Flooding is the biggest physical risk in Houston. Hurricane Harvey in 2017 flooded more than 150,000 homes in Harris County, and the rules that followed changed how investors buy, renovate, build and rent. Understanding them before you make an offer protects the budget and the exit.
Know the maps
- The 100-year floodplain. FEMA’s Special Flood Hazard Area, with a 1% chance of flooding in any year. A lender requires flood insurance on a property here.
- The 500-year floodplain. A 0.2% yearly chance. Many homes that flooded in Harvey sit here or outside the mapped floodplain altogether.
- New maps. Harris County’s flood maps are being updated with newer rainfall data, and more properties may be mapped into the floodplain. Check the current and preliminary maps.
The city’s elevation rule
Since September 2018, new homes in the City of Houston inside the 100-year and 500-year floodplains must be built with the lowest floor 2 feet above the 500-year flood elevation. The rule also applies to substantial improvements, which affects how far you can take a renovation without raising the house.
The 50% substantial improvement rule
In a floodplain, if the cost of a renovation, or of repairing flood damage, reaches 50% of the building’s market value, the house must be brought into compliance with current flood rules, which can mean elevating it or rebuilding. Get a realistic estimate and talk to the floodplain office before you set the scope.
Disclosure rules
- Sellers. The Texas seller’s disclosure asks whether the property is in a floodplain, has flooded, has flood insurance and has received flood claims or federal aid. Read it before you buy, and expect your buyer to read yours.
- Landlords. Every residential lease in Texas must state whether the landlord knows the property is in a 100-year floodplain and whether it has flooded in the past five years.
Insurance
Flood insurance is a separate policy from homeowners or landlord insurance, through the National Flood Insurance Program or a private carrier. Premiums now reflect each property’s own risk, so get a quote for the exact address before you make an offer. There is usually a 30-day wait before a new NFIP policy takes effect.
How it affects financing
We lend on properties in the floodplain and on houses that have flooded and been repaired. The flood premium counts in the payment on a DSCR rental loan, and for a fix and flip or a new build, the elevation rules shape the budget and the after-repair value.
Common questions
Yes, if it was repaired properly and the numbers account for flood insurance and the disclosure.
Inside the city’s 100-year and 500-year floodplains, the lowest floor must be 2 feet above the 500-year flood elevation.
Yes. Texas leases must disclose whether the property is in a 100-year floodplain and whether it has flooded in the past five years.