How cheap do sprinklers have to become before they’re considered cost-effective?

Blog Post created by ryan.quinn Employee on Apr 20, 2009

The cost of residential fire sprinkler systems has been a major point raised by builders in the residential fire sprinkler battle. They often cite unknown studies pointing to how many people will not be able to afford a home if the residential (one and two-family) code requirement is adopted.

I recently sat next to an actuary during one of my many flights and engaged in conversation as I often do with my seat mates. Of course, the conversation turned to residential fire sprinklers when he asked what I do for a living. So began the opportunity to take advantage of a "teachable moment" as I explained the whole residential sprinkler issue to this person who, as many persons, had not even thought of this technology when making a home purchase decision.

The very first question he asked after he learned all about this life safety technology was, you guessed it; how much does it cost? I explained about the 1 to 1.5% of a home's cost and the research putting this cost at $1.61 a sq. sprinklered foot. Immediately his mathematical mind went to work and within seconds he said; "That would only translate into approximately $5.00 extra mortgage payment a month" After I got over my awe of his mathematical abilities without the use of a calculator I remembered reading somewhere someone say that the additional mortage amount would equal the cost of a "Big Mac" a month.

During one of the recent hearings, someone provided testimony begging the question posed by the title of this blog. I bring it to you here in its entirety and urge you to make similar analogies, if given the chance, when addressing the cost of residential sprinkler systems. The testimony follows:


<span style="FONT-SIZE: 12px; FONT-FAMILY: Arial">&quot;To really look at the issue of the cost impact on homes and whether sprinklers will impact the cost of affordable housing, there is a basic question that has to be asked, “What drives the price of a new home?”<span style="mso-spacerun: yes">&#0160; </span>In many, if not most, markets, the answer to this question is not construction costs, but instead, what the market will bear, with sales prices rising and falling based on what buyers are willing to pay.<span style="mso-spacerun: yes">&#0160; </span>In such markets, costs associated with mandatory sprinklers are absorbed into the price by adjusting other costs or features or builder markup. <o:p></o:p></span>


<span style="FONT-SIZE: 12px; FONT-FAMILY: Arial">Even if there is an increase in the cost of a home based on sprinklers, the impact on a monthly mortgage payment is negligible in an average home.<o:p></o:p></span>


<span style="FONT-SIZE: 12px; FONT-FAMILY: Arial">Consider a hypothetical $3,000 sprinkler system in a $300,000 home with a 6.5% mortgage, a 5% credit on a $2,000/year insurance bill, and a combined Federal/State income tax rate of 33%; the net cost of fire sprinklers, after mortgage related tax deductions, would be $4.37 per month.<span style="mso-spacerun: yes">&#0160; </span>This represents a 0.23% increase in the monthly payment and roughly equates to the cost of a premium beverage at your local coffee shop<o:p></o:p></span></span></p>

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<span style="FONT-SIZE: 12px; FONT-FAMILY: Arial">So, I pose the question to everyone listening to this program today, just how cheap do sprinklers have to become before they’re considered cost-effective?&quot;<o:p></o:p></span></span></p>

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<p class="MsoNormal" style="MARGIN: 0in 0in 0pt"><span lang="EN-US"><o:p>[Maria Figueroa | mailto:mfigueroa@nfpa.org]</o:p></span></p>