Senate ‘Shelter Act’ Is a Welcome Step Toward Fortifying U.S. Homes to Withstand Extreme Weather

One of life’s certainties is that natural hazards will come, bringing predictable destruction from floods, wind and hail. Increased population in vulnerable areas ensures increased costs when they occur. And while work remains to better understand the effect a changing climate has on these events, it clearly adds to the cost. Reducing impacts requires a thoughtful approach on how and where we build.

But enhancing resilience increases the cost of construction, and that fact runs into another challenge for our country: affordable housing. It’s here that public policy can provide incentives for builders and home buyers to construct homes resilient to expected hazards over the life of the structure. A Senate bill introduced last month by Sens. Bill Cassidy, (R-La.), and Michael Bennet, (D-Colo.), is a welcome step in that direction.

The Shelter Act would provide as much as $5,000 in tax incentives for modifications to a home that mitigate damage from fire, hail, wind or flood. Qualifying examples include hail-resistant shingles (Class 3 or 4), adoption of FEMA recommendations from “Wind Retrofit Guide for Residential Buildings” and qualification for the FORTIFIED program sponsored by the Insurance Institute for Business and Home Safety.

Monetary damage from disasters is staggering. The National Climatic Data Center, an agency of NOAA, reports that weather and climate disasters since 1980 have caused more than $1.7 trillion in damage, with 74% of that damage since 2000. The hurricanes of 2017 alone are responsible for close to $300 billion. In 2011, damage from tornadoes was almost $25 billion. And the 2012 hailstorm that struck Dallas approached $2 billion in damage.

When major events strike populated regions, it’s a given that damages will be measured in the billions. Plus, these numbers fail to account for the value of lost productivity, injuries and fatalities that often accompany these storms.

Research shows that disaster mitigation works. And recent work by myself and others demonstrate that it’s also cost effective. A 2018 study of the statewide Florida Building Code finds reduction in damage exceeds implementation costs by a 6 to 1 ratio. This code was adopted after Hurricane Andrew devastated the state, damaging more than 25,000 homes and causing or contributing to the bankruptcy of 11 insurers. A new study, currently in peer review, identifies an additional eight states where a similar statewide code would be cost effective. In New Zealand, a study of flood mitigation also finds cost-effective results.

Further, homes having features that mitigate disaster damage increase their market value. In a study of hurricane mitigation on Galveston Island, my co-authors and I find an almost 6% premium to homes with hurricane shutters. Another study shows a similar result for homes with tornado shelters, where resale premiums approach 4%. And a study by researchers at Auburn University and the University of Alabama find homes which qualify for the FORTIFIED program sell for a premium of almost 7%.

Despite the economic case for disaster mitigation, adoption cannot be assumed to occur within normal market mechanisms. Most features that make a home resilient are “behind the walls” and not obvious features. Secondly, while disasters are predictable over the life of a structure, most families do not live in one for more than a few years. Such a short time frame makes voluntary adoption of mitigation unlikely. Public policy can provide either the carrot — incentives like the Shelter Act — or the stick, such as mandatory building codes designed to resist damage from disaster.

Mandatory codes are a good way to ensure that future housing is resilient, but to retrofit existing homes, incentives are a better approach. After the 1999 Bridge Creek tornado in central Oklahoma, FEMA began a program providing grants for the installation of tornado shelters. Shelter grants have been popular and fully subscribed. Tax incentives have also been successfully used to increase energy efficiency. These programs serve as prototypes for what can be expected with the Shelter Act.

The Shelter Act is supported by groups that advocate for disaster mitigation, insurance research centers and the home building industry. It has the potential to provide the nudge that individuals need to adopt mitigation. There is no reason for the legislation to become a partisan issue. The winners are not Republican or Democrat but society, since anticipating and preparing for the inevitable creates a sustainable and resilient community.

Simmons is a professor of economics at Austin College who specializes in natural hazards.