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Projects : CUREE-Caltech Woodframe Project

Element 4 - Economic Aspects
Task 4.1 - Loss Estimation

Problem Statement

Reliable estimates of repair cost and loss of use are required for woodframe building risk assessment and risk reduction decision-making. While tools for regional loss-estimation have long existed that deal with woodframe construction (e.g., ATC-13 and HAZUS), there are problems applying these tools to individual buildings. For example, they offer only a limited number of vulnerability functions (relationships between repair cost and ground motion), each intended to model a very broad category of woodframe structures. They are not sensitive to detailed design and construction features of particular buildings, nor can they reflect particular rehabilitation measures. The present project is intended to overcome these deficiencies, to take advantage of recent and emerging laboratory tests of woodframe structural and nonstructural building elements, and to create seismic vulnerability functions that do not rely extensively on expert opinion.

Main Objectives

The objective of this project is a set of probabilistic damage-estimation relationships based on detailed modeling and field data, suitable for incorporation into HAZUS. We will develop a methodology that is generally applicable to a variety of woodframe buildings and capable of relating repair cost and functionality to spectral acceleration (or other ground motion parameters). The methodology will be applied to four woodframe building types, called index buildings – these are (1) a small house, (2) a large house, (3) a townhouse, and (4) an apartment building. Each of these basic configurations will be represented by three variants: for example, one characteristic of typical design and construction quality, one poor-quality, and one that indicates superior materials or construction quality. Thus, 12 particular buildings will be analyzed to represent as-is conditions. Eight seismic rehabilitation measures will also be examined, for the purpose of evaluating the benefits of seismic rehabilitation in terms of reduction in future earthquake losses, thus making a total of 20 cases to be analyzed.


A combined theoretical and correlative approach is proposed for the improvement of loss estimation methods for buildings in general, and especially woodframe buildings. The approach combines structural modeling with empirical data from system and component tests and post-earthquake field investigations within a framework for loss estimation, termed Assembly-Based Vulnerability (ABV). ABV estimates repair cost, repair duration and loss-of-use cost as functions of ground-motion intensity. It is a simulation method that treats the building as a unique collection of standard assemblies, each with probabilistic descriptions of fragility, repair cost and repair duration. It uses nonlinear dynamic structural analysis of ground motion recordings to estimate structural response in terms of peak transient drift, floor accelerations, various internal member forces, etc.

These structural response measures are used as input to component fragility functions, which produces estimated failure probability of the damageable buildings components. Fragility functions are developed based on available and emerging laboratory data (e.g., from Task 1) and earthquake experience (e.g., from ATC-38). Some theoretical fragility functions may be developed based on reliability methods.

By simulating damage and unit repair costs, total cost can be simulated. Repeated simulation produces a probabilistic seismic vulnerability function for the building under examination. The highly detailed nature of the structural analysis and assembly definition allows for the creation of building-specific seismic vulnerability functions that are sensitive to building configuration; details of design, construction, and rehabilitation; and the various uncertainties that affect repair cost.


Seismic vulnerability functions. The project will produce seismic vulnerability functions, that is, probabilistic relationships between repair cost and a ground-motion parameter such as spectral acceleration or spectral displacement at the building’s small-amplitude fundamental period of vibration, denoted by Sa(T1) and Sd(T1), respectively. Figure 1 shows a schematic vulnerability function. It relates normalized repair cost, denoted by Y, to Sa(T1). The normalized repair cost Y is defined as the repair cost, denoted by C, divided by the building replacement cost, denoted by V. The vulnerability function is probabilistic in that the normalized repair cost is estimated as a random variable with a conditional probability distribution, denoted by fY|Sa(y|s). The three lines in the figure depict the median value of Y (solid line), and its 16th and 84th percentiles (dashed lines). The probability distribution accounts for uncertainty in ground motion, structural response, component damageability, and construction costs. The vulnerability functions will be presented in a form useable in the HAZUS software.

Benefits of rehabilitation. Vulnerability functions will be developed for the index buildings as-is and under various rehabilitation measures. We will calculate expected benefits of the rehabilitation measures under two scenario earthquake levels, in terms of reduced repair cost. The scenario events will be earthquakes with 72-year and 475-year mean return periods. While the results will be valid only for the particular index buildings examined and the particular sites where they are assumed to stand, the results will be indicative of the value of the rehabilitation measures.

The stated mitigation goal of FEMA is to reduce natural disaster losses by half by the year 2010.  With regard to earthquakes, the large exposure (the tremendous amount of value at risk), and the vulnerability (as demonstrated by the Loma Prieta and Northridge Earthquakes) of woodframe construction makes this goal unattainable unless current trends are reversed.  This Element of the project will deal with a double-edged economic impact:  without greater loss control, future earthquakes will cause disasters as large or larger than Northridge, but at the same time, increases in earthquake protection can be costly.  Five basic economic aspects--Insurance, Disaster Relief, Loss Estimation, Real Estate Disclosure, and Cost and Performance--will be investigated.  A draft report and then, following a workshop, a final report will be produced for each.  Key users for each topic will be consulted at the initiation of this Element.  The first four reports have obvious external audiences, while the fifth, Cost and Performance, will be of most value internally to the project in the evaluation of viable options in the Building Codes and Standards Element.

Rating Methods

The practical benefits of this component of the work will be in the form of better techniques for rating and predicting losses to woodframe construction in future earthquakes.  In the energy conservation field, there are "seals of approval" that buildings with superior characteristics can obtain.  The engineering work in the Building Codes and Standards Element will produce the technical basis for defining and achieving above-minimum levels of seismic performance, while the practical task here is to develop a way to implement such "seals of approval."  Aside from engineering accuracy, there is a need for "ratability" and "inspectability."

Improving the basis for distinguishing between levels of vulnerability provides a variety of ways to use incentives to actually mitigate the vulnerability.  The leverage of ratings combined with incentives includes insurance (lower premiums for better construction) and mortgage lending (e.g., Freddie Mac-triggered insurance requirements for condo mortgages).  The potential savings for those who pay for displacement of residents is vast--the residents themselves, insurance companies, and increasingly the public (e.g., under the California Earthquake Authority) and the Federal government (Housing Assistance at present, and potentially a natural hazards insurance or quasi-reinsurance role in the near future).

California Earthquake Authority

One key idea behind the California Legislature's adoption of the law establishing the California Earthquake Authority is that coverage should be less generous if the general public is to be ultimately responsible for excess losses to the properties affected by a disaster.  In part this means exclusions of detached structures and improvements such as swimming pools that may suffer extensive and expensive damage, but damage that does not make the dwelling uninhabitable.  The program of investigations carried out under the proposed project will be alert to opportunities to segregate out such loss data from case studies, and to extend this idea by evaluating the types of damage within dwelling units that disrupt the function of the residence and require the residents to move out, as compared to the kinds of damage that can be tolerated or repaired without disruption of the housing stock.  Many insurance adjusters, FEMA habitability inspection team members, or consulting engineers can tell the same basic story from their experience:  The damage from a construction or engineering point of view was frequently slight--just nonstructural cracking of plaster or gypsum board interior wall surfaces--but the resulting cost of repairs, including removal of damaged finish materials and  installation of new, alterations to correct or allow for structural frame distortion, painting, hard-wiring new smoke detectors or installing other non-seismic upgrades triggered by the building permit process, and substitute housing for the residents while the work was accomplished, might have been 25% of the replacement cost of the dwelling.

Insurance Services Office (ISO) and Insurance Institute for Property Loss Reduction

The Insurance Services Office (ISO), Commercial Services, Persippany, New Jersey has been contacted and has expressed interest in obtaining information from the project and participating in discussions of project results as they pertain to the classification of building construction and the associated ratings.  The ISO for many years has served as the property insurance industry's risk rating arm, providing manuals and data allowing an insurer's properties to be rated in a standardized way.

The Insurance Institute for Property Loss Reduction (IIPLR) has been contacted and has also expressed interest in the project.  The IIPLR has embarked on a number of broad programs recently that are directly aimed at earthquakes and other hazards, including an exploration of public-private partnership options for FEMA and a building code enforcement rating system used by the property insurance industry in conjunction with local building departments.

Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac)

Freddie Mac policy effective July 1, 1995 requires that earthquake insurance accompany mortgages which enter its portfolio if the project is located within "high risk" zip codes in California, and that in "medium risk" zip codes insurance is required if certain higher vulnerability construction features pertain.  It later allowed an in-lieu fee payment by mortgage lenders that was four times greater if no earthquake insurance was purchased.   Subsequent California legislation in May, 1996 attempted to prevent this regulation, based on the cost impact to condominium owners, and the situation is perhaps still in flux.  Also related are implications for Fannie Mae mortgages.   The rating system used to determine if the construction triggers greater concern and thus the insurance requirement will be significantly refined by the proposed project.  For example, Freddie Mac Bulletin 95-2 and Form 465S lists "tuck-under parking" as one negative characteristic, but this is defined only as "buildings with more than 30% of the structure built above a street-level parking garage."  Because this configuration is specifically included within the scope of the proposed project of investigations, (see Section 1.5.4 above) this rather general definition will be made much more specific.

City of Los Angeles Project

The City of Los Angeles was successful in obtaining FEMA Hazard Mitigation Grant Program funds to develop a quick and inexpensive method of field rating houses for their earthquake risks.  This is intended to provide a simple checklist way for homeowners to upgrade their construction and thus qualify for a lower risk.  Our project, via liaison with the City throughout the course of the project, will provide applicable results of our work, depending on the precise overlap of schedules.  The City of Los Angeles proposal provides an 11-point building characteristics list.  Suggestions for revising that list will be made based on the Testing and Analysis, Field Investigations, and Economic Aspects Elements of our project.

Housing Impact

Meetings with California OES, FEMA, and the Department of Housing and Urban Development will be held to explore how our project's results will relate to housing impacts, for example, by refining pre-earthquake or immediate post-earthquake estimates of temporary or long-term housing unit loss, and by estimating the benefit of improved woodframe seismic resistance in terms of reduced housing impact.  Prof. Mary Comerio of the UC Berkeley Architecture Department will participate in our project and provide a ready linkage with her past work  on Loma Prieta and currently on the Northridge Earthquake.  Her forthcoming book, Disasters and Housing (UC Press, spring 1988) explores the economic and housing impacts of earthquakes and other disasters (Loma Prieta, Northridge, Kobe, and Mexico City Earthquakes, and Hurricane Andrew) as relate to mitigation options.  Her "Northridge Housing Losses" produced for California OES documents that 60,00 housing units were destroyed or seriously damaged, 90% of which were apartments.  Her estimate is that less than 50% of these will be repaired in three to five years.  Her research on the 1993 Midwest floods, and in Florida from hurricanes, has proved useful in analyzing the private and public risk exposure of housing loss.  She recently completed research funded by the California Policy Seminar that looked at the question:  How much loss is contributed by the supposedly safe and undamaged "green tag" buildings?  In this work, she analyzed recovery funds for housing provided not only by FEMA and OES but also by the Red Cross, California Dept. of Social Services, California Department of Housing and Community Development, SBA, and HUD.  Her role in our project will be provide expert advice on how the results of the technical work of the project impact on housing losses.  For example, her work on producing a profile of the kind of damage that makes a residence uninhabitable will be an important way to define engineering measures with regard to performance (or "performance-based seismic design"), since habitability as well as safety and avoidance of direct property loss are important with the large proportion of woodframe buildings that are residences.

In the proposed project, in addition to working on the housing loss aspect improvements to woodframe construction, she will extend her California Policy Seminar work in which insurance data were obtained, by zip code, from the Department of Insurance.  In the proposed project, she will be able to use this data to do a breakdown of specific causes of loss--stucco, windows, framing, etc.--claim-by-claim, zip code-by zip code--for the Northridge Earthquake.

Loss Estimation

The National Institute of Building Sciences is conducting a multi-year project for FEMA to develop and test a standardized, nationally applicable earthquake loss estimation method, the software for which is called HAZUS.  The method, which has been developed by RMS, Inc., will be released later this year.  It includes a module for the forecasting of damage to a model building classification for small and another for large woodframe construction.  Our proposed project will provide information on which refinements to that module can be made, and because the woodframe component of overall urban earthquake loss is so great, this is expected to have a significant effect on refining the accuracy of the overall method.

Specifically, the NIBS method uses an "engineering" rather than "empirical" approach to predicting damage. Based on an engineering description (spectral acceleration) of ground motion, buildings of various construction classes and heights are predicted to "drift" or "lean over" a particular number of inches at the roof level.  This deformation is directly related to structural, and in woodframe construction, most of the nonstructural damage.  The drift-damage relationship is derived from physical testing and careful earthquake performance observations in the NIBS method.   Thus the new generation of test data to be produced in our project (Testing and Analysis Element) will be easily incorporated into the NIBS method.  In addition, the field evaluation of Northridge damage in our project's statistical and case study efforts will provide a means of comparing the laboratory data with actual earthquake performance, especially in terms of the losses caused by various damage levels.

NIBS (Phil Schneider, Earthquake Loss Estimation Project Manger) has been contacted and has expressed interest in applying the results of our project's work to future revisions of HAZUS.

Real Estate Disclosure

Another application will be to provide information in a format that can be used to refine California's real estate disclosure requirements  The California Seismic Safety Commission's committee of the AIA, SEAOC, and CALBO, which formulated these specific requirements in response to state law, the California Association of Realtors, and the California Department of Insurance will be kept informed of the project's developments.  Project consultant James Russell, who will be involved in the Building Codes and Standards Element, will also be involved in this task.  Essentially, the problem will be one of extracting from the detailed work of the proposed project a manageable list of construction features that can be included in the state's real estate disclosure forms and procedures.

Cost and Performance

This task is closely related to the Building Codes and Standards Element:  The objective is to develop economic data and use it to select and justify woodframe design and construction measures to advance in the codes and standards arena previously discussed in Section 3.4.  Cost is primarily but not exclusively a matter of construction cost.  Performance must be separated into three aspects--the danger avoided (the classic life safety rationale underlying most building code provisions), the property loss prevented (which relates to the issue of insurance and investment concern), and the reduction in disruption (especially the reduction in the number of displaced residents and reduced business downtime).

Using drafts of design and construction measures developed by the Building Codes and Standards Element, cost implications will be explored.  One realistic approach is to use the software LDG (Lateral Design Graphs) developed under an NSF grant by Prof. G. G. Schierle, Associate Project Manager for Field Investigations, to do trial designs of a number of woodframe building layouts.  His software is specifically intended to allow for the rapid estimation of the kinds of materials and connections needed to make a given design meet code or other criteria.  Using the draft criteria developed by the Building Codes and Standards Element will result in a realistic evaluation of design implications.  By such investigations, proposed provisions that result in unbuildable or excessively costly layouts (e.g., not enough window area allowed, or excessively costly shear walls required throughout the plan) can be identified.


The workshop "Estimate Earthquake Damage and Losses and Improving the Use of the Result" was held on May 11th, 2001 in Marina del Ray. The workshop was necessary to air differences of opinions over the topics raised above.  The draft versions of the reports for each of the above subtasks were distributed prior to the workshop.  Also meetings prior to the workshop helped to set up with key organizations listed above (OES, FEMA, Freddie Mac, California Department of Insurance, etc.).  In some cases, mini-workshops or meetings on one particular topic were held in order to bring out points efficiently in advance of this larger workshop.

    • May 11, 2001 - Loss Estimation Workshop Agenda
    Photos from the May 11th, 2001 - Loss Estimation Workshop
    Workshop Report: Woodframe Buildings: Estimating Earthquake Damage and Losses and Improving the Use of the Results

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last updated 03.20.15