The Construction and Building Subcommittee of the National Science and Technology Council has developed seven national construction goals for the entire construction industry (NIST, 1995). The seven goals are:
50-percent reduction in project delivery times
50-percent reduction in operations, maintenance, and energy costs
30-percent increase in occupant productivity and comfort
50-percent fewer facility-related illnesses and injuries
50-percent less waste and pollution
50-percent greater durability and flexibility
50-percent reduction in construction illnesses and injuries
A residential working group (RWG) was then convened to refine these goals for the housing segment of the construction industry. The RWG's report, Building Better Homes at Lower Costs: The Industry Implementation Plan for the Residential Building (NAHBRC. 1998c) which is referenced in the congressional enabling legislation for the PATH program, identified two priority goals for residential construction:
to reduce production costs through improved technology and shortened production cycle time
to improve product durability.
The report noted that these priority goals are “inextricably linked to the role of technology, [and] both goals address the direct connection between the material and process inputs to housing and the performance of the structure as related to the home's cost-effectiveness and efficiency and its impact on the natural environment” (NAHBRC, 1998c).
The goals for the PATH Program were expanded beyond the limited goals developed by the RWG when PATH was established in 1998. The goals are defined in terms of performance but do not specify the technologies or other means of realizing them. PATH's four goals are listed below:
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.
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Page 17 3 Program Goals and Objectives BACKGROUND The Construction and Building Subcommittee of the National Science and Technology Council has developed seven national construction goals for the entire construction industry (NIST, 1995). The seven goals are: 50-percent reduction in project delivery times 50-percent reduction in operations, maintenance, and energy costs 30-percent increase in occupant productivity and comfort 50-percent fewer facility-related illnesses and injuries 50-percent less waste and pollution 50-percent greater durability and flexibility 50-percent reduction in construction illnesses and injuries A residential working group (RWG) was then convened to refine these goals for the housing segment of the construction industry. The RWG's report, Building Better Homes at Lower Costs: The Industry Implementation Plan for the Residential Building (NAHBRC. 1998c) which is referenced in the congressional enabling legislation for the PATH program, identified two priority goals for residential construction: to reduce production costs through improved technology and shortened production cycle time to improve product durability. The report noted that these priority goals are “inextricably linked to the role of technology, [and] both goals address the direct connection between the material and process inputs to housing and the performance of the structure as related to the home's cost-effectiveness and efficiency and its impact on the natural environment” (NAHBRC, 1998c). The goals for the PATH Program were expanded beyond the limited goals developed by the RWG when PATH was established in 1998. The goals are defined in terms of performance but do not specify the technologies or other means of realizing them. PATH's four goals are listed below: 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.
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Page 18 4. Reduce by at least 10 percent the risk of life, injury, and property destruction from natural hazards, and decrease by at least 20 percent illnesses and injuries to residential construction work. An overarching goal of affordability is implied in all of the PATH goals. The Partnership for Advancing Technology in Housing (PATH) Strategy and Operating Plan also notes that the president has “charged the program with developing technologies, housing components, designs, and production methods that will reduce the time needed to move quality technologies to market 50 percent by the year 2010” (HUD, 2000). Several approaches to achieving the PATH goals could be adopted. Some would involve making institutional changes; some would involve education and training; and some would expand the use of products, systems, and technologies that are already commercially available. Major progress, however, is expected to require R&D leading to the demonstration, market deployment, and eventual diffusion of new technologies, as well as the diffusion of already developed technologies (NAHBRC, 2000). REVIEW OF PATH GOALS Reduced Monthly Cost The first PATH goal is to reduce the monthly cost of new housing by 20 percent or more. The low interest rates and full employment of the 1990s resulted in a rise in home ownership rates from 64 percent in 1990 to almost 67 percent in 1999, a historic high (USBC, 2000a). Measures of the affordability of home ownership, such as the Joint Center for Housing Studies Index,suggest that the relative costs of home ownership are near the historic lows of the past 30 years. Nevertheless, housing is plainly not affordable for millions of Americans, especially for the 23 million American households with incomes of less than half the area median incomes. HUD estimates that about 4.4 million very low-income homeowners spend more than half their incomes on housing. The Joint Center for Housing Studies estimates that about one-quarter of working-poor families devote half or more of their incomes to housing costs. In addition to these severely cost-burdened families, another 5.9 million very low-income families spend between 30 and 50 percent of their income on housing (USBC, 2000a). Affordability is also of interest to middle and upper income families, but for them affordability relates to the size of the house, the quality of finishes and furnishings, and the quantity of discretionary amenities. The level of income determines the level of need. Factors affecting the cost of ownership include mortgage principal and interest (70 percent); property taxes and insurance (20 percent); and utilities (10 percent). The mortgage burden is highly sensitive to prevailing borrowing rates and the cost of construction. Typically, builders' costs are primarily influenced by land prices (25 percent), materials costs (21 percent), and labor costs (14 percent) (NAHBRC, 1998b). The relative cost of land is highly variable from region to region.
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Page 19 Housing operating expenses are dominated by utility costs. Gas and electric costs represent 8 percent of the cost of ownership. Primary energy consumption includes heating, cooling, domestic hot water, lighting, and appliances. Energy consumption for heating and cooling per household declined roughly 17 percent between 1970 and 1979 but increased 18 percent between 1990 and 1997. At the same time, total energy consumption per household (including energy for domestic hot water, and appliances) decreased 7 percent between 1970 and 1979 and again from 1980 to 1989 but increased 15 percent between 1990 and 1997 (DOE, 1999). Discussions of housing affordability often ignore technology and focus on financing mechanisms or changes in regulations that affect land prices and other components of housing costs. Land prices, financing, and other soft costs are the province of policy, regulations, laws, and market forces. Construction costs, although relatively less important, are still significant (NAHBRC, 1998b). Productivity gains in the overall U.S. economy played a vital role in containing inflation in the 1990s, but the housing industry lagged behind the rest of the economy in productivity gains. An earlier NRC study found that the lag in productivity and the low rate of investment in R&D in the housing industry were indeed related (NRC, 1988). Therefore, achieving more affordable housing in the U.S. will require increased investment in R&D to improve productivity. In addition, the housing industry must address barriers to technology adoption, including building codes, standards, and regulations, as well as technology-transfer mechanisms to manufacturers, builders, and consumers. Environment and Energy The second PATH goal is to reduce the adverse environmental impact and reduce energy use of new homes by 50 percent or more and to reduce energy use in at least 15 million existing homes by 30 percent or more. Reducing housing-related energy consumption has been a goal of federal programs for almost 30 years. Since the oil crisis of the early 1970s, several federal agencies have had active programs to reduce energy consumption in residences. Energy consumption in homes has been reduced through stringent insulation standards, weatherization assistance, and efficiency rating programs that promote the use of efficient equipment and appliances. DOE administers the Building America Program, a private-public partnership to accelerate the development and integration of new technologies for energy efficiency into production houses (as opposed to custom-built houses). DOE and EPA co-manage ENERGY STAR, a program that identifies and promotes energy-efficient products, equipment, and homes, including design standards and building construction details. The goal of cutting energy use in at least 15 million existing homes by 30 percent or more can easily be achieved with wider adoption of existing technologies and designs. DOE and EPA are both participants in the PATH Program and their programs constitute a significant percentage of PATH activities. The vast majority of the energy used in both new and existing homes is in the form of electricity or natural gas. The Energy Information Administration of DOE conducts periodic surveys documenting energy use in the residential sector. These data
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Page 20 could be used to set benchmarks for evaluating reductions in energy use in new and existing homes. Durability The third PATH goal is to improve the durability of materials and systems and reduce maintenance costs by 50 percent. Maintenance and repair costs for residential structures range from $300 to 500 per year depending on the age of the residence. Replacement costs, according to the NAHBRC Baseline Data and Information Resource Guide, average $1,175 per year per house (NAHBRC, 1998b). The committee's experience suggests that the durability of materials and systems, however, is not usually of primary concern to home buyers. Nevertheless, durability has been a significant reason for the reluctance of the housing industry to adopt innovative technologies. The industry has been negatively affected by some rather large-scale failures of new materials and systems. Builders currently rely on performance information provided by manufacturers and suppliers, but manufacturers often do not have appropriate methodologies for making accurate predictions of the product or system's performance over its intended service. Because cost-effective predictive methodologies have not been available, durability characteristics have by necessity been determined in the field. One reason for past failures has been unanticipated incompatibilities of materials that make up a subassembly. For example, siding materials and systems must be compatible with windows and other exterior wall elements. Durability protocols should address compatibility issues for both products and systems. Recent building product failures have resulted in class action lawsuits (Kinsella Communications, Ltd., 2000). Examples of failures include premature deterioration of products, such as fire-retardant treated plywood and particleboard siding, and building envelope systems, such as exterior insulation finish systems. Builders are often named as defendants in these lawsuits, and failures tend to make builders more resistant to trying innovative technologies. To overcome their perceived risk in deploying a new technology, builders need independent assessments of manufacturers' claims for product reliability. Data relating to the maintenance, repair, and replacement of major systems in residential construction (through 1997) are included in the NAHBRC Baseline Data and Information Resource Guide (NAHBRC, 1998b). Progress toward meeting this goal may be difficult to measure in the short term because the service life of major construction systems, such as the furnace, roof, and water heaters, is more than 10 years. In addition, according to the PATH Strategy and Operating Plan for 2000, the cost of maintenance and system replacement was reduced from $857.28 to $420.42 per year from 1990 to 1997 (HUD, 2000). This trend might indicate that technological improvements and other factors have reduced costs without the PATH initiative. In any case, this market tendency, coupled with the 10-year time frame, will make measuring the impact of PATH on meeting the durability goal problematic.
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Page 21 Natural Hazards and Worker Safety The fourth PATH goal is to reduce by at least 10 percent the risk of loss of life, injury, and property damage from natural hazards and to decrease by at least 20 percent illnesses and injuries during residential construction. This goal combines two unrelated aspects of housing technology, worker safety and disaster mitigation. The goal does not address owner/occupant health and safety at all. Risks from natural hazards and worker safety are discussed separately below. Natural Hazards In 1998, NAHBRC reported to PATH that “there is no systematic collection of data regarding damage, injuries and loss of life resulting from various natural disasters” (NAHBRC, 1998b). A representative of NAHBRC told the committee that “most studies indicate that modern communications and warning systems have dramatically reduced the loss of lives from natural disasters in recent decades, but property loss from natural disasters has increased” (Fuller, 2000). “Although studies (of hurricanes and earthquakes) have described the performance of residential construction in natural disasters, they do not provide baseline data on the extent of residential damage in any given year. Nevertheless, it may be possible to use the lessons learned from these studies to predict damage loss from future natural disasters” (NAHBRC, 1998a). It will be extremely difficult to establish a baseline for measuring year-to-year improvements, and the committee believes that PATH should make every effort to use all government and commercial data sources to develop credible baselines for property losses due to natural hazards. Worker Safety The goal of a 20-percent reduction in injuries to workers appears to be reasonable in view of the reductions in injuries and illnesses in other segments of the construction industry. For example, the U.S. Army Corps of Engineers claims that its injury and illness rates are one-fifth to one-sixth of those of the construction industry as a whole. The Associated General Constructors of America, Heavy and Industrial Construction Committee claims similar rates for its member companies (Center to Protect Workers Rights, 1998). Logically, therefore, a 20 percent improvement should be feasible in any subdivision of the industry. However, documenting improvements in residential construction may be difficult. The Bureau of Labor Statistics (BLS), which maintains data on injuries and illnesses in the construction industry, has only limited data on residential construction. The NAHBRC baseline report describes the following limitations. BLS tracks the incidence of accidents and injuries by industry Standard Industrial Classification (SIC) code. The data for construction includes general contracting (residential and nonresidential), heavy construction (highways, streets and infrastructure), and special trade contractors. While the SIC identifies residential building construction, the data for specialty trade contractors cannot be sorted by residential versus nonresidential. This
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Page 22 means that an industry profile of workplace accident and injury data is not available for residential construction (NAHBRC 1998b). The committee is aware of additional problems that are not identified in the NAHBRC report. First, self-employed builders are not included in the regular reporting by BLS. Second, reporting on the Occupational Safety and Health Administration(OSHA) Log 200, which is the source of BLS safety data, is not required of employers with 10 or fewer employees, except for the years when they are part of the BLS sample, and no general site log is required. Because of the OSHA record-keeping threshold, more than 82 percent of construction firms are not required to log injuries or illnesses. Third, it is common knowledge that residential construction is more fragmented than the other major subdivisions of the industry, which creates a major barrier to obtaining information on residential construction. Although OSHA data indicate the general scope and magnitude of the problem for the residential industry, they do not provide sufficient detail to determine the incidence rates by job category for residential accidents and workplace deaths. In its current state, OSHA data cannot be used by PATH to track progress. NAHB has requested that OSHA change its methodology to collect data that segregates residential injury, illness, and fatality data from all other types of construction. This baseline data would help to identify the types of accidents occurring in construction and their overall incidence. Therefore, OSHA's integrated management information system (IMIS) includes information and data on the firms it inspects and the facilities it investigates. No statistical data are provided, however, on residential construction or on the incidence of injuries, either for residential or general construction. The IMIS does contain narrative information on some of the factors that contribute to work-related deaths. Workers' compensation claims are another source of information on injuries and illnesses. For PATH to use these data, however, studies would have to be done in all states, or at least representative states, to obtain baseline data (Dement and Lipscomb, 1999). Unlike the BLS and OSHA data, workers' compensation data are segregated for specialty trades and include small contractors. In its budget submittal for FY01, OSHA requested funds to support a data-gathering initiative for the construction industry. The proposal is for OSHA to collect logs from construction firms with 20 employees or more but would not identify residential contractors. OSHA logs (on a voluntary basis) from a sample of construction sites would list all injuries occurring on the site. PATH support for collecting these data could help orient OSHA's data toward residential construction. Other opportunities include tracking builder compliance with OSHA citations in residential construction and developing year-to-year comparisons; a special BLS survey of injuries and illness in residential construction; quantifying training initiated through OSHA special grants; and incorporating worker safety and health implications in proposals for new technologies. CONCLUSIONS The goal of reducing the monthly cost of housing by 20 percent, exclusive of financing or land prices, is probably not attainable through new technologies because the controllable factors account for less than half the monthly costs. For example,
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Page 23 construction costs represented approximately 53.3 percent of the cost of a new home in 1995 (NAHBRC, 1998b). If mortgage principal and interest represent 70 percent of the monthly cost of a home, the portion of the monthly mortgage payment attributable to construction costs will be approximately 37 percent (.533 x 0.7). When the 8 percent of monthly housing cost attributable to energy use is added, a total of 45 percent of monthly costs could potentially be influenced through the application of technology. Thus, achieving a 20 percent reduction in total monthly cost would require that the costs of construction and energy be reduced by approximately 44.5 per cent (0.2 ÷0.45). Although improving affordability is an appropriate goal for PATH, the performance measure should be more 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. 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. The committee believes that measuring overall progress toward achieving this goal is difficult, and determining environmental performance will require quantifiable measures, which have not yet been developed. The third goal is to improve durability and reduce maintenance costs by 50 percent. Although the committee believes that 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 per cent. Products with increased durability usually decrease maintenance and overall life-cycle costs but typically increase first cost—the amortization of 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 loss of life, injury, and property destruction from natural hazards and decrease by at least 20 percent illnesses and injuries to residential construction workers. Although the committee believes that substantial improvements could be made in both protecting the health and safety of workers on residential construction sites and 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 performance measurement for either aspect of this goal difficult; baseline data will have to be compiled before meaningful evaluations can be undertaken. 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. The goals can provide overall policy direction for PATH but are not
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Page 24 useful as performance measures. The PATH goals are influenced by numerous and complex factors, many of which are beyond the scope of the PATH Program, and full achievement of the performance levels set for all goals may not be possible. PATH's efforts should be focused and its performance measures consistent with its mission and level of funding. Currently, there is no method of evaluating the performance of PATH programs or individual technologies. A clearly defined method of measuring performance will be necessary for evaluating progress toward achieving the PATH goals. In the likely event that some PATH goals are difficult or impossible to achieve, PATH will have to prioritize its goals to determine where its emphasis should be placed and if certain goals should be reevaluated. For example, PATH's primary focus could be on innovations that are of value both to consumers in existing housing and to builders of new homes. In addition, goals could be established to shorten the product development cycle. In any event, assessing how a given project or technology would help PATH meet its goals will require a baseline for that technology. Programmatic Barriers to Achieving PATH Goals Several PATH goals appear to conflict with one another, which will render the achievement of all of them extremely difficult. This conflict is explicitly acknowledged in the PATH Strategy and Operating Plan (HUD, 2000). A major issue is that the goals do not distinguish between first cost and life-cycle costs but tacitly emphasize reducing first costs. For example, the difficulty of increasing durability and hazard resistance while decreasing monthly costs has already been discussed. Almost without exception, stronger, more durable products cost more. A window designed to resist a 150-mile per hour wind will inevitably be more expensive than a window designed to resist a 100-mile per hour wind even though over the life of the structure, the cost of the more expensive and durable window will probably be more than offset by reduced damages. In reality, this creates more of a logical than a practical dilemma, but it underscores the difficulty of concurrently achieving inherently conflicting goals. Targeting PATH programs almost exclusively toward new single-family homes, when existing housing makes up the majority of the nation's housing stock, will create another barrier to achieving all PATH goals. The goal of reducing the risk of loss of life, injuries, and property damage from natural hazards by at least 10 percent provides an excellent example of the consequences of the focus on new construction. New construction represents about 10 percent of the housing stock over a 10-year period. Therefore, to meet this goal, PATH would have to improve the disaster resistance of all new construction during that period. Another consequence of the focus on single-family construction is that the program plan practically ignores multifamily housing. The committee believes this to be an unfortunate consequence because efforts to improve this component of the housing stock would particularly benefit low and very low-income populations.
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Page 25 Revised Goals PATH is aware of some of the issues raised in this chapter and is attempting to address them. The PATH Strategy and Operating Plan restates the four goals originally announced by the president in the form of interim performance measures that may be more achievable (HUD, 2000): Goal A: Reduce the average monthly costs of new housing built in 2010 by 20 percent or more, relative to homes built from 1990 through 1997, where this reduced monthly housing cost reflects a 50-percent reduction in energy costs; a 50-percent reduction in maintenance and replacement costs; and at least a 10-percent reduction in construction and insurance costs. Goal B: Achieve safety, health, and environmental impact goals for new housing built in 2010, relative to homes built from 1990 through 1997, including a 50-percent reduction in environmental impact; a 20-percent reduction in residential work illnesses and injuries; and a 10-percent reduction in the risk of loss of life, injury, and property destruction from natural disasters. Goal C: By 2010, reduce energy use in at least 15 million existing homes (homes built before 1997) by 30 percent or more. Although these revisions are an attempt to make the goals more attainable, they do not resolve the inherent problems of the original goals. Namely, they continue to be overly broad and ambitious, difficult to measure, and combine unrelated, and possibly conflicting, issues that are influenced by factors other than technology. RECOMMENDATIONS 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. REFERENCES Center to Protect Workers Rights. 1998. The Construction Chart Book. 2d ed. Washington, D.C.: Center to Protect Workers Rights.
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Page 26 Dement, J.M., and H.J. Lipscomb. 1999. Workers' compensation experience of North Carolina residential construction workers, 1986-1994. Applied Occupational and Environmental Hygiene 14(2): 97-106. DOE (U.S. Department of Energy). 1999. Annual Energy Outlook with Projections to 2020. Available on line at: http://www.eia.doe.gov/oiaf/aeo99/preface. November 7, 2000. Fuller, G.R. 2000. Presentation by G. Robert Fuller, senior engineer, National Association of Home Builders Research Center, to the Committee for Oversight and Assessment of the Partnership for Advancing Technology in Housing, National Research Council, Washington, D.C., May 23, 2000. HUD (U.S. Department of Housing and Urban Development). 2000. Partnership for Advancing Technology in Housing (PATH): Strategy and Operating Plan. Washington, D.C. Also available on line at: http://www.pathnet.org. Kinsella Communications, Ltd. 2000. Class Action Legal Links. Available on line at: http://www.kinsella.com/links.shtml. November 7, 2000. NAHBRC (National Association of Home Builders Research Center). 1998a. A Background Research Papers on the Home Building Industry Compiled for PATH. Upper Marlboro, Md. National Association of Home Builders Research Center, Inc. NAHBRC. 1998b. Baseline Data and Information Resource Guide, May 1998. Upper Marlboro, Md.: National Association of Home Builders Research Center, Inc. NAHBRC. 1998c. Building Better Homes At Lower Costs. The Industry Implementation Plan for the Residential National Construction Goals. Upper Marlboro, Md.: National Association of Homes Builders Research Center,Inc. NAHBRC. 2000. PATH Technology Roadmapping. Prepared for the PATH Industry Steering Committee. Upper Marlboro, Md.: National Association of Home Builders Research Center, Inc. NIST (National Institute of Standards and Technology). 1995. National Planning for Construction and Building R&D. NISTIR 5759. Gaithersburg, Md.: National Institute of Standards and Technology. NRC (National Research Council). 1988. A National Building Research Agenda: Starting the Process. Building Research Board. Washington, D.C. National Academy Press.
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Page 27 USBC (U.S. Bureau of the Census). 2000a. The American Housing Survey, 1997. Available on line at: http://www.census.gov/hhes/www/ahs.html. November 7, 2000. USBC. 2000b. Census of Construction Industries. Available on line at: http://www.census.gov/ftp/pub/const/www/cci/fintro.html. November 7, 2000.