Earthquakes and old buildings: Seismic risk permits for California structures

California is unique among the 50 states; it is the most populous and has the most damaging earthquakes. Many unreinforced masonry buildings remain in use, and these buildings pose real hazards to human life. Modern buildings do not collapse on people, but economic loss from destruction of contents and the disruption of activity in a building typically exceeds structural damage. Emerging technologies, such as seismic base isolation, reduce shaking, thus lowering function loss and contents loss.

This dissertation considers policies for distributing permits under a quota system limiting total seismic risk. Developers would have two options: (1) to construct the building to the Uniform Building Code and obtain the appropriate quantity of risk permit units from someone who is reducing the seismic risk of an existing building; (2) to construct the building with seismic base isolation to reduce the risk. Owners of unreinforced masonry buildings could sell permits to help finance retrofit of their buildings.

Marketable seismic risk permits would promote cost-effective risk reduction. The policy would encourage base isolation of many buildings. Where base isolation is not cost-effective, the developer can purchase risk permits. Likewise, the policy provides an incentive for voluntary risk abatement of old buildings for which it is most cost-effective. Risk permits could be preferable to a command-and-control policy that imposes a single standard for all.

Alternatively, the state could collect a tax on new construction according to the number of risk permit units on each new building, and then distribute the proceeds for abatement of seismic risk according to the number of risk permits on each hazardous building. The tax eliminates uncertainty about the price of risk permits.

A marketable seismic risk permits policy is a risky mechanism for providing a financial incentive for the seismic retrofit of hazardous old buildings. A seismic risk permit tax is superior to a command-control imposition of a higher level of seismic standards for all new construction. A 2-percent tax would save the construction industry up to a billion dollars per year and provide up to $240 million to assist seismic retrofit of hazardous unreinforced masonry buildings.