SBA Disaster Loan Limits: Policy Options and Considerations
Changes from March 1, 2023 to June 17, 2024
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The Small Business Administration (SBA) Disaster Loan Program provides disaster loans to The Small Business Administration (SBA) Disaster Loan Program provides disaster loans to
Specialist in American eligible households and businesses to help them rebuild and recover after a disaster. SBA disaster eligible households and businesses to help them rebuild and recover after a disaster. SBA disaster
loans include (1) Personal Property Disaster Loans, (2) Real Property Disaster Loans, (3) loans include (1) Personal Property Disaster Loans, (2) Real Property Disaster Loans, (3)
Business Physical Disaster Loans, and (4) Economic Injury Disaster Loans (EIDL). As described Business Physical Disaster Loans, and (4) Economic Injury Disaster Loans (EIDL). As described
in this report, each type of loan has a maximum limit that has changed over time. in this report, each type of loan has a maximum limit that has changed over time.
located in a declared disaster area with up to $ located in a declared disaster area with up to $
property owned by the survivor; property owned by the survivor;
Research Assistant disaster area with up to $ disaster area with up to $
to its pre-disaster condition; to its pre-disaster condition;
•
and leasehold improvementsand leasehold improvements
obligations and operating expenses that could have been met had the disaster not occurred. EIDL loan obligations and operating expenses that could have been met had the disaster not occurred. EIDL loan
proceeds can only be used for working capital necessary to enable the business or organization to alleviate proceeds can only be used for working capital necessary to enable the business or organization to alleviate
the specific economic injury and to resume normal operations. Loan amounts for EIDLs are based on actual the specific economic injury and to resume normal operations. Loan amounts for EIDLs are based on actual
economic injury and financial needs, regardless of whether the business suffered any property damage. economic injury and financial needs, regardless of whether the business suffered any property damage.
The maximum amount that can be provided for a disaster loan, or disaster loan limit, was first established in SBA regulations The maximum amount that can be provided for a disaster loan, or disaster loan limit, was first established in SBA regulations
in 1968. In 1980, Congress began establishing disaster loan limits in statute, followed by SBA regulation updates.in 1968. In 1980, Congress began establishing disaster loan limits in statute, followed by SBA regulation updates.
Historically, limits for business disaster loans in SBA regulations have been for the same amount as set in statute, whereas Historically, limits for business disaster loans in SBA regulations have been for the same amount as set in statute, whereas
limits on home disaster loans in SBA regulations have been for a lesser amount than set in statute. SBA is authorized to limits on home disaster loans in SBA regulations have been for a lesser amount than set in statute. SBA is authorized to
establish loan limits lower in regulation than in statute because the statute establishes a ceiling for disaster loans, but not a establish loan limits lower in regulation than in statute because the statute establishes a ceiling for disaster loans, but not a
floor. In 2008, Congress increased the disaster loan limit in statute to $2 million; SBA floor. In 2008, Congress increased the disaster loan limit in statute to $2 million; SBA
regulation regulation to $2 million but not the home loan limit. Consequently, but not the home loan limit. Consequently, the limits on disaster home loans (limits on disaster home loans (previously $40,000 for personal property disaster $40,000 for personal property disaster
loans and $200,000 for real property disaster loans) loans and $200,000 for real property disaster loans)
remained the same in federal regulation for two decades (from 1994 to 2023). In 2023, SBA revised the disaster loan limit for personal property disaster loans to $100,000, and real property loans to $500,000. Further, SBA announced that the revision allowed the SBA Administrator “to increase maximum loan amounts to homeowners and renters … based on appropriate economic indicators, [including] current building costs, regional median home prices, the Consumer Price Index, and the Producer Price index” in a disaster declared region (or regions). This report provides an overview of the regulatory and statutory history of SBA disaster loan limits followed by policy This report provides an overview of the regulatory and statutory history of SBA disaster loan limits followed by policy
options that include information about inflation, construction costs, and median home values and home price trends. This options that include information about inflation, construction costs, and median home values and home price trends. This
report also includes brief descriptions of SBA disaster loan categories. report also includes brief descriptions of SBA disaster loan categories.
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Contents
Introduction ..................................................................................................................................... 1
Historical Developments ................................................................................................................. 2
Contextualizing SBA Disaster Loan Limits ....................................................................................
Inflation ...............................................................................................................................
Construction Costs ..............................................................................................................
Median Home Prices and Values ........................................................................................
Variations in State and County Home Costs ...................................................................... 11
Personal Property, Home Furnishings, and Vehicles ................................................................ 11
Policy Options ...............................................................................................................................
Disaster Loan Limit Floors .....................................................................................................
Concluding Observations ..............................................................................................................
Figures
Figure 1. Regulatory and Statutory History of Disaster Loan Limits.............................................. 5
Figure 2. Consumer Price Index Change .........................................................................................
Figure 3. U.S. Construction Cost Change .......................................................................................
Figure 4. Consumer Price and Construction Cost Comparison .......................................................
Figure 5. Median Sales Price for
Figure 6. Financial Characteristics for Housing Units with a Mortgage,
Figure 7. Consumer Price Index for All Urban Consumers: Household Furnishings and
Supplies in the United States ......................................................................................................
Figure 8. Consumer Price Index for All Urban Consumers: New Vehicles; Used Cars and
Trucks in the United States.........................................................................................................
15 Appendixes
Appendix. SBA Disaster Loan Categories ....................................................................................
Contacts
Author Information ........................................................................................................................
17 Congressional Research Service Congressional Research Service
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Introduction
Since 1953, the Small Business Administration (SBA) Disaster Loan Program has provided Since 1953, the Small Business Administration (SBA) Disaster Loan Program has provided
disaster loans to eligible households and businesses to help them rebuild and recover after a disaster loans to eligible households and businesses to help them rebuild and recover after a
disaster. Disaster loans for individuals and households (known collectively as home disaster disaster. Disaster loans for individuals and households (known collectively as home disaster
loans) fall into two categories: (1) Personal Property Disaster Loans and (2) Real Property loans) fall into two categories: (1) Personal Property Disaster Loans and (2) Real Property
Disaster Loans. Disaster loans for businesses (known collectively as business disaster loans) also Disaster Loans. Disaster loans for businesses (known collectively as business disaster loans) also
fall into two categories: (1) Business Physical Disaster Loans, and (2) Economic Injury Disaster fall into two categories: (1) Business Physical Disaster Loans, and (2) Economic Injury Disaster
Loans (EIDL). Loans (EIDL).
maximum amount of money that can be borrowed through these programs for any maximum amount of money that can be borrowed through these programs for any one disaster. The SBA Administrator is authorized to set the limit at a lower rate because the statutory language establishes a ceiling for disaster loans but does not establish a floor.1
Historically, businesses have been eligible for the full amount set in statute whereas individuals Historically, businesses have been eligible for the full amount set in statute whereas individuals
and households have been eligible for a lesser amount set in federal regulation by SBA. This is and households have been eligible for a lesser amount set in federal regulation by SBA. This is
presumably because the costs associated with presumably because the costs associated with repairing and rebuilding a home are less than rebuilding a home are less than
repairing and rebuilding a business. Working capital expenses may also be significantly higher than home repair and rebuilding costs. Additionally, smaller loan amounts may help the SBA provide more loans to individuals and households if there are loan amounts may help the SBA provide more loans to individuals and households if there are
budgetary limitations for these budgetary limitations for these programs
The current maximum amount available to individuals and households for home disaster loans The current maximum amount available to individuals and households for home disaster loans
was set in regulation by the SBA Administrator in 1994. They are (1) $was set in regulation by the SBA Administrator in 1994. They are (1) $
Property Disaster Loans; and (2) $Property Disaster Loans; and (2) $
maximum amount available maximum amount available
same amount that was set in statute in 2008 (seesame amount that was set in statute in 2008 (see Figure 1).
Source of Employment (MSE), the SBA may, under specified circumstances, exceed the $2 Source of Employment (MSE), the SBA may, under specified circumstances, exceed the $2
million loan limit to avoid substantial unemployment in a disaster area. P.L. 110-246 included a million loan limit to avoid substantial unemployment in a disaster area. P.L. 110-246 included a
provision granting the SBA Administrator this waiver authority.provision granting the SBA Administrator this waiver authority.
Disaster Loan Account, by Bruce R. Lindsay et al. , by Bruce R. Lindsay et al.
Any business may be eligible for Major Source of Employment (MSE) status if, at the time the disaster commences, it Any business may be eligible for Major Source of Employment (MSE) status if, at the time the disaster commences, it
has one or more locations in the disaster area that, individually or in the aggregate, employed 10% or more of the entire has one or more locations in the disaster area that, individually or in the aggregate, employed 10% or more of the entire
work force within the commuting area of a geographically identifiable community, no larger than a county, provided work force within the commuting area of a geographically identifiable community, no larger than a county, provided
that the commuting area does not extend more than 50 miles from such community; or employed 5% or more of the that the commuting area does not extend more than 50 miles from such community; or employed 5% or more of the
work force in an industry within the disaster area and, if the concern is a nonmanufacturing concern, employed no work force in an industry within the disaster area and, if the concern is a nonmanufacturing concern, employed no
fewer than 50 employees in the disaster area or, if the concern is a manufacturing concern, employed no fewer than 150 fewer than 50 employees in the disaster area or, if the concern is a manufacturing concern, employed no fewer than 150
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This report provides an overview of the historical developments of disaster loan limits, followed This report provides an overview of the historical developments of disaster loan limits, followed
by policy options related to disaster loan limits. To help contextualize disaster loan limits, this by policy options related to disaster loan limits. To help contextualize disaster loan limits, this
report includes narratives about inflation, construction costs, and median home values and prices. report includes narratives about inflation, construction costs, and median home values and prices.
A description of SBA disaster loan categories is located in tA description of SBA disaster loan categories is located in the Appendix of this report. of this report.
Historical Developments
SBA disaster loan limits were first introduced in 1957 through SBA notices published in the SBA disaster loan limits were first introduced in 1957 through SBA notices published in the
Federal Register and presented in SBA’s Administrative Manual. For example, on July 20, 1957, and presented in SBA’s Administrative Manual. For example, on July 20, 1957,
SBA announced that it would not provide disaster loans exceeding $100,000.SBA announced that it would not provide disaster loans exceeding $100,000.
disaster loan amount was determined on an individual basis, taking into account the disaster loan amount was determined on an individual basis, taking into account the
circumstances of the applicant and the disaster. A search of the circumstances of the applicant and the disaster. A search of the Federal Register indicates that indicates that
SBA limited disaster loans to no more than $350,000 in 1965.SBA limited disaster loans to no more than $350,000 in 1965.
SBA disaster loan limits first appeared in the SBA disaster loan limits first appeared in the Code of Federal Regulations (C.F.R.) in 1968. Prior (C.F.R.) in 1968. Prior
to that, the C.F.R. indicated that “there is no statutory limitation on the amount of a disaster loan”to that, the C.F.R. indicated that “there is no statutory limitation on the amount of a disaster loan”
and, as mentioned, SBA announced its disaster loan limits through notices published in the and, as mentioned, SBA announced its disaster loan limits through notices published in the
Federal Register. In this 1968 C.F.R. reference, SBA revised paragraph (a) of 13 C.F.R. §123.6, . In this 1968 C.F.R. reference, SBA revised paragraph (a) of 13 C.F.R. §123.6,
in part, by setting limits on business disaster loans at $100,000 for any one disaster (except for an in part, by setting limits on business disaster loans at $100,000 for any one disaster (except for an
additional amount to refinance any prior SBA disaster loan), personal property loans at $10,000, additional amount to refinance any prior SBA disaster loan), personal property loans at $10,000,
and real property loans at $20,000.and real property loans at $20,000.
loans to $500,000 and the limit for real property loans to $50,000. The SBA did not change the loans to $500,000 and the limit for real property loans to $50,000. The SBA did not change the
limit for personal property loans ($10,000).limit for personal property loans ($10,000).
the 1968 and 1970 disaster loan limits, or why those particular dollar amounts were selected. the 1968 and 1970 disaster loan limits, or why those particular dollar amounts were selected.
Procurement and Technical Assistance, and Administration,” 22Procurement and Technical Assistance, and Administration,” 22 Federal Register 5811, July 20, 1957. 5811, July 20, 1957.
Offices,” 30Offices,” 30 Federal Register 3340, March 11, 1965. 3340, March 11, 1965.
Provided further, that no loan under subsection (b)(1) shall be made, either directly or in Provided further, that no loan under subsection (b)(1) shall be made, either directly or in
cooperation with banks or other lending institutions through agreements to participate on cooperation with banks or other lending institutions through agreements to participate on
an immediate or deferred basis, if the total amount outstanding and committed to the an immediate or deferred basis, if the total amount outstanding and committed to the
borrower under such subsection would exceed $500,000 for each disaster, unless an borrower under such subsection would exceed $500,000 for each disaster, unless an
applicant constitutes a major source of employment in an area suffering a disaster, in which applicant constitutes a major source of employment in an area suffering a disaster, in which
case the Administration, in its discretion, may waive the $500,000 limitation.case the Administration, in its discretion, may waive the $500,000 limitation.
Congress did not provide a rationale for placing the limit in statute, or why $500,000 was selected Congress did not provide a rationale for placing the limit in statute, or why $500,000 was selected
as the limit.as the limit.
It appears that businesses—not individuals and households—became eligible for the $500,000 It appears that businesses—not individuals and households—became eligible for the $500,000
limit established in P.L. 96-302. Instead, individuals and households continued to be eligible for limit established in P.L. 96-302. Instead, individuals and households continued to be eligible for
the maximum amount established in the 1970 revised federal regulation: $50,000 for real property the maximum amount established in the 1970 revised federal regulation: $50,000 for real property
disaster loans, and $10,000 for personal property loans.disaster loans, and $10,000 for personal property loans.
Starting in the 1980s, SBA commonly made businesses eligible for the full amount established in Starting in the 1980s, SBA commonly made businesses eligible for the full amount established in
statute and individuals and households eligible for a lesser amount by regulation. The Small statute and individuals and households eligible for a lesser amount by regulation. The Small
Business Act authorizes SBA to set limits for home loans in regulation so long as they do not Business Act authorizes SBA to set limits for home loans in regulation so long as they do not
exceed limits established in statute by Congress. Under the Small Business Act, “no loan[s] ... exceed limits established in statute by Congress. Under the Small Business Act, “no loan[s] ...
shall be made ... [that] exceed $500,000.” Thus, home disaster loans remained capped at the shall be made ... [that] exceed $500,000.” Thus, home disaster loans remained capped at the
amount established in 1970 despite the statutory loan limit increase in 1980 (P.L. 96-302). amount established in 1970 despite the statutory loan limit increase in 1980 (P.L. 96-302).
In 1984, SBA increased the limits for real property disaster loans to $100,000 and personal In 1984, SBA increased the limits for real property disaster loans to $100,000 and personal
property loans to $20,000 in federal regulation. SBA disaster loan limits for business disaster property loans to $20,000 in federal regulation. SBA disaster loan limits for business disaster
loans remained at the maximum amount established in P.L. 96-302 ($500,000). loans remained at the maximum amount established in P.L. 96-302 ($500,000).
In 1993, without specific explanation, Congress tripled the limit on disaster loans in statute (P.L. In 1993, without specific explanation, Congress tripled the limit on disaster loans in statute (P.L.
103-75) from $500,000 to $1.5 million.103-75) from $500,000 to $1.5 million.
Following the Northridge earthquake in California in 1994, SBA increased personal property Following the Northridge earthquake in California in 1994, SBA increased personal property
disaster loans from $20,000 to $40,000 and real property disaster loans from $100,000 to disaster loans from $20,000 to $40,000 and real property disaster loans from $100,000 to
$200,000 in regulation.$200,000 in regulation.
previous loan amounts were insufficient to meet the needs of “homeowners and renters previous loan amounts were insufficient to meet the needs of “homeowners and renters
confronted by the effects of physical disasters by virtue of the impact of economic inflation.”confronted by the effects of physical disasters by virtue of the impact of economic inflation.”
SBA further stated that the previous maximum loan amounts were: SBA further stated that the previous maximum loan amounts were:
inadequate to compensate many disaster victims for the costs associated with rebuilding, inadequate to compensate many disaster victims for the costs associated with rebuilding,
replacing and repairing residential, real property and household effects such as clothing, replacing and repairing residential, real property and household effects such as clothing,
limitation. limitation.
Midwest Act of 1993. Midwest Act of 1993.
Northridge earthquake costed approximately $13 billion. See Kathleen Scalise, Northridge earthquake costed approximately $13 billion. See Kathleen Scalise, Damage Claims Skyrocket from
Northridge Earthquake, Finds New UC Berkeley Report, University of California at Berkeley, October 1, 1996, , University of California at Berkeley, October 1, 1996,
https://www.berkeley.edu/news/media/releases/96legacy/north.html. https://www.berkeley.edu/news/media/releases/96legacy/north.html.
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SBA stated that the new maximum loan amount was established without public notice in an effort SBA stated that the new maximum loan amount was established without public notice in an effort
to meet immediate disaster loan demand caused by the earthquake. According to SBA, 13 C.F.R. to meet immediate disaster loan demand caused by the earthquake. According to SBA, 13 C.F.R.
§123.1(b): §123.1(b):
authorizes emergency changes in the regulations governing its disaster assistance program, authorizes emergency changes in the regulations governing its disaster assistance program,
and 5 U.S.C. 553(b)(B) which permits publication of regulations in final form without and 5 U.S.C. 553(b)(B) which permits publication of regulations in final form without
notice of comment when an agency finds that good cause exists for publication in final notice of comment when an agency finds that good cause exists for publication in final
form on an emergency basis, and that notice and comment is impracticable, unnecessary form on an emergency basis, and that notice and comment is impracticable, unnecessary
or contrary to the public interest. In this regard, the public interest in seeing to it that the or contrary to the public interest. In this regard, the public interest in seeing to it that the
new limitations are effective as to the recent California earthquake disaster makes the new limitations are effective as to the recent California earthquake disaster makes the
utilization of notice and comment rulemaking impracticable.utilization of notice and comment rulemaking impracticable.
In 2008, Section 12078 of the Food, Conservation, and Energy Act of 2008 (P.L. 110-246) In 2008, Section 12078 of the Food, Conservation, and Energy Act of 2008 (P.L. 110-246)
amended the Small Business Act to make the disaster assistance program more accessible to amended the Small Business Act to make the disaster assistance program more accessible to
disaster victims, including by raising the statutory loan limit for disaster loans from $1.5 million disaster victims, including by raising the statutory loan limit for disaster loans from $1.5 million
to $2 million and authorizing the SBA Administrator to “increase the aggregate loan amount ... to $2 million and authorizing the SBA Administrator to “increase the aggregate loan amount ...
for loans relating to a disaster to a level established by the Administrator, based on appropriate for loans relating to a disaster to a level established by the Administrator, based on appropriate
economic indicators for the region in which that disaster occurred.’’economic indicators for the region in which that disaster occurred.’’
C.F.R. to make businesses eligible for the full amount, SBA did not revise disaster loan limits for C.F.R. to make businesses eligible for the full amount, SBA did not revise disaster loan limits for
home disaster loans in regulationhome disaster loans in regulation
as those established in 1994 by regulation ($40,000 for personal property disaster loans and as those established in 1994 by regulation ($40,000 for personal property disaster loans and
$200,000 for real property disaster loans). Section 12078 of the Food, Conservation, and Energy $200,000 for real property disaster loans). Section 12078 of the Food, Conservation, and Energy
Act of 2008 Act of 2008
list of regulatory and legislative disaster loan limit developments. list of regulatory and legislative disaster loan limit developments.
In May 2020, SBA lowered the maximum loan amount for Economic Injury Disaster Loans In May 2020, SBA lowered the maximum loan amount for Economic Injury Disaster Loans
(EIDL) for Coronavirus Disease 2019 (COVID-19) relief to $150,000 due to unprecedented (EIDL) for Coronavirus Disease 2019 (COVID-19) relief to $150,000 due to unprecedented
demand for limited loan resources.demand for limited loan resources.
Disaster Loan Account was replenished with supplemental funding (seeDisaster Loan Account was replenished with supplemental funding (see Table 1). In March 2021, . In March 2021,
SBA announced an increase in the maximum amount for COVID-19 EIDL relief from $150,000 SBA announced an increase in the maximum amount for COVID-19 EIDL relief from $150,000
to $500,000.to $500,000.
identify instances of the SBA Administrator increasing the aggregate amount based on economic indicators. Nor did it identify instances of the SBA Administrator increasing the aggregate amount based on economic indicators. Nor did it
identify the rationale for why the statutory loan limit was increased to $2 million, or why that particular amount was identify the rationale for why the statutory loan limit was increased to $2 million, or why that particular amount was
selected. selected.
Coronavirus Pandemic, October 28, 2020, p. 10, https://www.sba.gov/sites/default/files/2020-10/SBA OIG Report 21-, October 28, 2020, p. 10, https://www.sba.gov/sites/default/files/2020-10/SBA OIG Report 21-
02.pdf. According to the report, SBA “approved and disbursed more loans for COVID-19 relief than for all other 02.pdf. According to the report, SBA “approved and disbursed more loans for COVID-19 relief than for all other
disasters combined in the agency’s history.” See page 3 of the report. disasters combined in the agency’s history.” See page 3 of the report.
https://www.sba.gov/article/2021/mar/24/sba-increase-lending-limit-covid-19-economic-injury-disaster-loans. https://www.sba.gov/article/2021/mar/24/sba-increase-lending-limit-covid-19-economic-injury-disaster-loans.
Businesses Facing Challenges from Delta Variant, September 9, 2021, https://www.sba.gov/article/2021/sep/09/sba-Businesses Facing Challenges from Delta Variant, September 9, 2021, https://www.sba.gov/article/2021/sep/09/sba-
administrator-guzman-enhances-covid-economic-injury-disaster-loan-program-aid-small-businesses. administrator-guzman-enhances-covid-economic-injury-disaster-loan-program-aid-small-businesses.
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Contextualizing SBA Disaster Loan Limits
One challenging aspect of establishing disaster loan limits is the lack of consensus on a model or One challenging aspect of establishing disaster loan limits is the lack of consensus on a model or
formula for determining disaster recovery rebuilding and repair costs. Establishing an appropriate formula for determining disaster recovery rebuilding and repair costs. Establishing an appropriate
disaster loan limit is difficult for a variety of reasons, including (1) demolition, labor, disaster loan limit is difficult for a variety of reasons, including (1) demolition, labor,
construction, and material costs vary by region and fluctuate over time; (2) variation between construction, and material costs vary by region and fluctuate over time; (2) variation between
states and regions with respect to median home costs and prices, building permits, and codes; and states and regions with respect to median home costs and prices, building permits, and codes; and
(3) “normal” reconstruction costs may be of limited value to establish disaster reconstruction (3) “normal” reconstruction costs may be of limited value to establish disaster reconstruction
costs because disasters can deplete labor and/or material in an area, which may lead to increased costs because disasters can deplete labor and/or material in an area, which may lead to increased
labor and material costs. labor and material costs.
An additional consideration associated with developing disaster loan limits is whether the current An additional consideration associated with developing disaster loan limits is whether the current
loan limits are restrictive to individuals and households residing in areas with higher property loan limits are restrictive to individuals and households residing in areas with higher property
prices and values. prices and values.
The following sections help frame these issues by examining a range of factors Congress might The following sections help frame these issues by examining a range of factors Congress might
consider in evaluating disaster loan limits. consider in evaluating disaster loan limits.
Inflation
Inflation, or the general rise in prices of goods and services in the economy, is an important Inflation, or the general rise in prices of goods and services in the economy, is an important
indicator of purchasing power over timeindicator of purchasing power over time, or the value of a dollar. One tool used to measure or the value of a dollar. One tool used to measure
inflation, the inflation, the
typically purchased by households, and is often used to adjust household incomes for inflation. typically purchased by households, and is often used to adjust household incomes for inflation.
limits were last updated, to limits were last updated, to
304 in 2023 (note that (note that
representing representing
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SBA Disaster Loan Limits: Policy Options and Considerations
Figure 2. Consumer Price Index Change
1994- 1994-
Source: U.S.U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers, https://www.bls.gov/Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers, https://www.bls.gov/
well-known construction cost index (CCI) used by the construction industry to estimate project well-known construction cost index (CCI) used by the construction industry to estimate project
costs and prepare bids. The index takes into account the costs of both construction materials and costs and prepare bids. The index takes into account the costs of both construction materials and
labor, which vary by market (geographic area) and type of construction (e.g., commercial or labor, which vary by market (geographic area) and type of construction (e.g., commercial or
residential building; wood-frame or steel-frame structure).residential building; wood-frame or steel-frame structure).
According to the index, construction cost increases began to accelerate in 2004, According to the index, construction cost increases began to accelerate in 2004,
1994 to 1994 to
Atlanta, GA; Baltimore, MD; Birmingham, AL; Boston, MA; Chicago, IL; Cincinnati, OH; Cleveland, OH; Dallas, Atlanta, GA; Baltimore, MD; Birmingham, AL; Boston, MA; Chicago, IL; Cincinnati, OH; Cleveland, OH; Dallas,
TX; Denver, CO; Detroit, MI; Kansas City, MO; Los Angeles, CA; Minneapolis, MN; New Orleans, LA; New York, TX; Denver, CO; Detroit, MI; Kansas City, MO; Los Angeles, CA; Minneapolis, MN; New Orleans, LA; New York,
NY; Philadelphia, PA; Pittsburgh, PA; San Francisco, CA; Seattle, WA; St. Louis, MO. NY; Philadelphia, PA; Pittsburgh, PA; San Francisco, CA; Seattle, WA; St. Louis, MO.
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SBA Disaster Loan Limits: Policy Options and Considerations
Figure 3. U.S. Construction Cost Change
1994- 1994-
Source: Engineering News-Record (ENR), Construction Cost Index History, https://www.enr.com/economics/ Engineering News-Record (ENR), Construction Cost Index History, https://www.enr.com/economics/
historical_indiceshistorical_indices
Notes: Data represent annual averages of monthly values. Data represent annual averages of monthly values.
The data provided i The data provided in Figure 3 may not be analogous to reconstruction costs after a disaster. As may not be analogous to reconstruction costs after a disaster. As
mentioned, disasters potentially stress the availability of labor, local resources, and materials mentioned, disasters potentially stress the availability of labor, local resources, and materials
which may which may
The graph i The graph in Figure 4 plots the CPI along with the CCI, to show the difference between the rise plots the CPI along with the CCI, to show the difference between the rise
of the cost of a general basket of goods and services and construction costs. In 2013, the CCI of the cost of a general basket of goods and services and construction costs. In 2013, the CCI
eclipsed the CPI and has remained higher. eclipsed the CPI and has remained higher.
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Figure 4. Consumer Price and Construction Cost Comparison
1994- 1994-
Source: Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers, https://www.bls.gov/Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers, https://www.bls.gov/
News-Record (ENR), Construction Cost Index History, https://www.enr.com/economics/historical_indices. News-Record (ENR), Construction Cost Index History, https://www.enr.com/economics/historical_indices.
Notes: Data represent annual averages of monthly values. Data represent annual averages of monthly values.
Median Home Prices and Values
Another factor that may be considered when contemplating maximum loan amounts for SBA disaster loans are home costs. The following sections examine home prices and values, including how they have changed over The following sections examine home prices and values, including how they have changed over
time. time.
Home Prices
The Federal Reserve Bank of St. Louis indicates that the median sales price for a used home in The Federal Reserve Bank of St. Louis indicates that the median sales price for a used home in
the United States was $130,000 in 1994. Since then, median home sales prices have steadily the United States was $130,000 in 1994. Since then, median home sales prices have steadily
increasedincreased
5).
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SBA Disaster Loan Limits: Policy Options and Considerations
Figure 5. Median Sales Price for
1994- 1994-
Source: Derived from Federal Reserve Bank of St. Louis, Derived from Federal Reserve Bank of St. Louis, Median Sales Price of Houses Sold for the United States, ,
https://fred.stlouisfed.org/series/MSPUS#0. https://fred.stlouisfed.org/series/MSPUS#0.
Note: The current SBA Real Property Disaster Loan limit is $200,000. The current SBA Real Property Disaster Loan limit is $200,000.
Home Values
Some datasets assess homes by value rather than price. Value is generally considered what homes Some datasets assess homes by value rather than price. Value is generally considered what homes
with similar features and in similar condition might be sold for in a given area. Based on U.S. with similar features and in similar condition might be sold for in a given area. Based on U.S.
Census Bureau data, the median home value in Census Bureau data, the median home value in
United States (including Washington, DC) had United States (including Washington, DC) had median values above the $values above the $
Congressional Research Service Congressional Research Service
SBA Disaster Loan Limits: Policy Options and Considerations
Figure 6. Financial Characteristics for Housing Units with a Mortgage,
Median Home Values Median Home Values
Source: U.S. Census Bureau, S2506, U.S. Census Bureau, S2506, Financial Characteristics for Housing Units with a Mortgage, ,
https://data.census.gov/https://data.census.gov/
Some may object to the use of home prices and values to determine appropriate home disaster Some may object to the use of home prices and values to determine appropriate home disaster
loan limits. Home sale prices, they might argue, cannot be compared to repair and rebuilding loan limits. Home sale prices, they might argue, cannot be compared to repair and rebuilding
costs. For one, not all home disaster loans are for completely destroyed homes. Rather, most are costs. For one, not all home disaster loans are for completely destroyed homes. Rather, most are
for making structural repairs (such as replacing a roof). Similarly, some may question the use of for making structural repairs (such as replacing a roof). Similarly, some may question the use of
median home values as a tool for determining loan caps. Homes in California and Washington, median home values as a tool for determining loan caps. Homes in California and Washington,
DC, for example, have higher values, in part, because of their location. According to this line of DC, for example, have higher values, in part, because of their location. According to this line of
thinking, property values remain high in those areas even if the homes are destroyed. Disaster thinking, property values remain high in those areas even if the homes are destroyed. Disaster
loans, it could be argued, should be used to repair and replace the structure, not replace the loans, it could be argued, should be used to repair and replace the structure, not replace the
property. It could be further argued that people living in high-cost areas have higher incomes and property. It could be further argued that people living in high-cost areas have higher incomes and
Others might argue that federal disaster assistance is intended to supplement, not replace private Others might argue that federal disaster assistance is intended to supplement, not replace private
insurance. It could be further argued that increasing disaster loan limits induces moral hazard if insurance. It could be further argued that increasing disaster loan limits induces moral hazard if
homeowners believe the limit is high enough to make them whole again after the incident. If that homeowners believe the limit is high enough to make them whole again after the incident. If that
is the case, some homeowners may decide not to not to insure (or decide to underinsure) their is the case, some homeowners may decide not to not to insure (or decide to underinsure) their
property.property.
Interagency Floodplain Management Review Committee reported that ... [the] provision of ... federal disaster assistance Interagency Floodplain Management Review Committee reported that ... [the] provision of ... federal disaster assistance
to those without insurance [created the] perception with many floodplain residents that purchase of flood insurance is to those without insurance [created the] perception with many floodplain residents that purchase of flood insurance is
not a worthwhile investment.” There is, however, some debate on the topic of insurance. The Senate Task Force on not a worthwhile investment.” There is, however, some debate on the topic of insurance. The Senate Task Force on
Funding Disaster Relief also stated that “at least one study concluded that expecting ... federal disaster assistance did not significantly influence individuals’ decisions about purchasing flood insurance.” U.S. Congress, Senate, Federal Disaster Assistance, Report of the Senate Task Force on Funding Disaster Relief, 104th Cong., March 15, 104-4 (Washington: GPO, 1995), p. 64. Congressional Research Service 10
link to page link to page
Variations in State and County Home Costs
Throughout the United States, there are counties that have median home costs that are Throughout the United States, there are counties that have median home costs that are
significantly higher than the rest of the nation. For example, a major disaster declaration issued significantly higher than the rest of the nation. For example, a major disaster declaration issued
for the Camp Fire in California made home disaster loans available to individuals and households for the Camp Fire in California made home disaster loans available to individuals and households
residing in Butte, Los Angeles, and Ventura counties.residing in Butte, Los Angeles, and Ventura counties.
counties in 2020 were well above the national median counties in 2020 were well above the national median
respectively.respectively.
damages—Collier and Monroe counties—also have median damages—Collier and Monroe counties—also have median
median ($median ($
Personal Property, Home Furnishings, and Vehicles
SBA SBA
personal property loans may be used to repair or replace clothing, furniture, cars, or appliances damaged or destroyed in the disaster. The following section examines the cost of furnishings and vehicles in the United States. According to economic data published by the Federal Reserve Bank of St. Louis, from 2010 to According to economic data published by the Federal Reserve Bank of St. Louis, from 2010 to
to to
Figure 8). The data may suggest to some that the $. The data may suggest to some that the $
sufficient to replace vehicles, home furnishings, and supplies. Others may disagree and argue that, sufficient to replace vehicles, home furnishings, and supplies. Others may disagree and argue that,
while some household costs have increased, others have decreased. According to the Federal while some household costs have increased, others have decreased. According to the Federal
Reserve Bank of St. Louis: Reserve Bank of St. Louis:
It is natural to complain that some prices increase. But ... prices can also decrease. While It is natural to complain that some prices increase. But ... prices can also decrease. While
there are obvious seasonal fluctuations for some goods (say, agricultural products), other there are obvious seasonal fluctuations for some goods (say, agricultural products), other
goods have been declining year over year, contributing to a general price inflation that is goods have been declining year over year, contributing to a general price inflation that is
lower than one may think. [A] prime example is anything related to information lower than one may think. [A] prime example is anything related to information
technology.... IT devices with a given set of characteristics have continuously fallen in technology.... IT devices with a given set of characteristics have continuously fallen in
price. Or, to put it differently, a device of the same price year after year will provide much price. Or, to put it differently, a device of the same price year after year will provide much
better performance; its price by “unit of performance” must therefore be declining.better performance; its price by “unit of performance” must therefore be declining.
https://www.fema.gov/disaster/4407. https://www.fema.gov/disaster/4407.
venturacountycalifornia,losangelescountycalifornia,buttecountycalifornia/PST120221. venturacountycalifornia,losangelescountycalifornia,buttecountycalifornia/PST120221.
https://www.census.gov/quickfacts/fact/table/monroecountyflorida/PST045221. https://www.census.gov/quickfacts/fact/table/monroecountyflorida/PST045221.
not-all-prices-increase/. not-all-prices-increase/.
Congressional Research Service Congressional Research Service
SBA Disaster Loan Limits: Policy Options and Considerations
Figure 7. Consumer Price Index for All Urban Consumers: Household Furnishings
and Supplies in the United States
Source: Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, Consumer Price Index for All Urban Consumers: Household Furnishings
and Supplies in U.S. City Average, ,
Figure 8. Consumer Price Index for All Urban Consumers: New Vehicles;
Used Cars and Trucks in the United States
Source: Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, Consumer Price Index for All Urban Consumers: Used Cars and Trucks in
U.S. City Average, ,
Louis, Louis, Consumer Price Index for All Urban Consumers: New Vehicles in U.S. City Average, ,
https://fred.stlouisfed.org/series/CUUR0000SETA01. https://fred.stlouisfed.org/series/CUUR0000SETA01.
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Policy Options
The following sections describe policy options that Congress may consider when contemplating The following sections describe policy options that Congress may consider when contemplating
disaster limits, including formulas and the establishment of disaster limit floors. disaster limits, including formulas and the establishment of disaster limit floors.
Disaster
Rather than periodically adjusting disaster loan limits, Congress could require SBA to set disaster Rather than periodically adjusting disaster loan limits, Congress could require SBA to set disaster
loan limits by formula, incorporating measures such as loan limits by formula, incorporating measures such as CPI, PPI, inflation, economic indicators, and/or inflation, economic indicators, and/or
home values and prices. SBA applies a similar formula-based model to determine disaster loan home values and prices. SBA applies a similar formula-based model to determine disaster loan
interest rates for individuals and households that are unable to secure a disaster loan through interest rates for individuals and households that are unable to secure a disaster loan through a
private lender: private lender:
the rate prescribed by the [SBA] Administration but not more than one-half the rate the rate prescribed by the [SBA] Administration but not more than one-half the rate
determined by the Secretary of the Treasury taking into consideration the current average determined by the Secretary of the Treasury taking into consideration the current average
marketmarket
periods to maturity comparable to the average maturities of such loan plus an additional periods to maturity comparable to the average maturities of such loan plus an additional
charge of not to exceed 1 per centum per annum as determined by the Administrator, and charge of not to exceed 1 per centum per annum as determined by the Administrator, and
adjusted to the nearest one-eighth of 1 per centum, but not to exceed 4 per centum per adjusted to the nearest one-eighth of 1 per centum, but not to exceed 4 per centum per
annum.annum.
A disaster loan limit formula could be applied nationwide, or regionally for areas with higher A disaster loan limit formula could be applied nationwide, or regionally for areas with higher
housing costs. housing costs.
Disaster Loan Limit Floors
As described As described
assistance in 2020 from $2 million per loan to $150,000 to meet COVID-19 EIDL demand. assistance in 2020 from $2 million per loan to $150,000 to meet COVID-19 EIDL demand.
According to the SBA Office of Inspector General, SBA “approved and disbursed more loans for According to the SBA Office of Inspector General, SBA “approved and disbursed more loans for
COVID-19 relief than for all other disasters combined in the agency’s history.”COVID-19 relief than for all other disasters combined in the agency’s history.”
previously, the Small Business Act authorizes SBA to set disaster loan limits so long as they do previously, the Small Business Act authorizes SBA to set disaster loan limits so long as they do
not exceed the loan limits established in statute. The absence of a statutory floor allowed SBA to not exceed the loan limits established in statute. The absence of a statutory floor allowed SBA to
temporarily reduce the loan limit so that it could continue to provide COVID-19 EIDL assistance temporarily reduce the loan limit so that it could continue to provide COVID-19 EIDL assistance
to struggling businesses. While the SBA’s decision to lower loan limits may have helped the to struggling businesses. While the SBA’s decision to lower loan limits may have helped the
agency meet high levels of demand, some were concerned the amount was insufficient to meet agency meet high levels of demand, some were concerned the amount was insufficient to meet
the economic recovery needs of businesses.the economic recovery needs of businesses.
Coronavirus Pandemic, October 28, 2020, p. 3, https://www.sba.gov/sites/default/files/2020-10/SBA OIG Report 21-, October 28, 2020, p. 3, https://www.sba.gov/sites/default/files/2020-10/SBA OIG Report 21-
02.pdf. 02.pdf.
Program (EIDL) Loans to $150k, https://www.sbc.senate.gov/public/index.cfm/2020/5/cardin-schumer-shaheen-call-, https://www.sbc.senate.gov/public/index.cfm/2020/5/cardin-schumer-shaheen-call-
on-sba-to-reverse-policy-that-limits-economic-disaster-loan-program-eidl-loans-to-150k 36 For more information on the SBA Disaster Loan Account, see CRS Insight IN11433, Supplemental Appropriations: SBA Disaster Loan Account, by Bruce R. Lindsay et al. Congressional Research Service 13 link to page 18 SBA Disaster Loan Limits: Policy Options and Considerations loan limits to meet loan demand if needed. According to this line of thought, the lower limit loan limits to meet loan demand if needed. According to this line of thought, the lower limit
would allow SBA to provide as many disaster loans as possible, which is seen as better than would allow SBA to provide as many disaster loans as possible, which is seen as better than
denying loan applications on the basis of inadequate funding. To summarize, on the one hand, denying loan applications on the basis of inadequate funding. To summarize, on the one hand,
establishing floors would prevent SBA from lowering limits to an amount Congress believes is establishing floors would prevent SBA from lowering limits to an amount Congress believes is
too low. On the other hand, floors could limit the number of loans that can be serviced if loan too low. On the other hand, floors could limit the number of loans that can be serviced if loan
demand is high. demand is high.
Concluding Observations
SBA disaster loan limits have been placed in statute and created by SBA regulatory action. SBA disaster loan limits have been placed in statute and created by SBA regulatory action.
Historically, businesses have been eligible for the maximum amount set in statute whereas Historically, businesses have been eligible for the maximum amount set in statute whereas
homeowners have been eligible for a lesser amount than has been set in statute. To some, this has homeowners have been eligible for a lesser amount than has been set in statute. To some, this has
been an effective approach to (1) supplement, as opposed to replace, private insurance, (2) avoid been an effective approach to (1) supplement, as opposed to replace, private insurance, (2) avoid
moral hazard, and (3) balance the desire to help disaster victims with the need for prudent federal moral hazard, and (3) balance the desire to help disaster victims with the need for prudent federal
spending. spending.
Others may Others may
SBA Disaster Loan Limits: Policy Options and Considerations
Appendix. SBA Disaster Loan Categories
The following provides a brief overview of each SBA disaster loan category, including eligible The following provides a brief overview of each SBA disaster loan category, including eligible
recovery activities and loan terms. recovery activities and loan terms.
Personal Property Disaster Loans
Personal Property Disaster Loans cover only uninsured or underinsured property and primary Personal Property Disaster Loans cover only uninsured or underinsured property and primary
residences in a declared disaster area. Personal Property Disaster Loans can be used to repair or residences in a declared disaster area. Personal Property Disaster Loans can be used to repair or
replace clothing, furniture, cars, or appliances damaged or destroyed in the disaster. Interest rate replace clothing, furniture, cars, or appliances damaged or destroyed in the disaster. Interest rate
ceilings for Personal Property Disaster Loans are statutorily set at 8% per annum or 4% per ceilings for Personal Property Disaster Loans are statutorily set at 8% per annum or 4% per
annum if the applicant is unable to obtain credit elsewhere.annum if the applicant is unable to obtain credit elsewhere.
30 years. The maximum loan amount for a Personal Property Disaster Loan is set in regulation at 30 years. The maximum loan amount for a Personal Property Disaster Loan is set in regulation at
$$
Real Property Disaster Loans
Real Property Disaster Loans provide creditworthy homeowners located in a declared disaster Real Property Disaster Loans provide creditworthy homeowners located in a declared disaster
area with up to $area with up to $
disaster condition.disaster condition.
unless the upgrade or addition is required by city or county building codes. Secondary homes or unless the upgrade or addition is required by city or county building codes. Secondary homes or
vacation properties are not eligible for Real Property Disaster Loans.vacation properties are not eligible for Real Property Disaster Loans.
Disaster Loans are set in regulation.Disaster Loans are set in regulation.
Business Physical Disaster Loans
Business Physical Disaster Loans are available to almost any business located in a declared Business Physical Disaster Loans are available to almost any business located in a declared
disaster area.disaster area.
physical propertyphysical property
improvementsimprovements
Loans cannot exceed 8% per annum or 4% per annum if the business cannot obtain credit Loans cannot exceed 8% per annum or 4% per annum if the business cannot obtain credit
elsewhere.elsewhere.
loan amount provided for a Business Physical Disaster Loan is $2 million.loan amount provided for a Business Physical Disaster Loan is $2 million.
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SBA Disaster Loan Limits: Policy Options and Considerations
Economic Injury Disaster Loans
EIDLs are available to businesses located in a declared disaster area that have suffered substantial EIDLs are available to businesses located in a declared disaster area that have suffered substantial
economic injury, are unable to obtain credit elsewhere, and are defined as small by SBA size economic injury, are unable to obtain credit elsewhere, and are defined as small by SBA size
regulations.regulations.
have suffered substantial economic injury as the result of a declared disaster are also eligible for have suffered substantial economic injury as the result of a declared disaster are also eligible for
EIDLs. The loans are designed to help businesses meet financial obligations and operating EIDLs. The loans are designed to help businesses meet financial obligations and operating
expenses that could have been met had the disaster not occurred. The loan proceeds can only be expenses that could have been met had the disaster not occurred. The loan proceeds can only be
used for working capital necessary to enable the business or organization to alleviate the specific used for working capital necessary to enable the business or organization to alleviate the specific
economic injury and to resume normal operations. The interest rate ceilings for EIDL are economic injury and to resume normal operations. The interest rate ceilings for EIDL are
statutorily set at 4% per annum or less and the loans can have maturities up to 30 years.statutorily set at 4% per annum or less and the loans can have maturities up to 30 years.
maximum loan amount for EIDL is $2 million.maximum loan amount for EIDL is $2 million.
Author Information
Bruce R. Lindsay Bruce R. Lindsay
Specialist in American National Government Specialist in American National Government
Research Assistant R. Corinne Blackford Analyst in Small Business and Economic Analyst in Small Business and Economic
with figures for this report.with figures for this report.
barriers. For more information on SBA business size requirements see CRS Report R40860, barriers. For more information on SBA business size requirements see CRS Report R40860, Small Business Size
Standards: A Historical Analysis of Contemporary Issues, by Robert Jay Dilger, R. Corinne Blackford, and Anthony A. , by Robert Jay Dilger, R. Corinne Blackford, and Anthony A.
Cilluffo. See also 13 C.F.R. §123.300 for eligibility requirements. Cilluffo. See also 13 C.F.R. §123.300 for eligibility requirements.
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SBA Disaster Loan Limits: Policy Options and Considerations
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
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