Three Things to Know About New HUD FFRMS Rule
In late April, the Department of Housing and Urban Development (HUD) announced a final rule in the Federal Register to implement the Federal Flood Risk Management Standard (FFRMS). For those who are unfamiliar with the scope of HUD’s responsibilities, they are the federal agency responsible for national policy and programs that address America’s housing needs, improve and develop the nation’s communities, and enforce fair housing laws. HUD’s programs touch virtually every community: from rental assistance through Section 8 vouchers to mortgage finance through the Federal Housing Administration (FHA), and to community development assistance through Community Development Block Grants (CDBG). Because HUD’s fingerprints are everywhere, their final rule to implement the FFRMS may be one of the most significant among all federal agencies. To ensure its success, all of us are going to have to do our part and we don’t have much time to spare — much of the rule becomes effective June 24, 2024 while other aspects of it take effect January 1, 2025.
While this rule has many significant features, I want to highlight three of the most important changes impacting us as floodplain managers:
- the preference for defining the FFRMS floodplain by the Climate Informed Science Approach;
- the new requirement in the Minimum Property Standards, and
- the new flood Notification of Flood Hazard requirements.
I urge all of you to ponder these new provisions and how your communities can best help address them.
CISA First
The new rule establishes a preference for (but does not yet require) use of a Climate Informed Science Approach (CISA) to determine the floodplain of concern for HUD-funded projects, when possible. The floodplain identified using CISA provides the elevation and flood hazard area that results from using a climate-informed science approach based on best-available, actionable hydrologic and hydraulic data. CISA maps can provide more accurate and forward-looking information than existing Flood Insurance Rate Maps (FIRMs), many of which have not been updated in years or even decades. When CISA maps are not available for a particular HUD-funded project, the rule provides multiple alternate approaches to identify the FFRMS floodplain, including adding freeboard to the 100-year flood elevation Freeboard Value Approach (FVA) or using the 500-year flood elevation. This means with or without available CISA mapping, there will be a predictable and practicable option for compliance with the rule that still promotes resilience.
What I find important about the rule is that when a community has developed CISA data — and we are now entering an era where some communities are doing that — there is a process whereby HUD can recognize and utilize that best locally available data for CISA. Given that HUD has not yet endorsed any Federal CISA data, this will occur gradually over time. In the meantime, there is a Federal Flood Standard Support Tool (FFSST) to help with determining CISA, FVA ,or 500-year floodplain for a site.
Minimum Property Standards – New 2 Foot Freeboard Requirement
Perhaps one of the most widespread of all HUD’s programs is the availability of Federal Housing Administration (FHA) loans. An FHA loan is a mortgage that is insured by the FHA. The FHA doesn’t directly lend money, but instead provides mortgage insurance to private lenders who are approved by the FHA. Just how important are FHA loans nationally? According to FHA’s Fiscal Year 2023 report, FHA endorsed 580,000 home purchase mortgages through its forward mortgage program, and over 82 percent went to first-time homebuyers. The original mortgage amount of all endorsed forward mortgages, including both purchase and refinance mortgages, in FY 2023 totaled $208 billion.
FHA financing represents a significant source of financing for first-time homebuyers and is therefore important in nearly all communities. What happens then, if new housing doesn’t meet HUD’s minimum property standards? It doesn’t qualify for a FHA mortgage! Beginning on January 1, 2025, the new minimum property standards will kick in and require that, in order to qualify for a HUD mortgage (and this also applies to low-rent public housing programs), the lowest floor must be two feet above the base flood elevation (2-foot freeboard requirement), if the home is in an identified Special Flood Hazard Area (SFHAs).
In my opinion, any community that doesn’t have a 2-foot freeboard in their ordinance will be risking cutting off a vital source of mortgage funding because it is impossible to pre-identify which homes might have a buyer that will need FHA financing. Again, this will only apply to new construction and only in mapped SFHA’s. Given that it takes time to adopt changes to local floodplain management codes, I urge you to consider adopting at least a 2-foot freeboard if your community hasn’t already done so then you will not have to worry which homes meet the new Minimum Property Standard requirement.
Notification of Flood Hazard Requirements
HUD’s final rule includes several strong and important notification requirements, such as the requirement that HUD (or HUD’s designee) or the responsible entity must ensure that any party participating in a financial transaction for a property located in a floodplain and any current or prospective tenant is notified of the hazards of the floodplain location is retained. In addition, 24 CFR 55.4 defines the notification requirements for property owners, buyers, developers, and renters and identifies specific hazards and information that must be included in these notices based on the interests of these parties.
The required information for owners, buyers, and developers includes the requirement or option to obtain flood insurance, the approximate elevation of the FFRMS floodplain, proximity of the site to flood-related infrastructure including dams and levees, ingress and egress or evacuation routes, disclosure of information on flood insurance claims filed on the property, and other relevant information such as available emergency notification resources. For HUD-assisted, HUD-acquired, and HUD-insured rental properties, new and renewal leases are required to include acknowledgements signed by residents indicating that they have been advised that the property is in a floodplain and flood insurance is available for their personal property. Renters must also be informed of the location of ingress and egress or evacuation routes, available emergency notification resources, and emergency procedures for residents in the event of flooding. HUD encourages a proactive and systematic approach to notification requirements for properties in floodplains to ensure that prospective buyers and renters are made aware of potential flood risk so that they can make risk-informed decisions.
The way I translate the proactive and systematic approach is that all of us in the floodplain management community need to think about how to provide this information. For example, how would somebody find the proximity of the site to flood-related infrastructure, such as dams and levees? State, regional and local authorities typically maintain that information; are there systems available to provide this information to owners, buyers, and developers? Ingress and egress or evacuation routes, emergency procedures for residents and emergency notification contacts are typically maintained by local authorities — again, hypothetically how would or could folks easily get that information? In terms of flood claims filed on the property, while FEMA can provide that for existing property owners, are FEMA’s systems ready to handle a large number of requests in a timely manner? The point is that the new notification requirements are going to be a bit of a lift on everyone’s part and local floodplain managers in particular need to be aware of the new pieces of data that they need to be providing. HUD is currently developing further guidance on these notification requirements.
If you are a local or state floodplain manager, one good resource is the two webinars that HUD has developed for the FFRMS implementation. The first of those webinars occurred on May 30 but you can watch the recording and view the slides. The next webinar, which includes more information on the notification requirements, will be held on June 13.
As flood disaster costs rise at an unsustainable rate, HUD’s rule for implementing the FFRMS is both strong and necessary. It is also equitable. One thing I particularly appreciate about the rule is that poor and disadvantaged homeowners and renters are expected to have the same level of flood protection as someone who has the means to afford it. I applaud the vision and the perseverance of HUD to get the final rule completed, and ASFPM is committed to working with HUD through this implementation period. It is critical that floodplain managers in our states and communities are aware of not only these three items highlighted in my column, but the many other elements of the new FFRMS rule so together we can reduce flood losses in the nation.
Your partner in loss reduction,
