In this research, life-cycle benefit-cost analysis (LCBCA) is conducted separately from the perspective of the landlord, tenant, and insurer (i.e., National Flood Insurance Program (NFIP)), over the home’s 30-year mortgage period, for comprehensive evaluation of the most economically advantageous option at the time of construction regarding implementation of freeboard (defined as elevation above the base flood elevation (BFE)), with multiple scenarios evaluated. The expected benefits and costs over the useful life of the home for each freeboard height are estimated and discounted to the present value (DPV). In these calculations, net benefit (NB) is the difference between the life-cycle benefits and costs for each freeboard scenario compared to the “at BFE, no action” scenario. The optimal scenario is the freeboard with the largest joint life-cycle NB for landlord and tenant. The NB-to-cost ratio (NBCR) is defined as NB divided by the cost of the freeboard. The optimal freeboard scenario is the one that maximizes NBCR when NB is similar for multiple freeboard scenarios.

For the landlord, the NB and NBCR of implementing freeboard is evaluated through LCBCA considering freeboard cost, increase in rent, building flood insurance premiums, building average annual loss (AAL), and loss of rental income when the rental unit is withdrawn from the market.

For the tenant, the benefit-cost of freeboard is evaluated through consideration of content AAL, content flood premiums, displacement cost, moving cost, and increase in rent. Additionally, the LCBCA is calculated separately for the flood insurance policyholder and the NFIP, as the policyholder is liable for the deductible and loss above coverage of flood loss while the NFIP covers the remainder of the loss within coverage.

LCBCA is conducted on a micro-scale (i.e., single-building-level) basis, which allows for a greater level of detail than in bulk calculations. A one-story, single-family residence in Metairie, Louisiana, is used to demonstrate the method presented. The study is motivated by the need to establish a methodology for estimating freeboard LCBCA for the landlord, tenant, and NFIP. The methodology delivers actionable information and supports the decision-making process.

The methodology consists of estimating the freeboard life-cycle benefit-cost for the landlord, tenant, and insurer determined through LCBCA, performed for each 0.5-foot increment of freeboard above the BFE up to 4.0 feet, evaluated over 30 years – the expected useful life of a mitigation project.

This research offers a comprehensive, customized flood risk assessment to landlords and tenants by quantifying flood losses and actionable information, to enhance their awareness of their flood risk and the possible benefits from mitigation measures. Being aware of the full flood risk, mitigation options, and economic implications enhances investment and occupation decisions. To that end, an LCBCA methodology is demonstrated to determine the life-cycle benefits of adding freeboard for landlord, tenant, and NFIP in single-family rental housing.

Major results for the case study home in Metairie, Louisiana, include:

• The landlord and tenant combined/joint life-cycle NB is $14,978 with NBCR of 0.5 for a baseline real discount rate of 7% and $23,658 for a 3% real discount rate.
• Elevation to the optimal height of 2.0 feet reduces annual building premiums by 60% and annual content premiums by 40%.
• In addition to savings on insurance premiums, landlords and tenants would also enjoy the benefits of reducing direct physical loss and other costs due to loss of function.
• Elevating a home to the optimal height significantly reduces annual building and rental losses for the landlord, and annual content, displacement, and moving losses for the tenant.

Despite the limitations and the fact that our study's findings may not be applicable everywhere, the methodology proposed in this study provides a novel framework for quantifying the life-cycle benefits of freeboard for single-family rentals through LCBCA. To the best knowledge of the authors, no studies have applied a life-cycle cost-benefit analysis for the landlord, tenant, and insurer. The results highlight the need to evaluate the life-cycle benefits of freeboard at a single-building level, to allow for a more localized and detailed assessment. Extending this method to multi-family rentals and upscaling to estimate the community level will further assist in enhancing resilience to flood hazards.

To see the results in detail and read more about our peer-reviewed publication on this research click on the link below:

Freeboard life-cycle benefit-cost analysis of a rental single-family residence for landlord, tenant, and insurer

Gnan, E., Mostafiz R.B.*, Rahim, M.A., Friedland, C.J., Rohli, R.V., Taghinezhad, A., and Al Assi, A. (2024). Freeboard life-cycle benefit-cost analysis of a rental single-family residence for landlord, tenant, and insurer. Frontiers in Climate, 5, Art. No. 1295592. doi: 10.3389/fclim.2023.1295592