There are numerous articles on the web that can speak to this issue in more detail, and the American Society of Civil Engineers has gone so far as to publish a white paper to educate its members on balancing regulatory minimums vs known climate impacts.
FEMA 50% rule: [Substantial Improvement and Substantial Damage]
When you have a home in a flood zone, and the structure does not conform to flood requirements, FEMA, nationally, has stipulated that the homeowner can only expend funds not to exceed 50% of the value of the structure (excluding the land value), in a given year.
Said another way. If your home is valued at $200,000, and its non-conforming with respect to the flood elevation, your maximum renovation budget is $100,000 if you do not elevate the home.
Some communities, particularly those in high-hazard areas (think southern Florida), are even more restrictive and extend the time horizon, up to 5 years. No RI communities have done this, to my knowledge, yet.
The 50% rule excludes engineering, architecture, and planning, as well as landscaping, but pretty much includes everything else, including repairs like Concrete Repair and Foundation repair. Bear in mind there are a lot of 50% rules in this industry; this is typically the threshold between an insubstantial and substantial characterization and finds its way later in this article, re: CRMC, and is also found in many places in the building code, so it’s important to understand the context of each.
This rule also applies to structures damaged in a flood, so in the aforementioned example, if a $200,000 home receives more than $100,000 worth of damage in a flood, the house cannot be rebuilt as it was and would need to be elevated. This was a frequent challenge after Sandy.
It’s an incredibly hard rule to enforce, however. Number one, there is a “loophole” with the time restriction. If a homeowner is persistent, they can perform 50% of the value of their home in year one, and do a major renovation. Then, their house is worth more, so in year two (or three, etc), they do more work, at a higher value. That’s a hard nut to crack, most people don’t want to be in construction for multiple years, and I have personally only seen this happen twice in my 20+ year career, but it’s an issue.
Furthermore, trying to enforce those budgets, is extremely challenging for regulators. If someone pays their drywall and painter “under the table” in cash, they could mask the real cost of the work. Unfortunately in the construction industry, this is all too common, and very few municipalities stringently enforce construction budgets by having a third party review and attest to the actual construction costs through this process.
Even when working within the 50% rule, new building additions must still conform to FEMA building requirements, including height (that is, the lowest habitable level of the building needs to be elevated with 1′ freeboard, above the base flood elevation (BFE).This is known as the Design Flood Elevation (DFE)). Practically, this can be challenging in Velocity Zones to achieve, it’s difficult to marry an addition to a non-conforming structure and achieve suitable results. The risk of damage or debris from the non-conforming structure often can put the addition at risk.
Another workaround is the valuation of the home. The homeowner can elect to obtain a private appraisal, to, ideally increase the paper value of the structure vs what is on the tax rolls. This can substantially increase the available budget.
The reason the 50% rule exists in the first place is to protect homeowners, lenders, and insurers, from adding excess value to homes at risk. There are occasionally valid reasons to push the envelope on this rule, but for the most part, it’s there to incentivize homeowners into making their house flood compliant if they plan to invest significantly in a home. Broad brush, this means:
Elevating the home’s lowest habitable floor and utilities above the DFE, and also requires using only flood-resistant materials below it.
In “A” zones, install compliant flood vents.
In “V” zones, building on a suitable foundation, typically wooden or concrete piers, with “breakaway” wall panels between them.
These foundations typically require proper structural and civil engineering coordination for proper design. Due to the multi-disciplinary requirements surrounding them, it can be challenging to prepare a conforming design.
Risk 2.0 and the New Normal:
FEMA, as I’ve written ad nauseum, is upside down; the program requires billions in subsidies each year to function and essentially provides homeowners with perverse incentives to build in a risky manner due to the lack of an appropriate risk pricing structure. The National Flood Insurance Program ( NFIP) is a Federal insurance monopoly, with the government acting as the only insurer in the vast majority of cases. You may obtain your insurance through Mutual or State Farm, but all these policies are underwritten by the NFIP. This provides homeowners with “guaranteed” insurance at below “market” rates (I say “market” as in most areas, there are no private insurers remaining since the “real” insurance cost is well above what NFIP charges).
Slowly, private market insurance is becoming available, though in my experience is still relegated to low-risk structures in low-risk zones (e.g. the private market is “cherry picking” only safe bets)
Despite decades of a stagnant program structure, things are slowly changing. Last year, FEMA rolled out what has been called “Risk Rating 2.0.” This writer believes this is nowhere near enough to correct the ills of the program but is a positive step in the right direction. You have to start somewhere.
Readers are encouraged to further learn about the topic here: https://fema.gov/flood-insurance/risk-rating, but in short, this change essentially takes into account variables that were excluded in the prior version.
In years past, homeowners seeking NFIP insurance only needed to have an elevation certificate prepared. This form provides NFIP information about the elevation of a home, surrounding grades, and mapped flood zone; that’s the basis for how insurance cost was calculated. A shack built on a shaky basement would be charged similarly to a mansion built on reinforced concrete piers if the elevations and flood zone were the same.
Other elements include:
⦁ rebuilding costs (essentially, the value of the building)
⦁ coastal erosion, storm surges, barrier islands
⦁ distance to water
⦁ foundation type (crawlspace, slab, piers, etc)
⦁ average annual loss (total claims divided by time, factors in frequency)
⦁ catastrophe models (complex, proprietary risk modeling scenarios)
⦁ outlier removal (to minimize rate bias extremes.)
The goal of this effort is to more accurately predict and assess the real risk of loss and pass those risks to homeowners in the form of higher, or lower insurance costs. In some ways, it’s a clever workaround to the divisive political issue of changing Flood Insurance Maps (FIRMs) to include climate change and sea level rise.
But much of the point of this article is: this is causing many insurers to look more closely at structures, and in many cases provide the framework to increase rates, often substantially for riskier homes.
And what this means, to me is, the majority of calls to my office now are from homeowners, cognizant of their actual flood risk seeking resiliency, that is to say, not what the FEMA map may display, but risks including those brought about by sea level rise and climate change (thanks in part, in RI, to CRMC “storm tools” program I have written much about in other articles). The example I cited at the start of the article (people seeking to build to the antiquated minimum standard) is now the exception, not the rule. Now, the goal is to maximize elevation and mitigate flood risk and insurance costs. In many cases, homeowners have received a letter from their insurer requesting a more detailed assessment than is simply assessed by the elevation certificate. This is a changing space, but it appears this practice is becoming more common. My office has not only the expertise to assist in filing these insurance forms, but most importantly, what you can do about it.