Could the value of your home someday be affected by a line on a FEMA flood map that most
homeowners have never heard of?

It could.

Most of us are familiar with the 100-year floodplain. Builders, developers, lenders and
homeowners have dealt with it for decades. But there is another line on FEMA’s maps that
deserves considerably more attention: the 500-year floodplain.

The name is misleading. A 500-year floodplain doesn’t mean the property floods once every 500
years. FEMA defines it as an area subject to a flood with a 0.2% chance of occurring in any
given year. FEMA generally describes the area between the 100-year and 500-year flood
boundaries as an area of “moderate flood hazard.”¹

For years, most homeowners probably had little reason to know that distinction.

That may be changing.

The federal government has been debating how much regulatory significance should be attached
to areas beyond the traditional 100-year floodplain. Under the Federal Flood Risk Management
Standard, federal agencies have considered the 500-year floodplain when determining
appropriate flood-protection standards for certain federally funded projects.

HUD has been part of that discussion as well. In its federal flood-risk rulemaking, HUD
specifically defined the 500-year floodplain and considered it when establishing flood-resilience
requirements for certain HUD-assisted activities.²

That doesn’t mean the federal government has prohibited privately financed homes from being
built throughout the 500-year floodplain.

It hasn’t.

But it does mean something important:
The federal government has already established the 500-year floodplain as a boundary that
can have regulatory significance.

That should concern homeowners.

Why?

Because once government gives a line on a map regulatory significance, the consequences don’t
necessarily stop with new construction.

Consider a family that bought a house 20 years ago.

The house was legally built. It has never flooded. The owners have maintained it, made their
mortgage payments and accumulated $200,000 or $300,000 in equity.

For many Americans, that equity represents most of their net worth.

Now imagine that house is near a creek, pond, river or lake—not necessarily on the water, just
near it—and falls inside the 500-year floodplain.

What happens if that designation becomes increasingly important to government regulators?
What happens if insurance companies begin pricing that risk differently?

What happens if lenders react?

And what happens when that family decides to sell?

Imagine two identical houses worth $400,000 today. One is outside the 500-year floodplain. The
other is inside it.

If a future buyer of the second house faces substantially higher insurance costs, additional
restrictions or greater difficulty financing the property, are those two houses still worth
$400,000?

Probably not.

Something has to give.

And eventually, that something may be the price.

The house didn’t change. The government policy did.

I have spent most of my adult life developing residential property. I understand why floodplains
are regulated.

We shouldn’t build houses where engineering tells us there is an unreasonable danger to people
or property. Floodways matter. Stormwater matters. Infrastructure matters. Public safety matters.
But there is another side to this discussion that deserves equal consideration.

A home isn’t just a structure. For most Americans, it is their largest financial asset.

When government expands the regulatory importance of a floodplain, it isn’t simply changing an
engineering standard.

It may be affecting someone’s retirement.

It may be affecting someone’s inheritance.

It may determine whether a young family can afford to buy a particular house.
And it may affect what an existing homeowner can sell that house for.

There is also a fundamental question of fairness.

Suppose someone knowingly buys property inside a clearly regulated floodplain today. The
buyer knows the rules. The risk can be evaluated and incorporated into the purchase price.
That’s one thing.

But what about the homeowner who bought a perfectly legal house decades ago and then
watches government change the significance of the line surrounding it?

That’s something entirely different.

Before the 500-year floodplain becomes a more significant regulatory boundary, federal
policymakers should answer some basic questions.

How many existing homes are inside it?

What would expanded regulation do to their insurance costs?

What would it do to mortgage availability?

What would it do to property values?

And if a government policy substantially reduces the value of a previously legal home, who
bears that loss?

Those aren’t questions for engineers and bureaucrats alone.

They are questions for homeowners.

FEMA says the 500-year floodplain represents a 0.2% annual chance of flooding. That risk
shouldn’t be ignored. But by that same logic, we are being asked to jump through regulatory and
financial hoops for something that has a 99.8% chance of not occurring in any given year.
Neither should the economic risk government can create when it changes what that line means.

There may be good reasons to prevent construction in areas where the probability and
consequences of flooding create an unreasonable danger.

Make that case.

Show us the engineering.

Show us the risk.

Then show us something else.

Show us what happens to the people who already live there.

Because it is easy to draw another regulatory line on a map in Washington.

It is much harder to sit across the table from a retired couple and explain why the house they
spent 30 years paying for may now be harder to insure, harder to sell and worth substantially
less.

That isn’t simply flood policy.

That’s someone’s home.

And before Washington expands the significance of the 500-year floodplain, the people whose
homes are already inside that line deserve to be part of the conversation.

Sources

1. Federal Emergency Management Agency (FEMA), Flood Zones. FEMA identifies
   shaded Zone B and Zone X as areas of moderate flood hazard, generally between the
   limits of the 100-year and 500-year floods.
2. U.S. Department of Housing and Urban Development, Federal Flood Risk Management
   Standard rulemaking, Federal Register. HUD’s rulemaking defines the 0.2%-annual-
   chance floodplain as the 500-year floodplain and discusses its application to HUD-
   assisted activities.
   Jay Knight is a Georgia residential developer and the author of Zoned Out: How Cities and
   Counties Make Homes Unaffordable. He has worked in residential construction, real estate and
   land development since 1978.