When American homeowners buy subsidized flood insurance from the Federal Emergency Management Agency, they are making a commitment to rebuild better after flood disasters, even if it costs them. FEMA’s infamous 50 percent rule states that if a home in a flood zone suffers damage worth more than half its value, it must be torn down and rebuilt to raise it above flood level. It could cost homeowners hundreds of thousands of dollars, but it prevents the American public from footing the bill for the repeated destruction of vulnerable homes — at least in theory.
Enforcement of the 50 percent rule falls largely to local officials in flood-damaged regions, who are charged with ensuring their constituents don’t rebuild in flood zones. In return for this diligence, the federal government is subsidizing low-cost flood insurance for homes in communities that certify their compliance with the rule, tackling red-hot real estate markets in Florida and other scenic but climate-threatened regions.
As Florida continues to rebuild from 2022’s devastating Hurricane IanHowever, the Biden administration may signal that this era of easy money is over. Late last month, FEMA sent an explosive letter to local officials in Lee County, Florida, where more than 750,000 people live near some of South Florida’s most prized coastline. FEMA alleged that nearly 600 homeowners in the city of Cape Coral and other nearby towns have rebuilt vulnerable homes in the flood zone over the 18 months since Hurricane Ian, violating the 50 percent rule as well as local construction laws.
The agency has long given the county and its cities a 25 percent discount on flood insurance in recognition of the county’s efforts to control flood risk, saving residents millions of dollars a year. The letter threatened to yank away that discount, arguing that the country’s lax approach to rebuilding from Hurricane Ian negated those earlier efforts. The message was clear: After decades of risky construction in floodplains, the Fed was putting their foot down.
This new effort to penalize floodplain construction is another sign that the long-hidden costs of climate change and development are beginning to catch up with homeowners in coastal states — and at the same time that housing costs more broadly is increasing for many Americans. FEMA already has increased flood insurance premiums across the country in recent years to keep up with increasing risk, and private home insurance companies have too increased premiums for wind insurance in several states along the Gulf Coast.
The crackdown in Lee County represents an effort by FEMA to shift the cost burden of climate risk away from the federal government (and the public that funds it) and onto local homeowners. This will test the strength of the area’s white-hot real estate market, potentially forcing many homeowners to walk away from their waterfront properties. As the federal government and private insurers both try to reduce their exposure to climate change, Lee County and its cities could be canaries in the coal mine for a housing market marred by rising flood risk.
The reaction of these canaries was fast and furious. Elected leaders from the county and the city blasted FEMA as “villains” and accused the agency of obstructing Florida’s hurricane recovery ordered by President Joe Biden. Lee County’s board of commissioners decided to sue the agency at a tense meeting a few days after the announcement. Local TV stations have dozens of stories about the impact FEMA’s decision would have on homeowners, who are already dealing with a sharp increase in both flood insurance and traditional property insurance, which covers wind damage.
“It’s almost like revenge politics,” Cecil Pendergrass, a Lee County commissioner, said at the county meeting after the announcement. “Our citizens, our taxpayers are being held hostage here.”
FEMA soon put its decision on pause, giving the county an extra 30 days to prove it didn’t allow homeowners to break the 50 percent rule or build in the flood plain. It’s unclear whether Lee County or cities like Cape Coral will be able to do that. Federal and local officials declined to provide Grist with details on the post-Ian violations, citing privacy concerns, but if homeowners have already rebuilt their destroyed properties, the county won’t be able to fix them in a month.
The bigger question for communities across the country is whether FEMA is changing how it enforces the 50 percent rule in an effort to force homeowners out of flood-prone areas.
“The floodplain management community is watching this very closely,” said Susanna Pho, the founder of a flood risk firm called Forerunner, which helps flood-prone communities with FEMA compliance.
Lee County has long been a poster child for risky waterfront development. The city of Cape Coral sits on artificial filled land in what used to be a swampy stretch of Florida coastline, with no barrier between the city’s urban landscape and the Gulf of Mexico. When hurricanes hit, as Ian did in 2022, they can push as much as 15 feet of storm surge through the city and flood thousands of homes. Nearby cities like Bonita Springs, which also received a penalty from FEMA, aren’t much safer.
The 50 percent rule is supposed to reduce this risk over time by ensuring flood-prone homeowners don’t rebuild the same vulnerable properties over and over again. If a county determines that a home has suffered what FEMA calls “significant damage,” it must force the homeowner to tear it down and raise a new home above flood level, often on concrete pilings. If a county doesn’t comply, FEMA can kick it out of the federal flood insurance program, make homes more or less uninsurable, or downgrade its discount as it did with Lee County. This rule acts as a de facto tax on risky property: Flood insurance payouts are capped at $250,000 per home, which means homeowners are often on the verge of tearing down their homes and building new ones.
The problem is that determining what counts as “substantial damage” is a complicated process. Local officials conduct basic “windshield assessments” in the first few weeks after a storm, recording damage information they can see from the street as they clear debris. They only conduct detailed investigations for the 50 percent rule when homeowners request permits to rebuild. But many homeowners never request permits from their city or county. Instead, they come back and patch up houses that they have to tear down and rebuild at higher elevations, and the local government either never catches them or looks the other way.
Olivier Douliery/AFP via Getty Images
This mandate puts local governments in a difficult political situation: they have FEMA on one side, urging them to enforce strict flood rules, and displaced homeowners on the other, trying to get back into their homes without breaking the bank. to go It’s unclear how much Lee County and its cities knew about the hundreds of rebuilt homes FEMA claims failed to comply after Ian, but efforts to flout the 50 percent rule have been a plague for the agency going back decades.
Albert Slap, a coastal planning consultant in Florida, said he understands why Lee County or cities like Cape Coral might have allowed homeowners to repair their homes without lifting.
“It’s pretty clear that the motivation is voters,” he said. “The people who are damaged are voters, and they’re going, ‘If you better make me rebuild, I won’t be able to do it, and I’m going. I voted you into office and you’re screwing me.'”
Lee County says it followed normal protocol after Hurricane Ian, doing basic damage assessments in the immediate aftermath of the storm and inspecting homes only later when homeowners requested permits. Flood and disaster experts who spoke to Grist said this protocol is more or less standard in Florida and other hurricane-prone states, raising the question of whether FEMA is changing the way it enforces the 50 percent rule and crack down harder on rogue rebuilds.
FEMA did not answer questions about its enforcement strategy. In response to questions from Grist, a spokesperson said the agency is “committed to helping communities take appropriate corrective actions” to correct the redevelopment violations. A Lee County spokesperson said the county “will work with its partners at FEMA during a 30-day extension period.”
Adam Botana, a Republican state representative whose district includes much of Lee County, said he has faith that Lee County and other local governments will address the violations FEMA has identified and take action against homeowners who rebuild without FEMA- regulations to follow.
“No one likes the 50 percent rule, but I understand there have to be rules,” he told Grist. “Some municipalities may be a little more lax than others, but we have to keep everyone in line.” He added that he thinks the province will be able to prove that many of the alleged violations did not occur.
Even if Lee County succeeds in challenging the decision, Southwest Florida homeowners are almost guaranteed to suffer more financial pain as a result of this enforcement effort. If FEMA stays the course and removes the discount, it will increase flood insurance costs for homeowners in unincorporated parts of the state by between $14 and $17 million per year, which equates to an annual hit of $300 for every flood insurance customer in the area. But if Lee County suppresses the 50 percent rule and FEMA restores the discount, homeowners rebuilding in flood zones may have to spend hundreds of thousands of dollars to elevate their homes.
This new penalty comes on top of a much larger rate increase that FEMA has rolled out over the past few years as part of an effort to fix problems with the flood insurance program. This new system, called Risk Rating 2.0, will triple the cost of insurance in Lee County by the time it takes full effect, raising the average annual premium from about $1,300 to nearly $4,000, with some of the most extreme bills racking up well over $10,000 a year . Florida’s private wind damage insurance market is also in trouble: More than 30 private carriers have pulled back from the state in the past two years, in part due to rising hurricane risk. Those who held on saw their prices double or triple.
Lisa Miller, a veteran Florida political consultant and former state insurance regulator, said the burden of rising costs should not trump the need to ensure Lee County homes are resilient against future disasters.
“Whenever I hear someone tell me they don’t want to pay $12,000 a year, I remind them, ‘we live in Florida,'” she said. “Our disaster risk is higher than almost anywhere in the world. What matters is, the houses that were repaired when they should have been torn down and rebuilt — will they withstand the next storm? That is the question.”
