Thursday, May 22, 2014

Better Construction Matters!

Later this summer, a journal article Jeff Czajkowski of Wharton and I co-authored will appear in Land Economics.  But a shorter version of the research was published last week in Visualize, an insurance industry publication.  The link to the article is here:

We were interested to see if better enforcement of building codes could translate into lower damage when a hazard strikes a community.  The hazard we studied was hail, which is one of the costliest hazards for insured losses.  To determine the degree to which building codes were enforced we used the Building Code Effectiveness Grading Schedule (BCEGS) which is administered by the Insurance Services Office (ISO).  Damage data came from two sources, industry level damage from ISO and exposure level damage from Travelers Insurance.  We found that the difference in insured losses between communities with the higher ratings and those with no rating was a reduction in losses of about 20%.   

Monday, May 5, 2014

Building a House of Straw when a Wolf is in the Neighborhood

The Little Rock office of the National Weather Service has released some information on the damage survey conducted after the tornadoes of April 27.  The disturbing finding is that many of the homes suffering the worst damage did not have the exterior walls anchored to the foundation properly.  Anchor bolts are L or J shaped bolts inserted into the foundation before it cures leaving a threaded portion allowing the contractor to bolt the baseplate to the foundation.  Instead the baseplate of some of the homes were attached simply with cut nails.  Their summary can found here:

It may be faster and slightly cheaper to fasten the exterior walls without the anchor bolts but the cost and time saved makes little sense.   I checked prices for anchor bolts online and found that, when purchased in bulk the cost is less than $1.00 each for an 8 inch L shaped bolt with a diameter of ½ inch.  Spaced at 2 foot intervals, the material cost of a 2500 square foot house would increase by less than $100.  The American approach to production has been make it faster and make it cheaper.  That may be fine if the product in question is one that is largely disposable.  But if you are building a residential structure that may encounter a wind storm it seems to me that it is incumbent on the community and on the contractors to ensure that it will perform better than this.

It should not be expected that all residential homes have the capacity to survive a direct hit by an EF-5 tornado.  But the path of most EF-5 tornadoes only reach that strength for a small part of the path itself, meaning that many structures will only be exposed to winds in the lower level of the Enhanced Fujita scale.  Better construction will mean that the residents of those homes have a higher chance of survival and overall, the damage from the storm will be less.

A tension exists between providing affordable housing versus requiring that all homes be built to anticipate any possible hazard.  Communities want developers to choose their town for the next development and if lax standards make development more likely it’s tempting to water down the requirements.  But the cost differential on this one element can’t possibly be justified.

Monday, April 28, 2014

Tragedy Visits Again

Once again a storm roared through the country’s mid-section dropping powerful tornadoes that destroyed communities leaving grief and sorrow for the families and friends of the storms victims.  I’ve witnessed this scene many times both by living in Tornado Alley but more recently from the research I do.  The question that pops up in the aftermath is almost always the same, “What can be done?”

The morning after the Arkansas tornadoes I was watching the morning news shows and as the networks were covering the event I watched a reporter pick up a piece of debris and claim that these homes were well constructed, they were clad with brick.  I’m not an engineer but I work alongside them and I can testify that a home clad with brick is not necessarily an indication of strong construction.  The strength required to withstand tornadic winds comes from features that lie behind the brick and can’t usually be seen from the outside.  It involves how the various components of the home, foundation, walls and roof are tied together, what engineers call a “continuous load path”.  If the connections between the roof and the wall are weak, the roof will fail causing a failure of the walls as well, regardless of what material it is clad with.  Decisions to include these features must be done when the homes are first constructed.  Which brings up a second question, “Should these features be required by building codes?”

That question cannot be answered easily.  First, the most important element when thinking about tornadoes is preserving life and avoiding injuries.  The best advice, when confronted with an imminent tornado is to go to a central part of the structure and put as many walls between you and the tornado as possible.  If you have a shelter, use it!  And don’t get in a car and leave your home unless you live in a very vulnerable structure and have a safe place to go to quickly.  Tornadoes and cars are a deadly combination.  But beyond the issue of life safety, there is a secondary discussion of how to minimize the damage from tornadoes and this is where enhanced building codes come into the conversation.  For this question, as in most public policy debates, we must examine the costs of better construction to the expected benefits.

The key elements of the “continuous load path” are anchoring the exterior walls to the foundation and solid connections (hurricane straps) between the roof structure and the exterior walls.  Stiffening the exterior walls with stronger sheathing further increases the ability of the wall to resist the stress from the wind pressure and using a reinforced garage door reduces the probability of it failing which can cause a cascade of structural failures.  These changes cost money and if we ask all homes to be built in this way, the overall cost to society is large.  But as urban areas expand the chances of multi-billion dollar storms increases so it may be cost effective in some areas.  Oklahoma has experienced over $5 billion in tornado and wind storm damage since 1996.  The damage data I’m using here is found in the Storm Prediction Center’s tornado archive which comes with a caveat, that the damage data is not very reliable.  The true amount of the damage is likely above that amount.  So what would these added construction features add to the cost of a home?  It depends on who you ask but the material cost for the anchors and the roof/wall connections is small.  Better sheathing adds some cost but the home must be sheathed with something so it’s just a question of the added cost of better materials.  The largest component would be the reinforced garage door.

If the mitigation had increased the construction costs by $2,000 per home, total costs to the state of Oklahoma would have been about $2.4 billion for all permanent homes in the state.  And if these features would have resulted in a 30% reduction in damage, using the SPC damage figures, the damage over the last 18 years would have been $1.7 billion.  Not enough to cross the benefit/cost threshold.  But homes are an investment that will be on the plains of Oklahoma for more than 18 years.  So we need to adjust our analysis to a longer time frame.  Plus we need a better assessment of the actual damage than the SPC archive.  There is some evidence that the actual damage is much more than shown on the archive.  If it’s off by 40% then actual damages experience are closer to $8 billion meaning that a 30% reduction in damages is now $2.4 billion.  As a side note, the SPC archive has total damages from tornadoes in 2011 at less than $10 billion whereas the National Climatic Data Center has it at over $20 billion.

There is also empirical evidence that home buyers are willing to pay more for better construction.  To study this question economists use models that parse out the effect on the selling price of homes feature by feature.  These models are called hedonic pricing models and studies conducted in areas vulnerable to natural hazards show that selling price goes up when hazard mitigation features are present.

Better structures will not ensure that casualties will be eliminated but it’s reasonable to assume that if we can built better homes, those residing in the homes are more likely to escape harm or at least minimize the injuries and suffering that inevitably follow in the wake of nature’s most powerful storm.  And if we reduce the monetary damages in the process, well that’s just a bonus.