In the wake of Superstorm Sandy, the New York City Council has commissioned a “building resiliency” task force to study potential changes in the building code to minimize damage from flood events. In announcing the task force, City Council Speaker Christine Quinn said flood protection was the “single most important infrastructure challenge of our time”. Speaker Quinn also said the City also has to upgrade its sewer and wastewater treatment infrastructure.
The task force is expected to issue its report next summer. It is anticipated that the recommendations will not only apply to new construction but will also likely recommend retrofits to existing buildings based on location, building use and design, other factors. These upgrades will probably involve relocating critical equipment like boilers, generators and electrical equipment to the first or second floors or encasing these systems in watertight compartments. Such recommendations will likely encounter resistance from building owners who will not want to lose valuable ground-floor retail space to mechanical/electrical equipment. Less rental income or fewer commercial units will probably mean smaller mortgages. In addition, landlords will probably also be required to install emergency generators to ensure at least one operational elevator in high-rise residential buildings and to provide to power water pumps to minimize flooding.
For new buildings, the task force may recommend eliminating basements, requiring more fill material to raise building elevation, installing mechanical systems on the first and second floors and possibly adding floodgates at the entrances of residential buildings. Some real estate professionals say they are already seeing a shift in buyer behavior. These industry experts say that mid-rise buildings are drawing more interest from buyers who fear being trapped in dark buildings with no elevator service.
Under the New York State Building Code and the Residential Code of New York State, repairs to buildings in flood hazard areas that suffer “substantial damage” must comply with all of the flood design requirements for new construction. The definition of “substantial damage” is: “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.” This definition applies whether or not actual repair work is performed. (See The FEMA regulations implementing the National Flood Insurance Program at 44 CFR 59.1)
States and local governments in earthquake-prone regions frequently use building codes to address risks unique to those jurisdictions. For example,Californiahas adopted a seismic code for new construction and requires local governments in certain seismic zones to establish mitigation programs to strengthen existing buildings that might not comply with the seismic design code. Lenders now routinely evaluate the seismic design of buildings in these areas during due diligence. Given the enormous property losses followingSandy, the increasing frequency of severe weather and concerns about rising sea levels, it would not be surprising if lenders begin to evaluate the design of buildings located in flood hazard or low-lying areas along the coasts. Lenders may begin requiring retrofits as loan conditions to minimize damage to their collateral as well as loss of rental income that could cause borrowers to default on their loans.