Building Housing for the Low-Income Elderly: Cost Containment and Modest Design in the Section 202 Program

摘要

This study assesses HUD's November 1981 cost-containment rules. HUD issued a series of cost-containment and modest-design requirements to achieve efficiency at reasonable cost in the Section 202 direct loan program. Five field offices were selected for case study analysis: Minneapolis, Minn.; Indianapolis, Ind.; Greensboro, N.C.; Pittsubrgh, Pa.; and Jacksonville, Fla. For each office, projects funded after implementation of cost containment are compared to projects prior to cost containment. All five field offices have incorporated cost-containment and design requirements into their Section 202 processing routines. The relationship between Fair Market Rents (FMR) and local construction costs proves to be the key factor in the implementation of cost containment. Some offices have allowed greater latitude for projects and have enjoyed greater flexibility within FMR constraints. The cost-containment requirements have led to changes in Section 202 projects. Unit sizes have been reduced, commercial spaces have been eliminated, and design features and amenities are more utilitarian. Cost containment has appeared to reduce Section 202 development costs by 15 percent, although a reliable estimate of cost savings cannot be derived from a limited case study. FMR limits impose an effective constraint on Section 202 development costs. Cost savings are greatest where FMR's are high relative to construction costs. If in the future FMR's rise more rapidly in relation to construction costs, the savings achieved by cost containment could be substantially eroded. It may be possible to achieve further cost savings in some field offices by reducing the established FMR's. The study report contains tables of information on housing unit characteristics and costs, financial analysis, and cost-adjustment methodology.