Officials in Houston and across the country are failing to enforce a central pillar of the taxpayer-subsidized National Flood Insurance Program: Making sure severely damaged properties are elevated or removed from flood plains.

Thousands of such homes get rebuilt and then flood again, often for more than they are worth, costing taxpayers more than $1 billion in repeat losses.

The deeply indebted program is set to lapse July 31 without congressional reauthorization, and lawmakers have put forward a host of potential reforms to tie to that vote, but none directly address the costly problem of poorly enforced elevation requirements.

Texas has more flooded properties with evidence of this problem than any other state but Louisiana; Houston has more than any other city, a Houston Chronicle investigation found. Seven of the nation's 10 most frequently substantially damaged properties are in Houston. Those seven have had 107 damage claims totaling $9 million, even though the combined value of those buildings is just $426,000.

Under federal rules, local officials are supposed to assess flood damages and require demolition or elevation if the damage is estimated at 50 percent or more of the home's value. But telling traumatized flood victims that they will have to undertake expensive home elevation projects is politically and emotionally difficult, so officials lowball the damage estimates, putting people and homes back in vulnerable places, the Chronicle found.

The problem had largely been known only anecdotally, but the Chronicle's analysis used government data to bolster the reports of officials and flood victims in swamped communities, identifying thousands of losses that could have been avoided and homes put back in harm's way because requirements weren't followed.

Lynda Bates' 2,000-square-foot house on Galveston Island, for instance, is in no better a position that it was when Hurricane Ike swamped it with seven feet of water in 2008. She and her husband gutted it. Then they rebuilt at ground level, even though their front porch is just 300 feet from Offatts Bayou.

The city of Galveston did not object. It declared her home just 44 percent damaged, while appraisal records show it lost 67 percent of its value. Scores of Bates' neighbors did the same thing.

Ten years later, about 90 nearby homes remain at ground level, even though they are in a zone predicted to flood in a 100-year storm, which has about a 26 percent chance of happening during a 30-year mortgage.

"We were in a hurry," said Bates, a 70-year-old retired bank supervisor. "We wanted to get back in our home. The city never said anything to us."

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Because they get the blessing of the local government, homeowners such as Bates can continue to buy flood insurance at discounted or subsidized rates through the flood insurance program, which reached $25 billion in debt before the storms last year.

Galveston officials said they did the best they could under extraordinary circumstances, suddenly confronting construction permitting for an entire city all at once, after the storm inundated most of the city.

But it's not just those houses on those two streets in Galveston. It's hundreds more in that city, and thousands more across the nation.

The Chronicle examined claims records for more than 36,000 "severe repetitive loss" properties – the most frequently flooded properties in the flood insurance program nationwide. About 16 percent had evidence of being substantially damaged – beyond the 50 percent threshold – at least once before flooding again. This data suggests their damage assessments were too low or not enforced.

Properties that have avoided the 50 percent requirement in that fraction of the program have cost at least $1.1 billion in insurance claims – twice what the buildings are worth. The Federal Emergency Management Agency, which administers flood insurance, does not release detailed data on all flood claims, so the Chronicle's examination reveals only a slice of the problem.

One of the nation's worst properties in this regard, a house on the San Jacinto River in Kingwood, has had 22 flood insurance claims totaling more than $2.5 million since 1979. That's at least eight times what the house is worth, according to the data.

Most of the insurance payouts on that home could have been avoided if Houston had held to the federal requirement that it be elevated or torn down, the data suggest. The property first had a claim that reached the 50 percent threshold in 1989.

Everyone pays

The process of assessing substantial damage continues after Hurricane Harvey, and it's opaque.

Houston officials have mailed more than 2,200 notices of substantial damage to Harvey-affected homeowners. They say only whether a house is substantially damaged, but don't show the calculations used to make the determination. The city could not readily provide data that could be used to verify those assessments, or to determine whether the city is undercounting substantial damage. Officials said the information is spread out across too many departments and computers. In some cases, it's only in a paper file.

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Houston will not reveal the addresses of substantially damaged buildings, citing privacy laws. The letters represent only 1 percent of the 204,000 Houston homes and apartment complexes flooded in Harvey.

Like other communities, the city has few resources to police thousands of flood reconstruction permits at once, said Jamila Johnson, the city's flood plain administrator. A key problem, she said, is that FEMA will make a claim payout before a property owner gets rebuilding permits from the city. This results in untold amounts of unpermitted repairs and violations of elevation requirements.

"I just want the NFIP to be a better partner on enforcement," she said. "I know I'm not the only flood plain manager who says this."

FEMA officials have said they are shifting resources to better monitor the issue in cities that have large numbers of flood claims.

The extent of repetitive losses has long been known, but the Chronicle's analysis of federal data shows that incorrect damage assessments are a significant underlying problem.

"Nobody wants to tell a flood survivor, after they've lost everything, that, oh, by the way, you have to raise your house four feet," explained Chad Berginnis, executive director of the Association of State Floodplain Managers.

Or worse, tell them that they must leave their familiar neighborhood.

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So calculations of damage become political instead of mathematical, because the federal government puts the burden of that decision on local officials, even when the home is federally insured.

Everyone pays for bad assessments. Americans pay in the costs of disasters. In higher flood waters as a result of buildings standing where they shouldn't be. In massive infrastructure projects to protect high-risk homes. By becoming tenants and owners of repaired buildings in high-risk areas where developers have turned a buck and left. And, most directly, in the costs of federally subsidized flood insurance and the U.S. treasury's billion-dollar bailouts of the program.

"The social cost of trying to defend buildings that are deep in the flood plain is really high, and probably not really fair to the rest of their neighbors," said David Conrad, a consultant with the flood plain managers association.

Rebuilding in harm's way Thousands of homes in Galveston were declared less than 50 percent damaged (green dots) even though they had five or more feet of water. Select a home to see the water depth and damage assessment.

Source: Data from City of Galveston.| Created by Mark Collette/Houston Chronicle

'Red flags all over'

Rare instances where local data is available demonstrate how easy it is to subvert the 50 percent rule.

A database of damage assessments from Galveston after Ike, paired with recollections by officials there, shows how officials handled thousands of assessments, placing homes back at risk near the waters that inundated them under a 19-foot storm surge.

Among more than 5,000 damage assessments citywide reviewed by the Chronicle, most of them were declared below the 50 percent mark, including dozens of homes that took on eight to 15 feet of hurricane storm surge.

Five feet is usually enough to be considered major damage both by FEMA and the U.S. Army Corps of Engineers. Even less water was needed to meet that threshold in Ike because drenched homes sat in the summer heat for 11 days while residents waited for authorities to let them back on the island, allowing mold and rot to set in.

Yet Galveston assessments bore almost no correlation to the depth of water inside the homes, which is usually a predictor of damage severity.

"Three feet or more water on the first floor will almost always throw a frame-built structure over 50 percent," said Paul Osman, flood plain manager for Illinois, a state known for adhering well to the 50 percent rule.

Osman took a virtual drive of Bayou Shore, where Bates lives, using Google Earth.

BUILD, FLOOD, REBUILD: Flood insurance's expensive cycle

"Red flags are going off all over the place," he said. "There's a couple houses here that two feet of water should have thrown them over 50 percent ... I don't know how anybody at FEMA can't drive down Bayou Shore Drive and say, 'Whoa, what's going on here?' I just looked at it for 30 seconds and I can see it's a major problem."

Nevertheless, a one-story, 1,400-square-foot house that had seven feet of water and was gutted to the studs was declared only 28 percent damaged.

The months-long process of assessing damage across Galveston Island wore on, and residents' patience — waiting for insurance payouts, debris removal, contractors and permits — wore thin. Amid this uncertainty, all they wanted was a green light from the city to rebuild, recalled Elizabeth Beeton, a Galveston City Council member who witnessed this process in Ike's aftermath. "There's just tremendous pressure on local officials to accommodate their own constituents."

City staff could have held the line, but that would have meant forcing expensive elevation projects on people who couldn't afford it, ultimately kicking people out of town, and leaving homes to rot off the tax rolls. It can cost more than $150,000 to raise a 2,000-square-foot house, and standard flood policies cover only $30,000 of that.

So city officials gave in, Beeton said.

Julia Hatcher's house in Bayou Shore, valued at $62,000, took on six feet of water. The city declared only $25,000 in damages.

"One of the inspectors said to me something to the effect of, do you know how much it would cost if we rated everybody substantially damaged?" she recalled. "They just basically went around and lowballed damage for everybody so nobody would be substantially damaged. Everybody (on the street) was substantially damaged, in my opinion."

She was one of few who elevated her house anyway.

Over or under?

Catherine Gorman, the assistant planning director, said city staff bore tremendous stress. The first time she declared a house substantially damaged, the owner was in the permit office and had been waiting in a long line with other storm-ravaged residents seeking rebuilding permits. When the homeowner realized what the declaration meant, she collapsed on the floor. In the following months, Gorman and her staff would have thousands of those conversations with weary residents.

"Politically, the hardest part of their job is doing substantial damage determinations," said Berginnis, of the flood plain managers association. "I've been to places where communities are ready to repeal floodplain regulations entirely" to spare residents from such trauma, he said.

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Arriving at a damage percentage is a complex process involving dozens of variables and calculations, often performed by FEMA-produced software. Local officials are supposed to determine the cost of bringing the building back to its pre-flood condition using labor and materials at market prices, even if the homeowner elects to do less work.

Yet many of the variables are open to interpretation, allowing the end result to be easily manipulated. A FEMA handbook gives local officials four options for determining market value, one of which is simply "estimates based on sound professional judgment made by the staff of the local building department." The one-two combo of a high appraisal of property value, paired with artificially low contractors' estimates, can guarantee a damage declaration below 50 percent.

In its assessments, Galveston surmised that none of the thousands of damaged island homes would cost more than $65 per square foot to repair.

The Galveston staff had to assess tens of thousands of damaged properties via driving tours of the island, then whittle those down to the 5,000 or so that were thought to be close to 50 percent damaged. FEMA helped, but final determinations were up to a small staff, its members dealing with their own flooded homes. They heard appeals for months. Questioning the work of a licensed appraiser or contractor under such conditions was out of the question, Gorman said.

"We were not equipped to suddenly do permitting for an entire city," she said, adding, "Our goal was to get people back into their houses."

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Sometimes, Beeton said, building officials outright asked residents which way they wanted to go – over 50 percent or under, she said.

Beeton herself urged city staff not to reject residents' appeals of substantial damage declarations in instances where their neighbors had come in under 50 percent, she said. Her district included Fish Village, and the result was that only a single home out of at least 300 was declared substantially damaged.

Ike spared little of the island, flooding about 80 percent of homes. It was the worst Galveston disaster since the nameless hurricane of 1900 killed roughly 8,000 people, whose bodies had to be burned in funeral pyres on the beach.

After that storm, the town's collective leadership raised the height of the entire city by an average of four feet, pumping in 1 million dump trucks worth of dredged sand and fortifying the island with a 17-foot seawall.

They also lifted 2,100 buildings.

Julia Hatcher's street seen from the second floor balcony of her raised home on Campbell Lane, Wednesday evening. Hatcher raised her home after it filled with six feet of water during Hurricane Ike. It still sits as one of the few raised homes on the block. less Julia Hatcher's street seen from the second floor balcony of her raised home on Campbell Lane, Wednesday evening. Hatcher raised her home after it filled with six feet of water during Hurricane Ike. It still ... more Photo: Mark Mulligan/Houston Chronicle Photo: Mark Mulligan/Houston Chronicle Image 1 of / 16 Caption Close Flood Games: Manipulation of flood insurance leads to repeat disasters 1 / 16 Back to Gallery

'No accountability'

FEMA concluded as early as 1989 that bad damage assessments occurred because local officials "did not understand the regulation, failed to recognize the structure as substantially damaged, or simply neglected the responsibility of enforcement," according to an agency report.

"It's still an enormous problem," said Conrad, the flood plain managers consultant, who led one of few examinations of the issue when he was with the National Wildlife Federation in 1998. It's been poorly studied since.

Osman, the Illinois flood plain manager, called it "the most important component of flood plain management ... where we see the most effective reduction in flood losses — when you actually get out and do those damage assessments and stand by them and enforce them."

Despite early warnings from inside and outside government, the Chronicle's analysis shows the percentage of repetitively flooded properties with histories of substantial damage hasn't changed since Conrad's report 20 years ago – even as thousands more properties have joined the repeat loss list.

Insurance payouts to properties with past substantial damage have roughly doubled in that time.

Even as Congress prepares to reform the flood insurance program – or defer the reforms for the seventh time since September, only one of the proposals addresses oversight of substantial damage – it requires training of local officials but provides no new enforcement measures. FEMA doesn't track the issue, and neither do most local jurisdictions. In many communities that participate in the program, only paper records of damage assessments exist, even for recent floods, making databases like Galveston's rare.

FEMA didn't audit Galveston's handling of the substantial damage requirements in Hurricane Ike, even though the flood insurance program paid out more than $800 million in claims there since 1978.

The agency did, however, audit the city's flood plain management program seven months before Ike, finding only 20 deficiencies mostly related to individual properties. A FEMA official wrote to the city manager: "The city continues to demonstrate that its floodplain program is conforming to requirements and is very well managed." It has not been audited since.

Its flood plain residents get 15 percent off insurance premiums because the city maintains a Class 7 rating from the flood insurance program for good performance.

'No one's serious'

FEMA and its affiliates at the state level cannot keep up with the more than 22,000 communities in the flood insurance program. Houston, the most flood-prone metropolis in the country, has not had an audit since before 2007. Yet it has among the best flood insurance program community ratings of large cities, a designation that provides residents with up to 25 percent off their flood insurance policies.

Miami hasn't seen one in at least eight years. Only 23 percent of program communities have, a Reuters analysis found.

"No one's really serious about preventing repetitive flooding," Beeton, the council member, surmised. "If the federal government were serious about that, it would not leave it to local officials to make the decision about whether someone can rebuild or not – local officials who are in extreme distress."

Under current law, local officials don't get reimbursed by FEMA for building inspections after a disaster, so they don't ask for help or make temporary hires, Berginnis, director of the flood plain managers association said. His group is lobbying Congress for a measure to change that.

FEMA has shifted much of the burden for audits onto the states, but funding is inconsistent.

In 2017, FEMA gave the state's flood insurance program coordinator, the Texas Water Development Board, just $332,000 for the program that includes audits. Five staff members are dedicated to that program. To audit Houston under the guidelines set out by FEMA, they would have to spend weeks just driving the flood plain to look for violations, plus more time reviewing thousands of building permit files, board spokeswoman Kimberly Leggett said.

Roy Wright, the outgoing flood insurance program administrator, said the agency was considering mandating more regular monitoring of places such as Harris County with large numbers of flood policies, and spending less time on rural areas with lower flood exposure. Those mandates could be tied to future grants to the state coordinating agencies.

Damage assessments are seldom publicly available, either due to poor data management or the use of privacy laws to block their release.

"It's one of these areas where there's virtually no public accountability," said Rob Moore, a senior policy analyst at the Natural Resources Defense Council, which has issued several watchdog reports on the flood insurance program. "I suspect it's one of these big problems that nobody at FEMA really wants to find out how extensive it is."

Wright said he noticed substantial damage was a problem after floods in South Carolina in 2015 and Louisiana in 2016, largely because of inquiries from reporters in the affected communities.

"When I start hearing the same types of questions, that means I need to dive deeper in," he said. "The questions kept coming and frankly there weren't enough answers."

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He ordered a year-long review of program compliance issues, including substantial damage. The agency has not released a set of recommendations that resulted from that review.

He had no information on Galveston's practices. FEMA officials have monitored Houston's damage assessment processes since the storm hit, he said.

In the absence of greater help from FEMA, some states have developed a cooperative approach.

After severe flooding in Watseka, Illinois, in late February, a team of 18 flood plain officials from around the state assembled at city hall in the town of 5,000 people, where the building official would otherwise have been overwhelmed. In less than seven hours, they surveyed 676 buildings and identified 109 that needed more detailed substantial damage estimates.

They'd done this drill before, during another bout of flooding in Watseka three years earlier. Many homes then were declared substantially damaged and subsequently elevated.

None of them flooded this time.

***

Mark Collette finds the information the government and corporations don't want you to see. Contact him at mark.collette@chron.com. Follow him on Twitter at @ChronMC.

Matt Dempsey contributed data analysis for this report.

How this story was reported

Officials at the local and federal level have long known, anecdotally, that enforcement of the "50 percent rule" has been a significant problem, leading to repeat flooding and higher debt for the National Flood Insurance Program. Local officials are supposed to tag buildings that have damages amounting to more than half their market value, then force them to be brought up to code, usually through elevation above the floodplain.

As the Houston Chronicle investigated the program after Harvey, it was clear that little has been done to address the lack of enforcement and to understand its contribution to the program's billions in debt, and to repeat flooding.

The Chronicle interviewed 10 floodplain managers in six states whose communities had hit by heavy floods, and reviewed news reports and public policy papers stretching back decades to understand the scope of the problem. It also interviewed officials with the Association of State Floodplain Managers, an organization with more than 6,000 members across the country.

Click here to read the full methodology.

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