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NAHB UPDATE: HUD Proposes Expanded Floodplain Rules for FHA-Financed Loans

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HUD has proposed new floodplain development rules that threaten access to FHA financing for single- and multifamily builders and rely on floodplain maps that haven’t been drawn yet.

For nearly 40 years, federal floodplain requirements have been tied to the 100-year floodplain. A 2015 executive order greatly expanded the Federal Flood Risk Management Standard, offering three new options to meet it:

  • The best available climate-informed science
  • The freeboard value approach (adding elevation above the 100-year floodplain)
  • The 500-year floodplain

HUD has proposed to expand the definition of the 2015 executive order, which applies to federally funded projects, by imposing costly requirements on the FHA multifamily and single-family mortgage insurance programs.

Specifically, HUD seeks to expand its oversight using the freeboard value approach (see illustration below), corresponding both vertically and horizontally with an additional two feet of elevation above the 100-year base flood elevation for new and “substantially improved” single-family homes and multifamily properties financed using FHA-insured mortgages.

Single-family homes using FHA financing would trigger the elevation requirements only when they are built within the 100-year floodplain.

Multifamily builders would face the added burden of HUD’s elevation requirements (or flood proofing, in the case of “substantially improved” structures) both within the 100-year floodplain and in the expanded horizontal floodplain.

HUD’s new flood risk measures would also apply to projects that use federal grants, such as the HOME and Community Development Block Grant programs.

“HUD’s proposal will severely disrupt the housing market and harm affordability for millions of Americans living in areas designated under the expanded floodplain definition, where in many cases the odds of facing a flood event are extremely remote,” said NAHB Chairman Ed Brady.

In addition to the project design and structural elevation costs that will result if the proposal is implemented, HUD acknowledges that maps of the expanded floodplain don’t exist. This uncertainty will only add to project delays and costs.

HUD’s proposed rule is open for public comment until Dec. 27.

For more information, contact NAHB Environmental Policy Program Manager Owen McDonough at 800-386-5242 x8662 or NAHB Director of Multifamily Finance Michelle Kitchen at 800-386-5242 x8352.