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The economics of natural hazards engineering Kevin Simmons, Professor of Economics Austin College After spending 17 years working for an electric utility, Kevin Simmons enrolled in PhD program at Texas Tech thinking about starting a new career in the energy sector. But then, a prominent wind engineering researcher, Kishor Mehta, recruited him to examine the societal impacts of engineering against wind hazards. After examining variables like MLS data in Galveston, Texas, and running models, Simmons determined that indeed, wind mitigation features had strong positive impact on the selling price of a home. That became his dissertation. Since then, Simmons has found his calling as a researcher, including a stint at the National Severe Storms Lab in Norman, Oklahoma. Today, he continues to investigate the economics of natural hazards mitigation. Simmons describes his work studying the town of Moore, Oklahoma, which suffered 3 EF5 tornadoes in 14 years. He discusses the specific mitigations incorporated into the city’s building code, including things like wind-rated garage doors. His studies indicated that, over time, the cost of implementing the codes beats the estimated damage across the life of the house, with a benefit-to-cost ratio of 3:1. And he describes other assessments, including the hurricane-prone zone in Florida, where coastal areas have additional building code requirements. (That study will appear in the May issue of Land Economics.) Overall, he says, building codes reduce property damage and loss in two ways. First, homes built after code implementation had 53% less damage. Second, the codes reduced the likelihood that an insurance claim would need to be filed at all. All toted up, there was a 72 percent reduction in filed claims from wind losses, compared to construction cost increases. Simmons details the findings. Simmons discusses different economic considerations when it comes to flooding. He stresses that city planners need to consider potential flooding before building. As an economist, he finds it tragic that people do not take wind (or other) hazards into account before building. Generally speaking, he says, it doesn’t cost that much more to build a strong structure. Retrofits cost more, he says. And he is not optimistic that people are prepared to take natural hazards into account. “The human tendency is to fix things quick and cheaply,” he says. Ironically, he adds, in his studies he has observed that a destructive tornado will raise awareness about life safety during storms, and will tend to spike demand for tornado shelters. Nevertheless, new construction is still problematic for most towns in Oklahoma. Data show that new codes increase the cost of construction, and cities fear that developers will avoid building in communities with higher building costs. His research shows, however, that this is not necessary a problem. He recently compared Moore, Oklahoma, a city with tough codes, with the nearby city of Norman, without such building regulations. The study found there was no difference in real estate development between towns. Simmons discusses retrofits for wind storms, and specifically, work that U of Florida researcher David Prevatt has done to devise techniques for driving down the cost of retrofits. He refers to a recent study at the U of Alabama, where homes built to new standards have been shown to increase in value. If this data holds up across markets, Simmons says, it is justified to retrofit, and retrofitting may be seen as an investment, not a cost. He suggests that states have incentives that encourage citizens in wind-hazard regions to retrofit. For an economist like Simmons, it is exciting that engineers are able to remove financial objections people might have to retrofitting their homes and businesses.