THE FEMA 50% RULEWHAT IT MEANS, WHO IT AFFECTS, & WHY IT’S IMPORTANT.Suzanne McGuire Broker/Owner NextHome Coast2CoastSo you’ve suddenly heard about this FEMA 50% rule and have
THE FEMA 50% RULE WHAT IT MEANS, WHO IT AFFECTS, & WHY IT’S IMPORTANT.
Dated: October 25 2022
THE FEMA 50% RULE
WHAT IT MEANS, WHO IT AFFECTS, & WHY IT’S IMPORTANT.
Suzanne McGuire Broker/Owner NextHome Coast2Coast
So you’ve suddenly heard about this FEMA 50% rule and have questions. If you live in SW Florida and just went through Hurricane Ian, you’ll want to read on and get familiar with some basic principles.
1. WHO DOES THIS APPLY TO:
If your home is in a Special Flood Hazzard Area (SFHA), this applies to you and your home. If your home is not located in an SFHA, the 50% rule does not apply to your home, but you should check with your local county/city government to confirm if they’ve added any language that could potentially affect how you build/rebuild. The NFIP (National Flood Insurance Program) requires that any structure located in the SFHA (flood zones beginning with A and V) where the cost of proposed improvements or repairs equals or exceeds 50% of the value of the structure (calculation for the value of the improvements or repairs must include all permits obtained in the past five  years using the permit finaled date), must be brought into full compliance with current flood damage prevention regulations.
2. SUBSTANTIAL DAMAGE:
If your home has had substantial damage and it’s located within an SFHA zone, you will be affected by this rule. Keep in mind it doesn’t just apply after substantial damage, it applies all the time. You are not allowed to improve your home more than 50% of its value without bringing it up to modern building codes which means above the BFE Base Flood Elevation.
3. HOME VALUATION:
This will blow your mind. The property value is the structure ONLY not the land (read location). The purpose is to evaluate a home based on its construction not it’s location. Meaning your beach or canal front, slab on grade, 3 bed /2 bath /2 car garage home built in 1971 has the same value as a comparable home inland. Each municipality has its own formula for calculating value. Most use the tax appraiser’s website, and some add an additional 20%to the value. If you disagree with your home’s stated value, you may get and provide an independent appraisal.
4. WHY THE 50% RULE IS IMPORTANT:
After a natural disaster you always hear stories on the news about “should we even allow these structures to be rebuilt in such a flood prone area”. What’s being discussed is the expense to all of us (as taxpayers) if a flood damaged home is rebuilt in the same manner using taxpayer dollars. The underlying principle for counting extra costs associated with more expensive materials, labor or design is the added real property that would be at risk to flood damage. The Federal Government (NFIP, FEMA, or various disaster assistance programs) would likely be obligated to pay a portion of or all future damage to these more expensive improvements. In addition, structures located in a SFHA that are not elevated to above the Base Flood Elevation or BFE plus 1 foot pose a threat to the health and safety of the occupants of these structures. Over time it is not only important to protect the property of the existing structures through substantial improvement, but also protect the health and lives of the people that occupy them.
5. GOVERNMENT PERSPECTIVE
What local, state, and federal governments would like to see happen is to “harden” or improve the structure to withstand the conditions that created the damage in the first place. For example, if you have a slab on grade home in a Special Flood Hazard Area (SFHA) and it floods, it makes more sense to raise the house up on stilts or pilings (as an example), so it will be less likely to flood in the future. This can be extraordinarily expensive to the homeowner. They would feel penalized for having a home that was damaged in a natural disaster and carrying insurance that they thought would fully protect them. They may not have even realized there was a FEMA 50% rule governing how they build/rebuild when they purchased. At the same time, the current situation does present an opportunity for local government to address these structures for the long term.
6. SOME GOOD NEWS-EXCLUDED ITEMS
The silver lining is that some project expenses and capital improvements are not included in the calculation of the 50% of the home’s value including:
plans, specifications, surveys, building permits, outdoor landscaping, driveways, pools, seawalls, etc. After hurricane Irma many homeowners in Cape Coral suddenly discovered their seawalls were not insured and were also their financial responsibility, and not that of the City..
7. SELF OR VOLUNTEER LABOR & DONATED OR DISCOUNTED MATERIALS
Many will receive help from aid organizations, friends, and family. Unfortunately, the value placed on labor or donated/discounted material should be equal to the actual or estimated labor/material charges for repairs/replacement of all damages sustained by the structure. The local permitting official based on his/her professional judgment and knowledge of local/regional wages scales and building material costs can provide additional guidance to determine reasonable labor rates for professional trades and material cost.
Please allow me to introduce myself and present my credentials. I have been working in the SW Florida real estate market since 2007. I started in property management back in 2007 on Fort Myers Bea....
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