Substantial Improvement & Damage

Floodplain Development Requirements:

Any development in the floodplain required a building permit according to Chapter 21 of O-22-11 Ordinance Repealing Flood Damage Prevention and Replacing it with Floodplain Management Regulations, effective June 15, 2022.

Floodplain Development Permit

Substantial Improvements:

The Borough of Highlands requires that if the cost of reconstruction, rehabilitation addition, or other improvements to a building equal or exceeds 50% of the building’s assessed tax value, the building must meet the same construction requirements as a new building.

Damaged buildings must also be brought up to the same standards (e.g., a residence damaged so that the cost of repairs equals or exceeds 50% of the building’s value before it was damaged must be elevated above the base flood evacuation). The assessed value of the structure shall be determined before the improvement is started, or if the structure has been damaged and is being restored before the damage or destruction occurred.

Substantial Improvements mean 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. This term includes structures that have incurred “substantial damage,” regardless of the actual repair work performed.

To make the Substantial Improvement Determination, we compare the cost of the proposed improvement or repairs to the market value of the building (excluding land, accessory structures, and landscaping). If the resulting ratio equals or exceeds 50 percent, the existing building must be brought into compliance with NFIP requirements to elevate to or above the Base Flood Elevation (BFE).

Substantial Damage/Improvement is the ratio of the cost to repair/improve a building to the market value of the building:

Percent Damaged/Improved = Cost of Repairs/Improvements

Note:  When determining the cost of repair, donated or discounted materials must be included in their full market value and estimated as if they were purchased during a normal market transaction. When determining labor costs, self or volunteer labor must be estimated at prevailing wages for the appropriate type of construction wage scale. The only costs that may be excluded are the cost for plans, specifications, survey, and building permits. 

The following approaches have been identified to determine the value of the building:

• A detailed estimate of the Actual Cash Value as determined by the FEMA Substantial Damage Estimator (SDE).
• A detailed estimate of the structure’s actual cash value - the replacement cost for a building, minus depreciation percentage.
• Property values for tax assessment purposes with adjustment by tax appraiser to reflect current market conditions.
• The value of buildings taken from NFIP claims data (usually actual cash value)
• Qualified estimates based on sound professional judgement made by the staff of the local building department or local or State Tax Assessor’s Office.

Items included in a Substantial Improvement Determination:

• 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 (e.g., foundation excavation or filling in basements).
• Demolition and construction debris disposal.
• Labor and other costs associated with demolishing, removing, or altering building components to accommodate improvements, additions, and making repairs.
• Costs associated with complying with elevating a structure when the proposed elevation is lower than the Base Flood Elevation.
• Construction Management and Supervision.
• Contractor’s overhead and profit.
• Sales taxes on materials.
• Structural elements and exterior finished including:
  • Foundations (e.g., spread, or continuous foundation, footings, perimeter walls, chain walls, pilings, columns, posts, etc.
  • Monolithic or other types of concreate slabs.
  • Bearing walls, tie beams, trusses.
  • Joists, beams, subfloor
  • Joists, beams, subflooring, framing, ceilings.
  • Interior non-bearing walls.
• Exterior finished (e.g., brick, stucco, siding, painting, and trim).
• Windows and exterior doors.
• Roofing, gutters, and downspouts.
• Attached decks and porches.
• Interior finish elements, including:
  • Floor finishes (e.g., hardwood, ceramic, vinyl, linoleum, stone, and wall-to-wall carpet over subflooring)
  • Bathroom tiling and fixtures.
  • Wall Finishes (e.g., drywall, paint, stucco, plaster, paneling, and marble).
  • Built-in cabinets (e.g., kitchen, utility, entertainment, storage, and bathroom).
  • Interior doors.
  • Interior finish carpentry.
  • Built-in bookcases and furniture.
  • Insulation
  • Utility and service equipment, including:
    • Heating, ventilation, and air conditioning (HVAC) equipment.
    • Plumbing fixtures, and piping.
    • Electrical wiring, outlets, and switches.
    • Light fixtures and ceiling fans.
    • Security systems.
    • Built-in appliances
    • Central Vacuum systems.
    • Water filtration, conditioning, and recirculation systems.

It should be noted that this guidance document also contains a list of costs that may be excluded from Substantial Improvements and Substantial Damage Determinations

• Landscaping
• Irrigation
• Sidewalks
• Driveways
• Fences
• Yard Lights
• Swimming Pools
• Pool enclosures
• Detached accessory structures (e.g., garages, sheds, and gazebos)
• Costs required for the minimum necessary work to correct existing violations of health, safety, and sanitary codes.

FEMA P-784 Substantial Damage Estimator SDE Tool (2017)

FEMA developed the SDE tool to assist State and local officials in estimating Substantial Damage for residential and non-residential structures in accordance with the requirements of the National Flood Insurance Program (NFIP) as adopted by the communities. The tool can be used to assess floods, wind, wildfire, seismic, and other forms of damage. It helps communities provide timely Substantial Damage Determinations so that reconstruction can begin quickly following a disaster.

Click here for Highlands Borough Floodplain Development Permit

FEMA Desk Reference Substantial Improvement/Damage 

Click here for FEMA Substantial Damage Estimator SDE Tool

Click here to view/Download FEMA’s Substantial Improvement Substantial Damage Rule (Unit 8)