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Imagine waking up tomorrow to find out that the value of your home has been reduced by a third or more. That happened to thousands of property owners when the state adopted the FEMA “advisory” flood elevation maps. The maps, changes in the federal flood insurance program and the state’s adoption have created a perfect storm that could change the Jersey shore more than Sandy did.
The Federal Emergency Management Agency flood elevation maps were last revised in 1983. The maps, which were revised before Sandy, change not only the minimum first-floor elevation of many homes, but also expand the classification of vast areas of the shore.
This is only the second time in its history FEMA has issued advisory maps. The first time was after Katrina.
The new maps put many parts of shore communities in the most vulnerable flood zone, the V Zone, which stands for velocity and indicates the property is at risk for wave damage by three-foot waves. Most of the bay and oceanfront areas up and down the coast in Cape May and Atlantic County have been placed in this zone for the first time. If these homes are more than 50 percent destroyed in a storm and have to rebuild, they would be required to comply with the V Zone requirements for higher first floor elevations, in some cases three or four feet higher, and they would have to be constructed on piles or piers with breakaway walls between the ground and the first floor.
Between now and the next big storm, the homes that do not rebuild and comply with the new requirements would face substantially increased flood insurance premiums when the FEMA maps are finalized.
Second-home owners, who had been previously able to purchase a basic flood insurance policy through the federal program, are ineligible and have to resort to the private insurance market.
Gov. Christie made the advisory maps mandatory for new construction through the issuance of an executive order. In his announcement he indicated that nonconforming homes in the V Zone could face flood insurance premiums as high as $31,000.
While the executive order may give an immediate pathway to rebuilding for those who lost their home in the storm, the implications for others whose homes are still standing are serious, as they now face higher insurance premiums unless they raise the height of their homes.
The economic implications for all shore communities are serious. Prospective purchasers of nonconforming shore homes will think twice, worried that they will have to reconstruct if their home is destroyed by a storm and face high flood insurance premiums when the FEMA maps are finalized. Lenders, who have become increasingly stringent especially with second homes, will become more critical when being asked to finance a home that does not comply with the flood elevation requirements. Nonconforming homes may be viewed as teardowns worth no more than the value of the land that they sit on.
The effect on property values would have a corresponding impact on tax bases for shore communities. The properties in the V Zone – waterfront properties on the beach and the bay in shore towns – would be most severely impacted. Those properties have typically comprised a disproportionate portion of the shore tax base, a tax base that has already suffered from a decline in values. These changes will further deteriorate those tax rolls.
Like most serious problems, there are no easy answers. To ignore the threat of storms would be irresponsible. On the other hand, to impose such a drastic change that will affect so many is a step that should be taken with as much care as possible.
There are a couple of options that come to mind.
First, we need to recognize that the FEMA maps are advisory, not final, and will be subject to revision as a result of Sandy. FEMA has indicated that the final maps will not be issued until 2014. There are also serious questions being raised about the accuracy of the maps and whether they reflect changes such as the increased height of bulkheads along the bay. Some properties on the bay side in protected lagoons or blocks away from the water have been included in V Zones even though there has been no evidence of three-foot waves ever sweeping through those properties. Architects have pointed out that new homes complying with the current flood elevation requirements even on Long Beach Island weathered Sandy with little or no damage to the living space.
The FEMA map may be overly zealous both in the scope of the V Zone areas and the elevation requirements.
Second, the recent change in policy by the federal flood insurance program making second homes ineligible should be reversed. Second homes comprise 80 to 90 percent of most shore communities. To leave them at the mercy of the private insurance market is unfair and unnecessarily disruptive at the worst possible time.
FEMA’s new maps present a greater economic threat to shore communities than the red tide and Sandy combined. The effect of these changes will have repercussions for a long time. Before such drastic action is taken we should take care to make sure we are doing the right thing.
Sal Perillo is a former mayor of Ocean City and a partner at Nehmad, Perillo & Davis.