The Alabama Center for Insurance Information and Research (ACIIR) at the University of Alabama's Culverhouse College of Business has released findings from analyzing the return on investment for resilient construction of multifamily properties. Measuring economic value of using the FORTIFIED Multifamily program, the report revealed the return can be as high as 72%.

"Our study found that resilient construction can provide an impressive return on investment, both in coastal and inland areas," says Dr. Lars Powell, ACIIR director and senior research professional. "I think many people will be surprised not only by the low cost of the program, but also by the substantial expected savings and revenues."

Developed by the Insurance Institute for Business & Home Safety (IBHS), the FORTIFIED Multifamily program implements voluntary beyond-code construction and re-roofing methods to strengthen homes, multifamily properties, and commercial buildings against severe weather. Property owners can choose from three designations Roof, Silver, or Gold when a building is constructed to a FORTIFIED standard, which requires upgrades to be verified and documented by a third-party independent evaluator.

"With more than 60 million Americans living in multifamily housing, our nation cannot meaningfully reduce the impact of natural disasters without building stronger multifamily communities," stresses IBHS CEO Roy Wright. "Our research clearly demonstrates that a significant amount of storm damage can be avoided simply by investing in resilient construction, and this new study shows it's financially beneficial to do so."

The report predicts lower insurance costs due to reduced risk, coupled with increased revenue. Ranging from 8.1% with added hail protection in inland areas to 72% for a Gold designation near the coast, the size of the return on investment varied based on location and which FORTIFIED designation was sought. Also dependent on location and designation, the standard’s requirements increased construction costs between an estimated 0.29% and 1.43% of a building's total cost, the report finds.

"We surveyed more than one thousand people from throughout the Southeast, and 74% of respondents indicated they are willing to pay higher rent to live in a resilient building," explains Powell. Some respondents said they are willing to pay as much as 5% more in rent, while the average acceptable increase for those who are willing to pay more is 2.17%.

More than 40,000 homes in 22 states have earned a FORTIFIED Home designation, leading IBHS to expand the program to include a multifamily designation earlier this year.

"Past research has demonstrated when high winds from severe weather events like hurricanes and tornadoes impact a FORTIFIED building, the resiliency will pay off in terms of reduced damage and loss of use," says Fred Malik, managing director of the FORTIFIED program. "This study by the University of Alabama shows even before that happens, it literally pays to build resilient multifamily communities."