Investing in Resilience Pays Off More Than Thought, New NIBS Study Finds

The National Institute of Building Sciences’ “Natural Hazard Mitigation Saves: 2018 Interim Report” calculates benefit–cost ratios of 4:1 up to 11:1 for investing in higher quality buildings that meet contemporary codes and standards.

Investing more upfront in hopes of securing a better return pays off when it comes to resilient design and infrastructure, according to a new report by the National Institute of Building Sciences (NIBS). During NIBS’ seventh annual Building Innovation conference last week, the nonprofit NGO released “Natural Hazard Mitigation Saves: 2018 Interim Report,” which highlights the findings of its ongoing, multiyear study on the “significant savings that result from implementing mitigation strategies in terms of safety, and the prevention of property loss and disruption of day-to-day life,” according to its press release.

“Despite the widely publicized impacts of disasters such as Hurricanes Katrina and Sandy, the funding for mitigation has declined over the years, even if the risks clearly have not,” writes NIBS past president (and recently retired) Henry Green, Hon. AIA, in the report’s foreword.

Perhaps the most dramatic finding of the report, which was researched and reviewed by a multidisciplinary team of more than 100 experts, is the potential 11:1 benefit–cost ratio (BCR) of buildings designed to meet the 2018 International Building Code (IBC), the 2018 International Residential Code (IRC), and the Federal Emergency Management Agency’s (FEMA’s) National Flood Insurance Program requirements, as compared to a baseline building constructed to 1990s standards.

That is, for every $1 spent in added upfront construction cost and long-term maintenance costs to “improve existing facilities” by increasing their resiliency or build new, higher-quality construction projects, the nation as a whole experiences $11 in potential benefits, calculated as the present value of the savings in futures losses that the mitigation strategies prevent. (The report assumes a 2.2-percent discount rate.)

The 2018 report also reiterates NIBS’ earlier finding, published in the “2017 Interim Report,” that every $1 in government-funded mitigation grants can save the nation $6 in future disaster-related and recovery costs. This 6:1 BCR replaces the frequently cited 4:1 BCR from NIBS’ 2005 report “Natural Hazard Mitigation Saves: An Independent Study to Assess the Future Savings from Mitigation Activities.” This latest report also echoes past findings that designing new construction to exceed select provisions in the 2015 IBC and the 2015 IRC, as well as to meet the 2015 International Wildland-Urban Interface Code (IWUIC) leads to a national benefit of $4 for every $1 invested. Implementing these two prior strategies alone, NIBS estimates, would prevent 600 deaths, 1 million nonfatal injuries, and 4,000 cases of post-traumatic stress disorder (PTSD) in the long term.

The economic cost of avoided cases of PTSD is one new factor this study considers over its 2005 predecessor. The latest report also assumes a 75-year lifespan for buildings (versus 50 years) and factors into its benefits calculation avoided insurance administrative costs, loss of economic activity in the broader community, and costs for urban search and rescue, among several other variables.

The study goes so far as to quantify the BCRs for specific mitigation strategies. For example, the researchers found that buildings could save $6 for every $1 added in cost to elevate a building with at least 1 foot of freeboard in elevation for flood resistance, as per the 2018 I-Codes, the latest editions of the model codes by the International Code Council. Compliance with hurricane-wind resistant strategies for roofing, opening, and connection details could save $10 in remediation costs for every $1 invested. And, finally, buildings constructed with increased resistance to seismic forces per the codes could save $12 in potential remediation costs for every $1 invested.

Because the risk of specific natural hazards varies by geography—coastal areas, for example, are more prone to flooding and hurricane winds—the BCR for different mitigation strategies also varies by geography. However, the study authors do estimate that, based on 23 years of data on the outcomes of federally funded grants toward mitigation, each state in the contiguous U.S. stands to realize aggregate benefits upward of $10 million, to even $10 billion

The report also identifies who stands to benefit from the additional initial investment in mitigation. Clearly, occupants and tenants are benefactors from the increased resilience of their residence or place of employment, but developers, title holders, and lenders—who often hold the purse strings on capital projects—as well as the surrounding communities reap the advantages too.

The benefit to developers, who—spoiler alert—are usually looking to sell a property within months to a few years of its completion, might be most noteworthy since the additional investment to build a more expensive commercial or multifamily residential building frequently comes from their wallet. In all likelihood, the report says, developers would be able to pass on that added construction cost to subsequent owners, “who transfer an estimated fraction of it to the tenants.”

Sponsors of the 2018 report include the AIA, ICC, FEMA, U.S. Economic Development Administration, U.S. Department of Housing and Urban Development, Insurance Institute for Business & Home Safety, and National Fire Protection Association. NIBS says its needs additional funding to study the benefits of mitigation strategies further.

This article was originally published in ARCHITECT January 2019.