The Economics of Residential Fire Sprinklers and the Potential Impact of Recent Code Changes

Residential fire sprinklers are expected to prevent room flashover, improving conditions for occupant egress and thereby reducing the number of fatalities resulting from home fires. Based on data reported by the National Fire Protection Association, in the U.S., occupant deaths resulting from fires in one- and two-family dwellings (“homes”) averaged 2154 between 2008 and 2012—some 71 % of all fire deaths. Of these fires, none involved homes with sprinklers, partly due to their effectiveness, but also due to their rarity in the U.S. housing stock. Their scarcity is largely explained by economic considerations. Using ASTM Standard Practices, we demonstrate the economic performance of sprinklers is primarily driven by the (1) physical performance of sprinklers in terms of fatalities avoided, (2) value of a statistical life (VSL), (3) time value of money (discount rate), (4) insurance savings for owners of sprinklered homes, and (5) sprinkler installation costs. Only until recently have the benefits been shown to outweigh the costs, specifically when the VSL is high and the discount rate is low. Such research was cited in support of a change to the International Residential Code requiring sprinklers in all new one- and two-family homes, which became effective Jan. 1, 2011. We evaluate the impact—in terms of occupant fatalities and occupant and fire service injuries avoided—from continued penetration of sprinklers into the U.S. housing stock. The results suggest that the impact can be significant, but is moderated by the rate of statewide code adoption and the turnover in the housing market.