Left to their own devices, people don’t necessarily make the most responsible choices, especially if they cost money.
That’s the takeaway from a new working paper authored by researchers at the University of California, San Diego, and the University of British Columbia in Canada. The researchers examined the effectiveness of mandates in the context of climate change, specifically looking at wildfire building codes in California.
California’s upgraded building codes reduced the average risk of structural loss in a wildfire by roughly 40% for homes built in 2008 or later, as compared with a home built in 1990, the researchers found.
A mere look at the scale of wildfire-related losses across California is evidence of the necessity of updated building codes, they added. Efforts to have residents voluntarily implement wildfire protections have not been largely successful, the authors argue. California has recorded $40 billion in wildfire property damage over the past five years.
“‘Wildfire building codes deliver unambiguously positive benefits in the most fire-prone areas of the state, especially where homes are clustered closely together and thus create large risk spillovers.’”
To analyze the benefits of mandating property changes, the researchers compiled data that accounted for nearly every home nationwide that was affected by a wildfire between 2000 and 2020, of which over 50% survived the fires.
They isolated the data for California to see what effect the implementation of improved building codes had. The Golden State imposed stricter building codes — first in 1991 and then in 2008 — that required such elements as fire-resistant exterior siding, windows and doors and mesh-covered vents to prevent embers from entering homes.
The researchers compared the results in California to other states that have been affected by large-scale wildfires including Arizona, Colorado, Oregon and Washington — for the time period analyzed, none of those other states had implemented state-wide wildfire-related standards for buildings.
“People may be reluctant to voluntarily upgrade their buildings to meet codes due to misperception of risk and insurance-market failures. The cost of retrofitting older homes may also be prohibitive.”
But it wasn’t just the homes that were built to the new specifications that benefited from the policy. The risk of structural loss for a close neighbor’s home dropped by 6%. The benefit for neighboring homes was even greater in more densely built areas.
“Wildfire building codes deliver unambiguously positive benefits in the most fire-prone areas of the state, especially where homes are clustered closely together and thus create large risk spillovers,” the researchers wrote.
People may be reluctant to voluntarily upgrade their buildings to meet codes due to “misperception of risk, insurance-market failures,” among other issues. The study’s authors also cautioned that the costs of retrofitting older homes to be wildfire-resistant may be prohibitive, reducing the benefits of a broader policy.
Still, they argued their findings were relevant to policymakers considering how to combat other natural disasters such as floods and hurricanes “where voluntary take-up of self-protective investments seems to be constrained by similar barriers.”
“As climate change continues to increase disaster losses, this type of research on the role of public policy and market incentives in shaping adaptation is increasingly urgent,” they wrote in the paper, which was distributed by the National Bureau of Economic Research, a nonprofit research organization.