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Noise in buildingsFEATURESECTION

FROM TIME TO TIME, BRANZ evaluates the costs and benefits of new or changing regula-tions on the New Zealand economy. Examples include improved thermal or acoustic insula-tion requirements.

We need to understand the relative costs and benefits of new or changing regulations to know if it makes sense to implement them. As with any decision, if the costs (cons) of improving insulation are greater than the benefits (pros), it’s a bad decision.

Measuring the immeasurableMeasuring the costs of particular regulations is usually relatively easy. You can add the costs of materials and labour for new Acceptable Solutions to improve acoustic or thermal performance. But how do you calculate the value of a more comfortable home to the individuals who live in it in dollars and cents?

There are two ways we can try to measure the benefits of these regulations:

● Write a list of all the different types of benefits associated with the regulation and then try to measure them individually.

quality of life associated with less sleep disturbance and annoyance by using inter-national studies and modifying assumptions for a number of residential case studies.

A reduction in noise transfer from 53 decibels (dB) to 49 dB led to an estimated improvement in quality of life of a few hundred dollars per year across six case studies.

We could then calculate a net present value – the value today of all future costs and benefits of improved acoustic insulation – for each case study. Unfortunately, sometimes these estimates have to rely on some fairly heroic assumptions, and for some benefits, a reliable estimate cannot be made at all. For instance, in the case of acoustic insulation, the benefits of crime and noise complaint reductions and improved market stability could not be quantified.

Enter simplicity – hedonic pricingA much neater and economically attractive way to measure the value to residents of a better-insulated dwelling is to use hedonic

Economics of better acoustic insulation

Economic modelling shows that a quieter home is a more attractive home, not only for inhabitants but potential buyers. It’s a benefit that

reflects in the property’s value. How did BRANZ prove this?

BY DAVID NORMAN, BRANZ SENIOR ECONOMIST

● Use an economics measurement technique called hedonic pricing.

Make a list and check it twiceThe literature points to a number of benefits from improving inter-tenancy acoustic insulation in buildings, including:

● reduced sleep disturbance, annoyance and discomfort

● less sleep-related illness ● increased earnings potential as residents perform better at their jobs

● improved productivity for businesses as workers are less tired

● reduced health system costs ● reduced crime and noise complaints ● improved planning and market stability.

Some of these benefits accrue to the resi-dent of the better-insulated dwelling, while others accrue to their employers, govern-ment via the taxpayer or society as a whole.

Putting a value to benefitsWe can estimate some of these benefits. For instance, BRANZ estimated the improved

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Noise in buildings FEATURESECTION

pricing. This approach uses real data to measure the value the market puts on a better-insulated dwelling relative to those without.

Many international studies have estimated how better noise insulation affects sales price. A 4 dB reduction in noise transfer into a dwelling is conservatively associated with a 2% price premium. For a small residence priced at $525,000, for instance, better acoustic insulation would increase the sales price by about $10,500.

This single calculation neatly captures all the private benefits that accrue to the residents of the dwelling. Our work also showed that the estimates produced by the simple hedonic pricing method and by individually calculating component private benefits were very different. This is because of the lower level of certainty associated with an assumptions-based approach to estimating benefits rather than the hedonic pricing approach.

public benefits and costs of improved acoustic insulation across six case studies indicate?

In all cases except light-framed apartment buildings, the proposed insulation improve-ments would result in greater benefits than costs.

Unfortunately, there is no simple way to calculate the public benefits, so for that we had to still develop an assumptions-based estimate.

Benefits outweigh the costsSo what does calculating the private and

REDUCED SLEEP DISTURBANCE/

ANNOYANCE

IMPROVED PRODUCTIVITY

INCREASED COMFORT

REDUCED HEALTH SYSTEM COSTS

PRIVATE HEALTH BENEFITS – LESS

ILLNESS

REDUCED CRIME AND NOISE COMPLAINTS

INCREASED EARNINGS

POTENTIAL

IMPROVED PLANNING AND

MARKET STABILITY

HEDONIC PRICING METHOD – INCREASED PROPERTY VALUEPRIVATE BENEFITS

PUBLIC BENEFITS

IMPROVED INSULATION