'Dreaded' FEMA rule imperils Florida rebuilding

Thousands of homeowners in Southwest Florida whose homes were damaged by flooding from Hurricane Ian are running into a bureaucratic buzzsaw that may force them to tear down their properties and rebuild at higher elevations.

In response, some local governments are seeking workarounds to help homeowners avoid wholesale reconstruction, but because the regulations are designed to prevent future flooding damage, federal officials seem unlikely to relax the rules.

This will likely preclude some property owners from rebuilding because they can't afford the cost of building higher.

The total number of properties affected by the Federal Emergency Management Agency requirements at issue are not yet clear, but it is likely to be substantial. Many homeowners may not yet know the hardships they'll face if they are not far along enough in the post-Ian reconstruction process.

North Port Building Official Derek Applegate and his counterparts across the region have the unpleasant task of informing disaster victims about those requirements.

In the worst-case scenarios, the additional costs imposed by the federal regulations could mean homes must be taken down to their concrete slabs and several feet of fill dirt brought in to raise a site above the area's base-flood elevation before a homeowner could even begin to rebuild.

"I haven't yet met anyone that was excited about our conversation," Applegate said.

'Dreaded' 50% rule

Those conversations have centered on what one Collier County attorney describes as the "dreaded FEMA 50% rule."

County and municipal governments have to meet federal guidelines for area homeowners to qualify for policies under the National Flood Insurance Program.

One of those guidelines requires building departments to not issue building permits to homes in special flood zones when repair costs exceed 50% of a home's market value until the property owners raise their homes so that flood waters are less likely to cause damage in the future.

The rule is designed to prevent taxpayers from having to subsidize by repeatedly rebuilding properties in areas that are known to be vulnerable to future flooding.

But in Southwest Florida, the human impact and high cost of repairs stemming from the rule has jurisdictions looking at how they calculate the 50% rule and what wiggle room the federal government is willing to allow.

Earlier this month, Lee County's Board of County Commissioners discussed possible changes to allow for an additional 15% on top of the county property appraiser's assessed value, as that figure is used by the building departments to determine the maximum repairs allowed before a property triggers the 50% rule.

Building departments take the assessed value of a home in a flood plain and divide that number by two. The total value of the repairs can not exceed this figure. If it does, the property will be required to meet updated building codes before a building permit is issued.

But the federal regulators, according to Lee County officials, were not open to adding the 15% in calculating a home's assessed value.

In fact, when Lee County officials pointed to nearby jurisdictions that had similar multipliers in their regulations, County Attorney Richard Wesch told commissioners that federal regulators would demand those jurisdictions remove any additive values to how they implement the 50% rule.

Uniquely Florida problem

Charles Whittington, an attorney with the Collier County law firm Grant Fridkin Pearson, wrote an article on the "dreaded FEMA 50% rule" in 2018 on the law firm's website. He updated it in November after Ian, recognizing that many people would be impacted and searching for accurate information on the complex regulation.

Whittington said Florida properties could be more impacted by the FEMA 50% rule because the rule only looks at a structure's value. In Florida, he said, much of a property's value is in the land.

So, if someone bought a house for $300,000, but the home is valued at just $100,000, that means any repair work would need to be less than $50,000.

If the estimates for repair come in above that figure, a homeowner would be required to raise their house and meet all new building codes.

"It is cost prohibitive to raise the structure to meet current FEMA regulations," he said. "Some people won't be able to afford it."

Richard Durling, owner of Marvin Homes in Lee County, spoke during the Nov. 15 Lee County Commission meeting, imploring the board to proceed with the 15% multiplier despite what federal regulators had conveyed to county staff.

The Lee County homebuilder points to a rapid raise in construction costs due to the COVID-19 pandemic's effect on supply chain. He said the building industry had asked for a 40% multiplier to mirror the rise in construction costs.

Lee County does not have a figure on the number of properties that may be affected by the 50% rule, but Durling said county officials have identified as many as 20,000 substantially damaged properties in the county. Not all of those properties will be in federally identified flood zones, but many of them will.

So far, 14 building permits have been stopped due to the 50% rule, county staff said at the meeting last week.

"It's a difficult situation," Durling said, adding that county officials "are doing the best they can."

Durling said he believes the county has the authority to decide how they will calculate the 50% rule and chastised the federal regulators for not allowing the change.

"I don't know if they truly understand the impact of putting thousands of people out of their homes," he said.

There's also the issue of homestead exemptions. In Florida, a homesteaded property's assessed value can only increase by a maximum of 3% a year.

So, properties that have been homesteaded for years could have much lower assessed values than what their actual market value would be today.

Most local building departments will accept an appraisal conducted by an appropriately licensed professional if a homeowner appeals their assessed value determination.

However, finding an appraiser willing to sign off on a pre-hurricane valuation can be challenging.

"You're asking the appraiser to get into a time machine and go back to the day before the storm," Whittington said. "That's a very tough job."

Durling echoed that assessment and advocated for the "straightforward method" of some form of multiplier.

He said that he feels some property owners may be feeling backed into a corner, which could force them to use unlicensed contractors to repair their properties.

In the short term, that could result in property owners impacted by the 50% rule dodging the regulation by using contractors who don't pull the permits or see property owners take the risky move of hiring an unlicensed contractor.

It is illegal in Florida to use an unlicensed contractor, and building department officials have warned homeowners not to do so as it increases the risk of being scammed.

Also, Durling said, when a property owner goes to sell the property, they are required by law to disclose flooding to a buyer, who should then ask to see the building permits for the repair work.

If the buyer doesn't ask for the permits, the mortgage company will, Durling said.

"That's going to be a huge problem," he said.

Getting the bad news

Cassie Midas bought her North Port home this last May, uprooting her two children in Minnesota and moving closer to her husband's family so he can help with their business.

Just one corner of the property falls into a special flood hazard area, but that's enough for the FEMA 50% rule to apply to her repairs, she said.

So, she was one of more than 600 homeowners in the city of North Port who received notice that they may need to meet current Florida building codes before she can get a permit to rebuild.

She bought her house in the 5600 block of Bliffert Street for $325,000. The family also has flood insurance.

The insurance company estimates the cost of the repairs at $48,000.

She's hopeful that an April appraisal that put the value of her house at $215,000 will be accepted and she'll fall well outside of the dreaded FEMA 50% rule, because if it isn't accepted, the family may have to walk away from the house.

They would need to raise the house two feet to meet current code.

"The insurance adjuster said it (the insurance payout) wouldn't even touch the cost to raise the home," she said.

Applegate, the North Port building official, said that since Hurricane Ian hit, he's read eight to 10 manuals as he searches for accurate information and alternative avenues he can suggest to people with hurricane damage.

"The building department is here to help, we're trying to figure out ways to navigate through this," he said. "In North Port's 60-year history, we've never had to do this, so we don't have a base."

He's recently learned of a way to provide "temporary occupancy of substantially damaged structure after a disaster," but even that would only be a short-term solution.

"This is only a temporary patch, and it's not going to save the ones that are going to be lost," he said.

As to whether North Port would look at adding value to the property appraiser's assessed value, Applegate said he doesn't see how the city could do so without running afoul of regulators or harming residents by increases to insurance rates due to non-compliance with FEMA rules.

The insurance rates for an area are determined by a point system that takes into account many different parts of a jurisdiction's building codes and regulations. By messing with one part of the code, it could send insurance rates spiraling.

"I'm not sure what that does to their insurance," he said of some municipalities that did make changes, "but it will have some effect. It won't be free."

As to the hundreds of letters that the city sent out in November, he's hopeful that some of the properties won't fall into the rule when other factors are weighed.

"I'm going to work to get that number down to," he said with a big sigh, "anything less than 600."