ConstructionRenovating On Folly Beach: Know How FEMA’s 50% Rule Applies

Federal Emergency Management Agency (FEMA) was created to help manage and mitigate the many risks that can overwhelm resources of local agencies.  Let’s be clear here, their purpose is not to ruin your home building dreams BUT if you fall foul of their various and eminently sensible regulations, then they are unlikely to bend to your will. So here is a cautionary tale of a FEMA rule to watch out for.

For the owner of a house on the beach, this is a rule that probably produces the most headaches. That rule is often referred to as the “50% Rule. ”  This is the short version:  if your renovation project is below current FEMA Flood Elevation and, if your renovation is projected to cost more than 50% of the “value ” of the building (not the land) then your home must either be lifted to FEMA Flood elevation requirements, you must seek a FEMA Variance, reduce your renovation budget, or you must demolish it and build new.  It’s sometimes referred to as the “Substantial Damage ” or, “Substantial Improvement Rule ” – there is a little more to it than this, but let’s keep things simple.

The “value ” is the value of the house only.  County records are a good place to start and will identify a value for the land and the improvements. “Improvements ” generally refer to the buildings on the land.  If there is more than one building then the value of each building will be correspondingly less than the total.  In the absence of additional supporting information then this is the value that will be used by the local authority in deciding whether or not to issue a building permit.  

A practical example of this rule may be illustrative so let us look at 106 East Erie St. on Folly Beach.  This is a 1960’s 4 bedroom 2,200 sq. ft house with detached garage and 300 sq. ft ancillary dwelling.  It’s also one of our projects destined to become a 2,000 sq. ft renovated 4 bedroom vacation rental with two additional 1400 sq. ft new build homes on the same plot of land on Folly Beach just off Centre St.  We develop a lot of properties locally and should have known better but instead walked blindly into a problem with the 50% Rule.

We submitted building plans and went through the various stages to obtain approval.  That was a simple process.  We pulled an initial demolition permit from the City of Folly again without issue and so began the work of removing the garage, ancillary dwelling and unwanted parts of the main house.  Then we applied for a building permit with an estimated refurbishment cost of $142,000 believing we were well within the FEMA 50% Rule with a building value in the County records of $375,000.  Our application was (rightly) rejected.  This is a big problem.  The City of Folly had requested the County to split the assessed value across the three buildings and they allotted only $200,000 for the main house having no other knowledge of the building or its situation. The advice that followed from the City of Folly was either, get an independent appraisal, lift the building to FEMA Flood (an additional 8 feet), modify your plans or demolish and rebuild. 

Complaining is not an efficient strategy in these circumstances, what you need is independent fact.  We had completed the majority of the demolition work so the appraiser had only what remained of the house to look at.  They cannot work from historic photographs of what was once there.  Luckily we had HVAC, plumbing, electrical, roof, windows and most of the siding still installed and this contributed considerably to the appraised value “as is. ”  The final report gave an appraised value of the building “as is ” of $319,000 and with an estimated improvement bill of $142,000 we were now well within the 50% rule.  The independent appraisal was submitted again to the City of Folly and a permit was granted.  

This could have gone very differently for us, resulting instead in the need to demolish as the building could not easily be lifted.  We should have obtained the appraisal early on in the planning stage and not relied on Charleston County records. A valuable lesson learned for us.  We have seen other projects on Folly stopped this way and in those instances, the buildings were only fit for demolition. Your chances of getting support from City of Folly Beach for a FEMA Variance are probably near zero so it’s best not to even try.  Our advice would be to consult your architect or builder very early on in the process so as not to get caught by the sensible, but sometimes rather painful, “FEMA 50% Rule. “

Note: Each project, hurdle, or challenge we encounter only adds to our experience building and renovating in downtown Charleston and on Folly Beach. Before you undertake your next renovation, it will save you time and energy by understanding the rules and regulations around building on Folly. Our lessons learned are here to help you, so let us know how we can help…