Renovation of Public Housing: Suggestions from a Simple Model

Abstract

This paper presents a simple model to contrast the benefit and cost of renovating public housing units against the benefit and cost of building new ones. Benefit is measured as the additional expected life created, and empirically-estimated survivor functions for housing are used to calculate maximum costs at which renovation is cost-effective relative to new construction. Actual renovation costs for an existing program are compared with calculated maximums. Results suggest that past renovation practice may not have been cost-effective relative to new construction. Possible changes in program guidelines are presented. The paper concludes with a discussion of policy implications.government services, resource allocation, public program evaluation, reliability theory: applications

An extended actuarial model of rehabilitation versus new construction of housing

“…This expenditure is expressed as a ratio of the costs to construct a new dwelling of similar size and quality. Johnstone's (1995) maximum cost ratio model extends Gleeson's (1992) prior model to take into account the depreciation of dwelling services with age. Johnstone's model estimates correct maximum cost ratios when annual maintenance costs over each age interval are proportional to the depreciation of dwelling services.…”