Real Estate Alert - New Jersey Enacts New Rebuilding Rules In Response To Superstorm Sandy

by Pepper Hamilton LLP
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The impact of Superstorm Sandy on New Jersey was enormous: nearly 346,000 housing units either destroyed or damaged and 190,000 businesses affected.1 Sandy demonstrated just how vulnerable to damage much of the low-lying areas in the state are to major flooding events. Because the storm’s devastation was so severe it became apparent to state policymakers and regulators that the past construction norms and flood elevation levels in these areas would have to be significantly altered for any rebuilding. Moreover, developers and property owners alike were faced with the uncertainty of rising flood insurance premiums and huge reconstruction costs.

On January 24, 2013, Gov. Christie approved emergency regulations proposed by the New Jersey Department of Environmental Protection (DEP) that set forth revised rebuilding guidelines in the flood hazard areas throughout the state. The amended Flood Hazard Area Control Act (Flood Act) regulations, among other things, adopt the Advisory Base Flood Elevation (ABFE) maps that were recently updated by the Federal Emergency Management Agency (FEMA). According to the DEP statement accompanying the emergency rules, the objective of the new regulations is to encourage residents and businesses of New Jersey to rebuild stronger and as soon as possible and to do it using the best available flood elevation data for setting proper design elevations.

Below is a summary of the key elements of the new Flood Act regulations. The rules are effective immediately and will be officially published in the February 19, 2013 edition of the New Jersey Register.

  1. In adopting the ABFE maps, the DEP has established the state standard for reconstruction and new construction in flood-prone areas based upon the height requirements set forth in the FEMA maps. Under the rules, property owners who wish to rebuild must build to the new height requirements if more than 51 percent of their buildings were destroyed. Any new construction within a flood hazard area must also adhere to the higher elevation. Those property owners whose structures experienced 50 percent or less in damage are permitted to rebuild to the structure’s former footprint elevation. However, by doing so, they face the risk of significant increases in flood insurance premiums should the rebuilt structure be below the new height requirement in the final flood elevation maps issued by FEMA.
  2. Property owners who rebuild their structures to the ABFE height levels (plus one additional foot as already required by the Flood Act regulations) may be permitted to do so without first applying to the DEP for a Flood Hazard Area permit. Such activity will be authorized through a Permit by Rule. In order to qualify for the Permit by Rule, the following criteria must be satisfied when reconstructing, relocating and/or elevating an existing building: (a) the footprint cannot be increased by more than 300 square feet; (b) the lowest floor must be raised to at least one foot above the flood hazard area design elevation; (c) the building cannot be relocated or expanded closer to any regulated water; (d) the building being relocated must be moved outside any riparian zone (i.e., buffer area of any regulated waterbody) or situated within an area where previous development or disturbance has occurred; (e) vegetation may not be removed, cleared or cut in a riparian zone except for that within 20 feet of the building; and (f) any vegetation that is removed must be replanted with indigenous, non-invasive species. The Permit by Rule is intended to expedite the rebuilding process and save qualifying owners at least $500 in permit fees plus design and engineering expenses associated with an application of this type.
  3. The construction method known as “wet floodproofing” will now be permitted for non-residential buildings. This method permits owners of non-residential buildings to construct structures in a way that allows the building to flood, but structurally withstand the water. This new regulation is anticipated to have the greatest impact in flood-prone cities such as Hoboken and Margate.
  4. The requirement that permitted certain building foundations to have only three walls is now eliminated. The regulation does away with what many developers considered to be an unsafe and dangerous construction method even before Sandy made landfall.

The governor and his administration believe strongly that the emergency Flood Act regulations will reduce the impacts from future flooding events on homes and businesses and protect the safety of their inhabitants because new construction will now be based upon proper elevation requirements. The regulations make certain that every development uniformly use the same base elevation standards in the flood hazard areas throughout each municipality in the state. The regulations also enhance pre-existing DEP construction requirements by taking into consideration the flood-related damage upon structures in the aftermath of Sandy.

In addition, state officials argue that the new standards will have a dramatic impact on flood insurance rates. The following example is cited by Gov. Christie: if a property owner were to rebuild to the suggested ABFE and the appropriate applicable construction standards for the owner’s zone, the annual premium (phased-in) would be approximately $7,000. If the owner were to rebuild two feet above the ABFE utilizing the construction standards for their flood zone, the annual premium would be about $3,500. In contrast, a property owner in a high-risk flood area (four feet below the ABFE) that does not rebuild to the new standards, is likely to face an annual flood insurance premium (phased-in) of up to $31,000.

There is opposition to the emergency regulations, particularly from shore communities in the southern portion of the state where meeting the new construction standards will be very difficult or impossible due to physical constraints and small lot sizes. Critics charge that the cost of rebuilding to the new standards and raising a home or commercial structure would far exceed what the building is worth. They also claim that property values in the areas most affected by an increase in the flood elevation heights would plummet because the cost to reconstruct in those areas would be substantially higher forcing owners to either abandon their homes and businesses or sell at a significantly reduced price.

Although controversial, the emergency Flood Act regulations, in some form, are likely be part of the “new normal” for construction in New Jersey. They will have a major impact on the reconstruction, relocation, elevation and flood-proofing of all structures in flood hazard areas. As such, an understanding of the regulations is vital to the New Jersey development community.

Pepper will continue to monitor the new Flood Act regulations and other post-Sandy initiatives proposed by the governor and the legislature that impact development in New Jersey. Questions concerning this article may be directed to the authors.

Endnotes

1 The Associated Press, Tuesday, January 29, 2013 at 11:59 a.m. EST.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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