Substantial Damage (SD) Estimation Process

The Substantial Damage (SD) process is a critical effort conducted after a disaster to assess property damage and guide rebuilding efforts.

Preparedness

The Substantial Damage (SD) Estimation Process An Overview of Its Role in Post-Disaster Floodplain and Building Code Management

Response

Recovery

Mitigation

Be stronger than before

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Natural disasters present significant challenges to communities, causing not only loss of life and property but also leaving a lasting impact on the entire community infrastructure. When a disaster occurs and damages to structures within the boundaries of a Special Flood Hazard Area (SFHA) are observed, communities participating in the National Flood Insurance Program (NFIP) must assess the impacts on structures prior to repairs being made and permits being issued. The NFIP is a federally backed insurance program that provides flood insurance policies to property owners in communities that agree to adhere to program requirements. Participation in the NFIP requires the implementation of a local floodplain ordinance with a minimum set of criteria, including the Substantial Damage/Substantial Improvement (SD/SI) requirement. Over 22,000 communities nationwide participate in the NFIP. Additional benefits are offered to communities participating in the Community Rating System (CRS) for undertaking more floodplain management activities and can result in NFIP policy discounts for all holders in the jurisdiction. This benefit can result in hundreds of thousands of dollars in savings to the citizens. The SD/SI process is a foundational piece of a local floodplain management regulations and aids the response and recovery process in the wake of a disaster..

Key Elements of the SD Process Planning

As part of the larger floodplain management program, many communities plan how they will respond to an event impacting structures within the SFHA that may require SD/SI assessments. This can include but is not limited to the development of systems of record, identification of data sets that can be used to enhance the speed of assessment, identification of quality control procedures, and the process for notifying property owners of an SD/SI determination and their ability to obtain a permit for repairs. Damage Assessment After any disaster, all damaged structures located in a designated floodplain must be assessed to determine the extent of damage. Onsite assessments include evaluating components of exterior and interior damage and determining the extent, or percentage, of damage to those components. FEMA has provided guidance for measuring damage related to the components of the structure. Data Entry and Analysis Field-collected data, along with any previously obtained data (structure information from assessor inventory, floodplain information, etc.), are compiled into a community’s system of record (SOR). There is no prescribed SOR, although FEMA provides the free FEMA Substantial Damage Estimator v3.0 tool to support data collection, SD calculation, and record retention. Using the data, along with the previously determined methodology for calculating SD, the community calculates the percentage of damage based on a structure’s pre-damage value. Typically, the pre-damage value is determined by the local floodplain ordinance, which states that the value is to be calculated from assessment or appraisal documentation. If tax assessment or appraisal information is not readily available or consistent across a jurisdiction, the community has the option to use the actual cash value of the structure calculated from the square footage and standard cost/sf by construction type. If a structure’s estimated damage exceeds 50% of its pre-damage value, that structure is considered to be substantially damaged.

Code Compliance and Notice to Property Owners The SD process generates data to guide municipalities in issuing a Substantial Damage determination. Once a structure is determined to be substantially damaged, the local jurisdiction will issue letters of Substantial Damage Determination that require affected structure owners to repair or rebuild the structure so that it meets current floodplain regulations and building codes. Appeal Opportunities The SD process allows for consideration of factors that can affect the Substantial Damage determination. Historic buildings, commercial buildings, and other circumstances can require additional consideration. For example, if a structure owner cannot allow entry into the structure during the initial onsite inspection, they may wish to request a reinspection to allow the estimators to enter the structure in order to provide a more accurate estimate of interior damage. Communities may offer onsite reinspections to structure owners to allow owners to provide additional information or access, ensuring transparency and accuracy throughout the process. Owners can also appeal the pre-disaster market value of the structure used in the SD analysis. Permit Issuance and Inspection Once a structure has been identified as Substantially Damaged or not, it may progress through the community’s permitting process. Structures that do not meet the definition of SD have no additional requirements from the SD process that preclude them from moving forward with a typical repair permit. Note – there could be other factors that restrict issuance not related to SD. For structures that are identified as SD, typically, property owners must follow the individual community’s permitting process requirements to document how they will bring the structure into compliance with current floodplain and building code regulations if it currently does not meet those requirements. Following issuance of all permits, NFIP participating communities are required to perform inspections on SD structures during construction to validate that repairs were made in accordance with plans and permits. If work deviated from the approved plans and permits in variance from local regulations, the community must issue violations to the property owner. It is incumbent that good faith efforts be undertaken to resolve all violations, as the community’s standing in the NFIP and CRS (if applicable) can be jeopardized by lack of enforcement. In some cases of non-compliance, communities can be put on probation, losing their insurance discount for citizens, and in extreme cases, they can be removed from the NFIP entirely, removing the ability for the jurisdiction’s citizens to obtain federally backed flood insurance. If the cost to repair is 50% or more of the market value, the structure is considered “Substantially Damaged” and must be brought into compliance with current local floodplain management standards. Section 1206 | Building Code and Floodplain Management Administration and Enforcement The Disaster Recovery Reform Act of 2018 (DRRA) amended Sections 402 and 406 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) and authorized FEMA to “provide assistance to state and local governments for building code and floodplain administration and enforcement, including inspections for substantial damage compliance” and “base and overtime wages for extra hires to facilitate the implementation and enforcement of adopted building codes for a period of not more than 180 days after the major disaster is declared.” Substantial Damage in Action Structures in a SFHA that have suffered disaster damages that exceed 50% of the building’s pre-damage market value are determined to have substantial damage. For instance, if the pre-damage market value of a structure is $200,000, and repair costs are estimated at $120,000, it is deemed substantially damaged. Once a structure is determined to be Substantially Damaged, the structure must be brought into compliance with current local floodplain management and building code standards, which may include elevating the structure, using flood-resistant materials, proper flood venting, or other mitigation activities to bring the structure into compliance with current code. Local jurisdictions, not FEMA, are responsible for determining Substantial Damage based on their specific floodplain ordinances, notifying property owners of those decisions accordingly, and enforcing compliance with local floodplain regulations during the rebuilding process.

Determining Market Value of a Structure The method to assess market value of all structures within a community is determined by the local floodplain regulations prior to a disaster. Market value refers to the price an asset would bring on the open market. The source to determine market value may defined in statute or code by state or local governments pertaining to zoning, property taxation, or real estate transactions. It is important to note two basic NFIP requirements: • Market value must always be based on the condition of the structure before the improvement is undertaken or before the damage occurs. • Only the market value of the structure is pertinent. The value of the land and site improvements (landscaping, driveway, detached accessory structures, etc.) and the value of the use and occupancy (business income) are not included. Many communities estimate “market value” using either a formula based on a structure’s assessed value developed for property tax assessment purposes and adjusted to approximate market value or estimates of a structure’s market value, including depreciation. Communities may also allow a private licensed appraisal to provide a structure’s market value. The SD Process: Roles & Responsibilities Substantial Damage/Substantial Improvement is one tool available to state and local officials focused on managing development within the floodplain. The process is a collaboration between FEMA, municipalities, contract service providers, and property owners. • FEMA and NFIP Oversight – FEMA provides the guidelines, tools, and training for SDE. FEMA’s SDE tool, accessible to both professionals and trained laypersons, is the central technology for data collection and analysis. • Counties and Local Governments – Municipalities and counties, typically for unincorporated areas, are responsible for ensuring compliance with floodplain management regulations. They oversee SDE determinations and manage the permitting and appeal processes for affected properties. • Contract Service Providers – Organizations like engineering and disaster consulting firms provide staffing and logistical support to help municipalities and counties execute the SD process by supporting assessments, data workflow management, and quality assurance checks. Work performed by such service providers is reviewed by local governments prior to the issuance determinations of Substantial Damage. • Property Owners – Property owners are central to the SDE process. They receive detailed reports about their property’s substantial damage status and play an active role by providing additional damage evidence, requesting reassessments, or appealing findings. If the cost to repair is 50% or more of the structure’s pre-damage market value, the structure is considered “Substantially Damaged” and must be brought into compliance with current local floodplain management and building codes.

Who Makes the Substantial Damage Determination? Local jurisdictions are responsible for substantial damage determinations based on their specific floodplain ordinances and will notify property owners of those decisions. FEMA does not make substantial damage determinations or notify property owners; however, FEMA may assist local jurisdictions with damage data to help them make these determinations.

The FEMA Substantial Damage Estimator Tool v3.0

What a Substantial Damage Determination Means for Property Owners If local officials determine a building in the SFHA to be substantially damaged, it must be brought into compliance with current local floodplain regulations and building codes. This may involve: • Elevating or modifying a substantially damaged structure to meet floodplain and building code regulations. • Floodproofing non-residential or historic buildings. • Other building code compliance and mitigation measures. The SDE process is critical for disaster recovery. Through the collaborative efforts of FEMA, local governments, service providers, and property owners, it facilitates efficient recovery and rebuilding activities while upholding floodplain management regulations. Contracted service providers like engineering and disaster consulting firms offer significant support to local communities by providing trained estimators, data workflow management, rigorous quality assurance checks, and administrative support to ensure compliance with Public Assistance and NFIP program requirements.

The SDE tool assists state and local officials in estimating substantial damage caused by flood, wind, wildfire, seismic, and other events to structures within the floodplain per the National Flood Insurance Program requirements adopted by the communities. The tool utilizes estimates of damage to individual building elements to determine whether the building has incurred Substantial Damage.

Depending on the type of structure and specific

attributes, the tool calculates the percentage of damage to each building element as a percentage of the total building. Using the calculated element percentages, the user can apply a “percent damaged” or “percent improved” value to each building element to establish a Substantial Damage determination for the building.

For more information on our program support, visit our website.

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If your organization faces disaster recovery or compliance concerns under FEMA’s NFIP guidelines, contact us for further insights. Together, we can build a safer, more resilient tomorrow.

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