Demonstrating the Intensive Benefit to the Local Implementation of a Statewide Building Code

• Author: Jeffrey Czajkowski,James M. Done,Kevin M. Simmons
• DOI: http://doi.org/10.1111/rmir.12086
• Date: 01 December 2017
• Published date: 01 December 2017

Risk Management and Insurance Review

C

Risk Management and Insurance Review, 2017, Vol.20, No. 3, 363-390

DOI: 10.1111/rmir.12086

FEATURE ARTICLE

DEMONSTRATING THE INTENSIVE BENEFIT TO THE LOCAL

IMPLEMENTATION OF A STATEWIDE BUILDING CODE

Jeffrey Czajkowski

Kevin M. Simmons

James M. Done

ABSTRACT

Ultimately, risk reductionfrom the implementation of building codes is due to

not only the extent of the code as it applies to new construction, but also to the

intensity of local adoption and enforcement. It is normally an open question

as to how well a code is maintained and enforced at the local level, even for

a relatively strong adopted statewide code such as the Florida Building Code.

We test the importance of the intensity of building code implementation at the

local level for reducing Florida windstorm losses by utilizing Building Code

Effectiveness Grading Schedule (BCEGS R) rating data. BCEGS ratings provide

a joint assessment of local building code effectiveness in terms of the strength

of the adopted codes in addition to how well these adopted codes are enforced.

We find that both components provide value in reducing windstorm losses

in Florida, with the extent of the statewide code being the dominant effect

reducing losses on the order of 72 percent. Although not as substantial in terms

of its loss reduction magnitude, intensively implementing building codes at the

local level by ensuring codes are properly administered and enforced at this

scale provides additional loss reduction value on the order of 15–25 percent.

Understanding the relative value of these two implementation components is

important to better inform building code policy and enforcement efforts given

continuously updated codes.

INTRODUCTION

In a world of steadily increasing costs and frequency of natural disasters (United Na-

tions Office for Disaster Risk Reduction [UNISDR], 2015), the implementation of ef-

fective risk reduction strategies is critical. Having strong building codes in place is

frequently touted as a key risk reduction strategy in this regard, effective in reducing

Jeffrey Czajkowski works at the Wharton Risk Management and Decision Processes

Center, University of Pennsylvania; phone: 215-898-8017; fax: 215-573-2130; e-mail:

jczaj@wharton.upenn.edu. Kevin M. Simmons works at Austin College; phone: 903-813-2341;

fax: 903-813-2477; e-mail: ksimmons@austincollege.edu. James M. Done works at the National

Center for Atmospheric Research;phone: 303-497-8209; fax: 303-497-8181; e-mail: done@ucar.edu.

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364 RISK MANAGEMENT AND INSURANCE REVIEW

total property damage due to natural disaster occurrence (Mills et al., 2005; Kunreuther

and Useem, 2010; McHale and Leurig, 2012; Vaughan and Turner, 2014) such as that

from windstorms, including hurricanes. And a number of studies, typically by cap-

turing the differences in losses from properties constructed before and after the im-

plementation of a new and stronger building code, have demonstrated a reduction

in windstorm losses due to stronger building codes (Fronstin and Holtmann, 1994;

Insurance Institute for Business and Home Safety [IBHS], 2004; Applied Research As-

sociates Inc., 2008; Deryugina, 2013; Simmons et al., 2017). For example, an IBHS study

commissioned following Hurricane Charley in 2004 (IBHS, 2004) found that homes

built after 1996 (relating to the implementation of stronger building codes in Florida

following the catastrophic losses from Hurricane Andrew in 1992) had lower claim

frequency (60 percent less) and severity (42 percent less) as compared to homes built

before 1996. Applied Research Associates Inc. (2008) and Simmons et al. (2017) ex-

panded and further verified these Florida Building Code (FBC) loss reduction results

by using windstorm loss differences between pre- and post-2002 year of construc-

tion (Y.O.C.) properties given the fully effective implementation of the statewide FBC

that year.

As new building codes primarily apply to new construction, demonstrating windstorm

loss reductions via Y.O.C. loss differences that correspond to a code change (e.g., post-

2002 Y.O.C.for the FBC) captures the value of an improved building code at the extensive

margin, that is, the number (extent) of new residential properties built under the new

code. Yet, the implementation of a stringent building code provision is ultimately de-

pendent upon proper enforcement at the local jurisdiction through the permitting and

inspection process (Schmith, 1999; AIR Worldwide,2010; Deryugina, 2013; Vaughan and

Turner, 2014). Thus, it is always an open question as to how well a code is maintained

and enforced at the local level, even for a relatively strong adopted statewide code such

as the FBC. In other words, what is the intensity of building code implementation at the

local level and how much does this matter?

Here, we test the importance of the intensity of building code implementation at the

local level in Florida for reducing wind losses. We accomplish this by utilizing Building

Code Effectiveness Grading Schedule (BCEGS R) rating data at the ZIP code level, a

joint assessment of local building code effectiveness in terms of the strength of the

adopted codes in addition to how well these adopted codes are enforced.Czajkowski and

Simmons (2014) have shown the BCEGS rating to be a statistically significant determinant

of reduced hail related losses in the state of Missouri by an order of 10–20 percent on

average. We are interested in understanding whether at the local level in Florida more

intense adoption and enforcement of a strong statewide code leads to lower windstorm

losses. That is, we want to determine the value of a new building code at the intensive

margin given the intensity of adoption and enforcement at the local level. Determining

this thus allows for a better understanding of what portion of reduced windstorm losses

is attributable to the extent of new construction coming online under a new statewide

building code regime versus the portion of reduced windstorm losses attributable to the

intensity of adoption and enforcement at the local level. Given that both components

are important in successful implementation of building code risk reduction efforts, it is

important to understand their relative value to better inform building code policy and

enforcement efforts.