HUD ANNOUNCES FINAL RULE THAT WILL PROTECT COMMUNITIES FROM FLOODING EVENTS AND RISING INSURANCE COSTS

Source: U.S. Dept. of Housing and  Urban Development

Photo: Flooding during San Diego County's January 2024 severe storms

April 23, 2024 (Washington D.C.) – Yesterday, the U.S. Department of Housing and Urban Development (HUD) published a Federal Flood Risk Management Standard (FFRMS) final rule in the Federal Register to help communities prepare for and reduce flood damage. This rule aims to protect communities from flood risk, heavy storms, increased frequency of severe weather events and disasters, changes in development patterns, and erosion.  

The new rules apply in areas designated as 100-year floodplains, such as portions of San Diego County that experienced severe flooding in January, prompting disaster declarations at the local, state and federal levels.

By implementing the FFRMS, communities can become resilient to flooding, protect lives and properties, minimize damage to households, reduce insurance costs, and safeguard federal investments – ensuring that federally funded construction projects are built to withstand current and future flood risks.

“Across the country, I’ve seen firsthand the devastating impact flooding disasters have had on families and communities – especially those least equipped to handle the emotional and financial burden of recovery. HUD’s announcement today lessens the burden these disasters have on people,” said HUD Acting Secretary Adrianne Todman. “As climate change progresses, flooding disasters will continue to become more frequent, more severe, and more costly for families and taxpayers. This final rule will increase awareness for renters and homeowners, saving lives and reducing costs for years to come.”

The final rule implements the FFRMS required by Executive Order (E.O.) 13690 by updating two of HUD’s regulations: Part 55, Floodplain Management and Protection of Wetlands and Part 200, Minimum Property Standards. This rule strengthens standards by increasing elevations and flood proofing requirements of properties in areas at risk of flooding, where federal funds are used to develop or provide financing for new construction within the now defined FFRMS floodplain. It also applies to substantial improvement to structures financed through HUD grants, subsidy programs, and applicable multifamily programs. The update to Minimum Property Standards only applies to FHA-insured new construction within the 100-year floodplain.

“In updating flood risk standards, HUD is providing communities the flexibility to calculate their true risk. People of modest means are more likely to live in a flood-prone place and have a longer time recovering when disaster strikes,” said Marion McFadden, Principal Deputy Assistant Secretary for Community Planning and Development. “This rule will ensure HUD supported properties have the best chance of being undisturbed when flooding occurs. It is the responsibility of the federal government to ensure that taxpayer investments are built to withstand foreseeable risk – and has the added benefit of reducing the cost of flood insurance for property owners.”

HUD estimates approximately 10% of new Federal Housing Administration (FHA) single family homes constructed each year are within the 100-year floodplain, and many of those homes are already located in areas where state or local standards are higher than HUD’s previous standard. The updated standard reduces FHA homeowners’ exposure to losses caused by flooding, reduces insurance costs, and most importantly protects the risk to life faced in areas of greater flood risk.

Flooding is the most common and costly weather-related disaster in the United States costing taxpayers billions of dollars a year in economic losses, health impacts and funding to recover damages and rebuild or repair property. In 2023, the Congressional Budget Office (CBO) estimated that the expected annual flood damages in 2020 to homes with federally backed mortgages were $9.4 billion and projected to increase to $12.8 billion annually by 2050.

The impact on individual and multifamily homeowners is estimated to be equally staggering, with just 1 inch of floodwater resulting in losses ranging from $10,000 to $27,000 depending on the size of the home.

 When the elevation and floodproofing standards required by the rule are applied, HUD estimates the total combined benefits for each year of construction will result in approximately $56.4 million to $324.3 million of savings over the lifetime of the properties (40 years). These savings are a result of cost reductions due to decreased flood insurance premiums, reduced flood damage to buildings, cost avoided for homeowners and tenants, reduced expenses associated with relocation or temporary housing, and loss of income due to flooding events.

According to the National Institute of Building Sciences, investments in elevation of structures more than pay for themselves when flooding occurs. Building to higher elevations is cost effective when subsequent flooding occurs, providing a benefit of $6 in damages avoided for every $1 invested in elevation (Natural Hazard Mitigation Saves report). Underserved communities are disproportionately impacted by flooding events. Research from real estate company Redfin found that formerly redlined neighborhoods face a 25% greater risk of flooding than non-redlined neighborhoods.

There are several examples where communities have benefited from the standards outlined in this final rule. For example, as part of its 2008 flood recovery efforts, the City of Cedar Rapids, Iowa worked closely with state officials to increase their resilience to inland flooding. They implemented a variety of measures, including reassessing flood risks. In 2016 when the city experienced the second-highest flooding on record, their efforts proved successful, and they suffered less damage.

After Hurricane Katrina, the State of Louisiana and the City of New Orleans used HUD funding to replace damaged public housing with new homes elevated beyond the minimum requirements at the time. When subsequent flooding occurred a decade later, because of the increased elevation of the homes, water never breached the first floor and therefore caused no property damage sparing residents the burden and expense they would have otherwise had to endure.

This rule aims to save homes and save lives. In the past decade alone, there were more than 1,100 direct flood fatalities in the United States. This year’s spring flooding season is projected to place approximately 122 million people at risk. Elevation for flooding is already required in 80% of states and over 600 local communities and municipalities. Saving lives, keeping families in their homes, and shortening time and costs for community recovery after a flood are immeasurable benefits for communities across the country.