Answers to Questions About Substantially Improved/Substantially Damaged Buildings FEMA 213

Answers to Questions

About Substantially Improved/

Substantially Damaged

Buildings

FEMA 213 / August 2018

About the Cover

The photograph on the left shows a house after the storm surge from Hurricane Sandy ﬂooded it with 5 feet of

water. The photograph on the right shows the house being lifted on a taller foundation after the homeowners

made the decision to elevate above the new ﬂood level. FEMA photo by Kenneth Wilsey.

All other photographs in this document are public domain or taken by FEMA or a FEMA contractor.

Questions on this publication are welcome and should be addressed to

FEMA Building Science (http://www.fema.gov/building-science) through the

FEMA Building Science Helpline at FEMA-Buildingsciencehelp@fema.dhs.gov or call (866) 927-2104.

Answers to Questions

About Substantially

Improved/Substantially

Damaged Buildings

FEMA 213 / August 2018

Answers to Questions About Substantially Improved/Substantially Damaged Buildings i

Table of Contents

Contents

Acronyms and Abbreviations .......................................................................................................................................................iii

Section 1. Introduction ................................................................................................................................................................. 1

Section 2. Deﬁnitions, Regulations, and General Questions ................................................................................................... 3

1. What is substantial improvement? .................................................................................................................................. 3

2. Why was 50 percent chosen as the substantial improvement threshold? ..................................................................... 4

3. Who is responsible for making the determination of whether a building or manufactured home

will be substantially improved or has been substantially damaged? ........................................................................... 4

4. If proposed improvements are determined to be substantial improvements, what must happen

to the building or manufactured home to bring it into compliance? ......................................................................... 4

5. What is substantial damage? ........................................................................................................................................... 5

6. What must happen when a building or manufactured home is determined to

be substantially damaged? .............................................................................................................................................. 5

7. Which buildings and manufactured homes are subject to the substantial improvement and

substantial damage requirements? ................................................................................................................................. 6

8. What types of improvements might trigger the substantial improvement requirement? .......................................... 6

9. If a building or manufactured home is substantially improved or substantially damaged and is not

brought into compliance with community ﬂoodplain management regulations, how would that

impact NFIP ﬂood insurance rates and premiums? ..................................................................................................... 7

Section 3. How to Determine Substantial Improvement and Substantial Damage ............................................................... 9

10. What is the basis for determining whether a building or manufactured home is substantially damaged?

Is the basis for making a substantial improvement determination different? ............................................................. 9

11. What level of accuracy is required when determining whether a building or manufactured home

is being substantially improved or has been substantially damaged? ........................................................................10

12. For purposes of making SI/SD determinations, how should the market value of a building or

manufactured home be determined? ...........................................................................................................................10

13. If property appraisals used for tax assessment purposes are used to determine market value,

what are some of the limitations that should be considered? .....................................................................................11

14. Can actual cash value or replacement cost value be substituted as estimates for market value? ..............................11

15. How are the costs of improvements and costs to repair determined? ........................................................................ 12

16. What items must be included in the cost of improvements or repairs? ..................................................................... 12

17. What items can be excluded from the cost of improvements or costs of repairs? ...................................................... 14

18. The NFIP deﬁnition of substantial improvement states: “the term does not, however, include any project

for improvement of a structure to correct existing violations of State or local health, sanitary, or safety

code speciﬁcations which have been identiﬁed by the local code enforcement ofﬁcial and which are the

minimum necessary to assure safe living conditions.” What does this mean? ...........................................................14

19. When a building or manufactured home is completely destroyed and a new structure will be built on the

old foundation or slab, is it considered a substantial improvement or new construction? ........................................ 14

ii Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Table of Contents

20. What happens if damage is determined not to be substantial damage and during repairs,

the owner wants to make other improvements to the building or manufactured home? ........................................ 15

21. What if a building or manufactured home is substantially damaged but not fully restored,

or is repaired using donated or discounted labor and/or materials, such that the amount actually

spent on repairs is less than 50 percent of the structure’s market value? .................................................................. 15

22. How are estimates for donated or discounted materials and the owner’s labor or

volunteer labor determined? ......................................................................................................................................... 15

23. What requirements apply when a substantially improved or substantially damaged building or

manufactured home is located in a coastal high hazard area (Zone V)? ...................................................................16

24. What requirements must be met if a substantially improved or substanially damaged

building or manufactured home is located in a ﬂoodway? ..........................................................................................16

25. How are historic structures treated when they are substantially damaged or when

improvements are proposed? .........................................................................................................................................17

Section 4. Post-Disaster Permitting ............................................................................................................................................19

26. What are the permit requirements for buildings and manufactured homes that have

been substantially damaged? .........................................................................................................................................19

27. Given the number of permit applications may be overwhelming in a post-disaster situation,

what should local ofﬁcials focus on to assess potential substantially damaged buildings

and manufactured homes? ..............................................................................................................................................19

28. What options are available to help local ofﬁcials handle a large number of permit applications and

potentially substantially damaged buildings and manufactured homes after disasters? ........................................ 20

29. What is the FEMA Substantial Damage Estimator (SDE) and how can it help in determining

substantial damage? ....................................................................................................................................................... 21

30. When buildings and manufactured homes are substantially damaged by ﬂooding, how can local

ofﬁcials help property owners obtain the ﬁnancial beneﬁts of the Increased Cost of Compliance

(ICC) coverage that is as part of NFIP standard ﬂood insurance policies? ............................................................. 21

31. What steps can local ofﬁcials take to inform citizens about the permit process and substantial

damage determinations? ................................................................................................................................................ 22

32. Because of the trauma and inconvenience people experience during and after disasters, can

communities suspend permit requirements for the repair of damaged buildings and

manufactured homes in post-disaster situations? ........................................................................................................ 22

33. Can variances to the substantial damage requirements be granted? ........................................................................ 23

34. What steps can communities take to prepare to implement the substantial damage

requirement during the post-disaster period? ............................................................................................................ 23

35. What information should local ofﬁcials share with property owners during the post-disaster period? ................ 24

36. Are there grant programs available to communities to help property owners whose buildings

or manufactured homes have been substantially damaged? ...................................................................................... 24

Appendix A. Publications and Resources ................................................................................................................................. 27

Appendix B. Contact Information for NFIP State Coordinating Agencies and FEMA Regional Ofﬁces ........................ 29

Answers to Questions About Substantially Improved/Substantially Damaged Buildings iii

Acronyms and Abbreviations

ACV actual cash value

BFE base ﬂood elevation

CFR Code of Federal Regulations

FEMA Federal Emergency Management Agency

FIRM Flood Insurance Rate Map

FMA Flood Mitigation Assistance (grant program)

GIS geographic information system

HMGP Hazard Mitigation Grant Program

HVAC heating, ventilation, and air conditioning

ICC Increased Cost of Compliance

NFIP National Flood Insurance Program

PDM Pre-Disaster Mitigation (grant program)

RCV replacement cost value

SDE Substantial Damage Estimator

SFHA Special Flood Hazard Area

SI/SD substantial improvement and substantial damage

Acronyms and Abbreviations

Answers to Questions About Substantially Improved/Substantially Damaged Buildings 1

Section 1

Introduction

The National Flood Insurance Program (NFIP) is administered by the Federal Emergency Management

Agency (FEMA). FEMA identiﬁes and maps areas that are subject to ﬂooding under certain conditions,

establishes minimum criteria for development in identiﬁed ﬂoodprone areas, and underwrites ﬂood insurance

coverage. The purpose of the NFIP is to reduce future ﬂood damage and to break the cycle of repetitive

ﬂood damage by encouraging communities to adopt and enforce ﬂoodplain management regulations and by

providing affordable insurance to property owners, renters, and businesses. The NFIP regulations are found

in Title 44 of the Code of Federal Regulations (CFR) § 59.1, Deﬁnitions, and 44 CFR § 60.3, Flood plain

management criteria for ﬂoodprone areas.

The purpose of this booklet is to answer questions about the minimum NFIP regulations. It also summarizes

FEMA’s guidance and policies on substantial improvement and substantial damage (SI/SD) and what it means

to bring structures into compliance with the minimum requirements for new construction.

NFIP ﬂood insurance and certain types of Federal ﬁnancial assistance are available only in communities that

enter into agreements with FEMA to regulate ﬂood hazard areas. More than 22,300 communities throughout

the United States—counties, parishes, cities, towns, townships, villages, special districts, territories, Indian

tribes, and authorized tribal organizations—participate in the NFIP by adopting and enforcing codes,

regulations, and ordinances that meet or exceed the minimum requirements of the program.

The minimum NFIP requirements apply to new construction of buildings

and structures, installation of manufactured homes, and all other

development activities in Special Flood Hazard Areas (SFHAs) shown on

Flood Insurance Rate Maps (FIRMs). When improvements to existing

buildings, structures, and manufactured homes meet the deﬁnition

of “substantial improvement,” or when damage meets the deﬁnition of

“substantial damage,” communities must enforce requirements to bring

those structures into compliance by meeting the requirements for new

construction. The SI/SD requirements grew out of the recognition that there

were large numbers of buildings and manufactured homes already located in

ﬂoodprone areas before communities joined the NFIP.

This booklet refers

to the NFIP minimum

requirements. States

and communities that

adopt more restrictive

requirements in

oodplain management

regulations or building

codes must enforce

those requirements.

2 Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Section 1 Introducti on

As with all design and construction matters, property owners, design professionals, and building owners

should determine whether any State or local ﬂoodplain management regulations or building codes have

additional or more stringent requirements than those of the NFIP.

The enforcement of the SI/SD requirements can be a major concern for communities after they experience

widespread damage from ﬂoods or other disasters. In particular, local ofﬁcials may have many questions

concerning permits that must be issued for the repair of damaged structures.

This booklet answers many of those questions and concerns and

is organized into four sections. Section 1 outlines the role of the

NFIP and the purpose of the booklet. Section 2 explains the NFIP

deﬁnitions and regulations, and also answers some general questions

about SI/SD. Section 3 answers questions about how to determine

substantial improvement and substantial damage, and Section 4

answers common questions that arise in the post-disaster period.

The questions and answers in this booklet are intended to guide

building ofﬁcials, building inspectors, ﬂoodplain administrators,

zoning administrators, citizen planning boards, and elected and other

local ofﬁcials who have roles in enforcing ﬂoodplain management

and building codes. These ofﬁcials should also obtain a copy of

the Substantial Improvement/Substantial Damage Desk Reference (FEMA

P-758). This booklet refers to the appropriate chapters and sections in

FEMA P-758 for more detail. See Appendix A for links and ordering

instructions for free FEMA publications and other resources.

This booklet is also helpful for architects, engineers,

contractors, building owners, and other interested parties.

Local ofﬁcials may want to provide this booklet to property

owners to help them understand SI/SD, especially after events

that damage many structures.

Local ofﬁcials can also seek assistance from NFIP State

Coordinating Agencies and FEMA Regional Ofﬁces. Appendix

B lists contact information for these agencies.

See Another Question

These text boxes identify

other questions in this

booklet where related

information is located.

These text boxes identify

sections in the SI/SD Desk

Reference where related

additional information and

detail is found.

Answers to Questions About Substantially Improved/Substantially Damaged Buildings 3

Section 2

Deﬁnitions, Regulations, and

General Questions

The questions in this section address general deﬁnitions and regulations

pertinent to SI/SD. The questions in Section 3 address more speciﬁc issues

when detemining SI/SD.

1. What is substantial improvement?

Substantial improvement, as deﬁned in 44 CFR § 59.1, means any

reconstruction, rehabilitation, addition, or other improvement of a structure,

the cost of which equals or exceeds 50 percent of the market value of the

structure before the start of construction of the improvement. The term

includes structures that have incurred “substantial damage,” regardless

of the cause of damage and regardless of the cost of repair work actually

performed. However, the term does not include:

• Any project for improvement of a structure to correct existing

violations of State or local health, sanitary, or safety code speciﬁcations

that have been identiﬁed by the local code enforcement ofﬁcial, and

that are the minimum necessary to ensure safe living conditions, or

• Any alteration of a “historic structure,” provided that the alteration

will not preclude the structure’s continued designation as a “historic structure.”

Be sure to check the State and community’s ﬂoodplain management regulations and building codes to

determine whether any local requirements are more restrictive than the NFIP minimum requirements. Some

communities modify the substantial improvement requirements in one of two ways: adopting a lower threshold

than 50 percent (such as 40 percent or 30 percent) or tracking costs of improvements and costs of repairs

over a speciﬁc period, referred to as “cumulative substantial improvement.” Some communities adopt more

restrictive requirements that affect the design of buildings, such as requiring elevation higher than the NFIP

minimum elevation, which is the base ﬂood elevation (BFE).

This booklet uses the

terms “structure” and

“building” to refer to

buildings, structures,

and manufactured

homes subject to the SI/

SD requirements.

Historic Structures

See Question 25.

See Section 3.4 of the

SI/SD Desk Reference.

4 Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Section 2 Deﬁnitions, Regulations, and General Questions

2. Why was 50 percent chosen as the substantial improvement threshold?

The 50 percent threshold was chosen as a compromise between two

extremes. One extreme would be to prohibit all investment in existing,

non-conforming buildings that do not meet the minimum NFIP

requirements. The other extreme would be to allow buildings in ﬂood

hazard areas to be improved in any fashion without regard to the ﬂood

risk. In the ﬁrst scenario, there is the potential for causing hardship to those who have built in ﬂood hazard

areas without knowing the risk because those buildings were constructed before areas were designated as

ﬂoodprone. Those individuals would not be able to improve their buildings as damage or age contributes

to deterioration. The second scenario provides no mechanism to ensure that increased investment in ﬂood

hazard areas would receive needed protection from the ﬂood risk, contributing to the increased peril to life

and property. Thus, the threshold of 50 percent is a compromise at a halfway point and conforms to similar

building code and zoning standards that also use a 50 percent threshold.

3. Who is responsible for making the determination of whether a building or manufactured home

will be substantially improved or has been substantially damaged?

The NFIP requires participating communities to review all applications

for development in mapped SFHAs and to enforce their ﬂoodplain

management regulations and building codes. The local ofﬁcial who is

designated to administer those regulations and codes is responsible for

making SI/SD determinations. The local ofﬁcial reviews information

submitted by applicants and may use a combination of information to

estimate or verify costs and market values. The review determines whether

cost estimates reasonably reﬂect the proposed work, including all work to

repair and restore damaged buildings to pre-damage conditions.

To administer the SI/SD requirements, local ofﬁcials take four actions: (1) determine the cost of work, (2)

determine the market value of buildings, (3) make SI/SD determinations and provide determinations to

property owners, and (4) require owners to obtain permits to bring substantially improved and substantially

damaged structures into compliance with the ﬂoodplain management requirements. Property owners may

appeal decisions by providing additional information, especially when estimates of costs and market values are

used to make determinations.

4. If proposed improvements are determined to be substantial improvements, what must happen

to the building or manufactured home to bring it into compliance?

When a local ofﬁcial makes a determination that a building or

manufactured home in an SFHA will be substantially improved, the

structure must be brought into compliance with ﬂoodplain management

(and building code) requirements for new construction based on ﬂood

zone. Every aspect of the structure must be made compliant. To identify

how best to achieve this result, each provision of the community’s

regulations (and applicable building codes) should be reviewed, including:

• Lowest ﬂoor elevations

• Types of foundations

See Section 1.1 of the

SI/SD Desk Reference.

See Section 2.2,

Chapter 4, and

Sections 5.2 and 5.6

of the SI/SD Desk

Reference.

See Sections 6.2 and

6.3 of the SI/SD Desk

Reference.

Answers to Questions About Substantially Improved/Substantially Damaged Buildings 5

Deﬁnitions, Regulations, and General Questions Section 2

• Enclosures

• Basements

• Utilities and building service equipment

• Flood damage-resistant materials

• Making structures reasonably safe from ﬂooding

Several solutions can achieve compliance. The solution selected for any given structure will depend on several

factors, such as ﬂood zone (Zone A or V), the type of foundation, feasibility, and whether the structure is

residential or non-residential. Compliance solutions include, but are not limited to:

• Elevate in-place, which means detaching a building from its foundation and raising it onto a compliant

foundation (applicable in Zones A and V)

• Convert the ground level to a compliant enclosure (typically in Zone A)

• Extend foundation walls upward and raise the ﬂoor (Zone A only)

• Convert a walkout basement to a compliant enclosure (Zone A only)

• Dry ﬂoodprooﬁng (Zone A only, non-residential only)

5. What is substantial damage?

Substantial damage, as deﬁned in 44 CFR § 59.1, means “damage of any

origin sustained by a structure whereby the cost of restoring the structure

to its before-damaged condition would equal or exceed 50 percent of

the market value of the structure before the damage occurred.” Most

damage occurs during a single and sudden event, such as a ﬁre, wind

storm, lightning strike, falling tree, tornado, earthquake, ﬂood, or natural

gas explosion. Damage may also be unrelated to a speciﬁc event, such as

soil settlement, exposure to the elements, termite infestation, vandalism, deterioration over time, and other

causes.

6. What must happen when a building or manufactured home is determined to

be substantially damaged?

If a local ofﬁcial determines that a damaged building or manufactured

home in an SFHA has incurred substantial damage, then the structure

must be brought into compliance with ﬂoodplain management (and

building code) requirements for new construction based on ﬂood zone.

Work necessary to restore a substantially damaged structure to its pre-

damage condition constitutes substantial improvement, regardless of the

actual repair work performed. Therefore, when the NFIP regulations refer

to substantial improvement, repair of substantial damage is included.

Even if an owner proposes to perform less than all of the work necessary

to repair the damage completely, the determination must be made on the

cost to fully repair and restore the structure to its pre-damage condition.

See Section 3.4 of the

SI/SD Desk Reference

for other useful

denitions and terms.

See Sections 6.2 and

6.3 of the SI/SD Desk

Reference.

Requirements for

Compliance

See Question 4.

6 Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Section 2 Deﬁnitions, Regulations, and General Questions

If the total repair costs are equal to or greater than 50 percent of

the structure’s pre-damage market value, the structure must be

brought into compliance. The same requirements for structures that

are substantially improved apply to structures that are substantially

damaged.

Reconstruction of a completely destroyed building or manufactured home (or one that is voluntarily

demolished) is new construction, even if some or all of the original foundation is incorporated into the new

structure.

7. Which buildings and manufactured homes are subject to the

substantial improvement and substantial damage requirements?

Communities are responsible for evaluating permit applications to

perform work on buildings and manufactured homes in SFHAs,

including improvements (i.e., rehabilitations, alterations, and additions),

repairs, and reconstruction. After damaging events, local ofﬁcials

should proactively tour affected areas to identify buildings that should

be inspected or evaluated before repairs are started. Buildings that are

subject to the SI/SD requirements fall into two categories:

• Existing structures (sometimes called pre-FIRM structures). Existing

structures were already present when FEMA issued a community’s

initial FIRM. Because they pre-date the regulations, many existing

structures were not built in ways that recognized ﬂood hazards.

Existing structures are subject to the SI/SD requirements when

certain improvements are proposed and when they sustain substantial

damage.

• New construction (sometimes called post-FIRM structures). New

structures are those built after a community joined the NFIP.

Improvements and repairs of these structures, regardless of the

nature or value of the work, must not be allowed to alter any

aspect that was originally required for compliance with ﬂoodplain

management requirements. These structures are subject to the

SI/SD requirements if a FIRM has been revised and the BFE

increases, the ﬂood zone designation changes, or the ﬂoodplain

management regulations have changed.

8. What types of improvements might trigger the substantial

improvement requirement?

Any work on a building or manufactured home might be determined to

be substantial improvement, regardless of the type of work (or what it is

called), including:

• Rehabilitation or remodeling of a structure, with or without

modifying its external dimensions

Pre-FIRM and Post-FIRM

The NFIP uses these

insurance terms to

determine ood insurance

rates; they are tied to the

date of a community’s initial

FIRM. Using the terms to

identify buildings subject to

the SI/SD requirements is

common, but misleading.

Because FEMA periodically

revises FIRMs, sometimes

changing ood zones and

BFEs, reliance on “pre-

FIRM” and “post-FIRM”

terminology can lead to

incorrect interpretations.

Types of Work, in the SI/

SD Desk Reference, see:

Rehabilitation and

remodeling (Section 6.4.1)

Lateral additions (Section

6.4.2) and vertical

additions (Section 6.4.3)

Repair, reinforcement,

or replacement of

foundations (Section 6.4.4)

Repair of damaged

buildings (Section 6.4.5)

Reconstruction of

demolished or destroyed

buildings (Section 6.4.6)

Work on compliant

buildings (Section 6.4.7)

Work on buildings where

ood maps have been

revised (Section 6.4.8)

Elective Improvements

See Question 20.

Answers to Questions About Substantially Improved/Substantially Damaged Buildings 7

Deﬁnitions, Regulations, and General Questions Section 2

• Lateral additions that may or may not involve structural modiﬁcations of the load-bearing structure of the

existing structure

• Vertical additions

• Repair, reinforcement, or replacement of foundations, including extending existing foundations

• Repair of damage of any origin that is necessary to restore a structure to its pre-damage condition

• Work on structures that were compliant at the time of construction

• Work on existing structures where BFEs, ﬂood zones, or ﬂoodways have been revised

9. If a building or manufactured home is substantially improved or substantially damaged and is not

brought into compliance with community ﬂoodplain management regulations, how would that

impact NFIP ﬂood insurance rates and premiums?

When a building or manufactured home in the SFHA is substantially

improved or substantially damaged, the NFIP ﬂood insurance policy for

that structure will be rated using risk-based premium rates that depend

on the surveyed elevation of the lowest ﬂoor relative to the BFE. Risk-

based premium rates are actuarial rates that take into account the risk

of ﬂood damage. When a structure is elevated and brought into compliance with the requirements for new

construction, the cost of an NFIP ﬂood insurance policy generally will be lower than the premium calculated

based on discounted rates used for buildings built before communities joined the NFIP, called pre-FIRM

(see illustration on the next page). Communities require permittees to submit as-built surveyed lowest ﬂoor

elevations as a condition of permits for new construction and SI/SD.

If a building or manufactured home is substantially improved, or if a substantially damaged building or

manufactured home is repaired or rebuilt, and it is not brought into compliance, it is in violation of the

ﬂoodplain management requirements and the cost of an NFIP ﬂood insurance policy may be very high.

The annual premium could be more than 3 times the premium paid before the structure was improved

or repaired. When questions arise concerning how a proposed improvement might affect an NFIP ﬂood

insurance policy, property owners should obtain cost estimates from qualiﬁed insurance agents. The NFIP

may deny ﬂood insurance coverage for speciﬁc buildings if communities cite violations and owners refuse to

comply with the ﬂoodplain management requirements.

See Section 6.6 of the

SI/SD Desk Reference.

8 Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Section 2 Deﬁnitions, Regulations, and General Questions

Substantially Damaged, repaired

without permit or without proper

SI/SD determination, 3 feet below BFE

NFIP Premium: Zone A: $6,751

Zone V: $12,603

Substantially Damaged, repaired

and elevated to BFE

NFIP Premium: Zone A: $1,525

Zone V: $7,076

Pre-FIRM Building, before

damage, (independent of BFE)

NFIP Premium: Zone A: $2,247

Zone V: $4,950

Substantially Damaged, repaired

and elevated to 3 feet above BFE

NFIP Premium: Zone A: $318

Zone V: $3,538

The cost of

an NFIP ood

insurance policy

varies depending

on how a

substantially

damaged building

is repaired. The

example illustrated

is for a one-story,

single-family home

without basement

or enclosure.

Premiums shown

are based on

$250,000 building

coverage with

$2,000 deductible

(rates as of April

2018), without fees

and surcharges.

This gure is

for comparison

purposes only.

Answers to Questions About Substantially Improved/Substantially Damaged Buildings 9

Section 3

How to Determine Substantial Improvement

and Substantial Damage

This section addresses general questions about making SI/SD determinations. Questions in Section 4

typically arise after disasters.

10. What is the basis for determining whether a building or manufactured home is substantially

damaged? Is the basis for making a substantial improvement determination different?

When making a substantial improvement or substantial damage

determination, the calculation is the same: the cost of the

improvement (or the cost to repair to pre-damage condition) is

compared to the pre-improvement or pre-damage market value of the

structure:

Cost of Improvement or Cost to Repair to Pre-Damage Condition

Pre-Improvement or Pre-Damage Market Value of Building

≥

50%

When improvements to a building are proposed, the cost of the work

must include all labor and materials necessary to perform the work.

Minimum costs necessary to correct previously cited health, sanitary,

or safety code violations may be excluded. The market value of the

structure is the market value before the improvements are performed.

When repair of substantial damage is necessary, the cost of the work

must include all labor and materials necessary to fully restore the

structure to its pre-damage condition, even if the owner proposes to

perform less work or do the work over time. In addition, the value of

volunteer labor (including work performed by owners) and donated

materials must be estimated. The market value of the structure is the

market value before the damage occurred.

Who Makes SI/SD

Determinations?

See Question 3.

Determining Market Value

See Question 12.

Costs to Include & Exclude

See Questions 16 and 17.

Existing Violations

See Question 18.

See Chapter 4 of the

SI/SD Desk Reference.

10 Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Section 3 How to Determine Substantial Improvement and Substantial Damage

11. What level of accuracy is required when determining whether a building or manufactured home

is being substantially improved or has been substantially damaged?

Local ofﬁcials are responsible for reviewing the validity of all cost

estimates provided by applicants, whether prepared by licensed

contractors, engineers, architects, professional cost estimators, or

property owners. When applicants submit professional appraisals of

market value, local ofﬁcials should examine the documentation to

determine whether the appraisals reﬂect the speciﬁc characteristics of

the buildings. Local ofﬁcials also should inspect damaged buildings and manufactured homes to verify that

the proposed costs include all work necessary to restore the structures to pre-damage condition.

Estimates may be used for both costs and market values. To be consistent, local ofﬁcials should decide and

document in advance the estimation methods that will be used, especially in post-disaster situations when

many damaged structures may need to be evaluated to determine whether they have been substantially

damaged.

When using estimates, the closer the ratio of estimated costs to estimated market value is to 50 percent, the

greater the accuracy needed to make the SI/SD determination. Especially in the post-disaster period when

using estimates to focus attention on the structures for which additional data are needed, local ofﬁcials may

decide that if the ratio of estimated costs compared to estimated market value is less than 40 percent, no

further evaluation is necessary because the work obviously does not constitute SI/SD. Using that same logic,

the community may decide that if the ratio is greater than 60 percent, no further evaluation is necessary

because the work obviously does constitute substantial improvement. However, when the ratio falls between

40 percent and 60 percent, the local ofﬁcial may require the applicant to provide a detailed list of costs or to

obtain a professional appraisal of the structure’s market value.

12. For purposes of making SI/SD determinations, how should the market value of a building or

manufactured home be determined?

Market value refers to the price that a seller of real property can expect

to receive from a buyer in a fair and open negotiation. For SI/SD

determinations, only the market value of the building or manufactured

home is important (land, land improvements, and accessory structures

are excluded). In addition, the market value must always be based on

the condition of the structure before the improvement is undertaken

or before damage occurred. If structures have not been maintained and have deteriorated over time, then

the pre-improvement or pre-damage market values are the values as of the date applications for permits are

submitted.

Many communities require permit applicants to obtain appraisals of market value prepared by qualiﬁed

professionals who are licensed to perform appraisals in the State or community where the properties are

located. In addition, three other methods can be used to estimate market value:

• Values developed for property tax assessment purposes, adjusted to approximate market value

• Estimates of a structure’s actual cash value, including depreciation

• “Qualiﬁed estimates” based on the professional judgment of a local ofﬁcial

See Sections 4.2, 4.4, 4.5

and 7.4 of the SI/SD Desk

Reference.

See Sections 4.5 and

7.4 of the SI/SD Desk

Reference.

Answers to Questions About Substantially Improved/Substantially Damaged Buildings 11

How to Determine Substantial Improvement and Substantial Damage Section 3

Local ofﬁcials may need to use other methods to estimate market value

after disaster events that damage many structures, when it is important

to quickly and efﬁciently focus attention on those structures most likely

to have sustained substantial damage.

13. If property appraisals used for tax assessment purposes

are used to determine market value, what are some of the

limitations that should be considered?

Property assessment values determined by a State or local taxing

or assessment authority can be used if the values are adjusted to

reasonably represent market value. The assessor’s ofﬁce should provide

an adjustment factor that, when applied to assessed value, yields the

“adjusted assessed value,” which can be used as an estimate of market

value.

Local ofﬁcials who elect to use adjusted assessed values for making SI/SD determinations should consult with

the authority that prepared the assessment values to understand the limitations on use of the data. These

limitations are the length of the appraisal cycle (how old are the data), whether land value is listed separately,

and the assessment level (an established statutory ratio between the

assessor’s estimate of value and the true fair market value). If not

considered and accounted for, those limitations can produce erroneous

estimates of market value.

In post-disaster situations when no other market value estimates are

available or the number of permit applications is overwhelming,

unadjusted assessed values may sufﬁce as the estimate of market value.

14. Can actual cash value or replacement cost value be substituted as estimates for market value?

If depreciated to account for physical conditions, then actual cash value

(ACV) or replacement cost value (RCV) can be used to estimate market

value.

ACV is the cost to replace a structure on the same parcel with a new

structure of like kind and quality, minus depreciation due to age,

use, and neglect. ACV does not consider loss in value due simply to outmoded design or location factors.

Depreciation accounts for the physical condition of a structure. The concept of ACV is used in both the

insurance industry and the construction industry. In most situations, ACV is a reasonable approximation of

market value, provided depreciation is accounted for.

RCV is the cost to replace a structure on the same parcel with a new structure that is intended for the same

purpose and using comparable materials and quality (at the present day cost of materials and labor). The

concept of RCV is also used by both the insurance industry and the construction industry. Deﬁnitions may

vary from State to State.

RCV can be estimated easily, even when a large number of damaged structures must be assessed. Therefore,

local ofﬁcials may ﬁnd it useful to use RCV to estimate market values during the post-disaster period. However,

Post-Disaster Permitting

See Questions 26, 27,

and 28.

See Section 4.5.2 of the

SI/SD Desk Reference.

Post-Disaster Permitting

See Questions 26, 27,

and 28.

See Sections 4.5.3 and

7.4.3 of the SI/SD Desk

Reference.

12 Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Section 3 How to Determine Substantial Improvement and Substantial Damage

the older and more deteriorated a structure is, the greater the potential for a difference between RCV and

market value. Thus, local ofﬁcials who use RCV estimates for screening are advised to set a low threshold for

the ratio of cost to repair to RCV, such as 30 percent. In that case, any structure that the screening indicates

has a ratio value of greater than 30 percent would be examined carefully to ensure that valid cost estimates

and market values are used in the substantial damage determinations.

15. How are the costs of improvements and costs to repair determined?

“Costs of improvements” include the complete costs associated with all

of types of work being done. “Costs to repair” include the costs of all

work necessary to restore a damaged building or manufactured home

to its pre-damage condition. Both include the costs of all materials,

labor, and other items necessary to perform the proposed work. Most

costs must be included, although certain costs may be excluded.

Applicants for permits must provide estimates of the cost of the

proposed work. Acceptable sources of cost information include:

• Itemized costs of materials and labor, or estimates of materials and

labor that are prepared by licensed contractors or professional

construction cost estimators.

• Building valuation tables published by building code organizations

and cost-estimating manuals, and tools available from professional

building cost-estimating services.

• “Qualiﬁed estimates” of cost prepared by the local ofﬁcial using

professional judgment and knowledge of local and regional

construction costs.

• Structure owners may submit cost estimates that they prepare

themselves. Owners should submit as much supporting

documentation as possible.

Costs can also be estimated by using the FEMA Substantial Damage

Estimator (SDE) software. The program is most effective in the post-

disaster period, when many estimates of repair costs and many

substantial damage determinations must be made.

16. What items must be included in the cost of improvements or repairs?

Items that must be included in the costs of improvement are those directly associated with the work being

done on a building or manufactured home. The costs of repairs must include all work necessary to restore

a structure to its pre-damage condition. Whether determining costs

of improvement or costs of repairs, the determination must include

costs associated with complying with any other regulation or code

requirement that is triggered by the work. Any list of costs that must be

included cannot be exhaustive; however, the following list characterizes

the types of costs that must be included:

Included Costs

See Question 16.

Excluded Costs

See Question 17.

Donated and Owner

Labor Costs

See Questions 21 and 22.

See Section 4.4 of the

SI/SD Desk Reference.

Substantial Damage

Estimator (SDE)

See Question 29.

See Section 4.4.1 and a

sample Notice to Property

Owners, Contractors, and

Design Professionals in

Appendix D of the SI/SD

Desk Reference.

Answers to Questions About Substantially Improved/Substantially Damaged Buildings 13

How to Determine Substantial Improvement and Substantial Damage Section 3

• Materials and labor, including the estimated value of donated or discounted materials and owner or

volunteer labor

• Site preparation related to the improvement or repair, such as foundation excavation or ﬁlling in

basements

• Demolition and construction debris removal

• Labor and other costs associated with demolishing, moving, or altering structure components to

accommodate improvements, additions, and making repairs

• Costs associated with complying with other requirements and codes that may be triggered by the work

• Construction management and supervision

• Contractor’s overhead and proﬁt

• Sales taxes on materials

• Structural elements and exterior ﬁnishes, including:

" Foundations

" Monolithic and other types of concrete slabs

" Bearing walls, tie beams, trusses

" Joists, beams, subﬂooring, framing, ceilings

" Interior non-bearing walls

" Exterior ﬁnishes

" Windows and exterior doors

" Rooﬁng, gutters, and downspouts

" Hardware

" Attached decks and porches

• Interior ﬁnish elements, including:

" Floor ﬁnishes

" Bathroom tiling and ﬁxtures

" Wall ﬁnishes

" Built-in cabinets

" Interior doors

" Interior ﬁnish carpentry

" Built-in bookcases and furniture

" Hardware

" Insulation

• Utility and service equipment, including:

" Heating, ventilation, and air conditioning

(H VAC) equipment

" Plumbing ﬁxtures and piping

" Electrical wiring, outlets, and switches

" Solar panels and equipment

" Light ﬁxtures and ceiling fans

" Security and ﬁre, smoke, and CO2 warning

systems

" Built-in appliances

" Central vacuum systems

" Water ﬁltration, conditioning, and

recirculation systems

14 Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Section 3 How to Determine Substantial Improvement and Substantial Damage

17. What items can be excluded from the cost of improvements or costs of repairs?

Items that can be excluded are those that are not directly associated with

the structure. The following list characterizes the types of costs that may

be excluded:

• Clean-up and trash removal

• Costs to temporarily stabilize a structure so that it is safe to enter to

evaluate and identify required repairs

• Costs to obtain or prepare plans and speciﬁcations

• Land survey costs

• Permit fees and inspection fees

• Carpeting and recarpeting installed over ﬁnished ﬂooring, such as wood or tile

• Outside improvements, including landscaping, irrigation, sidewalks, driveways, fences, yard lights,

swimming pools, pool enclosures, and detached accessory structures

(e.g., garages, sheds, gazebos)

• Costs required for the minimum necessary work to correct existing

violations of health, sanitary, or safety codes

• Plug-in appliances, such as washing machines, dryers, and stoves

18. The NFIP deﬁnition of substantial improvement states: “the term does not, however, include any

project for improvement of a structure to correct existing violations of State or local health, sanitary,

or safety code speciﬁcations which have been identiﬁed by the local code enforcement ofﬁcial and

which are the minimum necessary to assure safe living conditions.” What does this mean?

To be excluded, the costs must be the minimum necessary to correct a

violation or condition that pre-dates the application and was previously

cited by an ofﬁcial who has the authority to enforce the community’s

health, sanitary, and safety codes. If substandard conditions are

identiﬁed by the owner or are discovered in the course of deciding what

work to perform, the costs to bring those substandard conditions up to code must be included. In addition,

the mere presence of a condition that does not conform to current codes does not qualify as a violation.

19. When a building or manufactured home is completely destroyed and a new structure will be built on

the old foundation or slab, is it considered a substantial improvement or new construction?

A building or manufactured home that is totally destroyed, or so

signiﬁcantly damaged that it cannot be repaired, is a substantially

damaged structure. However, any project that involves complete

reconstruction, even if rebuilt on the same foundation, is new

construction and must comply with all applicable ﬂoodplain

management and building code requirements. Sometimes owners elect to demolish structures located in

ﬂood hazard areas. In these circumstances, if the decision is to reconstruct using an existing foundation, the

reconstructed structure (including the existing foundation) must meet the requirements for new construction.

Existing Violations

See Question 18.

See Sections 4.4.2 and

4.4.7, and a sample

Notice to Property

Owners, Contractors,

and Design Professionals

in Appendix D of the SI/

SD Desk Reference.

See Section 4.4.8 of the

SI/SD Desk Reference.

See Section 6.4.6 of the

SI/SD Desk Reference.

Answers to Questions About Substantially Improved/Substantially Damaged Buildings 15

How to Determine Substantial Improvement and Substantial Damage Section 3

20. What happens if damage is determined not to be substantial damage and during repairs,

the owner wants to make other improvements to the building or manufactured home?

Local ofﬁcials often see applications for combinations of improvements

and repairs. In these cases, the combined costs of all work must be

used to make the SI/SD determination. For example, property owners

who make necessary repairs to damaged structures may elect to add

improvements at the same time. Applicants must provide the combined

estimated costs for all costs to repair buildings and all costs of proposed

improvements. The combined total cost is compared to the pre-damage or pre-improvement market value of

the structure to make the SI/SD determination.

If damage is initially determined not to be substantial damage or proposed improvements are initially

determined not to be substantial improvements, and the owner subsequently wants to add more work, the

permit must be modiﬁed. The cost of the additional work must be added to the costs used in the initial

determination and the local ofﬁcial must reevaluate the SI/SD determination. If the combined repairs and

improvements constitute substantial improvement, then the structure must be brought into compliance. Local

ofﬁcials should ensure proposed work is a complete project that does not depend on subsequent work, and

should discourage deliberate phasing to circumvent the substantial improvement requirements.

21. What if a building or manufactured home is substantially damaged but not fully restored, or is

repaired using donated or discounted labor and/or materials, such that the amount actually

spent on repairs is less than 50 percent of the structure’s market value?

By deﬁnition, a building or manufactured home is substantially damaged

if the cost to restore all damaged aspects to pre-damage condition

equals or exceeds 50 percent of the structure’s market value, regardless

of how much work the owner plans to do right away. Sometimes owners

decide to undertake restoration and repairs over time. Sometimes the

initial work is only the minimum necessary to make the structure safe

enough to reoccupy (provided such occupancy is allowed by the community). Sometimes the owner’s ﬁnancial

situation does not allow all of the repairs to be done at the same time. Even if an owner elects to perform less

work or delay repairs, the substantial damage determination must be made using the estimate of all costs to

fully restore the structure.

When repair work is done by owners or volunteers, or when labor costs are discounted by contractors, and

when materials are donated or discounted, the full costs must be estimated and included in substantial

damage determinations.

22. How are estimates for donated or discounted materials and the owner’s labor or

volunteer labor determined?

The value placed on all donated or discounted materials should be

equal to the full actual or estimated cost of such materials and must be

included in the total cost. Where materials or service equipment are

donated or discounted below market values, the costs should be adjusted

to amounts equivalent to normal market costs.

See Sections 5.6.1 and

5.6.2 of the SI/SD Desk

Reference.

See Sections 4.4, 5.6.2,

and 5.6.3 of the SI/SD

Desk Reference.

See Sections 4.4.4

(materials) and 4.4.5

(labor) of the SI/SD Desk

Reference.

16 Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Section 3 How to Determine Substantial Improvement and Substantial Damage

When property owners do their own work, or if volunteer labor is used, then the normal market value or

“going rate” for labor must be included in cost estimates. The value of labor should be estimated based on

applicable minimum hourly wage rates for the skill and type of construction work that will be done. Wage

rates can vary geographically.

In both cases, local ofﬁcials should verify the estimates based on professional judgment and knowledge of

local or regional material costs and construction industry labor wage scales.

23. What requirements apply when a substantially improved or substantially damaged building or

manufactured home is located in a coastal high hazard area (Zone V)?

Coastal high hazard areas are areas of special ﬂood hazard extending

from offshore to the inland limit of a primary frontal dune along an

open coast and any other area subject to high-velocity wave action from

storms or seismic sources. SFHAs where the waves are predicted to be 3

feet or higher are labeled Zone V on FIRMs.

In Zone V, substantially improved and substantially damaged buildings and manufactured homes must be

brought into compliance with the following requirements:

• Be elevated on open foundations (pilings or columns) that allow ﬂoodwater and waves to pass beneath

the elevated structures (ﬂoodprooﬁng is not allowed)

• Be elevated so that the bottom of the lowest horizontal structural member of the lowest ﬂoor is at or above

the BFE

• Have foundations anchored to resist ﬂotation, collapse, and lateral movement due to the effects of wind

and water loads acting simultaneously on all structure components

• Have areas beneath elevated structures free of obstructions that would prevent the free ﬂow of ﬂoodwater

and waves during a base ﬂood event

• Have utilities and structure service equipment elevated above the BFE

• Have the walls of enclosures below elevated structures designed to break away under base ﬂood conditions

without transferring loads to foundations

24. What requirements must be met if a substantially improved or substanially damaged

building or manufactured home is located in a ﬂoodway?

A ﬂoodway is the channel of a river or other watercourse and the

adjacent land areas that must be reserved (kept free of encroachments)

to discharge the base ﬂood without cumulatively increasing the

water surface elevation more than a designated height. Floodways

are delineated along most waterways that are studied using detailed

engineering methods.

If a building or manufactured home is located in a ﬂoodway, bringing it into compliance may involve having

a ﬂoodway encroachment analysis prepared if there is any increase in the footprint, such as a lateral addition

or increase in earthen ﬁll. The NFIP regulations require this analysis to be performed for any work that

See Section 5.6.9 of the

SI/SD Desk Reference.

See Section 5.6.8 of the

SI/SD Desk Reference.

Answers to Questions About Substantially Improved/Substantially Damaged Buildings 17

How to Determine Substantial Improvement and Substantial Damage Section 3

encroaches into a ﬂoodway. If the analysis indicates any increase in BFE, the local ofﬁcial must not allow the

proposed work. Using open foundations such as piers or columns may minimize the ﬂoodway impacts.

25. How are historic structures treated when they are substantially damaged or when

improvements are proposed?

Floodplain management regulations give special consideration to the

unique value of designated historic structures, which include structures

listed or preliminarily determined to be eligible for listing in the

National Register of Historic Places, structures certiﬁed or preliminarily

determined as contributing to the historical signiﬁcance of a registered

historic district, or structures individually listed on a State inventory of historic places or on local inventories

in communities with certiﬁed historic preservation programs. Note the NFIP has a speciﬁc deﬁnition for

historic structures. It does not include structures that are merely old, those that are referred to as historic, or

those that happen to be located in historic districts.

Provided historic structures retain their designations as historic structures, the requirement to bring

them into compliance does not apply if they will be substantially improved or have been substantially

damaged. Although compliance is not required for substantial improvement of historic structures, owners

should carefully consider the beneﬁts of implementing measures to minimize ﬂood damage. Guidance for

minimizing the impacts of ﬂooding on historic structures is found in Floodplain Management Bulletin: Historic

Structures (FEMA P-467-2).

Permit applications for improvements (including additions) or repairs of historic structures should be

accompanied by two pieces of evidence: (1) documentation that conﬁrms the structure is designated a historic

structure, and (2) documentation that conﬁrms the proposed work will not preclude the structure’s continued

designation.

Communities may elect to use one of two approaches to handle historic structures. One approach is to grant

variances, requiring evaluation of individual requests and consideration of conditions to make the structures

more resistant to ﬂood damage. The other approach is to exclude historic structures from the deﬁnition of

substantial improvement. Whichever approach is selected, it should be used in all cases when improvements or

repairs are proposed for historic structures.

See Section 6.5.1. of the

SI/SD Desk Reference.

18 Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Section 3 How to Determine Substantial Improvement and Substantial Damage

Answers to Questions About Substantially Improved/Substantially Damaged Buildings 19

Section 4

Post-Disaster Permitting

The questions in this section typically arise after a disaster, especially when many buildings or manufactured

homes are damaged. The questions and answers in Sections 2 and 3 still apply after disasters.

26. What are the permit requirements for buildings and manufactured homes that have been

substantially damaged?

Before starting to repair damaged buildings and manufactured homes,

property owners should always check with local permit authorities

to determine whether permits are required. Permits are typically

required to repair damage, and if a structure has been substantially

damaged, it must be brought into compliance with the community’s

ﬂoodplain management regulations. Note that it is not always easy to tell whether a damaged structure has

been substantially damaged because making that determination requires an estimate of the cost to repair the

damaged structure to its before-damage condition and an estimate of the market value of the structure before

the damage occurred.

27. Given the number of permit applications may be overwhelming in a post-disaster situation,

what should local ofﬁcials focus on to assess potential substantially damaged buildings and

manufactured homes?

Immediately after a damaging event occurs, the ﬁrst step in assessing

damage typically involves conducting an initial “windshield review” or

survey of the extent of damage, resulting in a broad characterization

of the number of buildings and manufactured homes affected and the

level of anticipated damage. This initial assessment, call a Preliminary

Damage Assessment, is usually a precursor to a decision regarding

whether to seek a declaration of the event as a major disaster.

The next step local ofﬁcials typically take is to conduct a rapid evaluation or structure condition survey of

affected areas. This is done to identify obviously unsafe structures and to identify those that will require a

permit before repairs are undertaken. This is the step where many communities use color-coded placards

to identify the structures that have been inspected and declared safe (green), those that have restricted use

(yellow), and those deemed unsafe (red).

See Sections 7.3, 7.4,

and 7.5 of the SI/SD Desk

Reference.

Existing Violations

See Questions 5 and 6.

20 Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Section 4 Post-Disaster Permitting

Preliminary Damage Assessments and safety evaluations are not equivalent to substantial damage

determinations. However, local ofﬁcials charged with performing building inspections and making substantial

damage determinations may ﬁnd the results useful to identify areas where signiﬁcant damage has occurred

and to coordinate their substantial damage inspections.

Although it is important to issue permits to allow property owners in SFHAs whose buildings have sustained

less than substantial damage to make repairs as soon as possible after a damaging event, it is equally important

to make substantial damage determinations and to enforce the substantial damage requirements. Failure to

do so means structures would remain vulnerable, may be in violation of ﬂoodplain management requirements,

and NFIP ﬂood insurance policies may have very high premiums.

Some readily available data can be used to estimate repair costs and market values. These estimates can be

used to screen damaged structures for those most likely to have sustained substantial damage. Comparing

readily available information on repair costs to readily available information on market value can give

local ofﬁcials a basic picture of which structures will require more

attention and more detailed information to make substantial damage

determinations. When using estimates, attention should be focused on

those buildings for which the resulting ratios fall within a range around

50 percent, such as between 40 and 60 percent. Even if more reﬁned

data are used, those with higher ratios are still likely to have incurred

substantial damage, while those with lower ratios are less likely to have

to meet the substantial damage threshold.

While the sources of information listed below should not be used to

make ﬁnal substantial damage determinations, local ofﬁcials can use

them to organize and focus efforts following disasters:

• Property owners who have insurance will receive estimates of damage from their insurance companies.

Because the basis used by insurance adjusters to estimate damage and the costs to repair are governed

by the terms of the insurance policy, these estimates cannot be used to make substantial damage

determinations. However, they are useful for screening to help identify the structures most likely to have

sustained substantial damage.

• Unadjusted assessment values can be used as estimates of market values to quickly screen damaged

structures to help focus attention on those for which more detailed information has to be provided.

• Replacement cost values can be used as estimates of market values to screen all damaged structures.

28. What options are available to help local ofﬁcials handle a large number of permit applications and

potentially substantially damaged buildings and manufactured homes after disasters?

Communities that have extensive ﬂoodplains and signiﬁcant numbers

of ﬂoodprone structures are encouraged to plan ahead to handle

the workload. Even with good planning, support may be necessary to

handle large numbers of damage inspections and permit applications.

In addition to support from the State and FEMA, resources may

be available from other communities, State ﬂoodplain management associations, State building code

associations, and organizations that represent engineers and architects. Some States and communities develop

mutual aid agreements, interlocal agreements, or some other mechanism to facilitate this post-disaster

See Section 7.2 of the

SI/SD Desk Reference.

Level of Accuracy

See Question 11.

Adjusted Assessment

Values

See Questions 12 and 13.

Replacement Cost Values

See Question 14.

Answers to Questions About Substantially Improved/Substantially Damaged Buildings 21

Post-Disaster Permitting Section 4

support. While help may be offered to perform inspections and gather data, perhaps using the FEMA SDE,

making ﬁnal SI/SD determinations and permit decisions remain the responsibility of local ofﬁcials in affected

communities.

Depending on the scale and severity of damage, some communities institute a full or partial moratorium on

issuing permits. Once the community has evaluated the magnitude, scope, and general location of potential

substantially damaged structures, the community may remove the moratorium. When mitigation projects

such as ﬂoodplain buyouts, elevation-in-place, or other measures are considered, it may be reasonable to delay

rebuilding until the pros and cons of such projects are evaluated.

29. What is the FEMA Substantial Damage Estimator (SDE) and how can it help in determining

substantial damage?

The SDE software offers a formalized approach to develop reasonable

estimates of structure values and reasonable estimates of the costs

to repair or reconstruct buildings. The SDE enables local ofﬁcials to

calculate a reasonable and defensible estimate of whether structures

have been substantially damaged and make substantial damage

determinations. The SDE is described in the Substantial Damage Estimator

(SDE) User Manual and Field Workbook, Using the SDE Tool to Perform

Substantial Damage Determinations (FEMA P-784).

The SDE can be used to evaluate damage by any cause (ﬂood, tornado, earthquake, etc.). The software allows

users to develop damage estimates by examining individual structure elements. Users can estimate damage

percentages for each described structure element. Using these percentages, the SDE produces an aggregate

“percent damage” for the structure as a whole. Because the SDE uses localized cost data and estimates of

market value (typically based on property assessments), communities should establish a procedure to handle

property owner appeals, especially when owners provide more detailed data for costs to repair and market

value.

30. When buildings and manufactured homes are substantially damaged by ﬂooding, how can local

ofﬁcials help property owners obtain the ﬁnancial beneﬁts of the Increased Cost of Compliance

(ICC) coverage that is as part of NFIP standard ﬂood insurance policies?

NFIP standard ﬂood insurance policies on buildings and manufactured

homes in SFHAs include ICC coverage. This coverage was authorized

by Congress to help pay the added costs of bringing structures

that are substantially damaged by ﬂooding into compliance with

the community’s ﬂoodplain management requirements for new

construction. ICC claims are paid any time ﬂood damage qualiﬁes and when local ofﬁcials make substantial

damage determinations, not just when major disasters are declared. Processing ICC claims, which involves

insurance adjusters, property owners, and local ofﬁcials, must be accomplished within speciﬁc timeframes.

As of 2018, the ICC coverage provides up to $30,000 toward the cost of bringing insured structures into

compliance. Additional guidance, brochures, frequently asked questions, and a policyholder processing

checklist are available online at https://www.fema.gov/increased-cost-compliance-coverage.

Compliance measures that can be paid with the ICC claim payment include elevation, relocation, demolition,

and dry ﬂoodprooﬁng (non-residential structures only).

See Section 7.5.1. of the

SI/SD Desk Reference.

Making Determinations

See Question 10.

See Section 7.6. of the

SI/SD Desk Reference.

22 Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Section 4 Post-Disaster Permitting

The community’s role helping property owners with ICC claims includes:

• Requiring compliance with all NFIP and local requirements.

• Collecting information and making substantial damage determinations.

• Informing property owners/policyholders about the requirement to bring structures into compliance and

working with them to determine the appropriate options to achieve compliance.

• Providing property owners/policyholders with letters documenting the substantial damage by ﬂooding

determination; the owner provides a copy to the claims adjuster to process the ICC claim.

• Issuing permits and inspecting construction.

• Performing ﬁnal inspections and issuing certiﬁcates of occupancy or letters stating the work to bring

the structure into compliance has been completed satisfactorily and that no variance was granted. This

evidence is required before policyholders receive the ﬁnal installment of their ICC claim payments.

31. What steps can local ofﬁcials take to inform citizens about the permit process and substantial

damage determinations?

Local ofﬁcials should recognize that citizens will have questions

about recovery and the process of obtaining inspections and permits.

Distributing substantial damage determinations may generate a number

of questions. Local ofﬁcials should be prepared to answer questions

throughout the post-disaster recovery phase.

Communities should consider developing and distributing guidance to citizens, property owners, contractors,

and design professionals on:

• The importance of having damaged structures inspected before repair work is started

• Activities that require a permit

• Activities that do not require a permit

• The ﬂoodplain management requirements that apply when structures in the SFHA are substantially

damaged and what it means to bring those structures into compliance

• The availability and beneﬁts of the ICC coverage that is part of NFIP standard ﬂood insurance policies on

structures in mapped SFHAs

• The importance of hiring licensed contractors and cautions about fraudulent and unlicensed entities that

may take advantage of victims in areas affected by signiﬁcant events

• The importance of including damage-reduction measures to minimize future ﬂood damage, even if such

measures are not required by the community’s ﬂoodplain management regulations

32. Because of the trauma and inconvenience people experience during and after disasters, can

communities suspend permit requirements for the repair of damaged buildings and manufactured

homes in post-disaster situations?

No, requirements for buildings and structures in SFHAs must not be

suspended or waived. Sometimes there is pressure on local ofﬁcials to

suspend issuing permits or to waive requirements that are perceived

See Sections 5.5 and

7.9 of the SI/SD Desk

Reference.

See Section 7.1. of the SI/

SD Desk Reference.

Answers to Questions About Substantially Improved/Substantially Damaged Buildings 23

Post-Disaster Permitting Section 4

to delay recovery, but returning structures to their pre-ﬂood condition

leads to repetitive ﬂood damage. Yielding to such pressure would

expose people and their properties to future damage. In addition,

allowing repairs and reconstruction of substantially damaged structures

means the owners would have very costly NFIP ﬂood insurance

premiums. Moreover, if a community fails to properly administer its ﬂoodplain management requirements for

substantially damaged structures, its standing in the NFIP could be jeopardized.

Communities may decide to waive permit fees after signiﬁcant damage events to be responsive to the needs of

property owners. However, waiving fees does not waive the requirement for property owners to obtain permits

and comply with the requirements.

33. Can variances to the substantial damage requirements be granted?

Generally, no. Local ﬂoodplain management regulations have criteria

for variances that must be satisﬁed even in the post-disaster recovery

period. A variance is a grant of relief from the terms of a code or

regulation. If granted, a variance allows construction in a manner that

is otherwise prohibited. Granting variances to the requirements would

allow property owners to repair and rebuild in ways that will continue to

expose their buildings to ﬂooding. Especially when damage was caused by ﬂooding, it is difﬁcult to conceive of

situations where waiving the requirement to elevate substantially damaged buildings could be justiﬁed.

NFIP ﬂood insurance policies written on new construction and

substantially improved buildings are rated based on risk (primarily

elevation relative to BFE). Even if variances are issued to allow the

substantially damaged buildings to be repaired without elevating and

bringing them into compliance, the cost of ﬂood insurance policies will

be high.

34. What steps can communities take to prepare to implement the substantial damage

requirement during the post-disaster period?

There are several ways communities can effectively administer

ﬂoodplain management responsibilities after disasters occur. Some

successful actions include:

• Brief elected ofﬁcials as soon as possible after an event to inform

them of the community’s responsibilities to:

" Issue permits for repair and reconstruction

" Make substantial damage determinations for buildings located in mapped SFHAs

" Explain what it means to bring substantially damaged structures into compliance with current

ﬂoodplain management standards

" Explain the NFIP ICC coverage that is part of NFIP ﬂood insurance policies on buildings in SFHAs

" Share the materials developed to communicate with citizens

NFIP Insurance Rates

See Question 9.

NFIP Insurance Rates

See Question 9.

See Sections 5.6.7 and

7.8 of the SI/SD Desk

Reference.

See Section 7.2 of the SI/

SD Desk Reference.

24 Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Section 4 Post-Disaster Permitting

• Ask electric utility companies and community utility departments to turn on service only when property

owners provide copies of building permits or evidence that permits are not required

• Establish a routine to drive through affected areas to check for unpermitted construction work

• Depending on the scale and severity of damage, institute a full

or partial moratorium on issuing permits to allow evaluation of

potential substantially damaged structures and possible mitigation

projects

• Keep records in a format that allows plotting by a geographic

information system (GIS) to easily document the status of damaged

structures

• Plan ahead to handle the workload, perhaps by developing mutual

aid agreements, interlocal agreements, or other support, and by

learning to use the SDE before disasters to facilitate use after

disasters

35. What information should local ofﬁcials share with property owners during the post-disaster period?

Communications with property owners will take place throughout the

post-disaster recovery period. Immediately after an event, communities

should be prepared to provide information about cleanup and repairs

and to caution property owners not to perform any work that requires a

permit until a permit is obtained, except work necessary to temporarily

stabilize structures so they are safe to enter.

Local ofﬁcials should recognize that there may be questions from

property owners about permit requirements and what it means if

they receive a substantial damage determination. Many communities

distribute notices to property owners, contractors, and design professionals summarizing the SI/SD

requirements and listing costs to be included in estimates. This booklet can be made available to property

owners, contractors, engineers, architects, and other interested parties.

36. Are there grant programs available to communities to help property owners whose buildings or

manufactured homes have been substantially damaged?

Yes. FEMA, working through the States, administers a number of

mitigation grant programs that allow communities to apply for

funds to implement a variety of ﬂood mitigation projects. Projects

that may help owners of substantially damaged structures include

acquisition of property (and demolition or relocation of structures),

elevating structures in-place on higher foundations, relocating structures to sites outside of SFHAs, and dry

ﬂoodprooﬁng (applicable only to non-residential structures and historic structures).

Each of FEMA’s hazard mitigation grant programs has speciﬁc requirements, notably that projects must

be cost effective, which may be determined by a beneﬁt-cost analysis. Visit https://www.fema.gov/hazard-

mitigation-assistance for more information about the following grant programs:

Federal Assistance

See Question 36.

See Chapter 8 of the SI/

SD Desk Reference.

See Section 7.9 and

a sample Notice for

Property Owners,

Contractors, and Design

Professionals in Appendix

D of the SI/SD Desk

Reference.

Substantial Damage

Estimator (SDE)

See Question 29.

Answers to Questions About Substantially Improved/Substantially Damaged Buildings 25

Post-Disaster Permitting Section 4

• Pre-Disaster Mitigation (PDM) Program. This nationally competitive program provides funds to States,

territories, federally-recognized tribes, and local governments to implement cost-effective hazard

mitigation activities that complement a comprehensive mitigation program.

• Hazard Mitigation Grant Program (HMGP). These funds are available following Presidential disaster

declarations. Eligible applicants include States, territories, federally-recognized tribes, local governments,

and some private non-proﬁt organizations. Communities may apply for HMGP assistance on behalf of

affected individuals and businesses, and all funds must be used to reduce or eliminate losses from future

disasters.

• Flood Mitigation Assistance (FMA) Program. This program provides funding to States, territories,

federally-recognized tribes, and local governments to implement measures that reduce or eliminate the

long-term risk of ﬂood damage to buildings and manufactured homes that are insured by the NFIP.

26 Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Section 4 Post-Disaster Permitting

Answers to Questions About Substantially Improved/Substantially Damaged Buildings 27

Publications and Resources Appendix A

Appendix A

Publications and Resources

Free hard copies of FEMA Building Science’s current publications may be ordered by calling the FEMA

Publication Warehouse at 1-800-480-2520, Monday through Friday between 8:00 AM and 5:00 PM (EST),

by faxing a request to 1-240-699-0525, or by emailing FEMA-Publications-Warehouse@fema.dhs.gov. Please

include the publication title and number, quantity of each publication, and the requestor’s name, address, zip

code, and daytime telephone number.

FEMA F-084, Answers to Questions about the National Flood Insurance Program. Washington, DC: Federal

Emergency Management Agency, 2011.

https://www.fema.gov/media-library/assets/documents/272

FEMA P-85, Protecting Manufactured Homes from Floods and Other Hazards: A Multi-Hazard Founda¬tion and

Installation Guide, Second Edition. Washington, DC: Federal Emergency Management Agency, 2009.

https://www.fema.gov/media-library/assets/documents/2574?id=1577

FEMA P-259, Engineering Principles and Practices of Retroﬁtting Flood-Prone Residential Structures, Third

Edition. Washington, DC: Federal Emergency Management Agency, 2012.

https://www.fema.gov/media-library/assets/documents/3001?id=1645

FEMA 301, Increased Cost of Compliance Coverage: Guidance for State and Local Ofﬁcials. Washing¬ton, DC:

Federal Emergency Management Agency, 2003.

https://www.fema.gov/increased-cost-compliance-coverage

FEMA P-312, Homeowner’s Guide to Retroﬁtting: Six Ways to Protect Your Home from Flooding, Third Edition.

Washington, DC: Federal Emergency Management Agency, 2014.

https://www.fema.gov/media-library/assets/documents/480

FEMA P-347, Above the Flood: Elevating Your Floodprone House. Washington, DC: Federal Emergency

Management Agency, 2000.

https://www.fema.gov/media-library/assets/documents/725

FEMA P-467-2, Floodplain Management Bulletin: Historic Structures. Washington, DC: Federal Emergency

Management Agency, 2008.

https://www.fema.gov/media-library/assets/documents/13411?id=3282

FEMA P-499, Home Builder’s Guide to Coastal Construction: Technical Fact Sheets. Washington, DC: Federal

Emergency Management Agency, 2010.

https://www.fema.gov/media-library/assets/documents/6131?id=2138

FEMA 511, Reducing Damage from Localized Flooding: A Guide for Communities. Washington, DC: Federal

Emergency Management Agency, 2005.

https://www.fema.gov/media-library/assets/documents/1012

28 Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Appendix A Publications and Resources

FEMA 551, Selecting Appropriate Mitigation Measures for Floodprone Structures. Washington, DC: Federal

Emergency Management Agency, 2007.

https://www.fema.gov/media-library/assets/documents/10618?id=2737

FEMA F-663, Increased Cost of Compliance Brochure. Washington, DC: Federal Emergency Man¬agement

Agency, 2017.

https://www.fema.gov/media-library/assets/documents/12164

FEMA P-758, Substantial Improvement/Substantial Damage Desk Reference. Washington, DC: Federal

Emergency Management Agency, 2010.

https://www.fema.gov/media-library/assets/documents/18562?id=4160

FEMA P-784, Substantial Damage Estimator (SDE) User Manual and Field Workbook, Using the

SDE Tool to Perform Substantial Damage Determinations. Washington, DC: Federal Emergency

Management Agency, 2017.

https://www.fema.gov/media-library/assets/documents/18692

FEMA P-936, Floodprooﬁng Non-Residential Buildings. Washington, DC: Federal Emergency

Management Agency, 2013.

https://www.fema.gov/media-library/assets/documents/34270

FEMA P-1080, Answers to Frequently Asked Questions About Increased Cost of Compliance. Washington, DC:

Federal Emergency Management Agency, 2017.

https://www.fema.gov/media-library/assets/documents/142200

FEMA, NFIP Technical Bulletin Series. Washington, DC: National Flood Insurance Program.

https://www.fema.gov/nﬁp-technical-bulletins

U.S. Government Printing Ofﬁce. Title 44, Code of Federal Regulations, Emergency Management and

Assistance, (Parts 59 and 60).

https://www.gpo.gov/fdsys/pkg/CFR-2017-title44-vol1/content-detail.html

Answers to Questions About Substantially Improved/Substantially Damaged Buildings 29

Contact Information for NFIP State Coordinating Agencies and FEMA Regional Ofﬁces Appendix B

Appendix B

Contact Information for NFIP State Coordinating

Agencies and FEMA Regional Ofﬁces

NFIP State Coordinating Agencies

Every State and territory has an ofﬁce or agency designated as the NFIP State Coordinating Agency, usually

called the NFIP State Coordinator. Contact information is available at http://www.ﬂoods.org.

FEMA Regional Ofﬁces

Regional ofﬁce addresses and contact information are shown below and are available at

https://www.fema.gov/fema-regional-ofﬁce-contact-information.

FEMA Regions and Location of Regional Ofﬁces

Alaska

American

Samoa

Guam Hawaii

CNMI

Virgin

Islands

Puerto

Rico

Washington, DC

Philadelphia

Kansas City

Bothell

Denton

Atlanta

Boston

New York

Oakland

Chicago

Denver

30 Answers to Questions About Substantially Improved/Substantially Damaged Buildings

Appendix B Contact Information for NFIP State Coordinating Agencies and FEMA Regional Ofﬁces

FEMA Region Contact Information

FEMA

Region States and Territories Address Telephone

Region

Connecticut, Maine,

Massachusetts, New Hampshire,

Rhode Island, Vermont

Federal Emergency Management Agency

99 High Street

Boston, MA 02110

877.336.2734

Region

New Jersey, New York, Puerto

Rico, U.S. Virgin Islands

Federal Emergency Management Agency

26 Federal Plaza

New York, NY 10278-0002

Region II Caribbean Address

Federal Emergency Management Agency

Caribbean Division

New San Juan Ofce Building

159 Calle Chardon, 6th Floor

Hato Rey, PR 00918

212.680.3600

Region

III

Delaware, District of Columbia,

Maryland, Pennsylvania, Virginia,

West Virginia

Federal Emergency Management Agency

615 Chestnut Street

One Independence Mall, Sixth Floor

Philadelphia, PA 19106-4404

215.931.5500

Region

Alabama, Florida, Georgia,

Kentucky, Mississippi, North

Carolina, South Carolina,

Tennessee

Federal Emergency Management Agency

3003 Chamblee Tucker Road

Atlanta, GA 30341

770.220.5200

Region

Illinois, Indiana, Michigan,

Minnesota, Ohio, Wisconsin

Federal Emergency Management Agency

536 South Clark Street, 6th Floor

Chicago, IL 60605

312.408.5500

Region

Arkansas, Louisiana,

New Mexico, Oklahoma, Texas

Federal Emergency Management Agency

FRC 800 North Loop 288

Denton, TX 76209-3698

940.898.5399

Region

VII

Iowa, Kansas, Missouri,

Nebraska

Federal Emergency Management Agency

9221 Ward Parkway, Suite 300

Kansas City, MO 64114-3372

816.283.7061

Region

VIII

olorado, Montana,

North Dakota, South Dakota,

Utah, Wyoming

Federal Emergency Management Agency

Denver Federal Center

Building 710, Box 25267, Denver, CO 80225-0267

303.235.4800

Region

Arizona, California, Guam,

Hawaii, Nevada, Commonwealth

of Northern Mariana Islands,

Republic of the Marshall Islands,

Federated States of Micronesia,

American Samoa

Federal Emergency Management Agency

1111 Broadway, Suite 1200

Oakland, CA 94607-4052

510.627.7100

Pacic Area

Ofce:

808.851.7900

Region

Alaska, Idaho, Oregon,

Washington

Federal Emergency Management Agency

Federal Regional Center

130 228th Street, Southwest

Bothell, WA 98201-8627

425.487.4600