The 50% Solution

I am astounded at the misinformation being spread about insurance and rebuilding.

New Orleans will be rebuilt one house at a time. What matters is whether a house can be rebuilt, economically and then insured. While I might not be 100% correct I think I have a pretty good handle on the rules.

This all hinges on the concept of "Substantially Damaged", as determined by the City of New Orleans. Under the Federal Flood Insurance Program rules, and the new state building code "Substantially Damaged" means damage equal to more than 50% of the pre-loss value of the structure, as determined by the City of New Orleans. The City of New Orleans has made a damage assessment for virtually all single family residences in the city.

Most of the damage is from flooding and was for the most part a limited kind of flood damage. The damage was simply an inundation by slowly rising and slowly receding flood waters. In spite of lot of scare stories these waters generally caused little structural damage. In a few cases structures near the breaches suffered damage due to rapidly flowing water, but that was relatively rare, even near the 17th Street Canal breach. My observation is that raised houses are more susceptible to that kind of damage because they were not anchored to their foundations as well as slab on grade houses.

The most common other types of damages are a limited amount of roof damage or damage due to falling trees. Many houses had little or no wind damage. The wind damage was greatly aggravated by the "chicken little" response of government at all levels which tended to present the most dramatic, most pessimistic interpretation of events. Had people been able to get back and take action sooner much of the actual loss could have been mitigated. Just opening the doors and windows in houses and throwing out the furniture as soon as possible would have helped a lot.

The City assessments are interesting. Virtually all flooded two story homes are assessed at less that 50% damage and are eligible to rebuild immediately and qualify for flood insurance as pre-existing structures. Virtually all single story homes which were only flooded and not otherwise damaged were assessed at just over 50%. In effect this gives the Owner a choice. They can appeal the assessment or they can accept it and apply for the additional benefits available for mitigation.

Here is the actual FEMA recommendation which has not yet been adopted in New Orleans (Although it has been adopted in Jefferson Parish).

FEMA recommends the following: new construction and substantially damaged homes and businesses within a designated FEMA floodplain should be elevated to either the Base Flood Elevation (BFE) shown on the current effective Flood Insurance Rate Map (FIRM) or at least 3 feet above the highest adjacent existing ground elevation at the building site, whichever is higher;

A typical Damage Assessment is recreated below.

Damage Assessment

Estimated Flood Depth:Unavailable
Flood Duration (days):Unavailable
Damage Report:52.13%

Report Detail:

Items	% Breakdown	% Damage
Superstructure (Framing/Masonry)	18.5	0
Foundations/Basements	16.9	0
Interior Finish (Plaster/Drywall)	8.7	100
Plumbing	8.0	50
Exterior Finish	6.2	20
Electrical	5.4	100
Cabinets/Countertops	5.2	100
Floor Covering	4.5	100
Heating-Cooling	4.2	100
Doors/Windows/Shutters	4.1	100
Lumber Finished	4.1	100
Roofing	3.9	10
Painting	3.4	100
Insulation & Weather Stripping	3.2	100
Built-in Appliances	2.5	100
Hardware	1.2	100

A typical house should be able to get this reduced. If for example, as many houses in Gentilly or Lakeview have, there was terrazzo flooring which needs only be cleaned and polished (bathroom tile floors can also usually be saved), or if the windows are operable, as are virtually all aluminum windows, even wood windows handled properly can be saved.

If you take those two items and reduce them to 50% damaged you have reduced the overall damage percentage by 4.75% to 48.95% and you can now obtain a permit to rebuild.

If someone were to decide that certain areas of the City cannot be rebuilt or should not be rebuilt the question of who will compensate the existing Owners of the existing property will become central. The result is likely to be massive long term litigation which would stall any progress.

Since I am stating an opinion that might have significant concequences if anyone should read and act on it I think it is necessary to caution everyone that each situation is different and each case must be evaluated on is merits.