Substantial Improvement
Substantial Improvement
Don Glondys, CFMRAMPP
FEMA Region III National Flood Insurance Program (NFIP)
Essentials and Best Practices
1Photo source: FEMA Region III.AgendaIntent of the Substantial
Improvement (SI) provisionDefining SIThe Communitys Role in SI
Determinations Best PracticesEnforcement of Violations
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2Reduce Risk to Existing StructuresOpportunity to break the
cycle of disaster damage, reconstruction, and repeated
damage.Reduce future costs associated with property
damages.Opportunity to build stronger, safer, and smarter
communities that are better able to reduce impacts from future
flooding and disasters. Communities that participate in the NFIP
are required to determine whether improvements to existing
structures within the Special Flood Hazard Area (SFHA) meet the
NFIP criteria for substantial improvement.
3Intent of the Substantial Improvement Provision
The only provisions within your floodplain ordinance that will
ever reduce risk to existing structures over time are the
substantial improvement and substantial damage provisions. The SI
provisions identify a threshold of investment above which
improvements need to be done in a stronger, safer, smarter way.
The intent of the SI requirement within the NFIP is to reduce or
eliminate future flood damages for existing structures.
Smart building reduces future losses and recovery times for both
residents and community officials.
In addition to better designs or elevating structures to or
above the BFE, communities can also encourage the use flood
resistant building materials.3Making SI DeterminationsTypes of work
that may trigger SI requirements: Remodeling the interior of a
building with or without modifying its external dimensionsRepairing
foundations, including replacing or extending foundationsLateral
additions that may or may not involve structural modifications of a
buildingVertical additionsSubstantially damaged buildings4
Source: FEMA Region III, Yardley, PennsylvaniaVertical addition
of a substantial improvement
These are some typical improvements that may involve SI.
4Defining Substantial ImprovementSubstantial Improvement (SI):
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 which have incurred substantial
damage, regardless of the actual repair work performed.5Percent
Improvement =Cost of ImprovementPre-Improvement Market Value of
Structure
SI is defined under 44 CFR 59.1
SI is required under 44 CFR 60.3
The SI equation is simply the cost of the improvement divided by
the pre-improvement market value of the structure.
5Community SI ResponsibilitiesReview permit
application.Determine the cost of improvement of the
structure.Determine the market value of structure.Make an SI/SD
determination.Communicate determinations to structure owner.Permit
development in compliance with local ordinance.Conduct
inspections.Maintain compliance documentation.
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It is the responsibility of local communities as participating
communities in the National Flood Insurance Program, and as the
enforcement agents for the Building Code, to determine if an
improved structure is in a FEMA mapped flood hazard area and, if
so, to determine if the proposed work involves substantial
improvement.
If a structure is located within the SFHA and is proposed for
substantial improvement, it must then meet the flood protection
requirements of the local floodplain management ordinance.
The NFIP regulations inform local officials of what they have to
do, but not how to do it.
Administering the SI requirements requires local officials to
perform four major actions: Determine pre-improvement market
values.Determine improvement costs.Make SI determinations.Require
owners with SI to obtain permits to bring substantially improved
structures into compliance with the local building code and
floodplain ordinance.
6Reviewing Permit ApplicationsEvery development application in
the Special Flood Hazard Area (SFHA) must be evaluated for SI.
Ensure permit applications include both market value and the costs
of the proposed improvement.Substantial Improvements of existing
structures are treated like new construction in local
ordinances.Inform applicant of flood insurance considerations.
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Use the communitys current FIRM and FIS report to determine if
the structure is located within the Special Flood Hazard Area
(SFHA)
If needed, transfer the floodplain boundaries to a community
base or GIS map.
All improvements to post-FIRM structures must meet current
ordinance and building codes regardless of size or cost.
Flood Insurance Considerations - if the structure is not
currently in the floodplain but is proposed to expand into the
floodplain,the entire structure is considered in the floodplain and
must be evaluated for SI/SDmandatory flood insurance purchase
requirements will applya new EC may be requireda structurally
attached deck could trigger this requirement, even if not a
SI7Determine Costs of ImprovementCosts of Improvement includes the
complete costs associated with the proposed improvements on the
structureAcceptable sources of cost information:Itemized
construction cost estimatesBuilding valuation tablesQualified
estimates8
Acceptable sources of cost information:
Itemized construction cost estimates includes estimates of
materials and labor, and should be submitted by a licensed
contractor
Building valuation tables published by building code
organizations and cost-estimating manuals/software/other tools.
These are acceptable so long as the regional differences in prices
have been taken into account
Qualified estimates these include estimates as prepared by the
local official or floodplain administrator using his/her
professional judgment. This is more likely to be done
post-disaster.
8Determine Costs of ImprovementCosts that must be
includedMaterials and labor (actual or estimated costs, not
discounted or owner labor)Site prep workDemo and debris
removalExterior (foundation, exterior finishes, windows, doors,
attached deck/porches )Interior finishes (flooring, wall finishes,
built-in cabinets)Utilities (HVAC, plumbing, electrical, lighting,
built-in appliances, security systems) Costs that can be
excludedClean-up/trash removalLand surveying costsCost to obtain
plans/specsPermit and inspection feesCosts to correct previously
cited heath/safety/sanitary violationsOutside improvements
(landscaping, sidewalks, detached accessory structures)Plug-in
appliances
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This is not an exhaustive list.
Estimates of donated/discounted materials the value placed on
all donated or discounted materials should be equal to the actual
or estimated costs of such materials and MUST be included in the
total cost estimate.
Some property owners may propose to make some of the proposed
improvements themselves without the use of a contractor. When
owner/volunteer labor is proposed, the going rate for labor MUST be
included in the cost estimate for the improvement. The value placed
on labor should be estimated based on applicable minimum-hour wage
scales for the skill and type of construction work to be done.
Any project to correct previously cited violations of any codes
identified by the local code enforcement official and which are the
minimum necessary to assure safe living conditions is not
considered as SI.
9Determine Market Value of StructureMarket Value the value of
the structure before the start of construction of the improvement
Acceptable sources of cost information:Professional appraisals by a
state-licensed appraiser.Adjusted assessed tax value (with or
without multiplier).Estimates of Actual Cash Value (ACV)"Qualified
estimates" based on sound, professional judgment made by staff of
the local building department or local or State tax assessor's
office (not recommended). 10
Remember, market value is the value of a structure before the
start of construction of the improvement. Though the NFIP does not
define market value, a general rule of thumb is that this is the
amount an owner would be willing to, but not obliged to accept, and
that a buyer would be willing to, but not compelled to pay.
Market value is always based on the condition of the structure
before the improvement is undertaken. Only the market value of the
structure is pertinent; the value of the land and site improvements
are not included.
Two homes built identically may have very different
percent-improvement results. For example, for two identical homes
proposing similar renovations on the structures, one may have SI
and the other may not. It depends on the pre-improvement market
value of the homes. If one home has had normal maintenance and the
other has been badly neglected, the pre-improvement valuations may
be significantly different so that the same amount of improvement
costs would substantially improve one but not the other.
The community floodplain administrator is responsible for
assuring that market value is reasonably accurate.
The ACV is based on a unit cost (cost per square foot), the
square footage for the building, a geographic adjustment factor,
add-ons such as a porch or enhancements such as upgraded flooring,
and a depreciation rating based on the pre-improvement condition of
the building.
The adjusted assessed tax value will come from the community or
county Tax Assessor's office. Tax assessed values must include a
factor that adjusts the assessed value to market value to provide
values that are comparable to the ACV. This is the data source most
communities use and is easiest to verify and apply uniformly.
Due to the cost, communities rarely use professional appraisals
for their initial building values. However, building owners that
appeal a SI determination may submit an appraisal at their own
expense.
10SI Determination Process11
FEMA Substantial Improvement/Substantial Damage Desk Reference,
Figure 4-1
Here is where you discuss the remaining steps in the
process:
Communicate determinations to structure owner.
Permit development in compliance with local ordinance.
Conduct inspections.
Maintain compliance documentation.
11Remodeling pre-FIRM Structures Substantially Improved
Residential StructuresLowest floor must be elevated to or above the
BFE
12
FEMA Substantial Improvement/Substantial Damage Desk Reference,
Figure 6-1
When an improvement meets the SI threshold, structures are
required to comply with the applicable regulations for new
construction in the SFHA.
Some improvements that have been determined to be SI may not be
visible from the street or other external views.
The community needs to be consistent on what is considered
maintenance, basic repairs, and an improvement.
This includes:Elevation of the lowest floor to or above
BFEElevation of mechanical components and utilitiesAdequate
foundation openings below the BFEAnchoring to prevent floatation,
collapse, and lateral movement
12Remodeling pre-FIRM Structures Substantially Improved
Non-Residential StructuresLowest floor elevated to or above the BFE
(A and V Zones) or dry floodproofed (A Zones)13
FEMA Substantial Improvement/Substantial Damage Desk Reference,
Figure 6-2
When an improvement to a non-residential structure meets the SI
threshold, structures are required to comply with the applicable
regulations for new construction in the SFHA.
This includes:Elevation of the lowest floor to or above BFE OR
floodproofing below the BFEElevation of mechanical components and
utilities (as applicable)Adequate foundation openings below the BFE
(as applicable)Anchoring to prevent floatation, collapse, and
lateral movement
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Lateral AdditionsLateral additions expand the floor area of the
building14Lateral addition, structurally connected SILateral
addition, not structurally connected - SIAddition required to
comply; existing building required to comply Addition required to
comply; existing building NOT required to comply Not structurally
connectedStructurally connectedFEMA Substantial
Improvement/Substantial Damage Desk Reference, Figures 6-3 and
6-4
Lateral additions are attached to an existing structure, with
existing walls, foundation, etc.
Lateral additions usually only add 3 sides to an existing
structure if the 4th side already exists in the pre-improved
structure.
14Vertical AdditionsExpands the floor area by adding an upper
storyIf SI, the lowest floor must be elevated to or above the BFE
and the foundation must be compliant with the applicable zone
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FEMA Substantial Improvement/Substantial Damage Desk Reference,
Figures 6-3 and 6-4
A vertical addition involves improvements that are built on top
of an existing structure. These normally dont increase the
structure footprint.
Non-residential structures can be also be
dry-floodproofed.15Additional GuidanceFor more detailed
information, see the Substantial Improvement / Substantial Damage
Desk Reference (FEMA P-758)Provides detailed guidance on:The
community roleMaking SI/SD determinationsFactors to consider when
evaluating a permit16
The Substantial Improvement/Substantial Damage Desk Reference,
FEMA P-758 (May 2010) is an excellent, detailed guide for
understanding and making SI determinations. This is available for
download from the FEMA website.
Chapter 2 of P-758 provides a concise description of the
community, State, and FEMA roles in making SI determinations
16Practical Tips for ComplianceWhen determining compliance,
always refer back to your local ordinanceMany communities have
higher standards. Check to see if your community:Permits new
construction in the floodway (or floodplain),Permits SIHas a
cumulative SI provision
17
Schoharie, N.Y. (FEMA photo library)
When determining compliance, always refer back to your local
ordinance. This webinar covers the minimums for compliance with the
NFIP, but most communities go beyond that by incorporating higher
standards. Remember, substantial improvements are considered new
construction by your local floodplain management ordinance. If an
ordinance prohibits new development or substantial improvements in
the floodway or floodplain, a property owner may not be able to
substantially improve their structure.
If an existing structure is located in a floodway, the footprint
cannot be expanded without first verifying that the proposed
addition does not cause an increase in the BFE. This is referred to
as a no rise determination. Non-compliant lateral additions will
increase flood insurance premiums and make the entire structure
non-compliant.
To verify that the proposed addition does not impact the
floodway, an engineer will have to prepare a hydrologic and
hydraulic (H&H) analysis and sign, seal and date a no-rise
certification for the structure. The community will need to keep
the no rise certification and support data to show the state and
FEMA.
The structure will need to be engineered to resist the hydraulic
forces of the floodway, which are normally higher than in the
floodway fringe.
Many communities do not allow any expansion in the floodway in
their ordinances.
17Permitting ConsiderationsDevelop a handout on SI for
structures in the SFHASummarize the requirements of the floodplain
ordinance and building code that apply to SI. Provide initial
written guidance on SI and implications for building owner. Include
flood insurance considerations:Ensure adequate insurance coverage
for increased value.Structure owners should carefully weigh all
improvements that do not reduce the risk of flooding All
improvements to post-FIRM structures must meet current ordinance
and building codes regardless of size or cost.
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If the community has a cumulative SI requirement, it will not be
a burden to the permit staff to verify the amount of total
improvement each time a permit is issued for that structure.
Handouts can provide a thorough and consistent message regarding
SI or cumulative SI.
Weigh the risks of developing in the floodplain. Why throw good
money after bad? It doesnt make sense to make investments in a
structure that remains below the BFE. The flood insurance savings
for elevation might save the owner enough to make those cosmetic
improvements while also improving the marketability.
18Importance of ConsistencyEnsure SI determinations are
consistent and fairUse written procedures that meet the NFIP
requirements and SI guidance.Implement the procedures on a
consistent basis to make fair and defensible determinations.Use the
same methods for building value and improvement estimates on a
community-wide basis. Document decisions and add this to the
community files.
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Local officials must be able to defend their SI determinations
to structure owners, elected officials, the State and FEMA. This
requires:
Best Practice - Compare the construction plans to the
accompanying itemized cost estimate to verify that project
costs:Are reasonable Are listed for each component of the
improvementInvolving any donated or discounted labor and materials
are valued at prevailing local rates
Best Practice - Field verify that the existing structure matches
the proposed improvement plans:Check the footprint size and
orientation and compare to improvement plans.Verify that there
havent been any vertical additions
1920Communicating the Determination
Sample determination letters are available
For Substantially Improved Structures:
Issue SI determination letter to the owner
Maintain SI calculation documentation - mark the permit and any
associated documents kept by the community to indicate that the
permit involves SI.
Direct structure owner and contractor the local ordinance for
building standards so that they are aware of the development
standards for new construction and SI. This may mean elevation of
the structure, filling in a basement, or a redesign of the
foundation type depending on the type of flood zone the structure
is located in.
Require submission of revised plans compliant with local codes.
Once a new permit application is received with new building plans
that are compliant with the local ordinance the community can issue
the improvement permit.
For Less than Substantially Improved Structures:
Issue less than SI determination letter to the owner. Even less
than SI determinations should have letters sent out.
Maintain less than SI calculation documentation in the permit
file. Flood insurance ramifications compare interior improvements
or expansion to elevation. The long term costs of not elevating
include flood damage, high flood insurance premiums and limited
marketability.
Issue permit for improvements as needed recommend that the
applicant consider taking other mitigation measures like elevating
utilities and using flood-resistant materials to decrease the risk
to the property.
20Refining the SI DeterminationEnsure SI determinations are
consistent and fairDetermine acceptable methods for costs of
improvement and market value of structuresAn applicant can provide
any of the acceptable sources of information to refine the
determination if in disagreement. For example:Appraisal to refine a
tax-assessed valueAdditional cost estimates from licensed
contractors21
Floodplain administrators must ensure that their substantial
improvement determinations are fair and are applied uniformly
across the community. This sets expectations across the community,
gives credibility to the process, and limits legal liability by
administering a consistent process.
Determine in advance what method the community is going to use
for market value. We recommend using the tax-assessed value of the
structure (including a multiplier, as applicable) as that is easily
accessible to local officials. After floodplain administrators have
made their determinations and have communicated the determinations
and the building requirements to the applicant, the applicant may
disagree.
Allow the applicant to provide any of the acceptable sources of
information to refine the determination if in disagreement. For
instance, if the applicant disagrees with the tax-assessed value
they can provide an appraisal from a licensed professional to
refine the determination.
21Tools for SI/SD DeterminationsThe Substantial Damage Estimator
(SDE) ToolFor substantially improved structures, the cost of
improvement and the market value will be knownUse of the SDE Tool
for SI determinations is not requiredConsider using the SDE tool
for non-disaster determinations to prepare for post-disaster
rebuilding22
Training on the SDE tool is available at the Emergency
Management Institute (EMI)
Differences between SD and SI:
SD determinations occur after a disaster and may involve a large
quantity of structures, while SI determinations are performed on an
as-needed basis in a non-disaster situation when owners apply for
permits.
For structures with SI, the cost of improvement and the market
value will be known and provided or made available at the time of
permit application. For SD structures, the full cost to repair the
damaged structure to its pre-damaged condition might require a SDE
evaluation or an estimate of repair costs.
We recommend becoming familiar with the SDE Tool during peace
time in preparation for using it post-disaster. Use of the tool for
SI determinations will familiarize you and your team with the
process and the tool itself. In addition, the preparatory work is
significantly less for SI determinations.
Those familiar with the SDE Tool may not be aware that FEMA
designed the tool to be used for both SI and SD determinations. The
latest version of the SDE Tool, Version 2.0 from April 2013, can be
used for both residential and non-residential structures.
Previous FEMA trainings and the SDE User Manual and Field
Workbook have been geared towards SD determinations, but the
overall approach for making SI determinations is similar to
evaluating SD.
SI determinations are based on the same principles as SD
determinations and rely on using the costs associated with the
improvement of individual structure elements to determine whether
the overall percent improvements to the structure constitute
SI.
22Applicability of the SDE for SI23Provides structure-specific
summary reports that can be shared with structure owners.Creates a
repository for current and future SI dataMajor difference:
estimated percent improvement will be entered in place of estimated
percent damagedUse the same method for collecting and recording SI
data and making determinations
Source: FEMA Photo Library
Applicability of the SDE Tool for SI determinations
If youre using this for damage and youre familiar, go ahead and
use it. Otherwise you will probably have the cost of improvement
numbers provided in the permit application and will not need to
estimate percent improvement.
Advantages of using the tool: Provides a written, formalized
approach for collecting SI data and determining SI. Users have the
option of printing either a pre-determined 1-page summary or 5-page
detailed SDE report for each structure. Future SI inventories can
be added to the tool to provide a single location for the SDE data
for multiple disasters and improvements.
The major difference for users of the SDE Tool is that they will
enter the estimated percent improvement on the Element Percentages
screen (Tab 4) in-place of the % Damaged.One way to estimate the %
improvement is to consider the change in element size, based on
dimensions.
Remember to use the same the method for collecting and recording
SI data and making determinations in this tool that you would if
you were not using the tool (for instance, use of tax-assessed
value for market value). Be consistent with your determinations to
limit legal liability.
23Incorporating Higher Standards24
SI is the only provision in the ordinance that will reduce risk
to existing structures.Consider higher standards such as:Cumulative
SI Lower SI Threshold (i.e., less than 50%)
SI is the only provision in the ordinance that will ever reduce
risk to existing structures.
50% improvement is too much money to invest in a high risk area
without investing in making the structure safer. Consider lowering
the threshold or including a cumulative trigger.
The standard NFIP floodplain management ordinance does not
contain a provision for cumulative SI, so communities need to
modify their ordinance to specifically state and describe their
cumulative SI and SD provisions.
A rolling 10 year period is typical.
For cumulative SI to work, the community will need to keep,
maintain and check structure records each time improvements are
required for that structure.Tracking the total improvement percent
over multiple permits may require a new estimate of building value
for each permit.A simple method for tracking cumulative SI is to
sum the percent improvement from all improvement permits and
recording that value.For communities with a cumulative SI
requirement, failure to assess the total percent improvement each
time a permit is issued for that structure could lead to liability
issues associated with inconsistent enforcement of their
ordinance.
24Historic Structures ExceptionFor NFIP purposes, the definition
of historic structure does not include structures that:Are merely
oldResidents or officials refer to as historicAre located in an
historic districtCommunities may elect to use one of two methods
when applying SI for historic structures:Granting a variance - as
discussed under 44 CFR 60.6(a)Exempting historic structures from
the SI requirements
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Historic structures are structures that are:
Listed or preliminarily determined to be eligible for listing in
the National Register of Historic Places;Certified or preliminarily
determined by Secretary of the US Dept. of Interior as contributing
to the historical significance of a registered historic district or
preliminarily determined to qualify as a registered historic
district;Designated as a historic site under a State or local
historic preservation program that is approved by the Secretary of
the US Dept. of Interior.
If in doubt about a historic structure, check with the State
Historic Preservation Officer or SHPO to verify whether the
structure qualifies or can qualify as a historic structure.
Of the two options listed for SI, Region III strongly encourage
use of a variance since it requires the applicant to mitigate the
structure to the highest extent possible without jeopardizing the
historic status of the structure.
25Variances for Historic Structures26Proposed improvement cannot
impact the continued historic designation of the structureMust
involve the minimum action necessary to preserve the historic
character and design of the structure.Consider other mitigation
measures like the use of flood-damage resistant materials and
designThe variance method allows the community to evaluate SI on a
structure-by-structure basis
Source: FEMA Region III
Using a variance also provides a paper trail, which will be
useful in answering questions from the state and FEMA.
26Ordinance EnforcementDiscovering and Investigating Potential
ViolationsViolations can be found through:Periodic
InspectionsReports by other government agenciesCitizens
complaintViolations not remedied can result in:Increased risk to
life and propertyIncreased insurance premiumsProbation increased
premiums for all flood insurance policy holdersSuspension NFIP
insurance and many grants/loans unavailable27Investigate potential
violations and take appropriate action!
Weve shared with you the importance of keeping on the lookout
for violations . At times detecting issues can be a challenge. You
cant always see behind a fence. These issues can come to light
through citizens complaints. FEMA also gets insurance information
such as submit-to-rate insurance policies and applications through
the LOMC process that often reveal violations.
Failure to enforce the SI provision of local ordinances can
result in negative ramifications for both the community and
structure owner. Violations not remedied can result in:
Structures that are in violation CAN get flood insurance, but
the premiums are significantly higher. This may make the structure
difficult to sell.Probation - $50 surcharge on all flood insurance
policy holders in a communitySuspension no new flood insurance
policies may be written or policies renewed, loss of most types of
disaster assistance, loss of access to grants and loans, mortgages
cannot be written for structures in the SFHA
27Enforcement OptionsCheck your ordinance for the enforcement
procedures that have already been outlinedMay include:Voluntary
compliance by property ownerWritten Notice of Violation or stop
work order and/or revoke permit Per day fineWithhold Certificate of
OccupancyRecord on DeedInjunction court order to stop non-compliant
activityMunicipal housing court or building courtCoordinate with
your solicitor
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Apply ordinance fairly and uniformly to avoid potential
lawsuits.
In addition to negative NFIP actions, such as probation or
suspension, the community could face liability issues if the SI
requirement of their ordinance is not enforced.
28Resources and AssistanceAvailable at the FEMA
Library:Substantial Improvement / Substantial Damage Desk
ReferenceSubstantial Damage Estimator (SDE) ToolFEMA Building
Science Homepage: http://www.fema.gov/building-scienceBuilding
Science Helpline: 1(866) 927-2104 or
[email protected] FEMA Building Science
Toolkit CD (FEMA P-950 CD, 2013)29
The first four resources on this slide can all be accessed via
the FEMA website at: www.fema.gov
A current list of NFIP State Coordinators can be found on the
Association of State Flood Plain Managers (ASFPM) website, under
the section on State/Local Resources and Tools, at:
www.floods.org29Contacts30FEMA Region III Floodplain Management and
Insurance Branch:[email protected]
Washington, D.C.Phetmano Phannavong, P.E.,
[email protected] Powell,
[email protected] MarylandDavid Guignet,
P.E., [email protected] PennsylvaniaDaniel
Fitzpatrick, CFM717-720-7445 [email protected] VirginiaCharley
Banks, CFM804-371-6135 [email protected] West
VirginiaKevin Sneed, [email protected]
Contact R3 to find the Regional Mitigation Specialists or other
staff assigned to your state.
Here is a list of the NFIP state coordinators for the District
of Columbia and the 5 R3 states.30
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