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Executive Summary

The Partnership for Advancing Technology in Housing (PATH) is the first major technology-based initiative in the U.S. housing industry in several decades. PATH is intended to stimulate the development and utilization of new technologies that will make American homes more affordable to own and maintain, more energy efficient, more environmentally sustainable, more durable, more resistant to natural disasters, and safer to build. PATH brings together key agencies in the federal government and leaders of the home building, product manufacturing, architectural, engineering, insurance, financial, and regulatory communities in a unique partnership focused on technological innovations in the American housing industry.

The impact of housing on the lives of Americans is enormous. According to the most recent consumer expenditure surveys, housing is the largest single expense for most Americans, and residential use constitutes a significant portion (11 percent) of national energy consumption. In addition, large numbers of accidents occur in the home. Falls in homes were responsible for almost 12 percent of all accidental deaths in the United States in 1998, and exposures to health risks in the home contribute significantly to health care costs. Cutting costs, reducing adverse environmental impacts and energy consumption, and promoting health and safety in the home could benefit all of society.

PATH has created a cooperative environment for bringing together industry, government, and consumer stakeholders to achieve common goals and to coordinate public and private funding for research and development to leverage limited resources. Publicly funded agencies can facilitate communications among researchers, manufacturers, designers, builders, and consumers, thereby increasing their understanding of housing technology and the potential benefits of new materials and products. Government can also facilitate demonstrations of key innovations by sponsoring field trials and participating in performance assessments, as well as helping manufacturers overcome regulatory barriers.

The PATH Program is administered by the U.S. Department of Housing and Urban Development (HUD) through the Office of the Assistant Secretary for Policy Development and Research (PD&R), which is also responsible for program evaluation and data collection. However, HUD believes that a multiyear oversight and assessment by an independent review body would be more effective. Based on the reputation and the expertise of the National Research Council (NRC) in performing independent program reviews of federal agencies, HUD requested that the NRC review and assess the PATH Program, develop a framework for evaluating program performance, and recommend specific performance measures.

SCOPE OF THE REVIEW

In response to HUD's request, the NRC assembled a panel of experts, the Committee for Oversight and Assessment of the Partnership for Advancing Technology in Housing, under the auspices of the Board on Infrastructure and the Constructed Environment. Over an initial term of three years, the committee was asked to review and



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Page 1 Executive Summary The Partnership for Advancing Technology in Housing (PATH) is the first major technology-based initiative in the U.S. housing industry in several decades. PATH is intended to stimulate the development and utilization of new technologies that will make American homes more affordable to own and maintain, more energy efficient, more environmentally sustainable, more durable, more resistant to natural disasters, and safer to build. PATH brings together key agencies in the federal government and leaders of the home building, product manufacturing, architectural, engineering, insurance, financial, and regulatory communities in a unique partnership focused on technological innovations in the American housing industry. The impact of housing on the lives of Americans is enormous. According to the most recent consumer expenditure surveys, housing is the largest single expense for most Americans, and residential use constitutes a significant portion (11 percent) of national energy consumption. In addition, large numbers of accidents occur in the home. Falls in homes were responsible for almost 12 percent of all accidental deaths in the United States in 1998, and exposures to health risks in the home contribute significantly to health care costs. Cutting costs, reducing adverse environmental impacts and energy consumption, and promoting health and safety in the home could benefit all of society. PATH has created a cooperative environment for bringing together industry, government, and consumer stakeholders to achieve common goals and to coordinate public and private funding for research and development to leverage limited resources. Publicly funded agencies can facilitate communications among researchers, manufacturers, designers, builders, and consumers, thereby increasing their understanding of housing technology and the potential benefits of new materials and products. Government can also facilitate demonstrations of key innovations by sponsoring field trials and participating in performance assessments, as well as helping manufacturers overcome regulatory barriers. The PATH Program is administered by the U.S. Department of Housing and Urban Development (HUD) through the Office of the Assistant Secretary for Policy Development and Research (PD&R), which is also responsible for program evaluation and data collection. However, HUD believes that a multiyear oversight and assessment by an independent review body would be more effective. Based on the reputation and the expertise of the National Research Council (NRC) in performing independent program reviews of federal agencies, HUD requested that the NRC review and assess the PATH Program, develop a framework for evaluating program performance, and recommend specific performance measures. SCOPE OF THE REVIEW In response to HUD's request, the NRC assembled a panel of experts, the Committee for Oversight and Assessment of the Partnership for Advancing Technology in Housing, under the auspices of the Board on Infrastructure and the Constructed Environment. Over an initial term of three years, the committee was asked to review and

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Page 2 comment on the following aspects of the PATH program: overall goals; proposed approach to meeting the goals and the likelihood of achieving them; and measurements of progress toward achieving the goals. The committee determined that the task of assessing the overall goals of PATH also required that the fundamental need and precedents for such a federal program be assessed. This report includes the committee's initial findings and recommendations on PATH's goals and proposed approach for achieving those goals. During the review, information was presented to the committee by officials of HUD, staff members of the PATH program office, and representatives of other participating organizations. The committee evaluated the precedents and need for PATH as a federal program, the validity and appropriateness of the program goals, the soundness of the management approach described in strategic and operating plans, and, based on the information provided and personal knowledge and experience, made an initial evaluation of several PATH initiatives. This report is a subjective evaluation of the PATH goals and the overall direction of the program. Future reports will focus on the development and application of criteria for evaluating, in detail, the progress toward achieving individual PATH goals. PATH PROGRAM AND GOALS PATH can play a vital role in coordinating ongoing activities and synergizing new ones, as well as providing direction for the future collection of information and its dissemination to researchers, industry, and consumers; providing seed money for the exploration of new technologies and leveraging public and private investments to provide the greatest benefit to society; and assisting in the deployment of new technologies and reducing the time required to bring them to market. PATH is intended to accelerate the introduction of new technologies that could improve performance and reduce monthly housing costs. From the outset, PATH has embraced very ambitious goals defined in terms of overall performance of the housing sector without specifying technologies or other means of realizing them. An overarching goal, which is implied in all other PATH goals, is to make housing more affordable. The PATH FY 2000 Strategy and Operating Plannotes that the president has charged the program with developing technologies, housing components, designs, and production methods that will reduce by 50 percent the time required to move quality technologies to market by 2010. Four housing performance goals are to be achieved by the new technologies, housing components, designs, and production methods by 2010: 1. Reduce the monthly cost of new housing by 20 percent or more. 2. Cut the environmental impact and energy use of new homes by 50 percent or more, and reduce energy use in at least 15 million existing homes by 30 percent or more. 3. Improve durability and reduce maintenance costs by 50 percent. 4. Reduce by at least 10 percent the risk of death, injury, and property destruction from natural hazards, and decrease by at least 20 percent illnesses and injuries to residential construction workers.

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Page 3 The committee believes that the first goal, to reduce the monthly cost of new housing by 20 percent or more (exclusive of financing or land prices), is probably not attainable because the factors controlled by builders and consumers, such as construction, operations, materials, labor, and energy costs, account for less than half of monthly housing costs. Therefore, meeting this goal by using new technology would require that controllable costs be reduced by nearly 50 percent. The committee believes that improving affordability is an appropriate goal for PATH but that a 20-percent reduction in monthly costs solely through technology is not realistic. The second goal is to reduce the environmental impact and energy use of new homes by 50 percent or more and reduce energy use in at least 15 million existing homes by 30 percent or more. The committee finds this goal difficult to assess because it combines associated but not necessarily congruent issues. For example, although energy use and the environment are obviously related, strategies for reducing energy use will not necessarily lessen environmental impacts. Reduction in the use of fossil fuels would reduce carbon emissions and the production of greenhouse gases (a positive environmental impact), but the technologies employed to reduce energy use in the home (e.g., reduced air infiltration) might unintentionally have adverse environmental impacts, such as diminished indoor air quality. An evaluation of environmental impact must also take into account water use, building materials, and construction waste. Finally, strategies for reducing energy use will differ, and differ significantly, for new homes and existing homes. Therefore, measuring overall progress toward achieving this goal is difficult, and determining environmental performance will require quantifiable measures that have not yet been developed. The third goal is to improve durability and reduce maintenance costs by 50 percent. Although increased durability is achievable and would reduce maintenance costs, this goal may be at practical odds with the goal of reducing the monthly cost of new housing by 20 percent. Products with increased durability usually decrease maintenance and overall life-cycle costs but increase first cost—amortizing first costs is the major factor in monthly housing costs. PATH will have to resolve this conflict to achieve meaningful progress toward meeting these two desirable goals. The fourth goal is to reduce by at least 10 percent the risk of death, injury, and property destruction from natural hazards and decrease by at least 20 percent illnesses and injuries to residential construction workers. Although substantial improvements could be made in the health and safety of workers on residential construction sites and in protecting homes from natural disasters, progress toward meeting the goal will be difficult to assess because it encompasses two unrelated aspects of housing technology. The lack of adequate baselines will also make measuring performance for either aspect of this goal difficult; baseline data will have to be compiled before meaningful evaluations can be made. Overall, the committee believes that the PATH goals are laudable targets for improving the affordability, quality, and livability of American housing. However, as currently stated, they are not realistic, particularly for this relatively small, technology-focused program. They can provide overall policy direction for PATH but are not useful as performance measures for the program itself. The PATH goals are influenced by numerous and complex factors, many of which are beyond the scope of the PATH Program, and achieving the performance levels set for all of the goals may not be

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Page 4 possible. PATH's efforts should be focused and performance measures consistent with its mission and level of funding. ORGANIZATION AND MANAGEMENT PATH has established a comprehensive management structure to coordinate program activities at the federal level, between the public and private sectors, and among private sector interests. Based on the committee's initial assessment, this structure appears to provide all stakeholders the opportunity to participate in the program. However, the building codes and standards community seems to be underrepresented, despite the fact that building codes and standards are considered one of the main barriers to the adoption of new technologies. The committee believes that the apparent lack of involvement of state and local building officials could jeopardize the success of the program. Partnership for Advancing Technology in Housing (PATH): Strategy and Operating Plandoes not clearly distinguish between PATH initiatives and those of PATH-related programs in HUD and other agencies. The program plan includes 148 separate line items, which seems out of proportion to the size of the program. Programs related to PATH but independently funded and managed are not distinguished from programs directly funded and managed within the PATH program. The plan does not specify the relative level or duration of funding for projects or ongoing programs and provides no procedures for qualitative evaluations of projects and programs. A number of ongoing programs in different agencies are grouped together, but no strong central leadership is provided to coordinate their activities. The committee believes that the large imbalance between PATH funding and the funding for programs run by other agencies could undermine PATH's leadership role. The imbalance is reflected in the PATH strategic plan for the next few years, which emphasizes the role of energy and focuses less on reducing construction costs or improving safety. This appears to be due, in part, to the relatively higher levels of funding enjoyed by the programs of the U.S. Department of Energy. IMPLEMENTATION OF PATH PROGRAMS PATH is playing an appropriate role by bringing together the diverse groups involved in the U.S. housing industry and facilitating discussions of PATH-related issues. Despite the dual and difficult requirements of being open to all stakeholders and at the same time narrowly focused on achieving program goals, PATH has accomplished several important interim objectives. Perhaps most important are the communication and collaboration links that have been forged between government and the housing industry, which will be key to the ultimate success of the program. Links among U.S. government agencies have also been developed, and the organizational and management infrastructure to carry out coordinated projects and programs has been put in place. The committee recognizes that the relationships between the federal agency partners and the PATH Program are unresolved but is not yet prepared to recommend a specific structure

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Page 5 for resolving them. As a first step, the committee did resolve that there should be a distinction between PATH-initiated programs and programs controlled by specific agencies. The relationship between PATH and its federal partners will be the focus of future assessments. The committee also believes that the program must have a clearer understanding of its multiple audiences and the market dynamics of each in order to target its existing programs and plan future activities. PATH has begun working on implementing the strategic initiatives designed to achieve individual goals, but it is too soon to evaluate the effectiveness of these activities. Similarly, some development of baseline data is also under way, but, as previously noted, it will be very difficult to develop meaningful baselines for several of the goals. PATH has made extensive use of field demonstrations, an effective method of showcasing and encouraging the use of new technologies. Although these demonstration projects have shown the economic viability of selected technologies, there is no evidence that they have influenced decisions in other projects or led to any long-term gains toward meeting the PATH goals. The committee believes that technology roadmapping is a good approach to identifying needs and influencing changes in the housing industry, but PATH's roadmapping process will have to be refined and expanded. Expanding the use of current off-the-shelf technologies is an important component of PATH's strategy. However, the committee believes that the technologies included in the current Technology Inventory should be further evaluated and information on their quality and effectiveness added to the database. The current inventory focuses more on individual products than on processes and does not address technologies for improved materials. PATH should evaluate the scope of the Technology Inventory and the effectiveness of the ToolBase program, among other strategies for transferring information to home builders and other audiences. As a final note in this initial review of PATH, the committee finds that although PATH's overall objective is to change the way Americans think about and build housing, most of PATH's efforts are focused on incremental changes and applications of existing solutions by encouraging consumers, builders, and regulators to accept new products and technologies to replace existing products and technologies. The committee does not believe that this approach is commensurate with the grand vision of the program. A portion of the PATH Program could be dedicated to unconventional, high-risk schemes with the potential of revolutionizing at least one critical aspect of the housing industry, such as design, construction, materials handling, training, or methods of product evaluation. RECOMMENDATIONS Recommendation 1. The PATH Program should be continued as a partnership among federal agencies and between the federal government and the private sector. The program should be reviewed and updated continuously to ensure that it evolves into an effective, efficient vehicle for the development and deployment of beneficial technologies.

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Page 6 Recommendation 2. PATH should undertake market research on builders' and consumers' perception of new technologies. Information on the successes and failures of new technologies and processes for introducing them into the housing industry should be incorporated into PATH's technology development and deployment strategy. PATH strategies for disseminating information to its diverse audiences should be evaluated continuously and refined, as necessary. Recommendation 3. More realistic and achievable goals should be developed commensurate with the size and mission of the PATH Program. Performance should be measured by criteria that are directly influenced by PATH initiatives, such as the rate of deployment of identified technologies and the level of investment by the housing industry in research and development. Recommendation 4. PATH should develop credible baseline data so that the program's performance toward achieving its goals can be objectively and independently assessed. Recommendation 5. PATH should maintain its current management structure but should be careful to maintain PATH's independence from ongoing programs and not become a surrogate for these programs. PATH strategic and management plans should focus on opportunities for synergies and collaboration in ongoing programs and should make a clear distinction between coordination and initiatives that are directly controlled and funded through PATH. PATH management objectives should measure the value added to ongoing programs by PATH initiatives. Recommendation 6. PATH should continue to provide seed money for research and development of new technologies, foster PATH name recognition to promote PATH goals and technologies, and educate and transfer information among its diverse stakeholders. Recommendation 7. PATH should expand its use of demonstration projects to help develop market recognition for the PATH Program. Demonstration projects should be planned to measure the performance and value of new technologies and disseminate information to promote and facilitate the use of the demonstrated technologies. Recommendation 8. The roadmapping process should include basic and applied research, technology transfer, and process and planning issues in addition to materials and hardware. Participation in the roadmapping process should be expanded to include representatives of the financial, insurance, real estate, planning, and regulatory communities, as well as trade, labor, and consumer groups. The roadmapping should also identify opportunities for academic/business partnerships. Recommendation 9. PATH should develop standard evaluation procedures, including the benchmarking of technologies that have been successfully integrated into the housing industry, to increase the usefulness of the Technology Inventory. The effectiveness of the ToolBase program in transferring information to home builders and other audiences should be evaluated.