I can't speak to that myself, it's not my specialty but I think that would be one of your biggest concerns is their permit processes. 

I’m curious to hear from other investors who have ventured into flooded properties such as what challenges did you face, particularly with insurance and permitting?

Most HOAs do allow rentals but you may need to obtain a rental permit or adhear to certain lease provisions.Feel free to PM me if you have any questions - would be happy to chat / give guidance

Recently I have been hearing about multiple hosts in Texas that are getting citations for operating a coliving facility with occupancy greater than the permitted number of unrelated occupants.

Working thru permitting.  

Definitely recommend reaching out to the city first to confirm what permitting would be needed for added square footage.

After  3.5 years we have permits for a 17 unit redevelopment project.We had hopes that we would break ground within a year of buying the property....that fell by the wayside for 2 reasons:1) we had worked with the city to increase density through an affordable housing scheme that did not go as planned.

Since most of the homes that flooded took on electrical damage, you will almost certainly need to file a permit to do renovation as you will need the electric company to shut the power off, provide temporary meters, and turn the power back on.

If there are any known issues(even as simple as a bad $7 shutoff valve) you will not be permitted to turn on utilities. 

If there are only 2-3, then investigate and question GC.3) Check with your state's Attorney General's office for any complaints.4) Contact several City Building Depts in the area and ask for list of permits they've pulled.