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					                                                                          Public Housing Operating Cost Study
                                                                           Harvard Graduate School of Design




                                       Monthly Public Meeting of the
                                    Public Housing Operating Cost Study

                                                    May 15, 2001
                                                      Notes

Attendees:
Greg Byrne, Harvard Design School
Joanne Farmer, HUD, Public and Indian Housing
Jenn Fogel-Bublick, Senate Banking Committee
Deb Gross, Council of Large Public Housing Authorities (CLPHA)
Dushaw Hockett, Center for Community Change/ Public Housing Residents National Organizing
                  Campaign
Joan Howell, PHMI
Tim Kaiser, Public Housing Authorities Directors Association (PHADA)
Marlene Kalenak, Council of Large Public Housing Authorities (CLPHA)
Jeff Lines, TAG Associates
Gretchen Maneval, Harvard Design School
Regina McGill, HUD, Funding and Financial Management
Frank Minore, General Accounting Office
Tony O’Leary, Akron Metro Housing Authority
Christine Siksa, National Association of Housing and Redevelopment Officials (NAHRO)
Christopher Stevens, HUD, Funding and Financial Management
Ted Van Dyke, Public Housing Authorities Directors Association (PHADA)
Sunia Zaterman, Council of Large Public Housing Authorities (CLPHA)
Jonathan Zimmerman, National Association of Housing and Redevelopment Officials (NAHRO)


Meeting Summary:
The purpose of the May 2001 public meeting of the Public Housing Operating Cost Study was to
communicate the progress and status of the Cost Study. In April, the Cost Study published the
―Discussion of Research Issues and Initial Recommendations for Review‖, and conducted regional
meetings in April and May to present this document and receive feedback from the public, industry
groups, public housing authority (PHA) representatives, HUD, OMB, and other interested parties. During
the May 15 public meeting, Greg Byrne mainly discussed the regional meetings the Cost Study team had
conducted over the previous month and a half, including a detailed review of the questions asked at the
regional meetings1. The Public set forth many questions/comments, both relevant to the Regional
Meeting Questions being discussed, and to the Discussion Document. All of these questions will be
documented with responses in the Final Research Design. Furthermore, the Cost Study will be meeting
with CLPHA, NAHRO, and PHADA representatives on May 23rd to address questions and issues
regarding the use of FHA data by the Study. Greg Byrne discussed the project schedule, the fact that the
Cost Study team is currently working on a detailed comparison of the similarities and differences of
public and assisted housing regulations, and a brief discussion of the case study protocol.




1
    A list of the Regional Meetings Questions is located in Appendix 1.

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    1. Regional Meetings and Review of Questions Asked at Meetings2
    •   Greg Byrne related that for the purpose of presenting the Discussion Document to stakeholders,
        the Cost Study team conducted nine regional meetings, plus a presentation at the national
        PHADA meeting (including a PHADA executive committee meeting.) The regional meetings
        were not well attended by PHAs despite outreach and communication by Cost Study staff, HUD,
        and the industry groups. Kansas City had the largest number of attendees, about twenty people,
        but the average attendance was about five people. Several possibilities for the low attendance
        rate may be: PHAs feel the industry groups are representing their interests sufficiently; many
        PHAs were planning to attend the presentation at the PHADA meeting; PHAs were too busy to
        attend; or there wasn’t enough time given for the PHAs to read the Discussion Document
        (suggested by Sunia Zaterman). Greg Byrne also conducted a national HUD telecast to present
        the Discussion Document.
    •   Sunia Zaterman suggested that the contents of the FHA database be made more clear, including
        the definition of type of assistance (inferring that the degree of assistance correlates to costs), the
        number of programs, and regulatory differences. Greg Byrne asked what Sunia felt would be the
        impact of different levels of assistance (i.e. partially versus fully assisted properties)? Sunia
        replied that in her opinion, project-based Section 8 developments would have lower income and
        larger families than unassisted. Greg replied that the Cost Study would make sure to look at the
        distribution of level of assistance, and that the Study will be using tenant characteristics such as
        income, as well as bedroom size of units, to address the difference in size of families. These
        issues will be further discussed at the May 23rd meeting.
    •   Deb Gross asked what information exists regarding the type of ownership for the assisted housing
        stock? Greg responded that unlimited dividend, limited dividend, and non-profit designations are
        made. Further, Deb asked if categories such as profit and capital investment were reflected in the
        database. Greg said the Study will look at the relationship of cost to ownership structure.
    •   Ted Van Dyke asked what the impact was of profit motives, with the thinking that profit
        motivated owners would tend to drive costs down. Ted added that in public housing, there is no
        profit incentive to holding costs down. Deb Gross added the example that in private housing,
        they may replace only a piece of damaged carpet, while in public housing, the whole carpet might
        be replaced. Tony O’Leary said that the level of service in public housing might be higher, for
        example, his PHA provides 24 hours 7 days a week maintenance availability, and in his opinion,
        this is unlike what the private operators would provide.
    •   Jonathan Zimmerman asked whether the Study would be able to look at trends of purchasing and
        sales of the properties relative to operating cost trends (presumption being that if costs are a snap
        shot, they may be skewed due to this cycle). Greg replied that the Study would be working with
        five years worth of data (1996-2000). Additionally, the fact that there are 10,000 properties in the
        database should even out the individual differences in the buying and selling cycle.
    •   Ted Van Dyke wanted to make sure the Study was reviewing the cost drivers that are not
        regulatory, such as insurance, workers compensation, etc.
    •   Tim Kaiser suggested that for the case studies, the team should visit as many dual providers as
        possible (those PHAs administering both public and assisted housing). Greg said the team is
        planning to do that.
    •   Sunia offered a general comment on the research design. Sunia feels that the reconnaissance
        phase was incomplete for the following reasons: unanswered questions about what is in the FHA


2
  The review of the Questions document from the regional meetings elicited other tangential and sometimes
unrelated questions from the Public. The Public meeting is therefore documented in a slightly ad hoc manner, which
follows the order of conversation, and not necessarily the agenda. If a reply from Greg Byrne is not documented,
this means Greg acknowledged the comment/question, and it will be recorded and added to the list of questions, and
taken under advisement by the Study.

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       data, and how good of a predictor it is for public housing costs; the first tasks should have been to
       look at housing authority operations and costs, which could have informed the FHA database
       (instead of the database informing the case studies); unclear whether the FHA regression can
       successfully predict costs without looking at actual properties; the placement of Chapter 6 at the
       end of the Discussion Document rather than at the beginning because this seems to articulate the
       vision of the Study; and the Negotiated Rulemaking Committee requested a variety of alternatives
       to create a formula — this approach only gives one. Greg replied that finding FHA comparables
       in every community is too expensive, and no matter what data are used (FHA or PHA), the
       predictive power would be challenged. The comparables approach might result in the most
       accurate figures, but this would be the most expensive design, and issues of local discretion and
       subjectivity come into play. Finally, no matter what database is used (whether public or assisted),
       the costs of a few would still be used to predict the cost of the many.
   •   Jonathan asked the Study to expand on why the Lambert Advisory method is 2nd as an approach
       for the model? Second, Jonathan asked whether Greg felt the Cost Study’s method satisfied the
       conference report, the negotiated rulemaking recommendations, and the HUD contract. Greg
       replied yes.
   •   Ted Van Dyke requested that the Study look at whether public housing generates more work
       orders than assisted housing, and if they do, this should be considered as a big cost driver. Greg
       replied that might be an area for the case studies.
   •   Jonathan asked if enough PHAs have project based budgets, would the Study use these data?
       Greg replied yes, if the data exist.
   •   Tony O’Leary asked how the Study would be determining whether an FHA property was well
       run? Greg replied that the Study may use REAC scores to truncate the database. Sunia
       commented that the S & P evaluations of the condition of units is not the most accurate indication
       of strong management.
   •   Jonathan asked whether the Study had looked at the private management of public housing?
       Greg replied that the Study has looked at this, but that no conclusions had been drawn yet. Sunia
       added that she had heard that costs of private management of public housing increase over time.
       Greg indicated that he was not aware of any such trend.
   •   Sunia asked what information came out of the resident focus groups. Gretchen Maneval replied
       that two resident focus groups were conducted. Residents gave valuable feedback that was
       captured in notes; all of the issues that were brought up reflected either points that are addressed
       in the Study’s Discussion Document, or have been raised by other stakeholders, and have been
       already addressed. The Resident Focus group notes will be posted on the Cost Study website per
       Sunia’s request.
   •   Jonathan Zimmerman asked what other studies/methodologies had the Cost Study reviewed/taken
       into consideration when designing the underpinnings of the Study, and whether any studies
       similar to the Cost Study had been undertaken.
   •   Jeff Lines requested that the Cost Study take into consideration: the possibility that the FHA
       database is inferior; the differentiation between PHA types, properties, and level of expectations;
       and, in his opinion, the theory that costs increase after private management takes over public
       housing because the private management entity starts being perceived as the PHA.
   •   Sunia requested that the Study take a more detailed look at tenant characteristics than the national
       aggregate level, especially for family housing, by using the Picture of Subsidized Households
       database. Greg said the Study would try to do some runs like this for the CLPHA, NAHRO,
       PHADA May 23rd meeting.
   •   Ted Van Dyke queried whether profit should be included as an operating cost for FHA properties,
       and whether the Cost Study could isolate the profit of these properties.
   •   Tim Kaiser suggested looking at how property taxes affect operating costs.
   •   Jonathan asked what the Cost Study would be using as a neighborhood distress indicator. Greg
       said the multivariate analysis that the Study will conduct will take into consideration different


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       types of census tracts. CLPHA asked what standard GSD would be using to identify
       neighborhood distress, as HUD uses different standards for different programs.
   •   Deb Gross asked whether the Study had taken into account the costs/characteristics of public
       goods. Greg replied that the Study had done research on that issue, including reviewing the
       information Deb had provided. Gretchen Maneval added that most of the information/books
       addressing public goods contain conflicting opinions about the costs associated with them.
       Furthermore, the evidence presented is mostly anecdotal, not nearly quantitative, or even
       qualitative enough to support an opinion as to the type and magnitude of the cost of public goods.
   •   Jonathan asked about several possible indicators of costs, and whether the Cost Study would be
       using them: square footage, mortgage age versus construction date, nonmetro designation,
       quality of building. Greg replied that both the square footage and construction date of the FHA
       properties will be obtained through the FOMNS database, which the Study has been requesting
       from HUD for several months. Non-metro designation is no longer an issue, as the Study will be
       using census data. Sunia added that she would like the Study to look at the quality of systems and
       building materials originally used to construct public housing, as cost constraints affected the
       quality.
   •   Tim Kaiser asked what HUD and OMB’s feelings were about the Study’s proposals. Regina
       McGill from HUD said they were currently reviewing the proposal, receiving comments from the
       field, and that HUD would comment on the Discussion Document soon.
   •   Rick Parker commented that he would like the Study and stakeholders to agree on the standards
       of regression analysis on the front end.
   •   Jonathan requested that summary tables of Rural Housing Service (RHS) data be provided. Greg
       said that when these data are released to the Study, they would be shared.
   •   Ted asked whether the Study could use military housing as a benchmark for costs. Greg replied
       that the Study had researched the costs and operations of military housing. Due to exorbitant
       costs revealed through several studies, the military has been privatizing its housing stock. Ted
       asked about using State public housing. Greg replied that State public housing has been
       historically underfunded, so it would not behoove the federal public housing program to
       benchmark its costs to the States’.
   •   Tony requested that the age, condition, and amount of capital investment be used in the
       regression analysis. Greg said that unfortunately, information about the amount of capital
       investment is not available in a national database, only at a local level. Tony said that the Section
       8 units that his housing authority administers are in poorer condition than his public housing
       stock, and that building condition is the most important cost driver.
   •   Tim Kaiser recommended that the Study not use PHAS due to the controversy surrounding it, and
       perhaps just use the management indicator, and the other indicators from PHMAP. Deb Gross
       added that in her opinion, the PHAS scores are arbitrary. Ted requested that the Study look at the
       costs of average well run PHAs instead of superstars.
   •   Sunia requested that the Study test the protocol of the case studies with a few PHAs before all of
       them are conducted. Sunia also recommended using a two tier approach — first conducting
       comprehensive evaluations of a smaller number of PHAs, then distributing self reporting surveys
       on key issues (perhaps electronically), on which the larger sample could respond to the findings
       of the comprehensive evaluations. Greg thought this was a good suggestion. Jonathan asked
       whether the case studies would be conducted at the development level or the PHA level, and
       whether the one-year of data would be examined, or projections would be made.
   •   Ted asked whether performance standards would be looked at. Greg replied that they would be
       taken into consideration. Sunia added that the issue of the level of services provided should be
       examined.




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2. Project Schedule
   •   Greg said the finalized research design would be completed by mid-June. The Study is
       continuing with the multivariate analysis of all databases, and in two to three months (July or
       August), the team will have a good handle on the regression models. A chart of the similarities
       and differences of public and assisted housing regulations will be completed by the early June.
   •   The protocols for the case studies will be developed by the end of June; from July through
       September the case studies will be conducted, and be finished in late fall.
   •   By the end of 2001, the Study will be wrapping up.
   •   Greg said the Study would post public comments to the website. Sunia requested that they also
       be included with the final research design.




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                                                                        Public Housing Operating Cost Study
                                                                         Harvard Graduate School of Design



                                              Appendix 1

                                    REGIONAL MEETINGS
                               LIST OF COMMENTS/QUESTIONS

1. Comments regarding similarities and differences in regulations/operating environment
   between public and assisted housing.

  •    Additional areas of regulations that were not included in GSD report, e.g., deconcentration, pet
       rules, etc.
  •    Items that were identified as being similar but that are in fact different, e.g., grievance rules.
  •    Differences in enforcement of regulations.
  •    Differences in public scrutiny or the fact that public housing is held to higher standard.
  •    Concern over the impact of ―old‖ regulations that have since been removed but still affect costs.
  •    Concern that PHAs are more than sum of operating costs of each property – for example, local
       housing planning functions, resident services, development of affordable housing, etc.
  •    Concern over fact that PHAs are creatures of state enabling legislation and that there are many
       unavoidable ―local‖ costs, e.g., state procurement laws, wages/benefits, local politics, special
       municipal ordinances, etc.


2. Comments regarding the use of FHA-assisted housing as a benchmark.

   •   Concern over the ―quality‖ of management in FHA-assisted housing.
   •   How will GSD determine what is ―well-run‖ FHA-housing?
   •   Concern over differences in tenant population.
   •   Concern that the physical attributes of FHA-assisted housing may not be sufficiently comparable
       to public housing, e.g., FHA-assisted has fewer large properties and fewer properties with
       preponderance of large units.
   •   Concern that FHA-assisted housing is also ―circular‖ with respect to operating costs.
   •   Concern that owners of FHA-assisted housing may have different motivations (profit, resale, etc.)
       that may affect their operating spending patterns.
   •   Request that PHAs be able to obtain the addresses/costs of FHA properties in their markets.
   •   Concern that FHA database does not include enough variables on each property (acreage,
       topography, physical condition, etc.).
   •   Concern over the importance of neighborhood location as a driver in costs.

3. Comments regarding use of regression model to predict public housing costs at a property
   level.

   •   Concern that metro area identifiers are not that precise.
   •   Concern that a regression model will be better at predicting ―portfolio‖ costs than ―project‖ costs.
   •   Recommend that test against properties not in the FHA database.
   •   Concern over a ―range‖ of costs rather than simply a ―number‖ for each property.




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4. Comments regarding Rejection of ―Sample of Well-run PHAs‖ as Recommended
   Methodology

   •   Concern that GSD not spent enough time attempting to examine existing PHA costs or develop
       appropriate methodology for capturing/examining those costs.

5. Comments regarding case studies.

   •   How many agencies will be included?
   •   How will these agencies be selected? How will GSD determine ―well-run?‖
   •   Will the industry be able to review the recommended protocol?

6. Comments regarding new financing program for public housing

   •   Concern over availability of credit enhancements.
   •   Concern over capacity/culture of HUD to implement (and PHAs, too).
   •   Concern that FHA-insurance is a ―Model T.‖
   •   Concern over need for transition period or demonstration program.
   •   Concern over requirement for project-based budgeting.
   •   Concern that Congress/HUD would never allow PHAs to accrue replacement reserves or would
       change the way public housing modernization is funded today (direct grants as opposed to debt
       financing).
   •   Concern over estimate of replacement reserve funding.
   •   Relationship of financing program and market rents.
   •   Fear that HUD would dictate the standards of capital improvements too much.

7. Other Comments/Concerns

       •   Concern over use of REAC data (too new, too inconsistent, etc.)
       •   Concern over design/comparability of public housing vis-a-vis private housing in relationship
           to utility study.
       •   Differences in mission of public and assisted housing (and expansion of services in public
           housing).
       •   Concern over the need for transition relief in any new formula system.
       •   Impact of Study on small PHAs and cost-effectiveness of smaller agencies.
       •   Future role, if any, of Neg-Reg Committee upon completion of Study.
       •   Concern over how GSD will handle distressed properties.
       •   Question as to usefulness of various ―mixed-finance‖ operating cost data.




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