Policy commentary

Next Generation Stormwater Management: Benefits, Costs, and Policy

May 16, 2011 | Amy W. Ando

Low-impact designs for stormwater management in urban environments can improve groundwater recharge and decrease runoff. The approach is a radical shift from traditional stormwater solutions because it is intrinsically decentralized, as opposed to the typical, system-level approach. The shift to such methods poses challenges for policymakers, but low-impact designs offer inexpensive ways to improve water quality and aquatic habitats, and at the same time make people in urban areas better off.

Urban development causes many problems that can disrupt natural water cycles. A recent report by the National Research Council (NRC) explains how impervious surfaces like roads and roofs limit rainfall infiltration that would naturally recharge groundwater supplies and support stream flows during periods with little rainfall. In this way, development increases the volume of runoff during storms, causing flooding, carrying pollution into rivers and streams, and damaging habitats for aquatic creatures. Traditional stormwater management strategies have relied on systems of storm sewers and detention ponds that can reduce local flooding. Those strategies, however, often increase surface water pollution and further damage aquatic habitats by increasing the volume and flow speed of runoff during storms.

But, an exciting new generation of stormwater management solutions exists, and, as outlined in the NRC report, promises to improve water quality and restore aquatic habitats while still controlling flooding. Such “low-impact design” (LID) approaches include elements such as: building arrangements that reduce the surface area of roads; rain barrels, cisterns, and green roofs that manage and use rainwater onsite; and rain gardens and pervious paving surfaces that increase rainfall infiltration and groundwater recharge. Emerging research indicates that LID approaches have potentially large environmental benefits and may have negative net costs, but effecting LID adoption across a landscape dominated by private land is no simple task.

In a recent book chapter, Braden and I (see Further Reading) estimated the benefits of a hypothetical national policy that would require new construction to return sites to pre-development hydrological conditions—essentially requiring LID approaches. Our calculations indicate that water quality improvement alone could yield benefits of at least $624 million each year; flood reduction benefits and reduced infrastructure costs would add another $34 million annually. These benefit estimates could not include the value of aquatic habitat improvement because research had not yet been done to estimate such values—but ongoing survey research by Londoño and myself indicates the total aquatic habitat benefits of widespread LID implementation may be very large. Although LID stormwater management appears to have significant environmental benefits to society, policymakers need to balance the benefits of any policy or project against its costs. However, reviews by Braden and myself as well as by the U.S. Environmental Protection Agency (EPA) find that LID approaches can accomplish the same stormwater management at lower cost (from 5 to 90 percent) than traditional approaches (though cost savings are not as large when LID approaches are retrofitted onto existing construction).

So, switching from traditional to LID stormwater management appears to have large environmental benefits and low (or even negative) costs. For these reasons, many cities in the United States are trying to encourage private landowners to adopt LID stormwater controls. To gain some insight into what factors might affect patterns in adoption, I analyzed data (with Freitas, see Further Reading) from a program in Chicago that sold subsidized rain barrels to city residents, allowing households to collect rain water and use it in their yards. That program sold almost 7,000 rain barrels between 2004 and 2009 from distribution points scattered randomly throughout the city.

Our analysis revealed several factors that appear to be significant for rain barrel adoption. Many more rain barrels were adopted in parts of the city that are wealthy and have strong environmental ideological leanings and more rain barrels were purchased in neighborhoods that happened to be close to the distribution points. What economists call “transaction costs” seem to be important barriers to consumer adoption of bulky green stormwater management solutions. Adoption rates were lower in places that have a lot of buildings with many housing units—rain barrels just may not be useful in a setting like that. Finally, fewer rain barrels were purchased in areas with a lot of rental housing, perhaps because the agents with control over a rental building do not live there and thus do not benefit personally from flood reduction in and around the building.

These findings imply that urban program managers might be able to strategically locate distribution points to target LID infrastructure uptake in neighborhoods where such solutions would be particularly useful but demographic characteristics are unlikely to be associated with high adoption rates. That sort of strategic targeting might be necessary, because we found absolutely no evidence that households in places with high flooding rates also have a high propensity for adopting LID solutions that might reduce that flooding. Program managers might also induce more socially beneficial LID adoption through outreach to owners of rental housing.

Promoting LID approaches to stormwater management in new construction is a different challenge, but one worth meeting because LID is most cost-effective when implemented at the design stage rather than as a retrofit. The policy community and EPA have suggested new regulations that would effectively mandate LID design, but those suggestions have provoked much opposition from home builders’ associations. Several strategies could be used to yield widespread LID construction. First, policymakers probably need to change municipal building codes to remove the many restrictions commonly embedded in such codes that would make it impossible for a builder to legally implement low-impact designs. To reduce the costs of doing this in every city, federal and state policymakers could develop model LID-friendly building codes that would be easy for municipalities to adopt. Second, because LID approaches shift at least some of the responsibility for maintaining stormwater controls from public to private hands, cities and states may want to use incentives, such as tax credits, to encourage builders and property owners to accept that responsibility. Finally, LID development is very different from traditional approaches to building (for example, LID design eliminates the concrete infrastructure used for traditional stormwater management by clustering buildings in ways that reduce the area of streets and sidewalks), and it may be difficult for developers and builders to make the transition to this new approach. Policymakers could take steps (such as free, widespread LID classes and practical information campaigns) to make it easier for people in the development and construction industries to acquire the skill sets they need to use LID stormwater solutions.

The LID approach to stormwater management is a radical shift from traditional solutions because it is intrinsically decentralized. Governments can deploy some LID stormwater solutions in public spaces—streets, squares, city buildings—but an effective network of LID technologies requires individuals and companies to bring these approaches to private properties as well. That shift poses serious challenges, for the environmental benefits of LID solutions accrue to the public at large rather than just to the individuals that install them. With programs to cut information and regulatory barriers, policymakers can reduce the transition and transaction costs of requiring new development to use LID. And policies such as subsidies, runoff fees, or tradable stormwater permits can provide landowners with cost-effective incentives to install LID retrofits in areas of existing construction. Such policies will be best designed with multidisciplinary input, because outcomes will be most cost-effective if incentives can be tailored and targeted to recognize the spatial variation in social benefits from LID adoption. This challenging issue of design is worth undertaking, for LID strategies for stormwater management offer low-cost ways to improve water quality and aquatic habitats—and at the same time make people in urbanizing areas better off.

Amy Ando is an associate professor in the Department of Agricultural and Consumer Economics at University of Illinois at Urbana-Champaign.



Further Reading

Ando, Amy W., and Luiz Freitas. 2009. Consumer Demand for Green Technology in an Urban Setting: The Case of Chicago Rain Barrels. Available at SSRN: http://ssrn.com/abstract=1440877.

Braden, John B., and Amy W. Ando. 2011. Economic Costs, Benefits, and Achievability of Low-Impact Development Based Stormwater Regulations. In Economic Incentives for Stormwater Control, edited by Hale W. Thurston. Boca Raton, FL: Taylor & Francis.

Londoño, Catalina, and Amy W. Ando. 2011. Valuing Preferences over Stormwater Management Outcomes Given State-Dependent Preferences and Heterogeneous Status Quo. Available on AgEconSearch: http://ageconsearch.umn.edu/.

National Research Council (NRC). 2008. Urban Stormwater Management in the United States. Washington, DC: National Academies Press.

Parikh, Punam, Michael A. Taylor, Theresa Hoagland, Hale Thurston, and William Shuster. 2005. Application of Market Mechanisms and Incentives to Reduce Stormwater Runoff: An Integrated Hydrologic, Economic and Legal Approach.  Environmental Science & Policy 8(2): 133–144.

U.S. Environmental Protection Agency (EPA). 2007. Reducing Stormwater Costs through Low Impact Development (LID) Strategies and Practices. EPA 841-F-07-006. Washington, DC.