Backgrounder: Property Acquisition Projects (Buyouts)

FEMA's Hazard Mitigation Grant Program (HMGP) takes a percentage of the federal money spent on recovering from a disaster and uses it for projects that reduce future risk. By law, FEMA can contribute 15 or 20 percent of a disaster's cost to this grant program. How this money is used is up to the State. Some states, for example, may use the money to elevate homes or they may use the money for the "acquisition of property", usually just called buyouts.

FEMA knows that it can be difficult for people to leave a precious home- even a home severely damaged by a disaster. Many communities and people have considered such an action, and they've rebuilt their lives and created new memories in safer places. Since 1993, participating communities have purchased more than 20,000 properties as part of this program. FEMA encourages all homeowners in affected communities to be sure they get all the information they need about buyouts so they can make the best decision for their families and their communities.

How the Program Works
It is important to understand that FEMA does not buy houses. Buyout projects, while 75 percent funded by FEMA, are administered by the State and local communities. The State and local communities work together to identify areas where buyouts make the most sense. Individuals may not apply directly to the State, but the community may sponsor an application on their behalf. Buyouts are an important way to reduce the risk of future disasters. Money is limited and in most cases, the amount of money set aside for mitigation cannot meet all the mitigation needs following a disaster. States prioritize mitigation programs-with input from the communities.

Property acquisition is one of many forms of hazard mitigation but it is the most permanent form. It removes people from harm's way forever. In a property acquisition project, the community buys private property, acquires title to it, and then clears it. By law, that property, which is now public property, must forever remain open space land. The community can use it to create public parks, wildlife refuges, etc. but it cannot sell it to private individuals nor develop it. Property acquisitions work the same way as any other real estate transaction. Property owners who want to sell their properties will be given fair prices for them. It is a terrific opportunity for people who live on or near hazard areas to get to safer ground.

Fair Compensation
Communities may offer homeowners who agree to participate in a buyout project up to the fair market value of the home BEFORE the disaster struck. A licensed appraiser hired by the community determines the fair market value.

Voluntary Participation
Buyouts are strictly voluntary. No homeowners are ever forced to relinquish their property. Homeowners who decide not to participate in the buyout may need to take risk reduction measures, such as elevating their homes.

The Steps of a Buyout:
Homeowners don't apply to FEMA for a buyout. Buyouts are not part of the disaster application process and are not part of disaster assistance.

1. An HMGP application is prepared by local officials - with input from the community and those homeowners with destroyed or severely damaged properties. The local officials will have been notified by the state of what the state's priorities are or other special restrictions decided upon by state officials.
   
   
2. The state receives and reviews the applications and submits those deemed appropriate to FEMA for approval. FEMA reviews the applications to ensure they follow the rules, are environmentally sound and are a cost-effective use of funds.
   
   
3. Once FEMA gives its approval, the state begins the acquisition process. The communities actually conduct the purchase and title transfer. Then the buildings are removed or destroyed by the community, and the land is cleared.

Since a buyout is not a simple matter- and requires a great deal of education and community input- it does not happen overnight. It may take months for a State and the affected communities to submit and agree to buyout proposals. Once a homeowner accepts a buyout offer, though, the average closing takes about 45 days.

Duplication of Benefits
Because federal funds are used to acquire property, FEMA takes care not to duplicate benefits paid by one program with benefits from another source. This means that FEMA will require the community to subtract from the purchase price the amount of other assistance the individual property owner might receive for the same purpose. This assistance includes flood insurance and grants that are available to individuals. FEMA considers this assistance as an advance, or down payment, on the property should the owner choose to sell it. However, if the homeowner has receipts showing that the money was spent on its intended purpose, for example repairing the home to make it livable again, the community will not subtract that amount documented by receipts.

While buyouts are an important means to ensure communities will not be at risk for disasters in the future, there are other actions FEMA is achieve the same goal. In 1997, FEMA launched a disaster-prevention initiative called Project Impact: Building Disaster Resistant Communities. FEMA helps individuals, businesses and local officials join together to identify a community's risk for disasters and then take common-sense steps to reduce or prevent damage before a disaster strikes. Since its inception in 1997, nearly 250 communities and 2,500 businesses have joined the effort.