Background: 1974 split level ranch built on the side of a hill. Climate zone 5A. Recently replaced gutters & downspouts. ~25 year old French drain servicing about 1/3 of the uphill facing side of home. Got a borescope to inspect the french drain and the underground drain pipes that 3 of the 4 downspouts are attached to. Most of what I can seen looks unclogged but much of the system is unreachable as the borescope is like pushing a chain. However, I ran a hose in the drain pipes and got flow out the other ends so while they may have leaks, I know they at least work somewhat. Last fall I installed a trench drain in front of the garage and tied it into a catch basin under the only downspout that wasn’t attached to underground drainage, then ran 50’ of corrugated drain pipe downhill to daylight. I intend to put a curtain drain spanning the entire uphill facing side of the house this spring because I know step 1 when finishing a basement is to control water and that battle is largely outside.

Figure 1. General property view

I am renovating a walkout “basement” (in quotes because I think since the most below grade wall is less than 50% below grade, code doesn’t consider it a basement?). On two sides of the room there is a 40” tall concrete (stem?) wall that had 16”oc 2×4 framing with fiberglass insulation in some stud bays and what appeared to be ~1” thick styrofoam boards cobbled on top of one another (not taped and not continuous or behind the studs/between the studs & concrete wall) in other stud bays. There was a poly sheet stapled to the interior side of the framing, then drywall, and then wood paneling. There was extensive mold and water damage and I discovered a couple vertical cracks in the concrete wall (Fig. 2 indicated in blue). The damage was undoubtedly made worse because the drywall was run all the way down to the concrete slab and the wood paneling hid the mold. I removed all of the moldy drywall and rotten wood last spring and sealed the cracks with an epoxy injection kit and have not seen any bulk water intrusion since. I also recently taped some 1’x1’ plastic sheets to a few places on the concrete walls to test for moisture and have not seen any but I’m not sure if that test needs to be done in the summer. I ran a dehumidifier in the room last summer and collected around 8 gallons of water a day on average (350sqft room).

Figure 2. Room detail

My question is what wall assembly would be best when I rebuild?

The consensus from a building science perspective is that exterior insulation is best. Unfortunately at this point that is unfeasible for many-myself included. Therefore most of what I have read, listened to, and watched recommends interior continuous rigid foam insulation.

However, I have a couple of reservations. With continuous rigid foam on the interior, I am concerned about moisture coming through the porous concrete not being able to breathe and dry, thus the growth of mold. There seems to be two camps regarding the installation of rigid foam: either completely air seal the edges off from the room, or leave an air gap so moisture can dry. I don’t know which is best to avoid having mold. It seems like you either accept that there will probably be mold but try to isolate it, or try to prevent mold growth by allowing the concrete to “breathe”.  The problem I see with the latter approach is it potentially allows warm moisture laden interior air to circulate and condense on the cool concrete behind the foam, then mold spores can breathe back into the room. 

My other concern is the flammability of rigid foam. There is a fireplace in the room and electric baseboard heaters I need to reinstall.

I spoke to a contractor and they recommended rockwool. I am intrigued by its fire resistance, inertness and lack of off-gassing and wonder if it would be a better choice than rigid foam for combating mold. Apparently it is hydrophobic but I don’t know if that means if it is touching the concrete walls it won’t wick water to the backside of the drywall. Would it allow for any incidental water vapor to diffuse and dry to the interior? And if it does allow moisture to move inward, what’s preventing warm moist interior air from going through it the other direction and condensing on the concrete and creating a mold issue like with the air gap foam assembly? I am also skeptical since I haven’t seen many other sources recommending rockwool in this application. 

Any advice would be greatly appreciated.