HUD Wants to Delete the Two-Foot Flood Elevation Rule. For FHA New Construction, It Already Stopped Applying
If you are buying a newly built rental house out of state — or building one — there is a federal elevation rule sitting in the Code of Federal Regulations that your builder, your agent, and even some lenders will quote at you. It says the lowest floor has to be at least two feet above the base flood elevation. As of today, for FHA-insured single-family new construction, that requirement is not being enforced. And HUD has now proposed to erase it from the regulation entirely. The comment period on that proposal closed on September 8, 2026.
Here is what is actually in force, what is only proposed, and which of it touches an absentee owner.
The facts, in order
April 23, 2024. HUD published a final rule (89 FR 30850) that did two separate things. It created the Federal Flood Risk Management Standard (FFRMS) floodplain — a wider floodplain than FEMA’s 100-year map — for HUD-assisted and HUD-insured projects under 24 CFR part 55. And it rewrote HUD’s Minimum Property Standards at 24 CFR 200.926d(c)(4) so that new one-to-four-unit housing under FHA mortgage insurance had to sit two feet above the base flood elevation (BFE), documented by a signed Elevation Certificate.
February 21, 2025. After Executive Order 14148 revoked the executive order underpinning the FFRMS, HUD issued a temporary partial waiver of 200.926d(c)(4), dropping the “two feet above” requirement and restoring the prior standard: lowest floor at or above the BFE.
February 20, 2026. HUD extended that waiver, signed by the FHA Commissioner. Per FHA INFO 2026-03, the extension runs February 20, 2026 through February 19, 2027. HUD’s stated reason: the elevation standard “will limit the land available for development and increase the cost of construction for FHA insured properties.”
July 10, 2026. HUD published a proposed rule, Docket FR-6527-P-01 (91 FR 42685), to rescind most of the 2024 rule: no more climate-informed-science floodplain, back to the 1 percent annual chance floodplain (0.2 percent for critical actions), and the two-foot MPS language replaced with “at or above the base flood elevation.” HUD estimates $4.5 million to $85 million in annual construction-cost savings. Comments closed September 8, 2026. No final rule has been published as of September 14, 2026.
The misconception worth correcting
Two mistakes are common right now, and they point in opposite directions.
The first is reading the CFR and assuming the two-foot rule applies. It is still the printed text of 200.926d(c)(4) — a waiver does not delete regulatory language — but it is waived for FHA single-family new construction through February 19, 2027. If a builder is pricing an extra two feet of fill or stem wall into your new-construction purchase and citing HUD, ask which document they are relying on.
The second is assuming the rescission means flood risk paperwork goes away. It does not. Even under HUD’s own proposed text, a Direct Endorsement or Lender Insurance mortgagee financing new one-to-four-unit construction in the 1 percent annual chance floodplain must still obtain a final Letter of Map Amendment, a final Letter of Map Revision, or a signed Elevation Certificate showing the lowest floor is at or above the BFE. And none of this changes the statutory flood insurance purchase requirement for a federally backed mortgage on a property in a Special Flood Hazard Area (42 U.S.C. 4012a), or FEMA’s own local floodplain-construction rules at 44 CFR 60.3, which your city or county enforces regardless of what HUD does.
Interpretation, not fact: the practical effect of a rescission for a small out-of-state buyer is mostly about new construction supply and price in coastal and riverine markets, not about your own risk. The two-foot cushion was a resilience margin. Removing it lowers build cost; it does not lower the water.
Where this touches an existing rental you already own
Mostly it does not. The part 55 floodplain rules bite when there is federal money or federal insurance behind an action. If you buy with conventional financing or cash and do your own rehab, HUD’s floodplain process was never in your chain. Where it can appear:
- Substantial improvement of a HUD-assisted property. HUD notes that roughly 9.31% of the public housing portfolio and 7.1% of multifamily-assisted and -insured portfolios sit in the FFRMS floodplain, and that elevating garden-style buildings for substantial improvement is often impractical. If your rehab money comes through a HOME, CDBG, or HTF-funded program, the applicable floodplain definition is the one your grantee is operating under.
- FHA-financed new construction you buy as an investor-occupant or later assume. This is where the MPS and Elevation Certificate rules live.
- Appraisal and resale. A house built to BFE rather than BFE plus two feet is fully financeable, and may be cheaper to buy — and may cost more to insure.
A short checklist
- On any new-construction contract in a flood zone, get the Elevation Certificate and read the lowest-floor elevation against the BFE. Do not accept “it meets HUD standards” as an answer.
- Ask the local building department, not the builder, what the local freeboard requirement is. Many jurisdictions require one to three feet above BFE on their own authority, and that is unaffected by HUD’s waiver.
- Quote flood insurance before removing your inspection contingency. Elevation drives the premium.
- If federal grant money is anywhere in a rehab, ask the grantee in writing which floodplain determination applies while the rescission is pending.
- Watch for the final rule. Until it publishes, the operative documents are the 2024 rule as modified by a waiver expiring February 19, 2027.
Related reading on remote ownership mechanics: managing a rental from another state, whether out-of-state investing fits your situation, and hiring a property management company.
This article is educational and general in nature. It is not legal, tax, insurance, lending, or investment advice, and it is not a substitute for reading the applicable regulation or consulting a licensed professional about your specific property. Rules change; verify dates and requirements against the primary sources linked above before acting.
