The willingness to pay for seismic retrofitted buildings: A discrete choice experiment

Abstract

The majority of the Italian building stock does not respect adequate aseismic design standards and is prone to seismic risk. Consequently, during years, some severe seismic events have caused numerous victims, relevant financial losses, buildings' structural damages, and many collapses. Buildings seismic retrofitting (BSR) plays a crucial role in reducing buildings' seismic vulnerability through the adoption of risk mitigation measures. BSR generates a wealth of benefits, which may be capitalized into buildings' market prices in terms of a market price premium (i.e. an additional price that homeowners are willing to pay for seismic retrofitted buildings, ceteris paribus), which in turn may accelerate investments. Literature on this issue is scarce, especially in the Italian context. The aim of this paper is to fill this gap. The capitalization effect of benefits generated by BSR can be estimated by survey-based methods to elicit individuals’ willingness to pay (WTP) for retrofitted buildings. In detail, we implemented a Discrete Choice Experiment (DCE) approach and estimated market price premiums for seismically retrofitted buildings in Italy. The contingent scenario refers to a detached masonry house, located in a high seismicity zone, i.e. Foligno (central Italy). Our estimates reveal that individuals are willing to pay higher prices for retrofitted assets. Estimated market price premiums vary from some 19%–56% with respect to the reference building, rated F seismic risk class. Our results provide interesting policy implications for the design of incentive instruments to promote BSR.