It is one year from the date that Hurricane Harvey dramatically changed the Houston landscape and housing market. Torrential rain fell accumulating to over 50 inches in the course of 3 days paralyzing the Bayou City. One year later we are still dealing with many of the devastating impacts and consequences of this 800 year storm. This article will discuss the different strategies implemented by many of the flood victims on their homes and the new building codes that are being imposed. We will also examine the overall economic impact on many homeowners brought about by this natural disaster.
Homeowner Flood Victim Strategies
Homeowner flood victims have spent agonizing hours deliberating about what their options were and the consequences of making a choose. There was been no consistent pattern to these decisions. These decisions have been made by flood victims based upon emotion, insurance benefits and their best financial interest for the long term.
Most flood victims were required to wait for long periods for both insurance benefits and contractors before rebuilding. FEMA flood insurance claims department were overwhelmed with claims. Many Houston homeowners received benefits for far less than the actual repair damages to their homes. This was due to the cap placed on flood insurance benefits in the amounts of $250,000 of property loss and $100,000 for personal property loss. In many cases far less than the actual cost of renovation.
- Selling “As-Is “ – Many emotional distraught flood victims elected to walk away from the ruins of their home and personal belongings. These properties were sold to builders and investors for less than current lot value. As we discuss shortly, in neighborhoods like Memorial the large number of properties that were listed on the market had generally an adverse effect on the overall market price for most homeowners.
There were also a large number of investors that bought these damaged homes with the intentions of repairing and either flipping or using them as rental properties. This strategy in larger numbers could have a negative effect on property values in the long run. As the numbers of rental properties increases there is a tendency for neighborhood values to slow or decrease.
- Rebuild in Kind – While another group of homeowners decided to just rebuild in kind. In fact just replacing the damaged materials as best they could by matching up materials like cabinets, doors and trim work. Many of these flood victims were just eager to put their homes back together and get on with their lives. The City of Houston waived the permit requirements on these types of rebuilds.
- Upgrade Renovation – This group of homeowners took advantage of the opportunity to upgrade their home design by making floor plan changes and upgrading new products. In many cases it was upgrading cabinets and flooring as a consequence of not finding suitable matches for damaged material.
While in other instances owners made major adjustments to the floor plan to create a fresher updated design to reflect their lifestyle. These owners were required to have design plans drawn up and pull building permits. Consequently this group of homeowners doubled down to actual attempt to increase their properties market value.
- Elevate The Foundation – A larger number of homes in the Bellaire and Meyerland area have flooded multiple times. The local building officials have passed building codes that require new homes to be elevated 2 ft above the street. Most of these elevated homes did not flood during Harvey. So a few owners are slapping down upwards of $150,000 to have their homes elevated 2-4 ft.
- Tear Down & Build New Homes – Yet even a smaller group of flood victims upended by Harvey are demolishing the ruins and having new custom homes build at a higher elevation. These are owners that like their school districts and their neighborhoods. They often had older homes that would have required a substantial investment to renovate. Faced with the reality of the likelihood of a future flood, many do not want to risk it.
Impact on High Value Home Prices Metro Houston
General home prices have fared well in Houston since Hurricane Harvey. Part of these increases in home prices were due to an existing housing shortage created during the 2008 mortgage meltdown crisis. In 2017 the Houston housing market was still attempting to catch up with the general demand for homes. So when Harvey hit the need for long term and temporary homes swelled. Apartment vacancy disappeared overnight.
This need fueled pricing increases in metro Houston. According to the Houston Business Journal, the impact on home prices increased in areas such as; Braeswood Place (32%), Memorial Close In (18%), Highland Village (27%).
During this period other metro Houston areas experienced only slight decreases such as; Midtown (5%), University (4%), Garden Oaks (3%).
Although land values in 15 close in Houston neighborhoods have experienced value increases of greater than 50% the past 5 years, there are other areas that were substantially impacted by Harvey such as West Memorial, Bellaire and Meyerland that had just the opposite effect. This is thought to be the consequences of the large numbers of flood ravished homes that were listed for sale as-is.
Appraisal & Assessment Values
The Harris County Tax Assessors office has made allowances for the future values of these damaged flood homes in their 2018 tax assessment. These adjustments are as much as 25% decreases in the homes tax base. So the real question becomes how long does the tax assessor’s office and the buying public discount homes that flooded.
If we can use Bellaire and the Meyerland areas as an example, their market prices have held consistent over the past 5 years while experiencing multiple floods. This is better than might be expected due to their being an issue with the sale home inspections and the homeowner insurance rules. Texas homeowners insurance is denied to properties that have two or more claims in a two year period. They are required to enter the State of Texas FAIR Plans for higher risk owners and properties.
Regional Government Preventative Action
After one year’s time local public officials are taking steps to implement alternatives to mitigate future devastation. Measures are being taken at the Houston building department to require all new construction to be subject to higher finished floor requirements. On the flood control side, stricter regulations are being imposed upon random debris piles, planning and zoning requirements and future possible bond issues to be voted on for flood control infrastructure repairs. Part of these repairs is proposed to update and re-plat a new flood plain map for the future.
New Building Code Requirements
Harris County approved new building code regulations that require all new construction inside of the 100-year flood plain to be required to apply for a building permit. The new building code requires any homes within the 100 year floodplain to build two foot above the 500 year flood plain to mitigate flooding. The City of Houston is expected to follow suit.
Harris County Flood Control District Actions
The Harris County Flood District has proposed to issue a bond on this November’s election ballet in the amount of $2.5 billion. These funds would be used to further a variety of flood prevention projects through the county.
The hopes of Judge Emmett is that the federal government will award matching funds on a portion of the available bond funds. The bonds passage to increase property taxes an estimated 2 or 3 cents per $100 assessed home value.
