Study Finds Disaster Mitigation Is Cost Effective and Reduces Losses

December 30, 2005

The Multihazard Mitigation Council (MMC) of the National Institute of Building Sciences (NIBS) released a study that shows efforts to reduce future damage from earthquake, wind and flood are cost effective.

The Congressionally-mandated study commissioned by the Federal Emergency Management Agency (FEMA) examined grants over a 10-year period (1993-2003). According to the study, mitigation results "in significant net benefits to society as a whole -- to individuals, to states and to communities -- in terms of future reduced resource losses and significant savings to the federal treasury in terms of future increased tax revenues and future reduced hazard-related expenditures."

Key findings include:

A dollar spent on mitigation saves society an average of $4, with positive benefit-cost ratios for all hazard types studied.
In addition to savings to society, the federal treasury can redirect an average of $3.65 for each dollar spent on mitigation as a result of disaster relief costs and tax losses avoided.
In each of the eight communities studied in depth, FEMA mitigation grants were a significant part of the community's mitigation history and often led to additional loss reduction activities.
Mitigation is sufficiently cost-effective to warrant federal funding on an ongoing basis both before disasters and during post-disaster recovery.

"We've all seen that mitigation helps to save lives and reduce property damage," said David I. Maurstad, FEMA's Acting Director of Mitigation. "But until the MMC study we haven't had independent, objective, quantitative data analysis to show that building stronger and safer is also a sound investment."

The study involved two interrelated components, a benefit-cost analysis of a broad sample of FEMA mitigation grants and additional empirical research on FEMA-funded mitigation activities carried out in eight selected communities. The community studies examined all FEMA mitigation grants received by the selected communities for any grants received between the years of 1988-2003.

Copies of the study are available at the Multihazard Mitigation Council web site.

Source: National Institute of Building Safety (NIBS).