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HUD sets new flood standard for homes it finances
The Biden administration is imposing sweeping new flood protection requirements on homes that are built or repaired with federal housing assistance, despite industry warnings that the policy would increase construction costs.
The Department of Housing and Urban Development is publishing a rule Tuesday morning to protect new and rebuilt HUD-financed homes from flood damage, requiring them to be elevated two feet above the local flood level. The final rule also expands the flood zones where the elevation requirement applies.
HUD recognizes that the uplift policy will increase construction costs – by up to $7,800 for a single-family home. But officials say it would save homeowners money in the long run by preventing flood damage and reducing flood insurance costs.
“It’s about protecting lives and property,” said Marion McFadden, principal deputy assistant secretary for planning and community development at HUD, in an interview. “We have seen a lot of flooding in this country. We saw a lot of people impacted.”
“The financial risk is not just to the people who live in these homes, but to the nation as a whole,” McFadden said, referring to the growing refusal of property insurers to cover homes in areas at risk of flooding or wildfires.
Bob Broeksmit, president of the Mortgage Bankers Association, immediately attacked HUD’s action, saying it would slow housing growth and “ultimately increase costs for homeowners, renters and builders.”
Right now, HUD requires that the homes it finances be situated at – but not above – the height at which flooding is likely to occur. The policy leaves homes vulnerable to intensified flooding due to future climate impacts, such as rising sea levels and excessive rainfall that overflows streams.
The new elevation requirement takes effect June 22 and applies to all homes or structures that HUD helps build or substantially repair. HUD gives billions of dollars a year to states, communities, and individuals through various housing and development programs.
“This will ensure that literally billions of dollars we spend on public infrastructure, economic development and affordable housing will become much safer in the future than they would be without this rule,” said Rob Moore, director of flood solutions at the Resource Defense Council. Natural.
Because HUD money is targeted toward low-income communities, the uplift requirement will be particularly helpful for people “who are most likely to live in neighborhoods that flood or in neighborhoods that have been redlined,” McFadden said.
With its final rule, HUD aligned itself with one of President Joe Biden’s first directives to address climate change and the damage it causes from floods and other disasters.
An executive order in May 2021 requires that buildings and facilities built or renovated with federal money be raised above flood levels. Agencies must adopt a so-called Federal Flood Risk Management Standard that explains the new elevation requirements in detail.
“This is one of the first regulations the federal government has published that consciously and deliberately says, ‘The future looks very different from the past, and we need to build for that future,’” Moore said.
The Federal Emergency Management Agency is the only other agency that has taken substantial action to impose an elevation requirement based on Biden’s executive order.
HUD’s new policy could go beyond HUD-financed housing and improve flood protection across the U.S., said Chad Berginnis, executive director of the Association of State Floodplain Managers.
Berginnis hopes states, counties and municipalities will adopt more stringent elevation requirements that match HUD’s new standard.
“This will have an effect across the country,” Berginnis said.
One part of the 219-page rule HUD will publish Tuesday says HUD will provide mortgage insurance for new homes only if they meet the 2-foot elevation requirement. HUD’s Federal Housing Administration sells mortgage insurance to millions of homeowners, helping them qualify for a mortgage.
The new requirement could encourage communities to adopt strict uplift standards for new homes so that people with an FHA-insured mortgage can afford the new homes, Berginnis said.
“It’s hard for me to imagine a community that doesn’t want to have housing available to as many buyers as possible,” Berginnis said.
“This rule is a win for the country and a win for flood resilience,” Berginnis added. “We have to change the trajectory of losses in the country, and only with higher standards will we be able to get there.”
HUD’s timing is strategically significant. By putting the policy into effect during Biden’s presidency, HUD made it more difficult for Congress or a future administration to reverse it.
“We hope this cannot be rescinded by Congress,” HUD’s McFadden said.
Industry groups including the National Association of Home Builders, the National Association of Realtors and the Mortgage Bankers Association raised concerns about the new uplift standard when HUD proposed it in 2023.
Broeksmit of the banking group said in a statement that the new HUD policy is taking effect as housing markets “continue to suffer from weakening affordability, supply shortages and rising property insurance costs.” ”.
HUD made some concessions in response to industry concerns raised last year, including relaxing proposed elevation requirements for some homes that are substantially repaired after a HUD-funded disaster.
The Federal Flood Risk Management Standard ordered by Biden in 2021 has a tortured political history that began in early 2015, when President Barack Obama issued an executive order establishing the standard.
But Obama, then entering his seventh year in office, gave federal agencies insufficient time to draft, propose and finalize new elevation requirements. HUD and FEMA failed to publish new rules until late in the Obama presidency.
President Donald Trump revoked Obama’s executive order in 2017, forcing agencies to abandon their regulation.