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Comparing the Costs of New Construction and Acquisition-Rehab In Affordable Multifamily Rental Housing

A recently published research working paper from the Center for Housing Policy titled Comparing the Costs of New Construction and Acquisition-Rehab In Affordable Multifamily Rental Housing  uses the lifecycle cost methodology to compare the total cost of developing and maintaining multifamily affordable rental housing for acquisition-rehab and new construction projects. The researchers’ analysis of a sample of more than 200 properties found that, all else equal, new construction added approximately $40,000 to $71,000 (25 to 45 percent) per-unit to the lifecycle costs.

The report findings suggest that acquiring and rehabilitating existing multifamily rental housing may be significantly more cost-effective than new construction when considering the costs of both developing a property and maintaining it in decent condition over a full 50-year lifecycle. 

The research paper is one component of a suite of products that focus on the costs of developing and maintaining affordable multifamily rental properties.  The full suite of products includes:

·         A technical paper describing how the lifecycle cost adjustment works and its impact on total development costs;

·         An online lifecycle cost modeling tool (L-Cycle, available at www.housingpolicy.org/lcycle), which allows users to input financial data on a property and obtain a quick estimate of the project’s ability to meet its long-term capital needs

·         A policy paper discussing the implications of lifecycle underwriting for policy and practice; and

·         A detailed research paper, to be submitted for publication to a journal, documenting the full methodology and results of our research.


 

— Posted on 3/25/2013