Harvard Graduate School of Design Public Housing Operating Cost Study
FIELD TESTING THE GSD MODEL ON INDIVIDUAL PUBLIC HOUSING PROPERTIES
A. Overview While the GSD model development described in the July 9, 2001 Draft Research Design document is proceeding, GSD will select not less than 50 public housing properties, or 8 to 10 in each of 5 or 6 metropolitan areas (and nearby rural areas) and will ask property managers expert in managing assisted housing in those markets to estimate the operating the costs of those properties as if they were privately owned assisted housing – that is, as if they had all the regulatory requirements and constraints of project-based Section 8 properties with budget-based rents. GSD will select properties from a list of all public housing developments in the relevant metropolitan area (and nearby PHAs with rural service areas), with the following selection rules: Some properties, but not all properties, should be owned by the largest PHA in the metropolitan area; The properties should represent a variety of building types and occupancy types typical of both that metropolitan area and of public housing nationally; Properties that have received HOPE VI grants, for which the PHA intends to apply for a HOPE VI grant, or that are subject to the viability analysis now required for certain public housing developments should not be included; and Properties determined (after consultation with the PHA) to have very atypical operating costs for any other reason should not be included.
Utilizing a standardized protocol, these property-based budgets will be prepared assuming that the properties were to be operated as well-run assisted housing (it will be assumed that residents will be similar to the current residents or to those who would be eligible to live and choose to live in a Section 8 project-based development in this location and of this quality. The real estate professional will be free to assume the residents could be screened as permitted by program rules and evicted for cause as permitted by program rules). The model-predicted costs for these properties will not be revealed to those preparing the budgets until after the field testing has been completed. These budgets will be supported with accompanying line-item narratives and recommended staffing plans. In the
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areas of security and resident programs, the budgets will be prepared assuming what is normal and customary for well-run assisted housing in those markets. All of these budgets will be created with the Chart of Accounts used for FHA that have been included in the GSD model of FHA operating costs. More specifically, these are the individual accounts on HUD form-92410 that are included in: Total administrative expenses (Line 6200/6300) Total operating and maintenance (Line 6500) Total taxes and insurance (Line 6700) minus real estate taxes (Line 6710) Utilities and real estate taxes are not included in these property-based budgets. GSD is studying utilities under a separate section of the overall public housing operating cost study because, under the PFS/Operating Fund, public housing authorities are funded for utilities according to a three-year average of consumption, adjusted for current rates. GSD has contracted with an energy consultant to conduct a feasibility study of changing from the current utility reimbursement system to one based on norms for utility use in private housing. See Chapter Four of the Draft Research Design for additional detail. Public housing authorities make payments in lieu of taxes (PILOT), if at all, and real estate taxes are therefore not included in these property-based budgets. Also, because the need for deferred capital improvements may effect operating costs, where warranted, these budgets will be developed under two separate scenarios: (1) assuming current conditions and (2) assuming capital needs were addressed. In addition to testing the predictive abilities of the costing model, another purpose of the field testing is to determine whether there are fundamental differences in the physical design of public housing that affect operating costs, but are not captured in the costing model. When the model development has produced a recommended model, GSD will use it to estimate the benchmark costs for the same 50 properties. GSD will then convene a focus group including both the real estate professionals and the key staff who worked on the model to discuss the comparison between the benchmark estimates produced by the model and the ranges estimated by the real estate professionals. GSD will also share these results and observations with industry groups (either through the recommended research working groups or through the regular monthly public progress meeting). The test of the model against specific housing properties will produce information for further refinement of the model and for decisions about its application. Any adjustments to be made on the model as a result of this field testing process will be fully documented. As mentioned at the beginning of the overview, the Field Testing of specific housing properties is a part of the larger effort to develop a model, using multiple regression techniques, that itself is one of four parts of
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GSD’s approach to identifying determinants of cost to operate well-run public housing. See Page ii of the Executive Summary in the July 9, 2001 Draft Research Design for a summary of the Cost Study Approach. B. Private Managers Tasks in Field Testing 1. Become acquainted with the purpose and current status of the Public Housing Cost Study (PHOCS). Materials are available on the PHOCS web site: www.gsd.harvard.edu/phocs. In particular, become familiar with the three published reports on the study to date, with particular attention to the July Proposed Research Design: o Draft Progress Report and Revised Work Plan dated 9/26/00 o Discussion of Research Issues and Initial Recommendations for Review dated April 2001 o Draft Research Design dated July 9, 2001 2. Contact the Public Housing Authorities to arrange for site visits of the properties assigned to you (see attached/enclosed excel workbook for contact person, property addresses, property profiles). 3. When you visit the properties, imagine that the public housing property is an FHA-assisted property that receives 100% project-based Section 8 assistance. This means it will have the following characteristics: o Residents would pay 30% of their income for rent. o At least 40% of the residents would have extremely low incomes (below 30% of the area median income adjusted for household size) at admission. o All residents would be required to have incomes below 80% of median at admission. o Property would have to meet all reporting requirements associated with project-based Section 8 subsidy and with FHA insurance. HUD field office would monitor. Incomes would have to be verified, there would be REAC inspections (assume annually), 50059s would have to be transmitted to HUD, and so forth. o The management of waiting lists, eligibility for unit size, affirmative marketing requirements would all be what they are for project-based Section 8 properties. o Assume that the owner is not a public housing authority but, rather, a private, for-profit owner of project-based Section 8 properties with budget-based rents. o Occupancy is stabilized at 95% to 100%. o There is a routinely funded Reserve for Replacement account.
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4. Every effort will be made to identify properties that are not severely distressed and, therefore, do not have major backlogs of unmet capital repair needs. However, some properties will be more than 30 years old, and these and other properties may have capital backlogs. Therefore, we ask that you create two budgets for each property in those instances where you believe that the need for deferred capital improvements may affect operating costs in a meaningful way. These budgets should be developed under two scenarios: (1) assuming current conditions and (2) assuming capital needs were addressed and should be identified accordingly. In those instances where the current conditions are good and there are not major backlogs of unmet capital repair, you will only submit one budget for the property. Accordingly, in these instances, those items typically reimbursed through an FHA project’s Reserve for Replacement account (such as appliances, water heaters, cabinets, etc.) should not be included in the Operating and Maintenance budget line items. The cover sheet for the Field Testing Operating Budgets has a place to identify whether the budget is being created assuming current conditions or assuming capitals needs are addressed. Be certain to clarify which approach you are taking. As noted above, it is expected that you will create two budgets in some, but not necessarily all, instances. 5. Create one (or two – see section B.4 above) detailed operating budget on a total and per unit per month (PUM) basis for each property using HUD Form 92410 for the accounts included in: a. Total administrative expense (Line 6200/6300) b. Total operating and maintenance (Line 6500) c. Total taxes and insurance (Line 6700) minus real estate taxes (Line 6710) The attached/enclosed budget form must be used The electronic version is in an excel format and will automatically calculate the PUM from the total when you insert the total number of units on the Cover page (Sheet 1) . A detailed narrative must accompany each line item, including recommended staffing plans by position title and salary/wage. In the areas of resident services and security, private managers should budget what is customary for a well-run assisted property in this location, not what is or is not currently provided by the public housing authority. In particular, any resident services staffing should be included in Office Salaries staffing and the amount identified in the narrative to that line item.
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You have the opportunity to establish a range of costs for each account if, in your professional judgment, identifying a range of costs is a more appropriate way to budget your usual and customary operating standards. In those instances where there is no recommended range, the budgeted number should be placed in the “High Annual” column. The budget year is January 1- December 31, 2001. Please do not make any inquiries of any PHA staff about operating costs at the properties visited. Please note what costs, if any, in the operating budget are a direct result of the physical design of the property other than features that are picked up by the classification by building type (elevator structure, townhouse, walkup, etc.), size or unit mix. Describe those physical design features and explain their effect on cost. Private managers are required to complete their budgeting on the enclosed standardized GSD-designed form that is derived from HUD Form 92410 (see Appendix B). Private managers may also submit their own format in addition if they wish, provided that it has identical accounts to those described in section 2.b above. For further detail on items included in each line item, refer to HUD’s website in the Forms section where you will find a link to the User’s Guide for HUD Form 92410. 6. Request and obtain a site map. 7. Take photographs of the buildings, common areas and sample units. Pay particular attention to photographing any unique design features (see B.5. above). Use a digital camera if you have one.
C. Deadline for Submission of Budgets and Focus Group Meeting 1. All operating budgets and accompanying narratives are due on Friday September 14, 2001, or eight weeks after receipt of these instructions, whichever comes last. 2. Questions should be directed and materials should be mailed and/or emailed to: Judy Weber 21 Belmont Street Newton, MA 02458 617-527-0048 phone 617-775-5609 cell 617-916-5219 fax jeweber@mediaone.net
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3. Private managers will join key staff who have been working on the GSD model for a day-long meeting to discuss the comparison between the benchmark estimates produced by the model and the ranges estimated by the private managers. This meeting will be held in late September 2001 and will be located on the east coast, probably in Washington, DC.
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