AN INNOVATIVE METHODOLOGY
The 10 Year Roadmap uses a new approach to estimate the baseline cost—$169.1 billion—to preserve the remaining public housing stock based on costs associated with properties that underwent conversions through the RAD program. This baseline cost does not include the complete investment needed to make building systems more operationally efficient or protect assets from natural hazards and extend the life of the buildings.
We used Ordinary Least Squares (OLS) regression, a research method for understanding linear relationships between variables, to model the association between a selected set of property characteristics and hard construction costs, which are the labor and material expenses associated with physical building construction, including: overhead, profit, and general requirements. Estimates from the model are then used to predict hard construction costs for the remaining public housing stock. Next, we applied cost adjustment factors to the predicted hard construction costs and account for soft construction costs, tenant relocation, loan payoff, and acquisition expenses to estimate the cost to preserve public housing.
Using RAD-converted properties as a reference point is a more efficient and cost-effective alternative to inspection-based assessments, and, as such, could enable more frequent examination of public housing preservation needs. Construction costs for public housing properties that PHAs converted through RAD were selected as a proxy for estimating broader preservation needs across the public housing portfolio because of the breadth of publicly available data, the reduced cost required to conduct this assessment, the large sample size available to draw conclusions from, and the thorough capital needs assessments PHAs are required to complete prior to converting properties through RAD.
It is important to note that this cost estimation approach is not intended to endorse only using the RAD conversion as a strategy for preserving the entire public housing portfolio. Financing mechanisms, including RAD and many other tools, will be discussed in detail in the forthcoming full report.
To learn more about our innovative methodology for and our process to estimate the baseline cost to preserve the remaining U.S. public housing stock, access the accompanying technical report authored by PAHRC here.
Want to learn more about this methodology?
Contact Malcolm Guy, Sr. Policy and Research Analyst, CLPHA at mguy@clpha.org.