When Property Is Substantially Damaged

Millions of people across the United States live in floodplains. Floods are the most common natural disaster. In 2006, floods accounted for more than $617.6 million in NFIP-insured losses and millions more in uninsured damage. Unfortunately, some of this flood damage occurs to buildings previously repaired only to be flooded again. NFIP policies include Increased Cost of Compliance (ICC) coverage designed to mitigate a portion of substantially damaged properties.

Increased Cost of Compliance Coverage

ICC coverage was added to the NFIP Standard Flood Insurance Policy in 1997. In 2003, limits of this coverage were increased to $30,000 paid in addition to the flood insurance claim. ICC funds can be used only to floodproof, relocate, elevate, or demolish (FRED) a damaged building to bring it into compliance with local floodplain regulations. Buildings mitigated with the FRED options permitted under ICC coverage must be located in a floodplain and must have an NFIP flood insurance policy in effect at the time of the loss. In addition, the structure must be determined to have substantial damage—that is, damage of 50 percent or more of the pre-flood market value of the building—or must be identified as an NFIP repetitive loss property.

All insurable buildings in NFIP communities have ICC coverage except structures insured under the Group Flood Insurance Policy, units insured under a condominium unit owner policy, and buildings located in communities participating in the Emergency Phase of the Program.

Floodproof

The ICC option of floodproofing is available primarily for non-residential buildings. Dry floodproofing seals a building by coating its walls with waterproofing compounds or impermeable sheeting. Openings such as doors, windows, sewer lines, and vents are blocked off with permanent closures or removable shields, sandbags, valves, or other barriers.

A professional engineer should be consulted when considering use of dry floodproofing because hydrostatic pressure (the pressure imposed by standing water) could cause a sealed structure to collapse under high water levels. Consequently, dry floodproofing is not appropriate where floodwaters are expected to be more than 3 feet deep. This form of mitigation is also not suitable for buildings with crawl spaces or basements because water can seep under the structure through these sites.

Wet floodproofing is often used when dry floodproofing is either not possible or too expensive. This form of protection can be employed on structures with basements. Wet floodproofing modifies a building to allow floodwaters inside while ensuring minimal damage to the structure and contents. To use this form of mitigation, there must be an area available above the Base Flood Elevation (BFE) where damageable items can be relocated or temporarily stored. Additionally, utilities and furnaces must either be protected or relocated to an area above the BFE.

There are three main components to wet floodproofing a structure: design elements (such as openings in foundation walls and other construction techniques), flood‑resistant materials (such as impervious construction materials and insulation), and protection of contents (by elevating mechanical, electrical, and HVAC systems or placing them in waterproof containers). As with the application of dry floodproofing techniques, developing a wet floodproofing strategy requires site-specific evaluations, which may involve the services of a design professional.

Additional information about floodproofing is available in two FEMA publications: Floodproofing for Non-Residential Structures and Technical Bulletin 7-93: Wet Floodproofing Requirements for Structures Located in Special Flood Hazard Areas. Both publications are available from the online FEMA Library, or by contacting the FEMA Distribution Center at 1-800-480-2520.

Relocate

Relocating floodprone structures to higher ground is one of the safest ways to protect against flooding and reduce the liability and cost to the community. Although relocation can be expensive initially, in the long run moving can be less costly than paying for repetitive flood damages or high flood insurance premiums. In addition, relocating buildings to areas with reduced flood risk allows floodprone property to be used for open space, wetlands, or recreation.

Wisconsin Village Rebuilds Above Floodwaters

Instead of embracing a traditional dam and levee floodproofing method to protect their community, residents of the Village of Soldiers Grove in southwest Wisconsin raised their town.

Beginning in 1907, residents of Soldiers Grove suffered repetitive minor flooding. In 1935, the first disastrous flood engulfed homes and businesses in the Kickapoo River Valley with sludge and mud. Congress directed the U.S. Army Corps of Engineers to study flood options.

In 1951, the Kickapoo River overflowed its banks again, causing serious damage to the downtown area. Delayed by wars, the Corps study wasn’t completed until 1962 when it recommended a dam be built 36 miles upstream and a levee constructed around the village. The levee system designed for Soldiers Grove was expected to cost $3.5 million, with the Village paying $220,000 toward construction and an estimated $10,000 in annual maintenance. Because Village property was valued at less than $1 million with an annual tax levy of $14,000, it did not make sense to residents to install the levees.

For decades the Village, with an estimated population of 600, debated another plan. Instead of spending all their money on trying to control the Kickapoo River, they proposed moving the floodprone areas of the town. However, without significant financial support from higher levels of government, the move could not be accomplished.

Soldiers Grove citizens took a huge first step in 1977 by pooling their local and private resources and, with $90,000 in public financing, purchasing a relocation site for their town. They acquired 100 acres of uphill land away from the Kickapoo River floodplain. The next step for Soldiers Grove residents was to wait and hope for eventual funding to realize their goal of raising the town.

Torrential rains in July 1978 caused the Kickapoo River to exceed its flood stage by more than 6 feet, resulting in flood damage in excess of $.5 million. The local debate about whether or not to move the town was over as community members formed a united front in approaching the State and Federal governments to help the town relocate.

Armed with the research results of feasibility studies and outside consultation paid for with small State grants, local officials convinced State and Federal officials the move would be the best form of floodproofing for the Village. They would buy out floodplain properties, demolish the structures, clear the land, and rebuild the town—uphill.

A combination of State and local funds provided more than a third of the estimated $6 million total project. The Village applied for and successfully received grants for the remaining cost from Federal agencies including HUD’s Community Development Block Grant (CDBG). CDBG funds may be used to assist communities recovering from a disaster, especially in low-income areas.

Soldiers Grove now sits high and dry, half a mile east and uphill from its former site. And, not only is the Village center now above the floodplain, the town decided to require all buildings constructed within the new business district be at least 70-percent solar-powered. Soldiers Grove stands as an example of how members of a community can act together to protect and improve the quality of life for its citizens when rebuilding after disaster.

From FEMA Best Practices Portfolio.

Elevate

One of the most common ICC retrofitting methods is to elevate a building above the expected flood level. When a house is properly elevated, the living area will be above all but the most severe floods. Elevation to or above the BFE allows a substantially damaged or substantially improved house to be brought into compliance with the floodplain management ordinance or law adopted by the community.

A building can be raised above the BFE by placing it on a crawlspace or compacted fill, or by elevating it on piles or piers. The elevation method used is dependent on the condition of the structure, the source of flood hazard putting the building at risk, local floodplain regulations, and the owner’s financial resources.  By raising a building so its lowest habitable floor is above the BFE, not only is this structure protected from floodwaters, but the owner can add parking and (limited) storage space beneath the building.

FEMA has approved three techniques for elevating buildings. Property owners may extend the walls of the building upward and raise the lowest habitable floor; convert the existing lower area of the house to non-habitable space, and build a new second story for living space; or lift the entire house (with the floor slab attached) and build a new, elevated foundation for the building.

When elevating, it is essential for all utilities (air conditioner, water heater, furnace, etc.) to be elevated at or above the BFE. After a building is elevated, the need to move vulnerable contents to areas above the water level during flooding is eliminated, except where a lower floor is used for storage.

Additional information about elevating buildings is available online in Above the Flood: Elevating your Flood Prone House or by contacting the FEMA Distribution Center at 1-800-480-2520 and requesting FEMA Document 347.

Demolish

By covering the costs for demolition and debris removal of lost buildings insured by the NFIP, ICC allows residents to move permanently out of harm's way. Buyout and demolition is voluntary, and the homeowner receives the fair market value of the home before the disaster struck. Under a FEMA buyout agreement, the structure is removed and the city maintains the land as open space. In many cases, after the acquired building has been demolished, the land has been flooded again.

Oklahoma Community Buys Out Floodprone Homes

In the past, residents in a six-block area in Kingfisher, Oklahoma, became anxious whenever severe rain was forecast. This part of town flooded many times every year.

On August 19, 2007, two local creeks spilled over their banks and poured into downtown. But Kingfisher avoided catastrophic losses thanks to programs the community used to buy frequently flooded lands.

“The vacant land program offered Kingfisher citizens many benefits,” said City Clerk and Floodplain Manager William Tucker. “Frequent flooding had displaced residents. But when the town acquired the open space, it not only controlled emergency costs but created a place residents can use as open space, in dry times.”

Kingfisher’s buyout program, begun in 2002, gave citizens who owned vacant land, which had previously flooded more than once, the option of selling the lot to the City for $300. Within five years, Kingfisher invested $20,000 in these vacant land parcels. The sale relieved the owners of paying property taxes and maintenance.

Kingfisher expanded its acquisition efforts with funds provided by FEMA through its Hazard Mitigation Grant Program (HMGP) and managed by Oklahoma’s Emergency Management Department. The HMGP infused $170,000 to buy houses while the city added the 25-percent match. Damage from the August 2007 flood to property and contents of homes that were bought out would have cost an estimated $170,000. Kingfisher is counting its buyout program a success!

From FEMA Best Practices Portfolio.

How to Start the FRED Process

FRED options become available after an ICC claim is filed, and this can only happen if the community determines a home or business has been substantially damaged or repetitively damaged by flood. This determination is made when the property owner applies for a building permit to begin repairing the home or business. An ICC claim is adjusted separately from the flood damage claim filed under the Standard Flood Insurance Policy.

If the community determines the home or business is substantially or repetitively damaged, a local official will explain to the property owner which of the floodplain management ordinance provisions must be met. It is advisable for the property owner to consult with the local official before deciding which option to pursue.

When the community has made the determination of ICC eligibility, the property owner contacts the insurance company or agent who wrote the flood policy to file an ICC claim. The insurer will assign a claims representative to help the policyholder file the ICC claim. At this time, the property owner can obtain contractor estimates for floodproofing, relocating, elevating, or demolishing.

Additional Information

See the Increased Cost of Compliance Coverage: How You Can Benefit brochure on the FEMA website for an overview of this coverage. Additional information, including questions and answers, is available in the Increased Cost of Compliance section of the NFIP Adjuster Claims Manual.