Hi,
I am just curious where in world do they build a house like that? And
local code permits it?

No idea if code permitted it. I'm in Urbana, IL. Part of the problem
is that the addition was built on an old carport slab. The slab was
not elevated like the house's foundation, but they didn't do anything
to build it up. It's idiotic to say the least

Another question: for the z-flashing, should it be a 5/8" deep z-
flashing, like the siding? Or does it need to be a little deeper so
it hangs out a little bit?