March 26, 2019

Flood Repair Regulations Refined and Codified

On the regulatory side of our flood mitigation policy, an area for improvement we identified soon after Hurricane Harvey was to formalize by ordinance our flood repair permit process, including how we apply the 50% Rule in making substantial damage determinations.  In assisting affected homeowners post-Harvey, the Permit Office followed established procedures based on past practice and developed new ones as appropriate to the situation, such as by limiting the cumulative effect to past flood repair costs only.  However, not all of that was actually spelled out in the Code.  Since that time we’ve been working on updating these policies based on our experience in Harvey, and in fulfillment of one of the adopted goals of our citizen Flood Hazard Mitigation Task Force the City Council has now formally codified them.

The objective is to find the right balance in how we regulate the floodplain, to remain in compliance with National Flood Insurance Program requirements and minimize repetitive flood losses, but without being unduly punitive about it.  Members of the Task Force additionally expressed concern that getting the balance wrong, with too onerous an approach relative to market, could negatively impact property values.  They advocated maintaining the exclusion of non-flood-related permits from the substantial damage calculation, at least for first-time flood repair applications, by not cumulating costs until after a second flooding event.  They also discussed adding a time element to the equation.

These Task Force recommendations make sense especially for the significant number of homes that flooded for the first time in Harvey and are too new to be considered “teardowns,” but not new enough to have been built to current elevation standards.  Following a review with positive feedback from the Building and Standards Commission, last week the City Council adopted both recommendations.  The Code now provides in the definition of “substantial improvement” that permitted work will be cumulated only after two flooding events, limited to a lookback period of 10 years.  In other words, if more than 10 years pass between floods, the cumulative repair clock starts over.  Again, it’s a balancing act:  In some respects this modified approach giveth, in others it taketh away.

Also included in the codification is our flood repair permit process, which worked very well for us in Harvey.  The progression of steps demonstrates the several ways a substantial damage declaration can be avoided.  If the contractor’s repair estimate is less than 50% of the Harris County Appraisal District’s assessed value, then the inquiry ends there and a permit is issued.  If the HCAD value is too low, then the City will apply its own, FEMA-approved alternative valuation formula to determine market value based on square footage, age and depreciation.  Failing that, the Building Official will conduct an inspection of the structure and make his own repair assessment based on average repair costs in the area, and see if that comes in lower than the original estimate.  If, after all that, the repairs still constitute a “substantial improvement,” then the only other option would be for the applicant to provide an appraisal performed by a state-licensed appraiser, showing the repair cost to be below 50% of market value.

Moving forward, and responsive to feedback received from repair permit applicants following Harvey, it will be a big improvement to have this process clearly documented in the Code.  As the Task Force recognized, it also serves to communicate our policies to the real estate marketplace and will help in setting expectations.  While the substantive changes we’ve adopted are important, based on past experience it seems unlikely they’ll result in different outcomes in most cases.  And of course, as the percentage of our housing stock built to compliance with our elevation requirements naturally increases over time, there will be fewer and fewer cases to test that.