How do I make a city recover from a disastrous flood?

How to re-create a town or city

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1. Find the center tile.

All town building is done by pathfinding (over roads) from the 'center tile'. A town cannot build on any tile with a road connection to the center tile.

2. Build a road on it.

The town has already helpfully done this. If you wait the same amount of time again, a house may appear. But you can help it along a little:

Doing this is required if you have the option 'towns build roads' turned off. This can be found under:

Settings > Environment > Towns > Towns are allowed to build roads 

3. Obtain £2,500,000

Since you were able to bulldoze, flood, and polder the whole town, you should have the money needed in the example.

4. Utilize 'Fund new buildings'

Utilize the Fund New buildings button to accellerate the town's building. Each time you press the button, it will do two things:

i. For the next two months, Building speed (number of days per house) is increased.

ii. The town will immediately attempt to build one house or road. (Sometimes this fails if the pathfinding fails to find a tile or there is no building available with the right parameters^note)

The town will more likely build a house if you pre-build some roads for it. (Which is why I advise doing step 2: it makes the process a lot cheaper).

There is a one-day cooldown on using this button. Thus, you want to click it every two game days. I've done so for a month, and this is the result after one month.

5. Wait until the buildings are built

Buildings take 3 months to be built. Some buildings will not have 'under construction sprites' so suddenly seem to appear later. Wait for the month counter to tick over at least 3 times.

In my example, I built from 22th of may to 27th of June. So I wait until at least 1st of November. Here's the result^note.

Note; my different buildings in this example are because I used some NewGRFs. These should not affect the outcome, though can sometimes have not enough low density center of town buildings so sometimes may cause empty tiles. It should work even better without.