Physical Needs Assessment and Energy Audits for Public Housing

1. U.S. Department of Housing and Urban Development Office of Public and Indian Housing Office of Public Housing Investments Physical Needs Assessment and Energy Audits for Public Housing HUD Office of Public Housing Investments Bruce Rieder bruce.d.rieder@hud.gov May, 2014 1

2. FACTS • The status quo in public housing is not sustainable • Public housing inventory is declining • Maintaining the physical plant is becoming more challenging • Political environment is not conducive to a return to an earlier model of public housing • Risk Management-alternate structures and funding

3. WHY A PNA? • Public Housing stands virtually alone in real estate as PNA not being routine • There is no strategy that can be pursued without a PNA • RAD, LIHTC, Demo, CFFP… • Waiting to start reduces ability to respond and creates lost opportunity

4. HUD’S NEED • Accountability to the taxpayer • Macro level risk management • Capacity building for the PHAs • Tools not reports • Technical assistance • 21st Century information expectations

5. The Trend • Apr 10 2014 • Senate Unanimously Passes Warner-Portman Transparency Legislation • ~ Bipartisan DATA Act allows taxpayers to track every dollar spent by federal agencies ~ ~ ‘Most significant transparency legislation since Freedom of Information Act' ~ • APRIL 28, 2014-UNANIMOUSLY PASSES IN HOUSE

6. What is a PNA? • A Physical Needs Assessment (PNA) is systematic review all of the major physical components of property to result in a projection of future needs and costs to meet those needs. • PNA as proposed is a strategic planning tool. It is not a budget but is a budget tool. • A PNA can serve as documentation for a long term grant or loan with more proscriptive protocols. • It’s the beginning point for a number of other tools

7. WHAT INFO GOES IN? • Inventory data (HUD uses PIC data) • Quantity of each physical component • Cost to replace each component • Estimated useful life-how long does it last from the time it is “new”? • Remaining useful life-how much longer before the component I have in place will not longer be useful and will need to be replaced?

8. PNA INSPECTION • An inspection is only a part of the ASSESSMENT process-the assessment is based on the inspection • Not the same as the UPCS • The PNA inspection is a sample but is more representative of the inventory characteristics than a UPCS sample

9. What is an Energy Audit? • An Energy Audit (EA) is a systematic review of the energy use and requirements for real estate that seeks to identify opportunities for energy savings. • While Energy Audits (EAs) and Physical Needs Assessment (PNAs) often involve a review of the same building systems, EAs have historically been completed independently of PNAs. • The broader real estate industry is moving aggressively to integrate EAs and PNAs as has HUD’s Mark to Market program.

10. Background • The current EA rule at 965 (302) requires only that an EA be performed to state standards but provides no standards of expectation for the result. • PHAs are exposed to energy audits of poor value and little usefulness particularly in states that lack standards. • The 2005 Energy Policy Act encouraged the integration of utility management and capital planning to maximize energy conservation in Public Housing.

11. Energy Audit Integration • Data points from an energy audit will be inserted into the PNA form • Identify ECMs, specify equipment and its cost and estimated useful life • Provide annual utility usage for the standard component and for the ECM so that a usage savings can be calculated • Provide the current utility cost rate • Can use EAs up to 3 years old

12. PROPOSED RULES The Proposed PNA rule was published in the Federal Register On July 20, 2011. The rule itself is 5 pages. The rule and comments received can be reviewed at www. Regulations.gov The Proposed EA rule was published in the Federal Register On November 17, 2011. The rule itself is 9 pages. The rule and comments received can be reviewed at www. Regulations.gov

13. PNA Rule The PNA Rule will require: All PHAs regardless of size to perform a PNA once every 5 years, to update annually, and to submit to HUD in a format determined by HUD-THE GPNA TOOL currently available The PNA will have a planning horizon of 20 years The PNA will be coordinated with and integrate data from the required energy audit Minimum qualifications for a PNA provider, can be performed by qualified PHA staff

14. PNA Provider Qualifications • Experience (5 years) performing physical property inspections and cost estimating • Demonstrated knowledge of applicable building standards and codes • Demonstrated knowledge of energy efficiency practices • Working knowledge of commonly used computer technology (MS Excel, Office etc)

15. Energy Audit Rule • The EA Rule requires: • Continuation of EA performance every 5 years • Specific categories of “Core” ECMs to be evaluated including water conservation • An assessment of existing property conditions, maintenance, and resident education • Analysis of utility bills with comparison to a benchmark if available (Portfolio Manager is an example)

16. Energy Audit Rule • The EA rule requires (cont’d): • Identification and recommendations on ECMs that should be considered by the PHA • Categorization of ECMs by payback period based upon a simple payback calculation • Cost of the recommended ECM’s in current $ and expected useful life • Annual consumption savings projection for each ECM • Identification of exposures and other opportunity

17. Energy Auditor Qualifications • The EA does not require a specific form or format • The EA rule will establish minimum qualifications for an energy auditor: • Experienced in the performance of residential energy audits • Shall hold a valid certification from a recognized state or national energy auditor certifying agency • The energy auditor can be qualified PHA staff or utility company providers

18. Energy Audit Rule • Does not require an investment grade energy audit but encourages Life Cycle Cost Analysis (LCCA) for ECMs that may warrant further investigation • Does not require that ECMs recommended by the EA be implemented by the PHA-remains the PHAs business judgment • Differentiates between “Core” ECMs and “Advanced” ECMs • Green assessment can be included but not required

19. Status and Rollout

20. Status and Rollout A working copy of the PNA tool is posted on the HUD website. A contract for training and providing technical assistance to PHAs and field offices is in place. Web based trainings have been prepared and are available to access at HUD.gov HUD is accepting voluntary submissions

21. Implementation Delay • HUD has delayed the commencement of implementation. • Capital Fund final rule published 10/24/2013. • First due date will not be earlier than early 2015. • Due dates will be established in an Implementation Notice published concurrently with or shortly after publication of the final rule-6 months minimum advance notice

22. Status and Rollout GPNA submission due dates are planned to be 120 days prior to the end of the PHA’s fiscal year. The initial submittal schedule may change depending upon when the final rule is published. • June 2 for fye 9/30 • September 1 for fye 12/31 • December 1 for fye 3/31 • March 2 for fye 6/30

23. CURRENT DECISIONS • Regardless of when a final PNA rule is effective: • PHAs with a current requirement need to decide if they are going to proceed based upon the proposed rules. This is entirely voluntary.

24. Proceeding Early • PHAs may now proceed on a voluntary basis prior to final implementation of the rules. • PIC data available by emailing request to PHAPNA@hud.gov; function migrating to EPIC • A blank tool, prototype tool, and other resources are available at the HUD website • Support available through field offices

25. Proceeding Early • Should a PHA proceed in advance of rule? • Risk of final rule change • Assess the PHA’s capacity and resources to proceed • Need to proceed (CFFP, EPC etc) • Advantage of better availability of contractors • Early submittals are being accepted by HUD and are not intended to change future due dates

26. How to Prepare • The tool will pre-populate with PIC data and will be validated at receipt against PIC data so it is critical that PIC data be current. • The tool will rely upon the creation of sample sets of like kind buildings and units at each site. The PHA has the best knowledge to create these sets in advance-what are you going to inspect?

27. How to Prepare Sampling Size • Protocol substantially the same as the existing protocol. • For dwelling spaces, survey a minimum of 10% of the number of units per project of similar condition; • not just a straight 10% sampling if more are required to obtain a diversity of unit characteristics. • For non-dwelling spaces, survey up to 100% but at least 50% if conditions are known to vary; or if all spaces are known to be in the same condition, survey at least 20% of the total.

28. How to Prepare • Acquaint yourself with the GPNA tool • Begin preparing RFP documents • Consider what new improvements you may want to include in projections • Any PNA relies upon a review of existing documentation as a starting point. Collating the likely documentation that will be needed for a PNA in advance will save time, and can save money if you are using a contractor.

29. Documentation for PNA/EA • At least one year of energy bills for all PHA held accounts (tenant held accounts if available); 3 years is recommended. • Copies of any previous energy audits, PNAs, EPC documentation, 504 assessments, and other similar property assessments • Maintenance log or summary, preventative maintenance plan

30. Documentation for PNA/EA • Building drawings if available • Current bids for major work if available and local cost records and database if developed-determine if a standard or customized cost index will be used • Capital Fund P&E reports for up to 5 years • UPCS Annual inspection reports

31. PNA Tool

32. PNA Tool • The primary purpose in creating a tool rather than another report was to provide a project based strategic planning tool. • By creating a tool HUD hopes to make more sophisticated and effective planning techniques available to smaller PHAs. • The tool makes use of current accessible technology in order to organize large amounts of data and automate as many of the routine calculations as possible • The tool will be pre-populated with the PHA’s data from PIC and adjusts calculations for non-ACC units

33. PNA Tool • The PNA Tool is a standalone Microsoft Access based application installed on PHAs desktop, notebook, or network computers. Not necessary for the user to have Access software • Internet based distribution of the PNA tool • The inspection based tool leads the user through a series of inputs and automatically calculates and produces the 20 year projection as well as a number of useful printable reports.

34. PNA Tool • PHA Inputs • Cost, Estimated useful life, quantity, and remaining useful life are the minimum entries required for each applicable component. • The PHA divides its sites, buildings, and units into representative sets from which a 10% inspection sample is performed. • The PHA enters costs from an index or supportable local data set for replacement or refurbishment of each applicable building component and enters this information in the cost library page.

35. PNA Tool • PHA Inputs (cont’d): -The PHA enters an estimated useful life in the cost library for each of the items from a national index or its local supportable data set. -The PHA enters quantity and remaining useful life for each component item on tool created inspection sheets for a sample set of each class of components-site, building exterior, building systems, units, and common areas if applicable. (same classifications as PASS) -The tool (cost library and inspection sheet)is pre-populated with most commonly applicable components but is fully editable by the PHA to reflect their actual components

36. PNA Tool • From the minimum inputs above the tool can calculate the 20 year projection for all applicable property components and create the reports. • Once this 20 year projection is created, it is fully editable by the PHA so that various scenarios of timing, cost, and quantity adjustments can be modeled.

37. PNA Tool • Once the basic 20 year projection of replacement needs is in place the PHA can consider the addition of components that do not currently exist: • Sustainability Needs-this is where the energy audit information is used to add energy conservation measures to the projection-the tool automatically calculates simple payback based upon the entries • Marketability Needs-comp0nents that the PHA would like to have to improve livability, security etc • Accessibility Needs-components that the PHA needs to put in place to achieve accessibility

38. PNA Tool • Additional Features • Allows a need to be reflected as “immediate” or “critical” and can create separate reporting for those categories. • Allows for markup to be added as well as a local multiplier adjustment • Cost libraries and inspection forms are exportable to excel spread sheet format so they can be worked with outside of the tool • Documents and Photos can be stored within the tool to provide documentary backup

39. PNA Tool • Additional Features (cont’d): • Allows refurbishment to be shown instead of replacement reflecting actual experience of PHAs • “New PNA” creates a new form which can be blank so that the user can create a PNA for other property types it may have, such as section 8 property-user would manually input inventory data • The tool has functionality to use the above feature to create a PNA for an individual development within a Development/AMP • Pre-existing PNAs can be directly entered into the 20 year spreadsheet

40. PNA Tool • Reporting to HUD • Once the PNA is completed to the PHAs satisfaction, the reporting function is found on the bottom of the Reports Page. With one selection the tool creates an XML file for each AMP which is emailed as an attachment to HUD by the user. T • HUD does not retrieve the entire tool, only an extract of data so it is important that the PHA maintain the integrity of their reporting version for future reporting. • Submittals can be updated at any time by resubmitting, the latest received is entered. • Annually, PHAs will “update” the PNA which simply involves recording in the form on the Annual Update report which items where completed during the year and submitting to HUD –the tool will automatically move incomplete items to the next year.

41. PNA Tool HUD will collect summary level data from the PHAs: Replacement Needs for Site, Building Exterior, Building Systems, Common Areas, and Unit gross numbers plus major historical component cost items such as roofs, windows, HVAC, plumbing, and electrical. Sustainability Needs within 23 designated measures and “other ” Marketability Needs Capital Improvements Accessibility Needs Capital Improvements

42. PNA Tool • How Will HUD Use the Submitted Data? • Each submittal will be reviewed for anomalies that may result in inquiry from HUD and possible need for correction. The review is intended to identify information that looks erroneous or falls so far outside the norm as to raise a question. The review is intended to correct error. • The PHA data will be aggregated nationally for analysis by HUD to inform policy and, if determined practical to provide some extracts that PHAs can use to assess their operations within their peer group of PHAs.

43. Thank You QUESTIONS? Contact your HUD field office PIC data files available by email request to: PHAPNA@hud.gov

44. LINKS PNA : http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/programs/ph/capfund/physicalassessment The GPNA Tool and prototype is located on HUD’s GPNA Resource webpage at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/programs/ph/capfund/gpnatool Rules: www.regulations.gov search on HUD proposed rules published in federal register on July 20, 2011 and November 17, 2011 PIH Energy Conservation Resources: http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/programs/ph/phecc