FEMA 50% Rule (Substantial Damage/Substantial Improvement)

Substantial Improvement

It is defined in 44 CFR § 59.1 means any reconstruction, rehabilitation, addition, or other improvement of a structure, the cost of which equals or exceeds 50% of the market value of the structure before the start of construction of the improvement. The term includes structures that have incurred "substantial damage," regardless of the cause of damage and regardless of the cost of repair work performed. However, the term does not include: Any project for improvement of a structure to correct existing violations of State or local health, sanitary, or safety code specifications that have been identified by the local code enforcement official, and that are the minimum necessary to ensure safe living conditions, or Any alteration of a "historic structure," provided that the alteration will not preclude the structure's continued designation as a "historic structure." Be sure to check the State and community's floodplain management regulations and building codes to determine whether any local requirements are more restrictive than the NFIP minimum requirements. Some communities modify the substantial improvement requirements in one of two ways: adopting a lower threshold than 50% (such as 40% or 30%) or tracking costs of improvements and costs of repairs over a specific period, referred to as "cumulative substantial improvement." Some communities adopt more restrictive requirements that affect the design of buildings, such as requiring an elevation higher than the NFIP minimum elevation, which is the base flood elevation (BFE). 

Requirements

  1. An elevation certificate must be submitted with the SI/SD packet. You may check for an elevation certificate in our records by: 
  2. The most current ICC Valuation is used to compare construction costs when reviewing SI/SD packets.
  3. Construction valuation is subject to review and approval by the Building Official 6-4.1(a)(1)

FEMA 50% Rule Actual Cash Value (ACV) Appraisal

  1. An ACV Appraisal is defined as: (add the following to appear when clicking on the link) The cost to replace an insured item of property at the time of loss, less the value of physical depreciation. An ACV Appraisal is defined as: The cost to replace an insured item of property at the time of loss, less the value of physical depreciation. "4.5.3 Actual Cash Value Actual cash value (ACV) is the cost to replace a building on the same parcel with a new building of like-kind and quality, minus depreciation due to age, use, and neglect. ACV does not consider loss in value simply due to outmoded design or location factors. The concept of ACV is used in both the insurance industry and the construction industry. In most situations, ACV is a reasonable approximation of market value. Several commercial sources of construction cost information are available to support estimating the replacement cost of a building, including industry-accepted guides available from companies such as RSMeans and the Craftsman Book Company, among others. These sources allow computation of construction costs based on occupancy, square footage, quality, and regional cost variations. Depreciation accounts for the physical condition of a structure. Depreciation does not take into account functional obsolescence (e.g., outmoded design or construction that pre-dates current codes) or factors that are external to the structure (e.g., reputation of schools or distance to shopping and parks). Commercially available references provide tables and formulas to calculate physical depreciation. These tables and formulas are objective and are used by most professionals in the fields of property appraisal and building inspection. Local officials may consult with a qualified appraiser regarding depreciation, or additional guidance for applying depreciation rates over time is found in FEMA P-84 CD, Substantial Damage Estimator (Section 5)." FEMA P-758, p. 4-15
  2. The Building Department will only accept FEMA 50% Rule Actual Cash Value (ACV) Appraisals

For additional information about SD/SI, visit Pinellas County's Website