Designing Grants to Fund the Resilience Delta.
NEW! Download Rebuilding Safer from Wildfire: Implementation Guidebook for a Post-Fire Resilience Delta Grant Program
What is the Resilience Delta?
‘Delta’ is a Greek letter that is often used to denote change or a difference. The Resilience Delta is the difference in cost between building or rebuilding a code compliant home with traditional material to the highest level of resilience. While research has shown that investments in hazard mitigation (or resilience) are typically highly cost-effective, reducing future expected losses by more than their cost, most do require somewhat more in upfront funds.
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A number of techniques can create more wildfire-resistant structures. This includes ensuring fencing and mulch immediately around the home are noncombustible, adding vent features that prevent embers from migrating inside, keeping the area around the roof and deck clear of debris, and ensuring landscaping features are spaced apart to prevent rapid fire spread.
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Fortifying a building, or just the roof, can significantly reduce the likelihood and severity of damage during severe wind events, including hurricanes. Research has shown this lowers damages and in many states will save consumers money on insurance.
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There are a range of interventions available homeowners to reduce damage from flooding, such as raising the elevation of certain features (like HVAC equipment) or even the entire building, upgrades to water resistant materials, and improving the sealing to prevent water from getting inside.
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Expanding tree canopy significantly reduces the urban heat island effect, which can lower illness and fatalities during an extreme heat event. There is also growing interest in programs to expand access to home air conditioning to keep residents safer during extreme heat waves.
What is resilient rebuilding?
There are proven approaches for our buildings and communities that lower future disaster losses.
How much is the resilience delta?
The amount of the resilience delta will vary by the hazard, the mitigation measure being adopted, existing building codes, and the details of insurance policies.
WILDFIRE: Headwaters Economics estimates that meeting California’s Chapter 7A wildfire resistant building requirements can add an extra $30,000 to building costs for a 2,000 square foot home. Building to the highest IBHS Wildfire Prepared Home™ standard can add approximately $5,000 per home for new construction for a total up-front investment of $35,000 per home.
STRONG WINDS: IBHS estimates it can cost an additional $1,000 - $3,000 to upgrade to a FORTIFIED roof for a 2,000 square foot roof.
For homeowners rebuilding post-disaster, if their homeowners policy covers code upgrades, this will pay for the costs of meeting any stronger codes in effect at the time of the loss.
How can we pay for the resilience delta?
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Post-disaster, insurance typically only provides funds to rebuild the structure as it was before it was damaged or destroyed. Policyholders, however, can ensure their policy has code upgrade coverage, which will provide extra dollars to cover the costs of rebuilding in compliance with any new building codes adopted since the home was first constructed. Strong building codes will ensure new construction is better able to withstand future disasters. In California, it is actually state law that replacement cost homeowners policies also include an extra 10% to meet any new codes. Where there are strong building codes in place, this then unlocks insurance dollars for resilient rebuilding.
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Insurers could offer resilience endorsements to help pay the costs of rebuilding to safer standards above current building codes. This would be an extra addition to a homeowners policy that would provide additional funds at rebuilding to invest in resilience measures. For example, three residual insurance programs have adopted free endorsements that provide policyholders additional funds to install an IBHS FORTIFIED roof following a substantial loss.
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Several hurricane-prone states have created household grant programs for loss reduction measures. These grant programs tend to provide a portion of the dollars needed for residents to adopt a FORTIFIED roof, and are typically geographically limited to the highest risk areas. The states take different approaches to where the grant programs are housed and how they are funded. New Mexico, Colorado, California, and other states are considering grant programs for wildfire mitigation.
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In general, there has often been little appetite from disaster survivors to take on additional debt, even for the purpose of investing in loss reduction measures. For instance, the federal Small Business Administration makes loans (which may be at lower interest depending on income levels) for disaster repairs and rebuilding. These loans can be increased up to 20% through the Mitigation Assistance program to cover the cost of disaster mitigation, yet very few borrowers chose to do this. One recent study found only 1.5% of borrowers took additional funds to mitigate their risk. It is unclear how much of the limited demand is due to lack of information about loss reduction, too many transaction costs to getting such work done, or from debt aversion.
LA Resilience Delta Grant Playbook
Insurance for Good is collaborating with diverse partners to develop a replicable model to fund the resilience delta for low- and moderate-income households, offering their best chance at future safety and insurability. This effort will produce an implementation playbook for grant administrators. Work on the playbook is underway and will feed into the Resilient LA Delta Fund.
Headwaters Economics and Insurance for Good examined the cost savings from rebuilding wildfire-resilient homes, estimated how much extra it would cost homeowners, and explored paths for funding the needed investments.
We estimate that rebuilding the average 2,000 square-foot home to meet California’s Chapter 7A wildfire-resistant building requirements adds $30,000 to construction costs. Under state law, homeowners with replacement cost insurance, and subject to Chapter 7a, will have 10% code upgrade coverage to use toward paying this amount. Unfortunately, homeowners not subject to 7a or who are uninsured would have to pay out of pocket for these important resiliency upgrades.
Upgrading to the Wildfire Prepared Home™ standard would cost up to $5,000 more per home. This standard is similar to California’s current wildfire building code with some notable additions including: (1) the use of noncombustible material for gutters and downspouts, (2) deck protections that include enclosing the under-deck area with noncombustible mesh, and (3) the use of noncombustible fencing and landscaping materials within five feet of a home.
Partners
Playbook Advisors:
Kimi Barrett, Headwaters Economics
Kayla Calkins, Megafire Action
J. Lopez, California Wildfire Mitigation Program Authority
Michael Newman, Institute for Building and Home Safety (IBHS)
Jonathan Parfrey, Climate Resolve
Mike Peterson, California Department of Insurance
Laurie Schoeman, Partners for the Common Good
Julie Shiyou-Woodard, Smart Home America