Construction Cost Indices HUD Section 202 and 811 Supportive Housing Program

by HUD USER

U.S. Department of Housing and Urban Development
Ofﬁce of Policy Development and Research
Construction Cost Indices
HUD Section 202 and 811
Supportive Housing Programs

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CONSTRUCTION COST INDICES

HUD SECTION 202 AND 811

SUPPORTIVE HOUSING PROGRAMS

Prepared for:
U.S. Department of Housing and Urban Development

Office of Policy Development and Research

Office of Housing

Prepared by:

NAHB Research Center, Inc.

and

Columbia Enterprises, Inc.

April 2005

The contents of this report are the views of the contractor and do not necessarily reflect the views
or policies of the U.S. Department of Housing and Urban Development or the U.S. Government.

TABLE OF CONTENTS
Executive Summary ..................................................................................... v

Chapter 1. Introduction................................................................................1

Chapter 2. Certified Development and Construction Costs.........................3

Chapter 3. Construction Cost Indices .........................................................6

Chapter 4. Variations Analyses..................................................................13

Chapter 5. Recommendations ..................................................................27

Appendix A. Summary of Field Office Visits – March & April 2004 ...........28

Appendix B. HUD 202 and 811 Program Construction Cost Model ...........29

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EXECUTIVE SUMMARY
The U.S. Department of Housing and Urban Development (HUD) commissioned the
National Association of Homebuilders (NAHB) Research Center to do a cost evaluation
of the Section 202 and Section 811 supportive housing programs. The legislatively
stated purpose of the Section 202 program is to provide “Supportive Housing for the
Elderly,” just as the purpose of the Section 811 program is to provide “Supportive
Housing for Persons with Disabilities” (including Group Homes). HUD initiated a study
of these programs because of concerns about the accuracy of the project development
cost limits it was using for this program. The most significant concern was that the total
development cost limits under this program were inadequate to fund all development
costs for projects in at least some area, and that the need for program sponsors to find
other sources of grant funding often resulted in significant project development delays.
HUD was also concerned about whether the cost limits had a consistent relationship
with actual development costs from area to area.
Major objectives of this research were to:
• Evaluate actual Section 202 and 811 Construction and Development Costs
with major industry Construction Cost Indices.
• Analyze cost accounting and processing procedures to obtain the information
needed to estimate costs on a per-unit, square footage, and elevator/non-
elevator basis, with adjustments for local cost variations and accessibility
costs.
• Determine accuracy of past indices used to adjust program costs limits, and
determine if any available alternative cost index approach would better match
actual local cost variations.
• Determine if any revision in current program cost limit relationships are
needed.
• Identify the most appropriate construction cost index approach for use in
annual updates of program cost limit, and recommend a cost model approach
for estimating costs for future Section 202 and 811 projects.
For purposes of this study, information on all Section 202 and 811 projects completed
between January 2000 and December of 2002 was sought. This included detailed
information on the project site, location, number of dwelling units and bedrooms,
structure type and characteristics, gross finished square footage, net residential rental
square footage, estimated costs of structure, land, improvements, and total replacement
costs. Detailed cost breakdowns and information on actual itemized costs for total
structures, land improvements, fees, and all overhead costs were also obtained.
A database was created that included Section 202/811 development cost data and
different available cost indices used to measure changes in costs. The Urban
Consumer Price Index (CPI-U) is currently used to update HUD Section 202/811 cost
limits. The other cost indices entered into the database were the National Association
of Homebuilders’ Economic Council Index (BEC), the R.S. Means Residential
v

Construction Cost Index, the Craftsman National Construction Cost Estimator, and the
Marshall and Swift Residential Cost Handbook. All but the CPI-U provide information
on material and labor costs for different types of construction.
The HUD Section 202/811 High Cost Percentage (HCP) factors were also entered into
the database. These are used to adjust statutory total development cost limits for
higher local costs. The normal and HCP HUD cost limits include all construction costs,
including land, and are therefore not directly comparable with construction cost indices
that do not consider land. Use of a valid measure of construction costs, however,
permits comparisons of project costs from area to area and with industry cost
standards.
Study Limitations
This study presents a detailed analysis of Section 202 and Section 811 program costs,
comparative private market costs, and relationships between program costs, private
market cost data, and HUD cost limits. Of the alternatives examined, the R.S. Means
Index, which is heavily relied upon for costing in the private sector and provides detailed
locality cost adjustments, was found to have the best fit with actual program costs. A
cost model was derived using actual program costs and the R.S. Means Index, but both
the cost model and other findings in this study are subject to three major caveats:
• There are no clear program guidelines for non-rental space. For purposes of the
cost model developed, a national average assumption was used. Actual regional
HUD office practices vary widely in terms of what is permitted in the Section 202
program. This is an even more significant and complex issue for the Section 811
program, where non-rental space used to provide meals and services often
significantly enhanced the ability of the project to meet the needs of its disabled
population but also increased its costs.
• Land costs were not included in the analysis or in the Cost Model. Land costs
were highly variable from area-to-area as well as within areas. A model-based
approach to accurately estimating land costs with available data was not
considered feasible.
In practice, land was found to have been donated for nearly all projects. This
finding, however, may be due to the fact that land needs to be donated to make
most projects feasible, which constrains the types and locations of projects likely
to be developed. About 75% of the projects studied had a land value equal to or
less than 15% of the Development Cost. In areas where land prices are highly
variable and location-sensitive, as is the case with most large metropolitan areas,
there is no reasonable way to model land costs in a manner that accurately
reflects the potential variations likely to occur.
• Section 811 project costs can only be roughly compared with each other or with
cost index data because of “scoping differences” in project design that result in
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differing relationships between bedrooms, bathrooms, kitchens, and common
space that are not accurately captured by the HUD project data collection forms
currently in use. As is noted, a method of calculating Section 811 cost limits is
provided, but it is not recommended for use in the absence of changes that
reflect explicit policy decisions on program design guidelines.
Major Findings
The current HUD approach to establishing development cost limits is to calculate the
cost limit for any given project as the total number of units times the respective structure
type/number of bedrooms limit times the area high cost percentage (if relevant). This
figure is intended to cover all development costs, including land. The overall finding of
this study is that neither the factors nor the fundamental approach used accurately
reflect current actual development costs for the projects studied or for typical privately
funded construction. More specifically, the findings of this study may be summarized as
follows:
1. Of the cost indexing approaches tested, the R.S. Means Index (Means) data had
the highest correlation with HUD High Cost Percentage
1
(HCP) adjustments and
with actual construction costs. This index has been extensively used and relied
on in the private sector for decades. Use of this index resulted in a measurably
better statistical match with actual HUD program costs than the national
Consumer Price Index-Urban (all items) approach currently used by HUD to
update its construction cost and High Cost Percentage factors. R.S. Means
Index values also can be used to convert local project construction costs into
“normalized costs” (i.e., costs adjusted as if all projects were built in the same
location with the same materials and labor rates). Project costs and costs per
square foot were normalized using the Means index in many of the charts and
tables presented in this report.
2. Actual average costs for both Section 202 and 811 projects were generally below
R.S. Means estimated per square foot costs (see Tables 4.1 and 4.2). R.S.
Means estimated that the per square foot cost of a normalized public housing
project built to HUD standards was $96.90 in 2003 dollars, as opposed to an
actual average of $87.46. The closest equivalent R.S. Means value for Section
811 is the $114.00 per square foot estimate for “assisted living housing,” which
compares with the actual program average of $101.43. (The Section 811 costs
include group home projects whose costs should have some correspondence
with assisted living projects but which cannot be considered directly equivalent.)
All other things being equal, these cost relationships imply that the average
202/811project is of relatively modest construction.
There are national cost limits for Section 202/811 projects that are based on the number of units in the
project, the number of bedrooms per unit, and structure type. High Cost Percentage (HCPs) adjustments
are published for specified areas that are intended to adjust for above average development costs.
vii
1

3. Maximum HUD-allowed Section 202 costs per unit are, on average,
approximately equal to R.S. Means estimated Total Construction and
Development Costs, exclusive of land (see Table 4.5). The only significant
exceptions to this pattern were Anchorage, Greensboro, and Honolulu. HCPs for
these areas were well in excess of construction costs. Land costs are included in
the HUD costs per unit in this table but not in the R.S. Means costs, but this does
not explain the magnitude of the differences.
4. There were inconsistencies in the current HUD High Cost Percentage (HCP)
indexing and other indices examined (see Chart 4.1). Most HUD Office HCPs
appeared to have a roughly equivalent relationship with R.S. Means values,
Craftsman Index values, and HCPs normalized to Fort Worth levels. The
Greensboro (NC), New York, and San Francisco HCPs, however, were much
higher than suggested by the other indices.
5. High cost projects reviewed at each Office had information that justified the
added costs. The relatively high cost projects examined had design features that
explained their costs. For instance, most group homes were designed for special
needs populations that required complete accessibility, including special ramps,
porches, kitchens, and bathrooms. The highest cost 202 project examined was
found to be on Nantucket Island, and had unusual additional materials, shipping,
and labor costs associated with its construction. Low cost projects, especially
low cost 811 projects, had “bare-bones” designs with rectangular-shaped
buildings, little common space, and few amenities.
6. There were large variations in actual project costs within and between offices,
and significant differences existed even after cost normalization. Tables 4.1 and
4.2 provide information on the range of costs for the primary R.S. Means cost
areas.
7. There were large variations in total square footage per unit. These were most
apparent between different HUD Multifamily Processing Center (HUB) Offices,
which have a large say in what constitutes an acceptable project (see Table 4.3).
The average Honolulu Section 202 project studied had 38 percent more square
footage per dwelling unit than the average for the second highest city, and 83
percent more than projects in San Antonio. The average Columbus (OH) Section
811 project had more than twice the square footage of the average Chicago
project. The additional square footage may provide desired amenities and
services, but the range of variation found appears high and suggests that local
HUD offices have different policies with respect to these items.
8. There was a lower than expected relationship between project square footage
and costs per unit. Projects with large average gross square feet (rental and
non-rental square footage) tended to be the most expensive on a per unit basis,
but project design and configurations also played an important role.
Inconsistencies in the HCPs themselves, variations in what can be afforded, and
viii

what additional funds are available probably explain why there is not a stronger
relationship between project size and cost.
9. Current HUD cost limits and High Cost Percentages force many projects to seek
supplemental sources of funding before and after initial approval of the project. In
many instances it was reported that this significantly lengthened total
development time frames. There were some exceptions, but information
obtained in this study strongly indicates that most projects are dependent on
supplemental funding and/or site donations to be feasible, which is consistent
with the industry standard construction cost comparisons made. Program
requirements essentially require that any additional funding needed has to be in
the form of outright grants.
10.If HUD wants to include land costs in this type of model, it may wish to allow for
costs up to a specified percentage of total development costs (e.g., 15 percent).
A 15-percent allowance for land would not eliminate the need for land or other
donations for above-average cost sites that might offer more amenities (e.g.,
better access to shopping, transportation, doctors), but would set a typical cost
allowance. If, however, HUD intends to include the cost of land and cover all
reasonable development costs with program grants, either most HCPs or basic
cost limits need to be increased. Unusually expensive sites within a metropolitan
area would, by definition, need to be donated or be permitted some form of cost 
exception process if funded by HUD. Also, use of this model implies that Section
202 projects with unusually large amounts of non-rental space would require
supplemental funding.
Cost Model
One of the objectives of this effort was to evaluate HUD’s current cost estimation
system and, if appropriate, recommend an alternative approach. Although program
costs are generally reasonable, HCPs do not provide equivalent cost constraints in
different parts of the country. Cost modeling should reflect industry standards to the
extent possible, and not be subject to variations that make some regions more attractive
to developers than others. A more reliable cost estimating and review process would
assist in identifying high costs projects earlier, and facilitate changing the design, or
obtaining agreement on the need for higher costs earlier in the approval process.
An easy to use, Excel-based Cost Model was developed for HUD use under this
research effort. The user enters the type of project, construction start date, bedroom
mix, and elevator/non-elevator characteristics. The model then calculates a cost
estimate based on HUD guidelines for apartment rental square footage for different
bedroom sizes. A program average ratio of 50 percent non-dwelling space was used to
estimate total square footage as the basis for the cost estimate. Section 811 costs per
unit are based on typical program cost relationships for the number of residents per unit
and type of service population. In practice, the ratio of dwelling to non-dwelling space
ix

varied significantly, but use of a standardized value (which can be easily changed in the
model) is needed to achieve program consistency.
HUD should review and modify the assumptions in this Cost Model to reflect intended
policies. The percentage or percentage range allowed for non-dwelling space is
especially important. This model offers an opportunity to more equitably administer
HUD’s current average approved cost levels. In the absence of policy and procedural
changes, the current system will continue to result in inconsistencies in application of
project cost limits in different regions.
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CHAPTER 1. INTRODUCTION
SCOPE
Based on the Statement of Work (SOW) for Task Order #1 of HUD Contract C-OPC-22168, the
Contractor (NAHB Research Center, Inc.) collected and analyzed historical and certified cost
data for HUD Sections 202 and 811 Support Housing Programs. Included are actual and
allowed variations in construction and development costs for the two programs. In addition,
consumer price indices, industry construction cost indices, high cost percentages (geographic
locality factors), maximum capital advances, inflation factors, and HUB and Field Office
processing procedures, were evaluated.
PURPOSE
Objectives established in the SOW are to:
• Determine actual construction and development cost variations of the 202 and 811
programs from the Builder Economic Council (BEC) Index, Consumer Price Index (CPI-
U), and alternative cost indices, such as R.S. Means, Marshall & Swift, and Craftsman,
• Analyze past cost accounting and processing procedures used for actual projects to
determine more accurate comparisons in certified costs, based on geographic variations
in projects of similar number of units, square footage area per unit, elevator or non-
elevator, accessibility requirements, and other construction markers,
• Determine relevance of past indices used to adjust program cost limits with actual
historical program costs, determine how regional or special area indices can be
developed, and assess whether some indices more appropriately match actual cost
variations than others, and
• Recommend effective Construction Cost Indices and Cost Models to be used by HUD
for future 202 and 811 projects.
Final recommendations include consideration of adjustments to account for geographic locality
costs, inflation, and other factors that may include accessibility requirements, environmental
conditions, building code and standard provisions, seasonal conditions, hazard mitigation, and
regulatory processes.
BACKGROUND
HUD’s Section 202, “Supportive Housing for the Elderly,” and Section 811, “Supportive Housing
for Persons with Disabilities” (including Group Homes), have permitted above average
additional development charges in certain metropolitan areas since 1991 (the year the Capital
Advance Program was established). Basic program cost limits, as well as special high cost area
factors, have been used to update these base year limits.
These programs have relied on various cost and consumer price indices to adjust costs.
However, actual “as-built” certified costs and cost variations have not been compared to these
indices, or to other industry construction and development cost indices.
Capital advances are provided by HUD to finance construction, rehabilitation, or acquisition with
or without rehabilitation, of structures that will serve as supportive housing for very low-income
elderly persons, or for persons with disabilities. Rent subsidies are also provided for projects to
help make them affordable.
1

HUD provides interest-free capital advances to private nonprofit sponsors and nonprofit
consumer cooperatives to finance development of supportive housing. Annually, HUD publishes
a Notice of Funding Availability (NOFA) in the Federal Register. This NOFA specifies the
maximum capital advance and number of dwelling units authorized for each HUD Field Office
jurisdiction.
Section 202 (12 USC 1701q) of the National Housing Act of 1959, requires the Secretary of
HUD to periodically establish development cost limitations by market area. These are published
by Notice in the Federal Register for various types and sizes of supportive housing for the
elderly. The Statute also requires that the Secretary adjust the cost limits not less than annually
to reflect changes in the general level of construction, reconstruction, or rehabilitation costs.
HUD opted to comply with the statute for updating base limits annually by using changes in the
overall Consumer Price Index – Urban (CPI-U).
Total development costs of a project attributable to dwelling use (less incremental development
cost and capitalized operating costs associated with any excess amenities or design features
the borrower must pay for) are annually adjusted by locality for each program, using the CPI-U.
Also, maximum development costs per number of bedrooms per unit for elevator versus non-
elevator structures are specified. Development cost limits for Group Homes under Section 811
are published annually, and categorized for either “Physical and/or Developmental” or “Chronic
Mental Illness” disabled. These costs are based on the number of bedrooms in a dwelling unit.
HUD can increase development cost limits for a geographic area where construction cost levels
justify an increase, or may provide increases on a project-by-project basis. For instance,
increases may be permitted for additional costs to make dwelling units accessible through
rehabilitation. If HUD finds that high construction costs make it infeasible to construct dwellings
without sacrificing sound standards of construction, design, and livability, the capital advance
can be increased to compensate for such costs. Developmental cost limits are published
annually.
Cost limits set by HUD are intended to reflect those costs reasonable and necessary to develop
a project of modest design that complies with HUD Minimum Property Standards (MPS),
Accessibility Requirements in the Uniform Federal Accessibility Standards (UFAS), and
appropriate Design and Cost Standards (24 CFR 891.120 and 891.210).
2

CHAPTER 2. CERTIFIED DEVELOPMENT AND CONSTRUCTION COSTS
GENERAL
NAHB Research Center Staff obtained from HUD representative samples of the following forms 
containing data applicable to Section 202 and 811 Programs:
• HUD-92264 – Multifamily Summary Appraisal Report
• HUD-92328 – Contractor’s and/or Mortgagor’s Cost Breakdown
• HUD-92330 – Mortgagor’s Certificate of Actual Cost
• HUD-92330-A – Contractor’s Certificate of Actual Cost
During the Kick-Off Meeting held on October 1, 2003, HUD Staff explained the purpose and
contents of each form. In November 2003, HUD provided a listing of over 950 Section 202 and
811 projects processed by all HUB and Field Offices for construction completed after January
2000 and through December 2002.
Following the Kick-Off Meeting, HUD requested the respective HUB and Field Offices having
responsibility for processing 202 and 811 projects, to submit completed copies of the four forms.
During November and December 2003, forms for the majority of 202 and 811 projects were
received by the Research Center. The information required for an analysis of development and
construction costs was abstracted from the forms and entered into a database during December
2003 and January 2004. Detailed analysis of this data was conducted during February and
March 2004.
In March and April 2004, research analysts from NAHB Research Center and Columbia
Enterprises visited Philadelphia, Atlanta, and Boston HUB Offices to review Section 202 and
811 processing procedures. These site visits were also to review files for projects with very high
and very low construction costs to document reasons for variations from HUB Area median
costs. Responses to several other questions were documented, including those concerning:
determination of HCPs, types of contracts used (Lump Sum or Cost Plus Fixed Fee), other
sources of funds used, amendment requests, construction cost estimating methods, and typical
number and size of bedrooms for 202 and 811 projects. See Appendix A for a summary of
findings from the site visits.
INFORMATION CONTAINED IN FORMS AND ENTERED IN DATABASE
HUD-92264 – Rental Housing Project Income Analysis and Appraisal. Project
Number (Program Type and HUD Office Code), Location, Planned Number of Dwelling Units
and Bedrooms, Type of Building and Structure, Gross Floor Area, Net Rentable Residential
Area, and Estimated Costs of Structure, All Improvements, and Total Replacement.
HUD-92328 – Contractor’s and/or Mortgagor’s Cost Breakdown (Schedules of
Values). Cost and Description of Trade Items (materials), and Total Cost of Improvements,
including Builder’s Overhead, Profit and Other Fees.
HUD-92330 – Mortgagor’s Certificate of Actual Cost. Actual Cost to Owner of Labor
and Materials, and necessary services for construction of physical improvements for Lump-Sum
or Cost-Plus Construction Contracts.
3

HUD-92330-A – Contractor’s Certificate of Actual Cost. Actual Itemized Costs for Total
Structures, Land Improvements, General Requirements, General Overhead, Bond Premium,
and Other Fees. [Note: A Contractor’s Certificate of Actual Cost is not required for Lump-Sum
Contracts]
4

DESCRIPTION OF DATABASE
Below is a list of the fields entered into the database. Each of the forms was useful in providing
project cost data for analysis. Form 92264 provided much of the background data needed to
analyze each project.
Form 92264 - Multifamily Summary Appraisal Report Form 92328 - Contractor's or Mortgagor's Cost Breakdown
Project No Project Number
Section of Act Author's Initials
Date Date Entered
Type of Project Project Name
Number of Stories Project Type (202 or 811)
Foundation Date
Proposed or Existing Location
Number of Units Total Structures
Number of Buildings Total Land Improvements
Accessory Buildings and Area General Requirements
Recreation Facilities and Area Builder's Overhead
Dimensions Builder's Profit
Year Built Bond Premium
Structural System Total for All Improvements
Floor System Comments
Exterior Finish Form 92330 - Mortgagor's Certificate of Actual Costs
Heating-AC System Project No
Total SF or Gross Floor Area Project Name
Total Structures Date
Total Land Improvements Amt Due under Lump-Sum Construction Contract
Main Buildings Amount due under Cost-Plus Construction Contract
Other Buildings Allowable Builder's Profit
General Requirements Architect’s Fee - Design
Builder's General Overhead Architect’s Fee - Supervisor
Builder's Profit Architect’s Fee - Additional Services
Bond Premium Total
Other Fees Comments
Architect Fee Design Form 92330A - Contractor's Certificate of Actual Cost
Architect Fee Supervisor Project No
Total for all Improvements Project Name
Cost Per GSF Date
Developer's Fee Total Structures
Total Estimated Development Cost Total Land Improvement
Total Estimated Replacement Cost General Requirements
Zero Bedrooms General Overhead
One Bedrooms Bond Premium
Two Bedrooms Total Costs
Other Number of Bedrooms Comments
Comments
5

CHAPTER 3. CONSTRUCTION COST INDICES
Various construction cost indices were used to analyze and compare historical base dwelling
unit costs to actual project costs. Information on the indices follows.
HISTORICAL BASE DWELLING UNIT COSTS
Under the Capital Advance Program, an annual Notice of Funding Availability (NOFA)
announces the amount of funds that are allocated to each HUB region around the country and
each key or Base City. Qualified entities submit applications at the local level to compete for the
allocated funding. The size of the capital advance that each candidate can expect to receive is
governed by authorized “development costs” and “high cost percentages.” Originally,
development costs were published in the enabling legislation. They were deleted from the
legislation in 1996 and now appear in the annual NOFA. The “development cost limits” are set
forth in a schedule that specifies the maximum dollar amount that can be authorized for
individual units depending on the number of bedrooms in the unit and the presence or absence
of elevators in the building. Periodically, the cost limits are reviewed and updated to increase
the overall authorized cost limits. The Historical Base Dwelling Unit Costs shown in Table 3.1
identify the authorized maximum capital advance amount for each dwelling unit based on the
number of bedrooms for elevator and non-elevator structures. HUD also determines High Cost
Percentage (HCP) adjustments that are applied to these base costs.
Table 3.1 Historical Base Dwelling Unit Cost Limits
EFFECTIVE
DATES 6/12/1991 2/26/1999 2/24/2000 1/22/2001 5/14/04
Non-Elevator Basic Limit
No. Bedrooms.
0 $28,032 $33,638 $33,638 $41,238 $42,980
1 $32,321 $38,785 $38,785 $47,548 $49,557
2 $38,979 $46,775 $46,775 $57,344 $59,766
3 $49,893 $59,872 $59,872 $73,400 $76,501
4+ $55,583 $66,700 $66,700 $81,770 $85,225
Elevator Basic Limit
No. Bedrooms.
0 $29,500 $35,400 $35,400 $43,398 $45,232
1 $33,816 $40,579 $40,579 $49,748 $51,849
2 $41,120 $49,344 $49,344 $60,493 $63,049
3 $53,195 $63,834 $63,834 $78,257 $81,563
4+ $58,392 $70,070 $70,070 $85,902 $89,531
6

HISTORICAL HIGH COST PERCENTAGES (HCP)
The High Cost Percentage (HCP) is a factor that is used to convert an overall development cost
limit, as discussed above, to a local development cost limit. For example, the 2004 HCP for
Boston is 202 percent. The 2004 development cost limit for a one-bedroom unit in a non-
elevator building is $49,557. Multiplying $49,557 by 202 percent yields a development cost limit
for a one-bedroom unit in Boston of $100,105. HUB directors can choose to exceed the HCP in
computing cost limits, on a case-by-case basis, up to a statutory limit of 240 percent. HCPs for
each HUB and Base City are updated and published annually. The HCPs for Capital Advance
Programs in several locations from 1993 to 2004 are shown in Chart 4.3. Information on
changes in HCPs during those years was used by HUD to adjust allowed costs for all Capital
Advance projects.
NAHB BUILDER ECONOMIC COUNCIL INDEX (BEC)
The Housing Market Index produced by the National Association of Home Builders (NAHB) was
reviewed for use in this study. Statistics are derived from the NAHB Builders’ Economic Council
(BEC) Monthly Surveys, and represent ratings for current single-family sales, single-family sales
in the next six months, and buyer traffic. Components are measured on scales of good/fair/poor;
or high/average/low, and provide assessments from builders about general economic and
housing market conditions. While these ratings are valuable in helping to track and predict
housing market conditions, they do not correlate well with data we gathered for analysis of HUD
Section 202 and 811 Cost Indices.
CONSUMER PRICE INDEX – URBAN (CPI-U)
Table 3.2 lists the Annual Consumer Price Index (CPI-U) values for urban areas from 1993 to
2003, as well as related annual percentage changes over time. The significance of this index is
that it was the basis for updating base dwelling unit costs and HCPs.
Table 3.2 Census CPI-U Index
Year
Annual CPI-U
CPI-U
Percentage
Change
1993 144.5
1994 148.2 2.6%
1995 152.4 2.8%
1996 156.9 3.0%
1997 160.5 2.3%
1998 163.0 1.6%
1999 166.6 2.2%
2000 172.2 3.4%
2001 177.1 2.8%
2002 179.9 1.6%
2003 184.0 2.3%
7

R. S. MEANS RESIDENTIAL COST DATA
General. The R. S. Means Company, Inc. publishes Residential Cost Data (Means). Data from
the 2004 – 23rd Annual Edition was used in this study. This is a comprehensive and reliable
source of current construction costs and productivity rates. It is intended for use by those
involved with construction cost estimating, including contractors, owners, architects, engineers,
and facilities managers. The cost data can also be used to develop preliminary project cost
estimates, and to measure the impact of modifying materials, methods, and structure types on
cost estimates.
Contents. Means Residential Cost Data contains material, labor, and equipment costs,
arranged in the following sections: Square Foot Costs, Assembly Costs, and Unit Prices.
Material prices are based on a “national average” obtained by contacting manufacturers,
dealers, distributors, and contractors throughout the U.S. and Canada. Labor costs are based
on a seven-region average of open shop wage rates, including overhead and profit markups.
Local cost indices that adjust for the difference between the benchmark average national costs
and local area costs are provided for all major metropolitan areas and states, arranged
alphabetically and by zip code.
Square Foot Cost Section. This section contains costs per square foot for four classes of
construction (economy, average, custom, or luxury) and seven building types (one-story to tri-
level). Costs are listed for various exterior wall systems and sizes of Living Area, with
modification, adjustment, and alternative multipliers.
Assembly Cost Tables. Tables for per unit costs of materials and installation are provided
for all components of nine assemblies or systems, from Site Work through Electrical Systems.
Unit Price Section. Unit Price tables are provided for the Construction Specification Institute’s
(CSI) 16 Master Format Divisions, with itemized costs for all components and materials.
Evaluation. The 2004 “Means Locality Cost Adjustment Factors” are shown in Table 3.3 for
HUD Base Cities that have been assigned High Cost Percentages (HCP). This table also lists
the 2004 HUD-HCPs, as well as the area modification factors from the 2004 Craftsman Cost
Estimator. The HUD-HCPs were normalized to compare to the factors in these two cost
estimating indices. Our analysis concluded that the Means Location Factors were statistically
preferable to the Craftsman Cost Indices as a means of adjusting future HUD 202 and 811 Cost
Indices, since it had a higher correlation with the HUD-HCP values.
8

Table 3.3 Local Cost Adjustment Factors
Base City
2004 HUD
HCP
2004 Means
Index
HUD HCP
Normalized to
Means Index
2004
Craftsman
Index
HUD HCP
Normalized to
Craftsman
Index
Boston, MA HUB 202% 115.0% 121.5% 116% 122%
Hartford, CT 205% 107.6% 123.3% 109% 124%
Bangor, ME (Portland) 164% 90.0% 98.7% 94% 99%
Manchester, NH 166% 93.7% 99.9% 102% 101%
Providence, RI 202% 104.6% 121.5% 110% 122%
Burlington, VT 153% 85.1% 92.1% 97% 93%
Buffalo, NY HUB 183% 101.9% 110.1% 108% 111%
Albany, NY 163% 97.0% 98.1% 106% 99%
New York, NY HUB 240% 134.0% 144.4% 126% 145%
Philadelphia, PA HUB 199% 112.1% 119.7% 109% 121%
Charleston, WV 159% 94.2% 95.7% 99% 96%
Camden, NJ (Trenton) 195% 108.4% 117.3% 108% 118%
Newark, NJ 211% 111.2% 127.0% 109% 128%
Pittsburgh, PA 167% 100.5% 100.5% 102% 101%
Wilmington, DE 184% 102.7% 110.7% 104% 112%
Baltimore, MD HUB 165% 91.4% 99.3% 100% 100%
Washington, DC 178% 95.2% 107.1% 102% 108%
Richmond, VA 149% 83.5% 89.7% 90% 90%
Greensboro, NC (WN-SLM) HUB 187% 75.3% 112.5% 83% 113%
Columbia, SC 159% 74.0% 95.7% 85% 96%
Atlanta, GA HUB 145% 89.7% 87.2% 99% 88%
Louisville, KY 156% 90.7% 93.9% 95% 95%
Knoxville, TN 137% 78.6% 82.4% 92% 83%
Memphis, TN 137% 86.7% 82.4% 93% 83%
Nashville, TN 141% 87.2% 84.8% 91% 85%
Jacksonville, FL HUB 140% 81.1% 84.2% 97% 85%
Birmingham, AL 140% 86.9% 84.2% 87% 85%
Jackson, MS 134% 74.7% 80.6% 86% 81%
Miami, FL 167% 87.1% 100.5% 94% 101%
Tampa, FL 160% 87.8% 96.3% 88% 97%
Chicago, IL HUB 204% 112.5% 122.7% 112% 124%
Springfield, IL 175% 98.3% 105.3% 106% 106%
Indianapolis, IN 158% 94.3% 95.1% 103% 96%
Columbus, OH HUB 151% 95.2% 90.9% 101% 92%
Cleveland, OH 170% 102.2% 102.3% 103% 103%
Cincinnati, OH 153% 84.0% 92.1% 100% 93%
Detroit, MI HUB 179% 107.2% 107.7% 106% 108%
Grand Rapids, MI 151% 85.0% 90.9% 107% 92%
Minneapolis, MN HUB 189% 113.4% 113.7% 109% 115%
Milwaukee, WI 182% 100.7% 109.5% 104% 110%
Fort Worth, TX HUB 138% 81.6% 83.0% 95% 84%
Little Rock, AR 128% 81.6% 77.0% 88% 78%
New Orleans, LA 136% 86.0% 81.8% 101% 82%
Shreveport, LA 130% 79.6% 78.2% 94% 79%
Albuquerque, NM 130% 89.3% 78.2% 96% 79%
9

Table 3.3 Local Cost Adjustment Factors (cont.)
Base City (cont.)
2004 HUD
HCP
2004 Means
Index
HUD HCP
Normalized to
Means Index
2004
Craftsman
Index
HUD HCP
Normalized to
Craftsman
Index
Kansas City, MO HUB 165% 102.0% 99.3% 101% 100%
Des Moines, IA 142% 91.7% 85.4% 101% 86%
Topeka, KS 142% 84.0% 85.4% 95% 86%
St. Louis, MO 180% 102.2% 108.3% 105% 109%
Omaha, NE 154% 90.0% 92.7% 92% 93%
Oklahoma City, OK 134% 82.5% 80.6% 93% 81%
Tulsa, OK 133% 80.8% 80.0% 92% 81%
Denver, CO HUB 185% 95.8% 111.3% 100% 112%
Helena, MT 136% 88.3% 81.8% 101% 82%
Fargo, ND 129% 85.2% 77.6% 96% 78%
Sioux Falls, SD 133% 80.8% 80.0% 90% 81%
Salt Lake City, UT 148% 88.9% 89.0% 92% 90%
Casper, WY 125% 81.5% 75.2% 88% 76%
Los Angeles, CA HUB 194% 108.3% 116.7% 114% 118%
Santa Ana, CA (L.A.) 194% 104.4% 116.7% 113% 118%
San Diego, CA 201% 104.7% 120.9% 110% 122%
San Francisco, CA HUB 240% 123.6% 144.4% 124% 145%
Phoenix, AZ 148% 87.9% 89.0% 99% 90%
Sacramento, CA 197% 111.1% 118.5% 110% 119%
Reno, NV 164% 98.5% 98.7% 104% 99%
Seattle, WA HUB 190% 104.1% 114.3% 108% 115%
Boise, ID 138% 92.1% 83.0% 94% 84%
Portland, OR 175% 104.0% 105.3% 106% 106%
Spokane, WA 151% 96.3% 90.9% 110% 92%
10

CRAFTSMAN NATIONAL CONSTRUCTION COST ESTIMATOR
General. The Craftsman Book Company publishes the National Construction Cost Estimator
(Craftsman). The 2004 - 52
nd
Annual Edition, referenced herein, was edited by Dave Ogershok
and Richard Pray. It is an encyclopedia of estimated construction costs obtained from
contractors, subcontractors, architectural and engineering firms, material suppliers, material
price services, mail and phone surveys, and several national estimating databases.
Contents. The Craftsman cost estimator contains current building costs for residential,
commercial, and industrial construction, and estimated prices for every common building
material. Also included are estimated labor hours, recommended crews, and installation labor
costs. Contractor overhead and profit are not included, although suggested contractor markups
to cover contingencies, overhead, and profit are provided, as well as subcontractor markups. A
list of “Craft Codes,” with appropriate “Cost Per Man-Hour” and “Crew Composition,” is provided
to enable preparation of labor costs for projects.
Area Modification Factors. Percentage adjustment factors were compiled from actual
construction costs for residential, institutional, and commercial buildings in over 400
communities throughout the United States. Construction costs for individual projects in various
metropolitan areas and states can then be adjusted by using these Area Modification Factors.
Evaluation. The 2004 Craftsman Area Modification Factors are also shown in Table 3.3 for
HUD Base Cities assigned High Cost Percentages (HCP). As shown in this table, Craftsman
Cost Indices were compared to Means Cost Indices. We concluded that the Means Cost Indices
provided a more conceptually valid approach to meeting the objectives of the HUD-HCPs, and
also resulted in higher correlations with actual HUD costs and HCP values. Therefore, the
Means Location Factors are recommended for adjustment of future HUD 202 and 811 Cost
Indices.
11

MARSHALL & SWIFT RESIDENTIAL COST HANDBOOK (M&S)
General. The M&S Handbook is generally used to estimate replacement costs for single or
multifamily residences, and was developed for Appraisers, Assessors, Adjusters, Architects,
and Realtors. Current Cost Multipliers are provided for either Frame or Masonry Construction in
Eastern, Central, or Western Zones. Local Multipliers for either Frame or Masonry Construction
are provided for most metropolitan areas throughout the U.S. and Canada. Multipliers are
updated quarterly. Two methods of estimating total replacement costs are provided: Square
Foot Method, and Segregated Method.
Square Foot Method. Based on square footage area of a residence, with a minimal number
of adjustments from a basic residence cost table, a replacement cost can be estimated.
Residences are generally categorized as site-built or manufactured, and tables are provided for
stud-framed walls with various exterior finishes, or masonry walls, including concrete. Separate
tables are provided for One-Story, Two-Story Bi-Level, Two-Story, One and One-Half Story, and
Split-Level; and for Basements, Porches, Breezeways, and Garages. There are adjustment
factors for roofing materials, and for energy and foundation costs in various climates. Separate
sections are provided for Low, Fair, Average, Good, Very Good, and Excellent Quality
construction.
Segregated Cost Method. This method considers the estimated replacement costs for major
building components for most types of residence. It can also be used for unique building types
not included in Square Foot Method. Basic units of measure are used, which requires
measurement of floor area, excavation volume, wall area and perimeter length, porch and
balcony areas, and any dormer face lengths. Cost tables for the following Components are
included: Foundations, Basement Foundations, Basement Floors and Interior Framing, Floor
Structures, Floor Covers, Exterior Walls, Ceilings, Roofs, Interior Construction, Heating and
Cooling, Electrical, Plumbing, Fireplaces, Built-In Appliances, Porches, Carports, and Garages.
This method is suitable for use by Appraisers and Estimators.
Evaluation. The M&S Residential Cost Handbook is an excellent tool to estimate
replacement costs. It also provides an alternative means of estimating relative construction and
development costs. However, our conclusion is that it is not as effective as Means for
developing and updating an overall cost model for 202 and 811 projects. Therefore, an analysis
was not conducted to determine actual 202 and 811 construction and development cost
variations from those obtained from M & S.
12

CHAPTER 4. VARIATIONS ANALYSES
GENERAL
The Project Team gathered field data on 871 new construction projects throughout the nation
(retrofit projects from the original list of 950 projects were excluded). Upon analysis we found
that 544 of these projects had complete project cost data, and could be included in our analysis.
Of these, 338 projects were under the “202 Program” and 206 were under the “811 Program.”
GEOGRAPHIC AREAS
Analysis Methodology. The actual cost data for different areas cannot be considered
directly comparable because of known, and often significant, differences in local construction
costs. In order to permit comparative analysis of the costs of construction for HUD projects for
which data was collected, it was necessary to “normalize” actual square foot costs to a
standardized level using “Means Locality Cost Adjustment Factors.” We began this process by
determining the zip code for the city or town for each project. From the zip code we were able to
identify a Means Area Cost Factor. Costs were divided by this factor to provide an equivalent
national average cost. Each project could then be directly compared to each other once all costs
were normalized in this manner.
Section 202 Costs. Additionally, we decided that we should compare costs on a per-square-
foot basis as well as on a per-dwelling-unit basis. Table 4.1 shows the normalized cost per
square foot for the Section 202 Construction Program. The first column shows the field office
code. The “Avg. Bldg Cost” column is the structure cost only, with no land or site costs included.
The “Avg. Total Improvement Cost” shows the actual improvement cost, without land cost. The
last four columns show the highest and lowest project costs in each category within each field
office.
Means provides a total average development cost estimate for Public Housing (low rise)
developments of $96.90 per square foot (in 2003 dollars) or $84,000 per dwelling unit (DU).
Public Housing and Section 202 construction standards and quality should be very similar for
similar structure types. From Table 4.1, it is apparent that the average costs per square foot of
the Section 202 Program are approximately 9% under the Means estimate. However, South
Carolina, Mississippi, Puerto Rico, San Francisco, and Alaska all have average normalized
costs that exceed the Means estimate. Additionally, most field offices have individual projects
that exceed the Means estimate.
13

Table 4.1

Section 202 Construction Costs

Actual Costs Per Square Foot by R.S. Means Regions

Region State
Costs Normalized with R.S. Means Locality Cost Adjustment Factors
No.
Projects
Avg.
Bldg.
Cost
Avg.
Total
Cost
Highest
Bldg.
Cost
Highest
Total
Cost
Lowest
Bldg.
Cost
Lowest
Total
Cost
ALL 338 $61.99 $88.12 $115.10 $162.32 $34.82 $48.10
01 47 $62.49 $89.80
012 NY 23 $61.92 $86.17 $72.68 $98.10 $58.62 $79.71
014 NY 11 $60.63 $85.14 $61.79 $90.18 $56.26 $75.64
016 RI 5 $59.61 $83.67 $70.36 $101.80 $53.97 $77.61
017 CT 8 $68.48 $110.46 $81.08 $155.77 $58.04 $82.27
02 15 $63.06 $93.98
023 MA 5 $64.89 $88.17 $78.60 $104.79 $56.50 $77.62
024 NH/ME 10 $62.15 $96.88 $75.07 $116.29 $56.62 $80.71
03 27 $66.27 $89.10
031 NJ 5 $63.27 $84.74 $81.09 $104.16 $57.16 $78.18
033 PA 7 $59.72 $79.42 $69.97 $87.05 $55.47 $73.09
034 PA 11 $71.44 $95.55 $95.76 $123.03 $48.53 $71.63
035 NJ 4 $67.29 $93.76 $71.63 $99.89 $60.28 $83.45
04 36 $58.11 $80.76
042 OH 11 $60.88 $81.18 $68.20 $94.70 $57.13 $74.47
043 OH 6 $51.67 $73.30 $60.46 $84.84 $45.11 $66.66
044 MI 2 $68.01 $93.56 $71.81 $98.63 $64.22 $88.50
045 WV 4 $67.10 $94.84 $79.70 $112.40 $54.73 $71.19
046 OH 9 $53.54 $78.15 $60.85 $93.53 $43.72 $61.29
047 MI 3 $57.64 $76.29 $57.92 $80.77 $54.23 $70.12
048 MI 1 $52.90 $75.84
05 15 $67.06 $102.69
051 VA 5 $60.24 $94.60 $66.37 $98.45 $53.30 $88.29
052 MD 4 $59.16 $85.26 $65.87 $88.73 $55.58 $81.37
054 SC 3 $76.96 $124.01 $86.31 $145.61 $72.18 $111.51
056 PR 3 $78.99 $118.08 $71.39 $122.84 $80.87 $111.75
06 29 $63.27 $89.49
061 GA 2 $55.61 $82.22 $61.32 $90.03 $49.91 $74.42
062 AL 5 $60.03 $83.03 $58.25 $88.71 $53.94 $75.40
063 FL 3 $62.59 $82.46 $64.35 $86.21 $58.26 $77.85
064 LA 12 $62.27 $87.38 $69.61 $115.09 $39.99 $61.13
065 MS 4 $76.33 $112.83 $81.10 $123.77 $67.67 $91.29
066 FL 1 $73.37 $94.58
067 FL 2 $54.85 $86.79 $57.02 $98.79 $52.68 $74.80
07 32 $57.69 $76.13
071 IL 8 $61.60 $79.47 $68.13 $89.75 $55.96 $70.34
14

Table 4.1

Section 202 Construction Costs

Actual Costs Per Square Foot (cont.)

Region State
Costs Normalized with R.S. Means Locality Cost Adjustment Factors
No.
Projects
Avg.
Bldg.
Cost
Avg.
Total
Cost
Highest
Bldg.
Cost
Highest
Total
Cost
Lowest
Bldg.
Cost
Lowest
Total
Cost
08 37 $62.02 $87.46
081 TN 3 $61.52 $85.34 $64.70 $89.04 $59.35 $81.74
083 KY 6 $53.29 $73.57 $62.90 $80.46 $34.82 $58.77
084 MO 3 $60.70 $82.73 $76.47 $93.16 $53.94 $77.09
085 MO 8 $59.77 $79.03 $69.70 $90.67 $53.10 $68.95
086 TN 5 $67.19 $100.85 $80.41 $112.43 $61.38 $83.63
087 TN 12 $66.18 $96.16 $78.47 $113.18 $62.85 $83.18
09 9 $54.01 $73.30
092 MN 9 $54.01 $73.30 $68.88 $84.53 $48.62 $63.63
10 6 $63.72 $84.25
102 KS 1 $55.90 $72.94
103 NE 5 $65.29 $86.51 $78.79 $100.65 $57.87 $74.29
11 10 $62.00 $92.63
112 TX 5 $63.71 $98.12 $72.28 $107.07 $60.41 $92.38
115 TX 2 $58.66 $83.20 $65.61 $90.28 $51.71 $76.11
116 MN 3 $61.38 $89.76 $70.49 $109.27 $48.27 $65.59
12 60 $62.40 $90.44
121 CA 14 $72.58 $108.52 $105.86 $143.20 $54.95 $79.53
122 CA 22 $60.95 $85.04 $78.03 $111.53 $50.92 $70.62
123 AZ 3 $50.63 $78.79 $53.73 $91.20 $45.90 $66.63
125 NV 2 $60.14 $84.61 $62.60 $89.59 $57.67 $79.63
126 OR 10 $57.31 $83.46 $82.07 $101.84 $48.97 $64.56
127 WA 5 $57.97 $86.38 $67.65 $91.47 $52.25 $77.72
129 CA 4 $63.02 $91.04 $75.49 $107.90 $49.96 $71.88
13 6 $63.12 $101.00
136 CA 6 $63.12 $101.00 $80.49 $135.36 $54.93 $79.05
14 4 $57.64 $94.48
140 HI 2 $56.43 $91.43 $66.14 $113.45 $46.71 $69.41
143 CA 2 $58.85 $97.53 $66.71 $114.31 $51.00 $80.76
17 5 $73.40 $106.32
171 WA 1 $51.29 $69.87
176 AK 4 $78.93 $115.44 $115.10 $162.32 $65.13 $99.13
15

Section 811 Costs. Table 4.2 shows the normalized costs per square foot for the Section
811 Construction Program. The format is the same as Table 4.1. Analysis of Section 811
program cost data, however, raised some issues.
Means provides an estimate for “Assisted Living Housing” at a total cost of $114.00 per square
foot (in 2003 dollars). Section 811 more closely corresponds with assisted living than with other
types of construction. There is, however, nothing equivalent to Section 202 unit size and
amenity guidelines for “Group Homes” built under the Section 811 Program. In addition, many
project forms did not identify whether they were Group Homes or not. Therefore, costs for
Group Homes could not be analyzed separately.
Many different configurations and use of bedrooms, bathrooms, kitchens and common space
are possible. This limits the ability to apply a standard average cost per square foot comparison
when evaluating and comparing specific projects. Table 4.2 shows that the average total cost
per square foot for the Section 811 Program is $101.43, which is approximately 11% under the
Means cost estimate of $114 per square foot for assisted living facilities. However, the Mid-
Atlantic regional average exceeds the Means estimate, and about 3/4 of field offices have
individual projects that also exceed the Means estimate.
16

Table 4.2

Section 811 Construction Costs

Actual Costs Per Square Foot by R.S. Means Regions

Region State
Costs Normalized with R.S. Means Locality Cost Adjustment Factors
No.
Projects
Avg.
Bldg.
Cost
Avg.
Total
Cost
Highest
Bldg.
Cost
Highest
Total
Cost
Lowest
Bldg.
Cost
Lowest
Total
Cost
ALL 206 $66.26 $101.43 $128.60 $240.47 $36.22 $53.65
01 19 $64.98 $100.41
012 NY 4 $75.50 $126.83 $95.91 $154.69 $57.38 $84.44
014 NY 11 $60.90 $92.91 $76.98 $115.97 $46.60 $73.08
016 RI 3 $57.22 $83.07 $60.35 $92.90 $52.97 $70.41
017 CT 1 $83.05 $129.13
02 8 $64.42 $95.15
023 MA 4 $60.72 $89.93 $87.73 $137.88 $38.51 $57.80
024 ME 4 $68.12 $100.37 $89.67 $142.13 $36.22 $53.65
03 21 $72.30 $108.63
031 NJ 8 $73.91 $115.18 $104.81 $160.47 $62.97 $90.15
032 DE 2 $67.67 $102.03 $86.51 $134.50 $48.84 $69.55
033 PA 6 $71.15 $102.86 $114.33 $150.47 $50.88 $73.86
034 PA 2 $82.85 $119.33 $110.43 $154.72 $55.27 $83.93
035 NJ 3 $66.34 $99.99 $69.94 $106.80 $60.53 $93.94
04 27 $64.57 $93.52
042 OH 10 $66.21 $95.89 $83.72 $128.27 $53.61 $75.87
043 OH 5 $53.17 $80.92 $60.91 $87.73 $47.96 $75.15
044 MI 1 $49.42 $79.82
045 WV 5 $73.34 $97.06 $86.13 $103.98 $58.79 $73.18
046 OH 3 $59.12 $95.95 $69.53 $119.33 $43.24 $79.56
047 MI 2 $63.83 $94.05 $69.40 $99.01 $58.26 $89.09
048 MI 1 $94.28 $120.41
05 10 $90.58 $136.93
051 VA 1 $80.33 $130.63
054 SC 5 $100.41 $148.67 $128.60 $193.27 $63.68 $84.84
056 PR 4 $80.86 $123.82 $100.84 $138.35 $68.10 $112.04
06 26 $64.02 $98.66
061 GA 3 $64.40 $107.00 $71.07 $129.61 $59.90 $93.80
062 AL 4 $58.56 $93.43 $60.06 $101.69 $59.19 $80.10
064 LA 11 $59.82 $87.76 $80.38 $117.61 $47.41 $73.82
065 MS 5 $69.80 $106.72 $77.06 $117.40 $58.82 $90.50
066 FL 3 $80.80 $130.92 $90.29 $137.55 $74.39 $120.65
067 FL 1 $54.43 $85.38
07 24 $64.04 $93.14
071 IL 6 $77.85 $115.46 $102.79 $137.48 $60.25 $98.05
072 IL 9 $65.30 $93.51 $94.92 $140.25 $51.60 $73.01
073 IN 3 $62.55 $96.93 $75.07 $114.54 $51.60 $77.15
074 IA 1 $52.76 $70.39
075 WI 5 $48.38 $67.97 $54.05 $76.60 $44.23 $59.94
17

Table 4.2

Section 811 Construction Costs

Actual Costs Per Square Foot (cont.)
Region State
Costs Normalized with R.S. Means Locality Cost Adjustment Factors
No.
Projects
Avg.
Bldg.
Cost
Avg.
Total
Cost
Highest
Bldg.
Cost
Highest
Total
Cost
Lowest
Bldg.
Cost
Lowest
Total
Cost
08 21 $62.58 $92.78
083 KY 6 $72.25 $104.02 $84.41 $126.63 $54.39 $85.98
084 MO 5 $58.65 $87.02 $67.54 $106.01 $53.10 $76.17
085 MO 5 $54.24 $80.51 $63.35 $91.20 $49.48 $71.51
086 TN 1 $71.55 $105.61
087 TN 4 $61.14 $95.22 $71.96 $106.60 $53.76 $75.35
09 3 $59.24 $82.71
092 MN 3 $59.24 $82.71 $65.00 $86.61 $54.24 $78.77
10 5 $75.20 $109.78
103 NE 5 $75.20 $109.78 $95.76 $163.47 $47.19 $64.18
11 8 $65.78 $104.00
112 TX 2 $63.35 $104.81 $67.50 $123.31 $59.21 $86.32
113 TX 1 $66.22 $125.60
115 TX 2 $65.00 $103.58 $67.98 $115.28 $62.02 $91.87
116 NM 3 $67.78 $96.54 $89.00 $122.57 $47.93 $70.45
12 24 $65.45 $112.54
121 CA 6 $69.91 $120.68 $86.80 $148.86 $58.16 $91.63
122 CA 9 $59.04 $97.31 $73.09 $116.18 $49.31 $92.76
123 AZ 3 $65.01 $115.01 $72.01 $130.20 $54.95 $85.65
125 NV 1 $72.45 $105.65
126 OR 2 $51.65 $81.83 $64.09 $99.75 $39.20 $63.91
127 WA 3 $83.05 $162.58 $106.55 $240.47 $68.34 $112.90
13 3 $49.61 $92.36
133 TX 1 $53.71 $88.62
136 CA 2 $47.56 $94.23 $55.10 $117.01 $40.02 $71.46
14 3 $73.56 $110.30
140 HI 2 $88.50 $127.21 $96.11 $142.90 $80.89 $111.51
143 CA 1 $43.70 $76.48
17 2 $66.36 $101.40
176 AK 2 $66.36 $101.40 $82.30 $115.01 $50.43 $87.78
18

Cost per Dwelling Unit. Another method of analyzing cost of the programs is to divide total
improvement costs by number of dwelling units constructed, to arrive at an average
improvement cost per dwelling unit. Note that regional costs shown in Tables 4.3 and 4.4 are
both actual local costs and normalized costs using “Means Locality Cost Adjustment Factors.”
Table 4.3 also provides information on average gross square feet per dwelling unit, and the ratio
of gross square feet constructed, to authorized rentable space. This provides a measure of
amenities provided in addition to apartment space.
Table 4.3 - Section 202 Construction Program

Dwelling Unit Cost and Size

Area
Number
Metro Area
Average
Cost Per
Dwelling
Unit
Average
Normalized
Cost Per Dwelling
Unit
Average
Gross Square
Feet Per
Dwelling Unit
012
New York
$ 90,732 $ 76,883 843
023
Boston
$ 76,104 $ 77,905 840
034
Philadelphia
$ 76,569 $ 73,711 834
043
Columbus
$ 65,055 $ 66,681 800
052
Baltimore
$ 66,017 $ 81,461 711
061
Atlanta
$ 53,503 $ 61,585 742
071
Chicago
$ 67,815 $ 65,622 870
084
Kansas City
$ 55,972 $ 64,572 739
103
Omaha
$ 63,056 $ 69,598 857
115
San Antonio
$ 50,777 $ 61,681 677
122
Los Angeles
$ 86,305 $ 78,634 902
140
Honolulu
$ 135,516 $ 110,310 1242
176
Anchorage
$ 112,280 $ 89,182 900
ALL $ 73,396 $ 72,554 812
164 TOTAL PROJECTS
2
2
Total number of projects is less than total of 338 listed in Table 4.1 because only projects in certain
metropolitan areas were selected for analysis, or information was not available from forms.
19

Table 4.4 shows the same information for the Section 811 Program.
Table 4.4 - Section 811 Construction Program
Dwelling Unit Cost and Size
Area
Number
Metro Area
Average
Cost Per
Dwelling
Unit
Average
Normalized
Cost Per Dwelling
Unit
Average
Gross Square
Feet Per
Dwelling Unit
012
New York
$ 87,402 $ 87,075 934
023
Boston
$ 84,098 $ 85,059 884
034
Philadelphia
$ 83,037 $ 79,209 738
043
Columbus
$ 102,469 $ 105,261 1249
052
Baltimore
$ 60,569 $ 79,714 621
061
Atlanta
$ 56,615 $ 63,797 617
071
Chicago
$ 58,186 $ 54,444 621
084
Kansas City
$ 58,435 $ 65,375 677
103
Omaha
$ 51,282 $ 56,602 882
113
Fort Worth
$ 43,378 $ 56,335 636
115
San Antonio
$ 59,722 $ 71,560 712
122
Los Angeles
$ 106,458 $ 102,921 892
ALL $ 77,284 $ 81,131 808
93 TOTAL PROJECTS
1
Tables 4.3 and 4.4 show significant differences in total square footage reported for projects
within the program. Differences are particularly apparent when comparing HUB Offices, which
is expected, given that local offices have a large say in what constitutes an acceptable project.
Some projects provide more than twice the square footage of other projects. This makes review
of cost on a per square foot basis less reliable than if all projects were being built to the same
scope. Cost comparisons have limited meaning if the items being compared are not similar.
1
Total number of projects is less than total of 206 listed in Table 4.2 because only projects in certain
metropolitan areas were selected for analysis, or information was not available from forms.
20

G
r
ee
n
sb
o
ro
,
NC
(
W
N
-S
LM)
Ja
c
k
sonville,
FL
For
t
W
o
rth,
TX
At
la
n
t
a
,
GA
Ba
lti
mo
re
,
MD
C
o
lumbu
s
, OH
D
e
nv
e
r,
C
O
Bu
ff
a
lo
,
N
Y
K
ans
as
C
i
t
y
, MO
S
eat
t
le
,
W
A
D
e
t
r
oit
,
MI
Lo
s A
ngele
s
, CA
P
h
ilade
lphia,
P
A
C
h
ic
a
g
o,
I
L
Minn
e
apo
l
i
s, MN
Bo
s
t
o
n
,
MA
N
e
w Y
o
rk
,
N
Y
S
an Fr
anc
isc
o
,
C
A
COMPARISON OF HCP TO CONSTRUCTION COST INDICES
The HCPs were compared to other nationally accepted construction cost indices to see if they
were reasonable predictors of construction costs. Chart 4.1 shows the 2004 cost indices for
Means, Craftsman, HUD-HCP, and HUD-HCP normalized to Fort Worth. The normalization
process matched the HCP to Means at Fort Worth and used the same scaling factor for all other
cities. As the chart shows, the normalized HCP is relatively close to other indices for many
cities, but cities such as Greensboro, New York, and San Francisco are more than 20% off.
Chart 4.1

Actual HCP Comparison to Other Cost Indices

0%
50%
100%
150%
200%
250%
300%
PERCENT
2004 HUD HCP
2004 Means Index
2004 Craftsmen
HCP Normalized to Fort Worth
BASE CITIES
21

Gr
eensb
o
ro
,
NC (
W
N-
S
L
M
)
HU
B
F
o
rt W
o
rth,
TX
H
U
B
Jacks
o
nville, F
L
HUB
A
t
lanta
,
GA
HUB
Baltim
o
r
e, M
D
HUB
Colum
bus,
OH HUB
Den
ve
r
,
CO
HUB
K
ansa
s
City, M
O
HUB
B
u
ffa
l
o
,
NY HUB
S
eatt
l
e
,
WA HUB
Lo
s
A
n
geles,
CA
HU
B
Detr
oit, M
I
HUB
P
h
ilade
l
p
hia, P
A
HUB
Min
neap
olis, M
N
HUB
Chicag
o, IL
HUB
B
o
ston
, MA
HUB
San F
r
a
n
cisco, CA HUB
New Yor
k
, NY HUB
Chart 4.2 is a comparison of Means and HCP values normalized to the average of the Means
Index values, which average 100% for the nation as a whole. As the chart shows, there is often
a correlation within 5% between the two indices, but there is little correlation for three cities, with
Greensboro being about 35% too high. Interestingly, San Francisco and New York (which are
both capped at 240% HCP) are 20% and 10% above the Means average.
Chart 4.2

2003 Normalized HCP Comparison to Means

150%
140%
130%
120%
110%
100%
90%
80%
70%
60%
2003 HCP Norm.
2003 Means Index
PERCENT
BASE CITIES
22

RELEVANCE OF VARIOUS COST INDICES AND HISTORICAL HCP
The study team evaluated changes of HCP over time in relation to the Consumer Price Index-
Urban (CPI-U). Chart 4.3 graphs HCP changes between 1993 and 2004 for six HUB areas.
Two major adjustments were made to the HUD Base Dwelling Unit cost in 1999 and 2001, as
apparent in Charts 4.4 and 4.5 that plot rates of change of HCP and CPI-U for Baltimore and
Cincinnati, respectively.
Chart 4.3

HCP Change Over Time

Boston, MA HUB
Buffalo, NY HUB
New York, NY HUB
Philadelphia, PA HUB
Baltimore, MD HUB
Greensboro, NC (WN-SLM) HUB
0%
50%
100%
150%
200%
250%
300%
HCP
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
YEARS
23

Chart 4.4
CPI-U %Change vs. Baltimore HCP Rate of % Change
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
YEARS
ANNUAL %
CHANGE
CPI-U % change
Baltimore HCP %Change
Chart 4.5

CPI-U %Change vs. Cincinnati HCP Rate of % Change

-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
1
993
1
99
4
1
995
1
996
1
997
1
998
1
9
99
2
000
2
001
2
002
2
003
YEARS
ANNUAL %
CHANGE
CPI-U % change
Cincinnati HCP %Change
24

ANALYSIS OF BASE DWELLING UNIT COSTS
HUD authorized limits for both the 202 and 811 Programs are based on a cost per dwelling unit
(DU), rather than on a cost per square foot (SF) basis. The cost of $49,748 per DU (one-
bedroom, elevator unit) when marked up by a High Cost Percentage (HCP) yields the maximum
allowable Total Development Cost.
Table 4.5 compares the Means total cost estimate (excluding land price) to the HUD generated
Total Development Cost for 18 HUB Offices, as well as for three additional cities. The table
shows that the HUD estimating procedures are roughly similar to Means-based values, except
in the instance of the same three metropolitan areas identified as outliers in previous charts.
Table 4.5 – Section 202 Construction Program

Costs per Dwelling Unit

City
Means Total
Improvement
Cost
(Does not
Include Land)
HUD Total
Develop-
ment Cost
(Includes
Land)
HUD Total
Develop-
ment Cost as
% of R S
Means Total
Improvement
Costs
Avg. Actual
Replacement
Cost
(Includes
Land)
Range of
Actual
Replacement
Costs
No. Actual
Projects
Avg. Actual
Replacement
Costs as % of
R S Means
Improvement
Costs
Avg. Actual
Replacement
Costs as % of
Total HUD
Development
Costs
BOSTON $95,634 $96,014 100% $89,186 $77K - $99K 4 -7% -8%
BUFFALO $85,512 $86,064 101% $79,248 $71K - $86K 5 -8% -9%
NY CITY $110,270 $119,395 108% $98,720 $89K - $118K 24 -12% -21%
PHILADELPHIA $90,769 $93,029 102% $107,418 $87K - $149K 4 15% 13%
BALTIMORE $72,778 $79,597 109% $78,702 $78K - $80K 2 8% -1%
GREENSBORO $63,000 $90,044 143% N/A N/A 0
ATLANTA $73,006 $68,652 94% $61,089 $61K 2 -20% -12%
JACKSONVILLE $68,628 $67,160 98% $56,935 $56K 1 -21% -18%
CHICAGO $91,607 $97,009 106% $78,123 $67K - $79K 4 -17% -24%
COLUMBUS $80,472 $72,632 90% $69,351 $65K - $77K 6 -16% -5%
DETROIT $88,576 $97,009 110% $98,653 $95K - $102K 2 10% 2%
MINNEAPOLIS $93,186 $89,049 96% $82,328 $82K 1 -13% -8%
FORT WORTH $67,255 $65,667 98% N/A N/A 0
KANSAS CITY $82,865 $79,099 95% $72,534 $69K - $76K 2 -14% -9%
DENVER $78,139 $85,069 109% N/A N/A 0
LOS ANGELES $88,494 $92,531 105% $97,748 $82k - $117K 14 9% 5%
SAN FRANCISCO $100,709 $119,395 119% $144,800 $122K - $167K 2 30% 18%
SEATTLE $85,119 $89,546 105% $78,919 $76K - $82K 2 -8% -13%
SAN ANTONIO $67,443 $61,190 91% $57,186 $57K 2 -18% -7%
HONOLULU $101,418 $179,093 177% $130,564 $131K 1 22% -37%
ANCHORAGE $116,332 $179,093 154% $129,305 $118K - $141K 2 10% -39%
AVG 110% AVG -3% -10%
25

FACTORS AFFECTING CONSTRUCTION AND DEVELOPMENT COSTS
Application of the existing HUD cost model for the two construction programs is based
on a cost per dwelling unit (DU), rather than on a cost per square foot (SF) basis. This
makes use of the model, and comparison to other estimating guides and cost indices,
difficult. The cost of $49,748 per DU (one-bedroom, elevator unit) is a cap in price,
based on a former low cost area that is no longer applicable.
Commercial estimating guides are based on national average costs. Local costs are
generated from this average cost by applying a Local Area Cost Factor that can be
below or above the national average. The same one-bedroom elevator unit that forms
the HUD standard can be built for $84,000 at an average cost site. This difference in
approach, which was originally included in mandatory legislation, is no longer required
and should be corrected in the future.
Project scope is not necessarily similar for all projects, making comparative costs on a
square foot basis difficult. Unless developers obtain alternative funding in some
regions, it is not clear why some regions build much larger buildings than others.
Cost modeling should reflect industry standards as much as possible, and not be
subject to variations that make some regions more lucrative to developers than others.
On a nationwide basis, average development costs for 202 and 811 programs on a per-
square-foot basis are reasonable. However, a few Field Offices are averaging higher
costs, and may need assistance in keeping costs down. There also are Field Offices
that have high cost projects significantly above their regional average.
A more reliable and standard cost estimating and review process would assist in
identifying high cost developments earlier, and allow changing the project or justifying
costs early in the approval process.
26

CHAPTER 5. RECOMMENDATIONS
As a result of this analysis of High Cost Percentages (HCP) and Total Development
Costs of Section 202 and 811 Programs, our recommendation is that HUD should adopt
a Cost Model similar to the HUD 202 and 811Construction Cost Model in Appendix B.
In addition, R.S. Means Locality Cost Adjustment Factors should be used to determine
capital advances and an HCP for each metropolitan area, adjusted annually to conform
to R.S. Means. Adjustments can also be made annually to account for factors such as
inflation, any local code, regulatory, or geographic conditions, and accessibility or
historic preservation requirements.
In order to monitor total development costs of Group Homes separately from other 811
projects, they should be clearly identified on all forms. An effort should also be made to
simplify and combine forms in order to have complete and specific cost information for
all Section 202 and 811 projects for future analyses and cost modeling.
27


APPENDIX A
SUMMARY OF FIELD OFFICE VISITS – MARCH & APRIL 2004
HUD Construction Analysts at the three sites visited performed detailed cost analyses
on construction contracts submitted as Cost Plus proposals. Analysts in the
Philadelphia HUB Office utilized a historical database of funded projects; the Atlanta
and Boston HUB Offices used historical square footage costs, with Boston referencing
the local Marshal and Swift for cost estimating. Once Lump Sum Contracts, coupled
with a cost estimate by an independent construction estimator hired by the developer,
were introduced, this type of analysis was no longer required. Over the past five years
the development community has generally elected the Lump Sum process as the
contract of choice. As such, only Total Construction Cost and subsequent change
orders are reviewed and cost certified against the original Lump Sum Construction
Costs.
High cost projects reviewed at each Office had information that justified those added
costs. Most Group Homes were designed for special need populations, requiring 100%
accessibility: ramps, porches, kitchens, and baths. A Section 202 high cost project in
Boston was constructed on Nantucket Island, and involved additional materials and
labor costs. Low cost Section 811 units were “bare-bone” designs with rectangular-
shaped buildings with little common space and few amenities. This was also the case
for the low cost Section 202 projects. Designs were basically rectangular buildings with
few architectural design amenities, or sites where existing buildings provided simple
access to site utilities, thereby greatly reducing site preparation costs for new
construction.
Area HCP costs were calculated and distributed by the Philadelphia and Boston HUB
Offices to each local jurisdiction office. However, the Atlanta HUB Office used the
Atlanta HUB HCP throughout the state, with no adjustments. There were cost
adjustments that were influenced by availability of labor and materials and union
influence (open or closed shops). The Philadelphia and Boston HUB Offices utilized
third party or supplemental funding to cover cost overruns and any unfunded amenities
and services, and requested HUD amendments for any additional allowable
construction and development costs.
28

APPENDIX B
HUD 202 AND 811 PROGRAM CONSTRUCTION COST MODEL
(The following pages show the user sheet of the model, illustrative reference
worksheets, and model assumptions)
29

HUD 202 AND 811 PROGRAM
CONSTRUCTION COST MODEL
INSTRUCTIONS
Yellow cells are for input. All other cells are locked.
Type the data in the yellow cells or select from
the drop down menu where appropriate.
Menu items will change depending upon
“Type of Facility” selected.
PROGRAM
PROJECT NAME
STREET ADDRESS
CITY/TOWN
STATE
ZIP CODE
Area Cost Factor 0
PLANNED CONSTRUCTION START YEAR INFL
TYPE OF FACILITY
APT. SQ. FT.
NO OF 0 BEDROOM UNITS
-
0
NO OF 1 BEDROOM UNITS
-
1
NO OF 2 BEDROOM UNITS
-
2
NO OF 3 BEDROOM UNITS
-
3
NO OF 3+ BEDROOM UNITS
-
3+
TOTAL
-
ELEVATOR BUILDING
PROJECT SIZE FACTOR
0.00
CAPITAL ADVANCE AMOUNT TOTAL DEVELOPMENT COST
30

MODEL TABLE REFERENCES

ACF TABLE INFLATION TABLE SIZE TABLE
ZIP ACF YEAR INFL BR SQ FT
2000 0.9525 0 415
2001 0.9696 1 540
2002 0.9774 2 800
2003 0.9852 3 1050
2004 1 3+ 1150
2005 1.015
2006 1.0312
GROUP HOME COST
2007 1.0488 RESIDENTS
Physical or
Develop-
mental
Disability
Chronic
Mental
Illness
2008 1.0676 2 $ 166,022 $ 160,262
2009 1.0869 3 $ 178,533 $ 172,340
2010 1.1064 4 $ 191,045 $ 183,069
2011 1.1263 5 $ 203,556 $ 193,798
2012 1.1466 6 $ 216,054 $ 204,527
2013 1.1673
2014 1.1883
2015 1.2097
RATIO OF CAPITAL
ADVANCE TO TOTAL
DEVELOPMENT COSTPROJECT SIZE FACTOR
GSF FACTOR
0 0.0 1
1 1.0
18,000 1.10
19,800 1.09
21,600 1.08
23,400 1.07
25,200 1.06
27,000 1.05
28,800 1.04
30,600 1.03
32,400 1.02
34,200 1.01
36,000 1.00
54,000 0.97
72,000 0.94
90,000 0.92
108,000 0.91
126,000 0.90
31

Model Assumptions
1. R. S. Means cost data is used for this model. A 1 BR Apt. in an elevator building has a cost of
$84,000 or $103.57/SF (811 GSF). This compares to a cost in the HUD estimated system
of $49,748 or $61.34/GSF. Means is 168.8% of HUD's costs.
2. The average GSF per unit is 811 SF and the average ratio of GSF to allowable SF is 1.5 from
data analysis of submitted project data. A factor of 1.5 is therefore used in the cost model
to increase allowable Apt. SF to GSF.
3. The ratio of the Capital Advance Amount to the Total Development Cost is 100%. This ratio is
used to calculate the Capital Advance Amount from the Means construction cost estimate.
This ratio may change from year to year so it is an input cell on the Table sheet.
4. Inflation is based on one year after the start of construction which should be approximately the of
mid-point of construction. Inflation factors are from the US Military Housing construction
cost inflation tables for 2004.
5. Non elevator buildings are 4.4% cheaper than elevator buildings in HUD's estimating system
($47548/$49748 = .956). This differential is maintained. (e.g., $103.57/SF * .956 = $98.99
or $99/SF for non-elevator buildings)
6. Yellow Cells are input cells. All other cells are locked.
7. Group home costs in the HUD estimating system already take into account the small project size
associated with detached homes. No Project Size adjustment is used in the model.
32

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