Paul Emrath VP-Survey and Housing Policy Research National Association of Home Builders

1. Housing Value, Costs, and Measures of Physical Adequacy American Housing Survey User Conference March 8, 2011 Paul Emrath VP-Survey and Housing Policy Research National Association of Home Builders

2. Housing Value, Costs, and Measures of Physical Adequacy: Motivation • HUD’s mission includes creating quality affordable homes for all. • Need to identify units failing a qualify test (avoid sacrificing quality to achieve affordability). • Need a definition of inadequacy. • Standard AHS-based definitions exist, indicating physical inadequacy a relatively small problem. • Many different approaches possible with AHS data & standard definitions have been in place for decades—time to revisit & consider alternatives.

3. Housing Value, Costs, and Measures of Physical Adequacy: Strategy • Use 2009 AHS to develop baseline statistical models that explain value / rent. • Hypothesis: Inadequacy should have depressing effect on value / rent, controlling for other factors. • Develop a new definition of inadequacy consistent with the hypothesis. • Compare new & traditional definitions of inadequacy. • Use AHS data to look at numbers / characteristics of inadequate units.

4. Baseline Model for Value in Owner-Occupied Single-Family Units: Explanatory Variables • Waterfront property crossed with region • Property not on waterfront, but body of water within 1/2 block • Buildings with bars on windows within 1/2 block • Abandoned buildings within 1/2 block • Bad roads within 1/2 block • Neighborhood crime within the past year • Neighborhood w smoke, gas, or bad smells • Neighborhood w heavy street noise / traffic • Trash/litter/junk within 1/2 block (metro) • Trash/litter/junk within 1/2 block (non-metro) • Businesses or institutions within 1/2 block Factories/industrial structures • within 1/2 block • Manufactured housing within 1/2 block (metro) • Manufactured housing within 1/2 block (non-metro) • Region crossed with central city/suburb/ non-metro status • (CA metros a separate “Region”) • Size of unit in sq ft crossed with year built • Lot size • # of full bathrooms • # half bathrooms • # of bedrooms • # of dining rooms • # of family rooms • # of other rooms • presence of a basement crossed with region • Garage or carport • Fireplace • Central air in Midwest & South regions • Open spaces within 1/2 block • Community recreational facilities • Gated community

5. Baseline Model for Rent (Gross Rent minus Fuels) in Multifamily Units: Explanatory Variables • On a floor with access to an elevator • Building with restricted access • Building with 3 floors • Building with 4 to 9 floors • Building with 10 or more floors • 1 floor building with fifty or more units • Community recreational facilities • Waterfront property • Property not on waterfront, but body of water within 1/2 block • Neighborhood with satisfactory public transportation • Neighborhood with satisfactory shopping • Trash/litter/junk within 1/2 block (metro) • Trash/litter/junk within 1/2 block (non-metro) • Region crossed with central city/suburb/ non-metro status • (CA metros a separate “Region”) • Size of unit in sq ft crossed with year built • # of full bathrooms • # half bathrooms • # of bedrooms • # of other rooms • presence full or partial basement crossed with region • Use of a garage • Working dishwasher in the unit • Working clothes dryer in the unit

6. Inadequacy in the AHS: Traditional Definition of “Moderately Inadequate” • At least 3 of the following • outside water leaks • inside water leaks • holes in the floor • open cracks in the inside walls or ceilings • an area of peeling paint larger than 8 x 11 • seeing rats recently • More than 2 6-plus hour toilet breakdowns • Main heating equipment is unvented room heaters • Lack of complete kitchen facilities

7. Inadequacy in the AHS: Traditional Definition of “Severely Inadequate” • At least 5 of the conditions in 1. on previous slide • Less than 2 full bathrooms without hot and cold running water, or without bathtub or shower, or without a flush toilet, or with shared plumbing • Respondent reporting being cold for 24+ hours and at least 2 breakdowns of heating equipment lasting longer than 6 hours • Respondent reporting that the household does not use electricity • Exposed wiring, plus a lack of electrical outlets in every room, plus fuses that have blown more than twice

8. Inadequacy in the AHS: Proposed Definition for Single-Family Housing • Missing siding • Broken windows • Holes, cracks, or crumbling in the foundation • Sagging roof • Holes in the roof

9. Inadequacy in the AHS: Proposed Definition for Multifamily Housing • Lack of a kitchen sink • Lack of a bathroom sink • Open cracks in the inside walls, or ceilings • A breakdown of the sewage system since the last interview • Lack of built-in equipment designed to distribute heat throughout the unit in climates with 4,000 of more heating degree days

10. Inadequacy in the AHS: Proposed Definition for Multifamily Housing • Lack of built-in equipment if main heating equipment is any of the following: • vented room heaters burning kerosene, gas or oil • unvented room heaters burning kerosene, gas or oil • portable electric heaters • cooking stove • no main heating equipment

11. Alternate Definitions of Inadequacy in Single-Family Model

12. Alternate Definitions of Inadequacy in Multifamily Model

13. Number of Housing Units Classified as Inadequate Under Alternative Definitions

14. Distribution of Housing Units by Year Built

15. Distribution of Housing Units by Geography

16. Housing Cost Burden for Owners of Units Inadequate Under the New Definition AMI = Area Median Family Income

17. Housing Cost Burden for Renters of Units Inadequate Under the New Definition AMI = Area Median Family Income

18. Household Type Distribution

19. Housing Value, Costs, and Measures of Physical Adequacy: Summary • Models that estimate value / rent developed using AHS. • New definition of inadequacy proposed that performs better than traditional definition in models. • More units than previously thought may be inadequate—especially single‐family. • Inadequate units tend to be old, have disproportionate share of unmarried households with children. • Many non-seasonal single-family homes are inadequate. • Many sections of AHS used in this analysis.

20. Housing Value, Costs, and Measures of Physical Adequacy: Sections of AHS Used • Sample status, allocation variables (to screen data) • Housing value / costs • Geography / climate • Housing unit characteristics • Neighborhood characteristics • Multifamily building characteristics • Quality indicators • Utilities / heating equipment • Income (household and area) • Household composition • Conclusion: Many sections of the AHS have practical utility.

21. Thank you for your attention Questions about this presentation? contact Paul Emrath Vice President Survey and Housing Policy Research National Association of Home Builders 1-800-368-5242 x8449 pemrath@nahb.org