Where I live on the western shore of Tampa Bay, Fla., many homeowners are required to purchase flood insurance in addition to their homeowners insurance policy. The reason: Most homeowners policies will only cover you for water that comes from the sky, not from the ground up. Those ground-up events are insured through the National Flood Insurance Program administered by FEMA, the Federal Emergency Management Agency.
We're not exactly flood-prone around here. My home sits 8 feet above high tide and Warren G. Harding was president the last time a major hurricane passed by. The chances of that happening again are about 1 percent. Still, I pay my 700 bucks every year because we're listed on FEMA's flood map.
But, as many homeowners around the country are about to find out, flood maps and insurance risk models can change, sometimes at the expense of your home's value.
The latest issue of Appraisal Journal includes a study, "Flood Zone Revisions and Economic Loss: An Example from Florida," that examines how flood map revisions can cost homeowners plenty.
Though it may come as a surprise, mandatory flood insurance is just one of many regulatory restrictions that can accompany a flood zone designation. Inclusion in a flood zone, particularly adjacent to a floodway where flood waters run swift, also can severely limit development and redevelopment of the property: new construction, expansion, fill, the whole shebang.
Since the loss of value from such improvements would last for years, the impact on resale value of the property can be considerable. In the study's example, the value of a light industrial manufacturing operation in southwest Florida declined $760,000, or 29 percent, due to flood rezoning alone.
Fortunately, there's a remedy. Property owners may ask the courts to deem a change in designation as a "regulatory taking" and petition the government for compensation. In Florida, a state statute known as the Harris Act provides for just such relief, as does case law.
Have you found yourself on the short end of a flood zone designation? If so, were you able to recover damages for lost value? And just wondering -- did it have any impact on your homeowners insurance rates?
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