Substantial Damage quick guide: Making the determination easy 

Substantial Damage quick guide: Making the determination easy 
Sep 19, 2022

For any community at risk of flood disasters, it’s critical to make Substantial Damage determinations early in the disaster recovery process. Drawn from their experience supporting countless communities through disaster response and recovery, our experts developed this quick guide to help you understand when and how to make Substantial Damage assessments. By conducting these assessments early in the recovery process, you can prevent wasteful spending, ensure compliance with federal requirements, and speed time to recovery.

How to use this guide

1. Read the guide and review the workbook before your community faces a flood disaster so you understand the regulations and the data you should collect.

2. Use the workbook after a flood event for step-by-step instructions to make your determinations efficiently, reduce recovery costs, and shorten the time needed for compliant residential recovery.

Why are Substantial Damage assessments important?

After a disaster strikes, community leaders are often eager to quickly get repairs underway and return their area to pre-disaster conditions. Before jumping into rehabilitations, it’s important to assess Substantial Damage because it impacts how residents repair and rebuild their homes. Substantially damaged structures in flood-prone areas are subject to strict regulations, and residents may be required to comply with additional elevation or floodproofing standards when repairing their homes.

If you don’t take Substantial Damage assessments into consideration, you risk:

  • Inadvertently investing in rehabilitations that don’t meet code or insurance requirements
  • Applicants becoming ineligible for federal funds
  • Suspension from the National Flood Insurance Program, which means insurance agents cannot write new flood insurance policies or renew existing policies for any structures in the jurisdiction

What is Substantial Damage?

Let’s start by clarifying the term Substantial Damage. Substantial Damage doesn’t just mean a structure was heavily damaged. It has a specific regulatory meaning within the National Flood Insurance Program and is used to evaluate damage of structures located in special flood hazard areas.

44 CFR 59.1 defines Substantial Damage as: “Damage of any origin sustained by a structure whereby the cost of restoring the structure to its before damaged condition would equal or exceed 50 percent of the market value of the structure before the damage occurred.”

Substantial Damage is calculated with the formula:

Cost of Improvement or Cost to Repair to Pre-Damage Condition/Pre-Improvement or Pre-Damage Market Value of Building >= 50%

When should you complete Substantial Damage assessments?

As soon as possible following damage to a structure. If Substantial Damage determinations are made too late in the recovery process, residents may need to undo previous work, which wastes funds and puts other financial resources at risk.

  • For a grant program this means: Upon initiation of the recovery program—this should be done as soon as the grant administrator can gain access to the jurisdictions’ records and prior to community outreach or offers of grant awards.

  • For a local permitting official this means: As soon as you are aware of damage to a structure. This relies on sufficient code enforcement inspector deployment to observe when structures in the community are damaged (even in a one-off event like a house fire).

How do you know if a Substantial Damage assessment is needed?

To determine whether a Substantial Damage assessment is needed, answer the following questions:

  • Is the impacted structure located in a Special Flood Hazard Area (SFHA)?
  • Special Flood Hazard Area (SFHA) or Regulatory Floodplain: An area having special flood, mudflow or flood-related erosion hazards and shown on a Flood Hazard Boundary Map (FHBM) or a Flood Insurance Rate Map (FIRM) Zone A, AO, A1-A30, AE, A99, AH, AR, AR/A, AR/AE, AR/AH, AR/AO, AR/A1-A30, V1-V30, VE or V. The SFHA is the area where the National Flood Insurance Program's floodplain management regulations must be enforced and the area where the mandatory purchase of flood insurance applies. For the purpose of determining Community Rating System (CRS) premium discounts, all AR and A99 zones are treated as non-SFHAs.

  • Does the local jurisdiction participate in the National Flood Insurance Program?
  • National Flood Insurance Program: A program that makes federally backed flood insurance available in those states and communities that agree to adopt and enforce flood-plain management ordinances to reduce future flood damage.

If you answered yes to these questions, it’s essential to complete a Substantial Damage assessment prior to repairs.

What should you consider when assessing Substantial Damage?

Only two data sets are needed to determine Substantial Damage: the cost to repair and the pre-disaster market value. However, collecting this information can be daunting because there are many data sources and potential valuation methods to keep track of.

Download this free workbook to get step-by-step instructions for determining when repair is feasible and when elevation, mitigation, or relocation actions should be taken. Remember to save it somewhere you can easily access after a flood event occurs.

Meet the authors
  1. Lauren Nichols, Senior Director, Disaster Management

    Lauren is an expert in community development and disaster management with over 14 years of experience. View bio

  2. Dennis Morazan, Senior Director, Disaster Recovery

    Dennis Morazan is an expert in disaster recovery with more than 20 years of experience.  View bio

  3. Ann Schmid, Senior Disaster Recovery Policy Manager

    Ann is a grants and compliance expert with more than 10 years of experience working with federal programs and regulations. View bio