HUD announces final rule to protect against flood risk

The U.S. Department of Housing and Urban Development (HUD) announced Monday that it published a final rule, the Federal Flood Risk Management Standard (FFRMS), in the Federal Register.

The rule is designed to “help communities prepare for and reduce flood damage” and other extended climate risks, including “heavy storms, increased frequency of severe weather events and disasters, changes in development patterns, and erosion.”

Growing impact of flooding, natural disasters

As flooding and other extreme weather events have impacted more people across the U.S. housing ecosystem, the FFRMS is designed to address these increased risks to protect people who are unprepared for the resulting “emotional and financial burden of recovery,” according to a statement from HUD acting secretary Adrianne Todman.

“HUD’s announcement today lessens the burden these disasters have on people,” she said. “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 updates two key HUD 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,” HUD explained. “It also applies to substantial improvement to structures financed through HUD grants, subsidy programs, and applicable multifamily programs.”

The minimum property standards update applies only to Federal Housing Administration (FHA)-insured new construction within the 100-year floodplain, the announcement explained.

More accurate information

Updating flood risk standards allows communities to have a more accurate picture of the risk they face, according to a statement by Marion McFadden, principal deputy assistant secretary for community planning and development at HUD.

“People of modest means are more likely to live in a flood-prone place and have a longer time recovering when disaster strikes,” she said. “This rule will ensure HUD supported properties have the best chance of being undisturbed when flooding occurs.”

HUD estimates that about 10% of new single-family homes financed by the FHA are constructed within the 100-year floodplain each year.

“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,” the announcement stated.

It went on to cite data that shows 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.”

MBA response

Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit said that the organization appreciates the intent of the new final rule but maintains misgivings about its execution and potential impacts.

“At a time when housing markets across the country continue to suffer from weakening affordability, supply shortages, and rising property insurance costs, we are disappointed that several aspects of the final rule will slow housing production and ultimately increase costs for homeowners, renters, and builders,” Broeksmit said in a statement.

Expanding floodplain areas while adding new elevation requirements and higher levels of flood insurance could make FHA financing “more expensive and less competitive, Broeksmit said. The addition of climate-informed, scientific-approach tools could create “inconsistencies” due to a lack of nationwide maps, he added.

“We will continue to work with the Biden administration on policies and solutions that address climate risks and extreme weather impacts, stressing the need for common sense approaches that do not curtail housing construction and negatively impact borrowers and renters,” he said.