Measuring and Assessing the Consequences of 

Technology and Innovation for Affordability of 

Housing: Proceedings of the NIST - PATH Workshop 

William I. Whiddon, David B. Hattis, and Chi J. Leng 

U.S. Department of Commerce 

Technology Administration 

National Institute of Standards and Technology

NISTIR 7064 

Office of Applied Economics 

Building and Fire Research Laboratory 

Gaithersburg, MD 20899 

Measuring and Assessing the Consequences of 

Technology and Innovation for Affordability of 

Housing: Proceedings of the NIST - PATH Workshop 

William I. Whiddon and David B. Hattis 

Building Technology Incorporated 

Silver Spring, MD 20910 

and 

Chi J. Leng 

Office of Applied Economics 

Building and Fire Research Laboratory 

National Institute of Standards and Technology 

Sponsored by: 

U.S. Department of Housing and Urban Development 

Office of Policy Development and Research 

Washington, DC 20410 

February 2004 

U.S. DEPARTMENT OF COMMERCE 

Donald L. Evans, Secretary 

TECHNOLOGY ADMINISTRATION 

Philip J. Bond, Under Secretary for Technology 

NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY 

Arden L. Bement, Jr., Director 

U.S. Department of Commerce 

Technology Administration 

National Institute of Standards and Technology

Office of Applied Economics 

Building and Fire Research Laboratory 

Gaithersburg, MD 20899 

NISTIR 7064 
ii
iii

Foreword 

The Office of Applied Economics (OAE) in the Building and Fire Research Laboratory 

(BFRL) at the National Institute of Standards and Technology (NIST), through the 

support of the Partnership for Advancing Technology in Housing (PATH), a program of 

the U.S. Department of Housing and Urban Development (HUD), is developing a set of 

affordability guidelines for owner-occupied housing. This report describes the NIST–

PATH Housing Affordability Workshop held at the NIST Gaithersburg, MD campus on 

June 4-5, 2003. The purpose of the workshop was to discuss ways for measuring and 

assessing the consequences of technology and innovation on the affordability of housing. 

Affordability has always been an important consideration in housing, but its impact on 

housing choice has usually been informal. Housing industry stakeholders are realizing 

the need to address affordability both explicitly and formally. There is no standard, 

uniform, or accepted definition of affordability, however, that housing industry 

stakeholders can use to define and measure affordability. Without a set of guidelines for 

measuring affordability, manufacturers, code officials, homebuilders, mortgage lenders, 

consumers, and other housing industry stakeholders will not have a clear methodology 

for evaluating the affordability of alternative or new technologies in housing. 

The guidelines currently under development will show how to measure and evaluate the 

affordability of alternative residential building technologies when compared with a 

conventionally used technology satisfying the same function or code requirement. The 

affordability guidelines will help PATH achieve its vision of a 20 % reduction in monthly 

housing costs by 2010. The affordability guidelines will also support HUD’s strategic 

goal of increasing the availability of decent, safe, and affordable housing in American 

communities. 

The development of the affordability guidelines is a four-step process: (1) producing a 

white paper highlighting affordability-related issues in owner-occupied housing; (2) 

convening the NIST–PATH Housing Affordability Workshop and producing this 

Proceedings; (3) producing a consensus roadmap for developing and deploying the 

affordability guidelines; and (4) producing a proposed set of affordability guidelines. 

Shortly after project initiation, OAE entered into a collaborative effort with Building 

Technology Inc. (BTI). BTI has worked closely with OAE through the completion of the 

first two steps in the four-step process. 

The first step was the production of a white paper. The white paper was used as a 

background piece by participant stakeholders in the NIST-PATH Housing Affordability 

Workshop to identify (1) what affordability means to them and (2) what sorts of 

measurement guidelines and other economic tools would help them. The white paper 

examined the linkages between affordability and innovation at two scales: (1) the 

individual materials, products, elements, components, and systems of housing and (2) the 

entire house and its delivery system. 
iv

The second step was to convene the NIST-PATH Housing Affordability Workshop. The 

workshop provided a framework for discussing key affordability/innovation-related 

issues. This report, prepared jointly by BTI and OAE, summarizes the findings and 

recommendations of that workshop. Prior to the workshop, OAE and BTI developed 

discussion topics for each of the two scales of innovation and refined them for use by 

workshop participants. These topics provided the framework for keynote presentations, 

which served to focus the participants’ discussions and to get their views on affordability/ 

innovation-related issues. 

The third step is to develop a consensus roadmap building on the workshop outputs. 

NIST is exploring ways in which reliance on a carefully selected set of standard practices 

and input from key housing industry stakeholders can be used to produce a consensus 

roadmap for developing a set of affordability guidelines. The consensus roadmap will 

include plans for awareness building and information dissemination. This report contains 

specific recommendations for a road-mapping exercise as the next step in producing a set 

of affordability guidelines for owner-occupied housing. 

The fourth step is the production of the affordability guidelines. A subsequent technical 

report will contain a proposed set of affordability guidelines. It will document themes 

drawn from the white paper, the workshop, and the road-mapping exercise to produce a 

coherent economic methodology and a proposed set of affordability guidelines based on 

that methodology. The goal is to deploy a set of affordability guidelines that each key 

housing industry stakeholder will support. 

Robert E. Chapman 

Office of Applied Economics 

Building and Fire Research Laboratory 

National Institute of Standards and Technology 

Gaithersburg, MD 20899-8603 
v

Abstract 

On June 4-5, 2003, the National Institute of Standards and Technology (NIST) and the 

Partnership for Advancing Technology in Housing (PATH), a program of the U.S. 

Department of Housing and Urban Development, held a joint workshop with industry at 

the NIST Gaithersburg, MD campus on key issues affecting housing affordability. The 

purpose of the workshop was to discuss ways for measuring and assessing the 

consequences of technology and innovation on the affordability of housing. The 

workshop was attended by a broad cross-section of the housing industry. Stakeholder 

groups represented included homeowners, homebuilders, product manufacturers, code 

officials, financial institutions, and government agencies. Keynote presentations were 

followed by facilitated discussion for each of the following topics: (1) who benefits from 

innovation; (2) how to transfer benefits to the home owner; (3) how does each 

stakeholder view and compute costs; (4) how does each stakeholder view and compute 

uncertain future benefits; (5) how to evaluate the risks of using innovative technologies; 

(6) how to measure the social costs and benefits of innovative technologies; (7) how can 

the regulatory system be used to encourage innovation; and (8) who should bear the costs 

of new delivery systems for innovative technologies. A final plenary session was held to 

discuss future directions for applied research. These proceedings contain a synthesis of 

findings and recommendations for each discussion topic and stakeholder group. Specific 

recommendations for a road-mapping exercise are included as the next step in producing 

a set of affordability guidelines for owner-occupied housing. Also included are two 

appendices that compile findings, recommendations, and observations, organized by 

discussion topic and stakeholder group. 

Keywords: Affordability; building codes and standards; building economics; 

construction; costs; economic analysis; housing; innovation; life-cycle cost; technology 
vi
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Preface 

This study was conducted by the Office of Applied Economics in the Building and Fire 

Research Laboratory (BFRL) at the National Institute of Standards and Technology in 

collaboration with Building Technology Inc. The study was sponsored by the Partnership 

for Advancing Technology in Housing (PATH) program at the U.S. Department of 

Housing and Urban Development (HUD). The overall purpose of the BFRL project, of 

which this study is a part, is to develop a set of affordability guidelines for owneroccupied housing. These guidelines will help PATH achieve its vision of a 20 % 

reduction in monthly housing costs by 2010. The affordability guidelines will also 

support HUD’s strategic goal of increasing the availability of decent, safe, and affordable 

housing in American communities. The intended audience for this document is the 

public and private sector members of PATH, construction industry representatives, and 

other interested parties. 
viii
ix

Acknowledgements 

The authors wish to thank all those who contributed so many excellent ideas and 

suggestions that they have attempted to incorporate into this report. The authors wish to 

thank Mr. David Engel, Dr. Carlos E. Martín, and Mr. Dana B. Bres of the Office of 

Policy Development and Research at the U.S. Department of Housing and Urban 

Development (HUD) for their guidance, suggestions, and support. HUD’s Office of 

Policy Development and Research, in collaboration with the private sector, provides 

leadership and administrative support to the Partnership for Advancing Technology in 

Housing (PATH) program. Thanks are also due to Dr. Christopher C. White of the 

Materials and Construction Research Division at NIST’s Building and Fire Research 

Laboratory (BFRL) for his efforts to coordinate PATH-related research within BFRL and 

for his comments on the report. Special appreciation is extended to Drs. Harold E. 

Marshall and Robert E. Chapman of BFRL’s Office of Applied Economics for the 

thoroughness of their reviews and for their many insights and to Mrs. J’aime L. Maynard 

for her assistance in preparing the manuscript for review and publication. Special thanks 

are due to each of the Steering Committee members—Mr. David Conover, International 

Code Council; Mr. Paul Emrath, National Association of Homebuilders; Dr. John R. 

Hall, National Fire Protection Association; Ms. Michelle K. McDonough, Fannie Mae; 

Mr. Ron Piester, New York Department of State; Mr. Edgar Sutton, National Association 

of Homebuilders; Ms. Theresa Weston, DuPont Nonwovens; and Dr. Richard N. 

Wright—for their guidance in planning and conducting the housing affordability 

workshop. The report has also benefited from the careful note taking of Ms. Christine A. 

Izzo and Ms. Jennifer Helgeson of BFRL’s Office of Applied Economics during the 

housing affordability workshop and their reviews and comments on earlier versions of the 

manuscript. 
x
xi

Table of Contents 

Foreword............................................................................................................................iii 

Abstract............................................................................................................................... v 

Preface............................................................................................................................... vii 

Acknowledgements............................................................................................................ ix 

List of Tables .................................................................................................................... xii 

List of Acronyms .............................................................................................................xiii 

1 Introduction............................................................................................................. 1 

1.1 Background............................................................................................................. 1 

1.2 Affordability and Technology: Costs, Benefits, and Incentives............................. 1 

1.2.1 Technology and Innovation at the Scale of Materials, Products, 

Elements, and Components of Housing...................................................... 2 

1.2.2 Technology and Innovation at the Scale of the Entire House and Its 

Delivery System.......................................................................................... 2 

1.3 Key Concepts.......................................................................................................... 3 

1.4 Project Description.................................................................................................. 4 

1.5 Customers and Stakeholders................................................................................... 5 

1.6 Workshop Discussion Topics ................................................................................. 5 

1.7 Workshop Procedures ............................................................................................. 6 

1.8 Expected Outcome.................................................................................................. 6 

2 Summary of Discussion Topics ............................................................................ 11 

2.1 Who Benefits from Innovation ............................................................................. 11 

2.2 How to Transfer Benefits to the Homeowner....................................................... 11 

2.3 How Does Each Stakeholder View and Compute Costs ...................................... 12 

2.4 How Does Each Stakeholder View and Compute Uncertain Future Benefits...... 12 

2.5 How to Evaluate the Risks of Using Innovative Technologies ............................ 13 

2.6 How to Measure the Social Costs and Benefits of Innovative Technologies....... 14 

2.7 How Can the Regulatory System Be Used to Encourage Innovation................... 15 

2.8 Who Should Bear the Costs of New Delivery Systems for Innovative 

Technologies......................................................................................................... 16 

3 Summary of Stakeholder Perspectives.................................................................. 17 

3.1 Owners .................................................................................................................. 18 

3.2 Lenders.................................................................................................................. 18

3.3 Builders................................................................................................................. 19

3.4 Building Product Manufacturers........................................................................... 20 

3.5 Building Code Regulators..................................................................................... 20 

3.6 Model Codes Developers...................................................................................... 21 
xii

3.7 Buildings/Economics Researchers........................................................................ 22 

3.8 Consultants............................................................................................................ 23 

4 Next Steps ............................................................................................................. 25 

4.1 Housing Market Considerations ........................................................................... 25 

4.2 Housing Delivery System ..................................................................................... 26 

4.3 Attribute Metrics................................................................................................... 26 

4.4 Role of Regulation ................................................................................................ 28 

4.5 Innovation ............................................................................................................. 28 

Appendix A Individual Comments Organized by Discussion Topic ........................... 29 

Appendix B Individual Comments Organized by Stakeholder Group and Keyword ... 81 

Appendix C Schematic Durability Rating System and Valuation ............................. 143 

Appendix D Workshop Agenda ................................................................................. 147 

Appendix E List of Attendees..................................................................................... 149 

List of Tables 

Table 1-1. Affordability and Technology: Hierarchy of Key Stakeholder Groups...... 7

Table 1-2. Affordability-Related Benefits (or Cost Savings) Classified by 

Stakeholder Group ...................................................................................... 8

Table 1-3. Affordability-Related Costs (or Benefit Reductions) Classified by 

Stakeholder Group ...................................................................................... 9 

Disclaimer: The comments represent viewpoints of the individuals participating in the 

workshop and not those of any organization, institution, or stakeholder group. Workshop 

participants may have mentioned trade names and company products as examples to 

illustrate their comments. In no case does such mention imply recommendation, 

endorsement, or judgment by the National Institute of Standards and Technology or the 

U.S. Department of Housing and Urban Development. 
xiii

List of Acronyms 

AHJ authority having jurisdiction 

ASTM American Society of Testing and Materials, International 

ATC Applied Technology Council 

BCEGS Building Code Effectiveness Grading Schedule 

BFRL Building and Fire Research Laboratory 

BTI Building Technology Incorporated 

DOD U.S. Department of Defense 

DOE U.S. Department of Energy 

EIFS exterior insulation finishing systems 

EPA U.S. Environmental Protection Agency 

ESR evaluation service report 

FDA U.S. Food and Drug Administration 

FEMA Federal Emergency Management Agency 

FHA Federal Housing Administration 

FNMA Federal National Mortgage Association (Fannie Mae) 

GFCI ground fault circuit interrupter 

HUD U.S. Department of Housing and Urban Development 

HVAC heating, ventilation, air conditioning 

IAQ indoor air quality 

ICBO International Conference of Building Officials 

ICC International Code Council 

IRC International Residential Code 

ISO Insurance Services Office 

LCC life-cycle cost 

LEED Leadership in Energy and Environmental Design 

LTV loan-to-value 

MF multi-family 

NAHB National Association of Home Builders 

NBS National Bureau of Standards (forerunner of NIST) 

NES National Evaluation Service 

NIH National Institutes of Health 

NIST National Institute of Standards and Technology 

O&M operations and maintenance 

OAE Office of Applied Economics 

OMB U.S. Office of Management and Budget 

OSB oriented strand board 

QA quality assurance 

QC quality control 

PATH Partnership for Advancing Technology in Housing 

PBC performance-based codes 

PHD planned housing development 

PITI principal, interest, taxes, and insurance 

PRD planned residential development 

R&D research and development 
xiv

RIF resource impact factor 

ROI return-on-investment 

RUF resource utilization factor 

SF single-family 

SKU Stock Keeping Unit 

URMB unreinforced masonry building 
1 

1 Introduction 

1.1 Background 

Affordability has always been an important consideration in housing, but its impact on 

housing choices has usually been informal. With recent changes, such as the addition of 

affordability as an explicit goal to the International Residential Code,1 more and more 

housing decision-makers are realizing the need to address affordability both explicitly 

and formally. There is no standard, uniform, or accepted definition of affordability, 

however, that code officials can use to define and measure affordability. Without a set of 

guidelines for measuring affordability, manufacturers, code officials, and consumers will 

not have a clear methodology for evaluating the affordability of alternative or new 

housing technologies in owner-occupied housing. The NIST project “Affordability 

Guidelines for Owner-Occupied Housing” will develop those guidelines in collaboration 

with building community stakeholders. The guidelines will show how to measure and 

evaluate the affordability of alternative residential building technologies when compared 

with a conventionally used technology satisfying the same function or code requirement. 

The guidelines will accommodate multiple measurement methodologies. For example, 

one such methodology is life-cycle costing as described in ASTM standard practice E 

917.2

 The consensus affordability guidelines resulting from this joint effort will result in 

a more rapid introduction of new, more cost-effective technologies in housing, thereby 

supporting HUD’s Strategic Goal 1: Increasing the Availability of Decent, Safe, and 

Affordable Housing in American Communities.3

1.2 Affordability and Technology: Costs, Benefits, and Incentives 

This introduction highlights discussion topics that relate to technology, innovation, and 

the affordability of housing.4

 The workshop expanded on these topics by promoting 

discussions on the connections and relationships between housing affordability and 

technology and innovation. It focused on the effect of both new innovations and new 

uses of existing technologies on costs of materials, products, components, and, 

ultimately, the home. Measurement of housing affordability underlay all the discussions. 

The relationship between technology, innovation, and affordability will be examined at 

two scales: 

• Technology and innovation at the scale of materials, products, elements, and 

components of housing. 

 

1

 International Conference of Building Officials (ICBO). 2000. International Residential Code for Oneand Two-Family Dwellings. Whittier, CA: ICBO. 2

 American Society for Testing and Materials (ASTM). 2001. Annual Book of ASTM Standards 2001: 

Volume 04.11 Building Construction. West Conshohocken, PA: ASTM. 3

 U.S. Department of Housing and Urban Development. 2001. Fiscal Year 2002 Annual Performance Plan. 

Washington, DC: HUD. 

4

 It does not address the broader policy, societal, and economic issues that also relate to housing 

affordability, although the issues comprised a significant proportion of the discussions at the workshop (see 

Appendices A and B). 
2 

• Technology and innovation at the scale of the entire house and its delivery 

system. 

1.2.1 Technology and Innovation at the Scale of Materials, Products, Elements, 

and Components of Housing 

Existing technologies and new innovations at this scale penetrate the housing market 

within the current traditional housing production and delivery system. Innovators who 

develop new materials, products, elements, or components for housing must recover their 

costs through the marketplace. If this is to be achieved, it is necessary to examine the 

flow of costs and benefits that relate to innovations as they enter the housing market 

under the current production and delivery system and the stakeholders (see Table 1) 

affected by these costs and benefits. (See Tables 2 and 3 for matrices mapping the 

potential benefits and costs associated with technology change in housing to broadly 

defined stakeholder groups.) 

Costs of innovation: 

• Development costs, including the cost of obtaining code approval. 

• First cost of the product. 

• Replacement cost at the end of its service life. 

• Maintenance and operation costs related to the product. 

• Cost of risk of new-technology product uncertainty and failure. 

• Poorer performance on aspects of performance that were not the focus of the 

innovation, such as durability or fire risk. 

Benefits of innovation: 

• Reduced first cost, such as lower cost materials of acceptable durability. 

• Reduced housing maintenance costs. 

• Reduced internal housing “operation” costs, such as lower annual fuel costs. 

• Reduced external housing “operation” costs, such as lower commuting expenses.5

• Reduced vulnerability to natural or manmade disasters. 

• Improved performance that cannot be easily monetized, such as improved 

acoustic privacy, aesthetics, or more easily cleaned surfaces. 

1.2.2 Technology and Innovation at the Scale of the Entire House and Its Delivery 

System 

Innovations at this scale penetrate the housing market through the creation of an 

alternative delivery system, since they cannot be accommodated by the current delivery 

system. The “open building” concept is an example of such an innovation. This concept 

is based on separation of the building structure and envelope from the finishing of interior 

spaces, with each produced by a different delivery system, and independently regulated 

 

5

 Higher density housing located nearer urban centers that may have higher first and operating costs, but 

lower transportation costs associated with it. 
3 

and financed. It has reportedly been used to produce housing in the Netherlands and in 

Japan. 

Also, at this scale the range of stakeholders is expanded to include: 

• Housing finance 

• Housing insurance 

• Public utilities (water, waste, energy, communication) 

• Public services, such as transportation 

Costs of innovation: 

• Development costs, including the cost of obtaining code approval, which are 

significantly higher at this scale due to the longer development time and more 

comprehensive and complex product. 

• First cost of the product. 

• Replacement cost at the end of its service life. 

• Maintenance and operation costs related to the product. 

• Cost of risk of new-technology product uncertainty and failure, which can be 

significantly higher at this scale because of the wider impacts of a total system 

failure. 

• Cost of developing a new delivery system, including finance, insurance, and 

regulation. 

• Cost of new infrastructure entailed by technology at this scale, such as public 

utilities and public services. 

• Poorer performance on aspects of performance that were not the focus of the 

innovation, such as durability or fire risk. 

Benefits of innovation: 

• Reduced first cost, such as lower cost materials of acceptable durability. 

• Reduced housing maintenance costs. 

• Reduced internal housing “operation” costs, such as lower annual fuel costs. 

• Reduced external housing “operation” costs, such as less commuting expenses. 

• Reduced vulnerability to natural or manmade disasters. 

• Improved performance that cannot be easily monetized, such as improved quality 

of life. 

1.3 Key Concepts 

The following key concepts have been used in the preceding discussion. 

Technological innovation in housing, for our purposes, is defined as new ways of 

designing, constructing, producing, or of combining materials, at each of the scales 

discussed above. New technologies in housing are often slow to be adopted because of 

uncertainties about what they will cost stakeholders, both in the short and long run. Yet 

new technologies can be more cost effective than traditional technologies. Having a set 
4 

of guidelines for measuring the cost effectiveness of new technologies will encourage 

their consideration and adoption, and accelerate adoption of those new technologies that 

make sense. 

First costs are those incurred at the beginning of a project. The first costs of windows, 

for example, when examined from the perspective of the homeowner, is what the 

windows cost to purchase and install. If we compare a traditional window system to a 

new technology on the basis of first costs, we would say the new technology is affordable 

on a first cost basis if its cost is less than or equal to that of the conventional technology 

used to satisfy the same function or code requirement. 

Life-cycle costs are all costs associated with a given technology. They include first costs; 

operations, maintenance, and repair costs over a specified life cycle (e.g., the typical 

holding period for owner-occupied housing); replacement cost at the end of the life cycle; 

and any other costs associated with the technology over time. These life-cycle costs could 

be expressed as monthly mortgage costs (i.e., principal, interest, taxes, and insurance) or 

monthly holding costs (i.e., mortgage costs plus amortized operations, maintenance, 

energy, and repair and replacement costs). Thus the life-cycle costs of a new-technology 

window system would take into account, in addition to the purchase and installation costs 

(first costs), all costs of repairs, replacement, and even energy savings if the new system 

resulted in better thermal performance than the conventional system to which it was 

being compared. 

Incentives are important in evaluating affordability because they affect the bottom line of 

how much building technologies ultimately cost a stakeholder. Cost sharing, tax credits 

or deductions, and grants to stakeholders will make new housing technologies more 

affordable when compared with technologies not favored with incentives. If a state 

government, for example, were to cost share the first cost of residential solar hot water 

heaters, the life-cycle costs of solar hot water (taking into account reduced energy bills 

for water heating) could become affordable (i.e., cost competitive) with conventional 

water heating systems. Cost sharing, tax deductions or credits, and grants to stakeholders, 

whether taken singly or in combination, all affect stakeholder affordability. 

1.4 Project Description 

There are four steps in the development of the affordability guidelines. The first was the 

completion of a white paper (that formed the basis for this introductory chapter of the 

workshop summary). It was used as a background piece by participant stakeholders at the 

affordability workshop to identify (1) what affordability means to them and (2) what sorts 

of measurement guidelines and other economic tools would help them. 

The second step was to conduct the workshop to provide a framework for discussing key 

affordability/innovation-related issues. Discussion topics, based on the eight questions 

(see Section 1.6) and the two scales of innovation presented previously, were developed 

for use by participants of the affordability workshop to focus their discussion and to get 

their views on affordability/innovation-related issues. 
5 

The third step will be to develop a consensus roadmap based on the workshop outputs. 

NIST will explore ways in which reliance on a carefully selected set of standard practices 

and input from the stakeholder groups can be used to produce a consensus roadmap for 

developing a set of affordability guidelines. The consensus roadmap will include plans 

for awareness building and information dissemination. It is believed that this approach 

will facilitate the deployment of a set of affordability guidelines that can be supported by 

each of the key stakeholder groups. 

The fourth step is the production of the affordability guidelines. 

1.5 Customers and Stakeholders 

Customers are the intended users of the affordability guidelines. A manufacturer who 

wants to advertise the relative affordability of a new product, for example, could measure 

that affordability with the guidelines. A consumer who wishes to compare the 

affordability of a new roofing shingle to conventional shingles is also a customer. These 

customers are at the same time the stakeholders. Having or not having affordability 

guidelines makes a difference in their evaluation of housing products. Thus they have a 

stake in what those guidelines say. 

Six key customer/stakeholder groups are (1) homeowners, or their representatives, who 

wish to select a particular material, product, or system; (2) home builders, remodelers, 

developers, and their subcontractors, who integrate materials, products, and systems and 

provide the integrated package to homeowners; (3) innovators, product manufacturers, 

distributors, and retailers who wish to verify that their material, product, or system meets 

affordability criteria; (4) code officials and evaluation services who formulate codes or 

judge if the proposed material, product, or system meets code requirements; (5) real 

estate, financial, and insurance institutions and their agents; and (6) government 

programs concerned with housing-related issues (e.g., HUD, FEMA, DOE, and DOD). 

Each of these groups was represented at the workshop because housing industry 

stakeholders are affected in different ways by affordability/innovation-related issues. 

Participants in the workshop considered alternative measures of affordability and 

commented on how each of those measures would or would not help them when making 

choices among housing technologies. Special emphasis was placed on documenting how 

each stakeholder group looks at affordability. 

1.6 Workshop Discussion Topics 

Eight questions formed the basis for sequential consideration and discussion at the 

workshop: 

1. Who benefits from the innovation? Do the homebuyers or homeowners benefit? If 

there is a benefit of reduced first cost, does it pass through to the homeowner, or 
6 

does it go into the pocket of someone in the supply chain of the current delivery 

system?6

 

2. How to “push” the benefits to the homeowner? How can we help the home buyer 

to see the big picture, e.g., benefits as well as costs, especially initial costs? If a 

benefit comes at added cost, can the homeowner trade it off against reduced 

performance somewhere else in the house? Is the production function of housing 

(the current delivery system) flexible in that way to allow for substitutions among 

component costs, or is every innovation an “extra expense”? 

3. How does each stakeholder view and compute life-cycle costs and benefits 

compared to first costs? 

4. How does each stakeholder view and compute future benefits that are uncertain or 

contingent on very low probability events, such as protection from earthquakes or 

hurricanes that may never happen? 

5. How should the uncertainty and risk associated with using new versus traditional 

technology be addressed? 

6. How should society value or monetize the social costs and benefits of introducing 

technology in residential housing, such as energy conservation or disaster relief 

and recovery? 

7. Can the regulatory system be used to encourage innovation, and to distinguish 

innovations with net benefits from those with net costs? 

8. Who should bear the costs of development of new delivery systems and new 

infrastructure systems that are needed for innovation to penetrate the market at the 

scale of the entire house and its delivery system? 

1.7 Workshop Procedures 

Each discussion session was introduced by two individuals (leads) who briefly set the 

stage of possible positions, followed by facilitated discussion of subordinate questions 

among the full group. Leads were asked to pose divergent initial positions, as possible. 

Leads and/or facilitators sought to ensure that relationships to affordability guidelines and 

roadmap development were considered as part of the discussion and recommendations 

for each session. 

1.8 Expected Outcome 

This report summarizes the needs identified at the workshop for measures for 

affordability in relation to housing technologies. The report will form the blueprint for 

making a roadmap of what needs to be done in developing a set of affordability 

guidelines for owner-occupied housing. By following this blueprint, stakeholders will 

ultimately have a standardized, accepted definition of affordability that meets their needs 

and will help them make more cost-effective choices in owner-occupied housing. 

 

6

 When the code allowed non-metallic conduit in garden apartments, did the cost of the more expensive 

system it replaced get transferred from the union mechanic to the electrical contractor, or to the 

homebuilder, or was the cost to the consumer reduced? 
7 

Table 1-1. Affordability and Technology: Hierarchy of Key 

 Stakeholder Groups 

Homeowners 

Homeowners 

Occupants 

Tenants 

Neighbors 

Homeowners’ associations 

Home Builders 

Home builders 

Remodelers 

Developers 

General contractors 

Subcontractors 

Maintenance and repair providers 

Product Manufacturers

Manufacturers 

Innovators 

Distributors 

Retailers 

Code Officials Code officials 

Evaluation services 

Finance 

Real estate 

Financial institutions 

Insurers 

Government 

HUD 

FEMA 

DOE 

DOD 

State/Local 
8 

Table 1-2. Affordability-Related Benefits (or Cost Savings) Classified 

 by Stakeholder Group 

Stakeholder Group 

Type of Benefit or Cost Saving 

Homeowners Home Builders Product Manufacturers Code Officials Finance Government 

 

Reduced first cost, such as lower 

cost materials of acceptable 

durability 

x x 

Less frequent replacement/longer 

product life/improved durability x 

Reduced housing maintenance costs x 

Reduced internal housing operation 

costs, such as lower annual fuel 

costs 

x 

Reduced vulnerability to natural or 

manmade disasters x x x 

Improved performance in other 

qualities (convenience, comfort, 

soundproofing, health) x 

Greater demand in marketplace, 

increased value of asset or product x x x x 

Reduced susceptibility to shortages 

Economic incentives (cost sharing, 

tax credits or deductions, grants) x x x 

Reduced external housing 

“operation” costs, such as lower 

commuting expenses 

x 
9 

Table 1-3. Affordability-Related Costs (or Benefit Reductions) 

 Classified by Stakeholder Group 

Stakeholder Group 

Type of Cost or Benefit 

Reduction 

Homeowners Home Builders Product Manufacturers Code Officials Finance Government 

 

New technology development costs x 

Cost of obtaining code approval x x x x 

Cost of introducing and adapting to 

new technology: installation and 

maintenance training 

x x x x 

Cost of risk of product uncertainty 

and failure x x x x x 

Cost of economic incentives x x 

Reduced sales of selected 

product/equipment lines and 

associated services 

 x 

Increased marketing costs x x x 

Higher first cost x x x x 

Replacement cost at the end of 

product's service life x x 

Maintenance costs related to the 

product x x 

Operations costs related to the 

product x x 

Cost of financing (closing costs, 

mortgage interest) x x x x x 

Insurance costs (premium, 

deductible, type of coverage) x x x x 

Location/Usage costs (convenience, 

school district, commuting, crime; 

housing size, features, amenities) 

x x x 
10 
11 

2 Summary of Discussion Topics 

Workshop discussions covered a wide range of issues. Some of the discussions focused 

on policy considerations, which are beyond the scope of concerns for this work. The 

following sections highlight the key points that emerged from each workshop discussion 

session. All documented comments for each discussion session, arranged in sequence, are 

presented in Appendix A. 

2.1 Who Benefits from Innovation 

Richard Wright and Carlos Martín, representing homeowners and building/economics 

researchers, respectively, introduced the question of who benefits by asserting that 

housing value results from both economic and non-economic factors. Further, any 

discussion of affordability must address pricing and the uncertainty of being able to 

recoup an investment in housing. Key discussion points included: 

• Prices and pricing are local 

• Cost of production (of a dwelling) does not set price, though there are indirect 

relationships (cost determines whether or not the house will be built) 

• Benefits of innovation do not pass directly to home buyers 

• Producers make decisions regarding product, not the consumer (who buys a 

complete package, not a collection of options or attributes) 

• Durability may be a key to passing benefits to home buyers and owners 

• Buyers focus on their own time horizon (how long they will own the house—not 

its extended life-cycle; there is no incentive to consider a longer period) 

• Lenders define affordability—not builders, not buyers 

• Benefits accrue to decision-makers at various points in the production process 

• Regulation is a significant factor in housing cost (estimated at 30 %) 

• Delivery systems for innovation in new and existing housing are very different 

2.2 How to Transfer Benefits to the Homeowner 

Ed Sutton, representing the builder stakeholder group, and Theresa Weston, representing 

product manufacturers, led the discussion of delivering innovation benefits to 

homeowners. Producers and product manufacturers look for market ‘pull’. The industry 

does not ‘push’ products or benefits to consumers. Communication with the consumer is 

key to the sales process. The builder is typically the buyer of housing products, not the 

homebuyer or owner—especially for the new home market. Manufacturers must create 

value for the builder, and, through the builder, for the homeowner. An innovation cannot 

trade off performance from one system to another. Key discussion points included: 

• Innovation must bring some sought after benefit (a ‘hook’) 

• Builders limit the number of options available to buyers 

• Builders and buyers want benefits of innovation at no cost or reduced cost 

• Some builders target 80 % of buyer’s budget, then allow 20 % for add-on options 
12 

• “See and feel” innovations are easier to sell than hidden changes that may 

affect/improve durability 

• Today, QC/QA (quality control/quality assurance) and business management 

(non-building considerations) are key to delivery system efficiency improvement 

• How does builder/buyer decision-making differ throughout the product 

adoption/penetration process? 

• Buyers do not know what they want, at least until it is shown to them 

2.3 How Does Each Stakeholder View and Compute Costs 

Robert Chapman and Paul Emrath, representing researchers and builders, led the 

discussion of attitudes toward costs across stakeholder groups. From a buildings research 

perspective, stakeholder variations occur in discount rate, time horizon, and relevance of 

costs. Life-cycle analysis is flexible, provides structure, under a wide range of conditions. 

Time horizons are important to builders as well. Buyers are uncertain of time in home 

and who will buy when they sell, and so use varying discount rates—in addition, different 

buyer segments behave differently. Key discussion points included: 

• Time horizons increase with income, length of time in the home, and repeat 

buyers 

• Lenders focus on first costs while insurers, communities, and governments have 

longer time horizons 

• Differences between single-family and multifamily markets are significant—age, 

service life, and condition are considered at multifamily resale 

• Standing and position of building code regulation and enforcement 

representatives as stakeholders in questions of affordability are unclear (although 

International Residential Code now explicitly cites affordability along with safety 

as goals) 

• It is difficult to juxtapose economics against safety in codes and standards 

deliberations 

• Rare event risk assessment is based on documented actuarial experience 

• Home inspections could become the counterpart to due diligence for single-family 

home resale assessments 

2.4 How Does Each Stakeholder View and Compute Uncertain Future Benefits 

Ed Sutton and Robert Chapman, representing builders and building researchers, 

introduced a discussion of the effect of uncertainty associated with rare events on 

decision-making. Visible innovation aids market acceptance of change requirements. But, 

consumers are largely unable to rationally differentiate risks (may fear low risk more than 

high risk events). Insurance and taxes may be fruitful areas for incentives to innovation. 

Minimum acceptable levels of health and safety standards are neither well defined nor 

understood—much less so for issues such as affordability. Understanding of risk should 

be based on magnitude, probability, and expected performance during rare events. But, 

risk-based decisions, such as in determining insurance premiums, may penalize those 

least able to afford an increase. Key discussion points included: 
13 

• The magnitude of any event is, essentially, the magnitude of the loss that occurs 

• Home buyers, in attempting to understand quantitative data in a qualitative way, 

divide hazards into ‘impossible’ and ‘intolerable’ categories (protecting against 

only the latter) 

• There are three types of consumers: one group will choose mediocre performance 

because they want to avoid the uncertainty, even at a cost of lower performance. 

The second will choose the high performance option if the uncertainty is 

controllable by their own actions. A third may choose the high performance/high 

uncertainty option because they care only about first cost 

• Product innovation that relies on maintenance for operation will fail 

• Tolerance of deterioration in homes (deferred maintenance) is a problem, at 

present there is no direct accountability for inaction—how can it be addressed? 

• Building condition has extended impacts—building vacancy rate has been found 

to be a strong indicator of fire frequency for entire neighborhoods 

• Increased safety leads to increased costs of housing; the same will be true for all 

other attributes 

• Increased enforcement/adherence (to whatever the standard is) leads to increased 

housing quality 

• There is no guarantee that innovation either lowers costs or increases quality 

2.5 How to Evaluate the Risks of Using Innovative Technologies 

Theresa Weston, representing product manufacturers, and Michelle McDonough, 

representing lenders, introduced the discussion of uncertainty associated with the use of 

innovation. Uncertainty includes unforeseen costs, durability of value, and consistency of 

the capability to measure multiple aspects of innovation. Manufacturers reduce risk in 

new products by making evolutionary rather than revolutionary changes (with greater 

chance of failure), by addressing all aspects of impacts on performance, and by 

developing installation, delivery, and O&M procedures as the product is developed. Key 

discussion points included: 

• New products are in direct competition with existing substitute products 

• Building codes and standards can become barriers to innovation 

• Product assessment should involve 3 distinct stages: assessment by manufacturer, 

controlled assessment by a limited population, then general distribution 

• Site assembly by third-parties is a problem—more systems integration 

(engineered product) is needed. 

• To manufacturer, time is a critical factor—extended development and testing 

takes time off the patent and reduces the value of the innovation to the innovator 

• Development of innovations must look closely at even minor portions of costs, 

such as flashing for windows 

• New products often must completely replace an existing product in the supply 

chain because of marketing and distribution considerations. 

• Innovation developers seek standards of acceptance—code compliance 

acceptance is very important 
14 

• For new products: 

o Manufacturer will understand risk 

o Consumer (builder) will overestimate risk 

o Both will try to shift risk to someone else 

o Ultimate consumer (home buyer) probably least able to afford risk 

2.6 How to Measure the Social Costs and Benefits of Innovative Technologies 

Michelle McDonough, representing lenders, and Ron Piester, representing building code 

regulators, introduced the discussion of social costs and benefits in housing. There is a 

difference between ‘valuing’ and ‘monetizing’ social aspects of housing. Similarly, there 

are differences between ‘general stakeholders’ (e.g. regulators and repairmen) and 

‘stakeholders with standing’ that have a direct economic investment in housing. In terms 

of distribution of costs and benefits, lenders are far more concerned with negative 

impacts on low-income buyer segments (which are much more susceptible to adverse 

effects). Social costs vary depending on the geographic/political level at which they are 

considered and are highly subjective. 

Rather than direct stakeholders, code regulators are key players/actors in expressing and 

promoting societal valuation of housing and housing innovation. The government must 

assess the effectiveness of ‘incentive’ versus ‘regulation/mandate’. The government must 

determine a threshold for action based on perceived risk or lose public trust. The public 

will reject increased cost until they recognize benefit, then they will embrace action. The 

public does not want to pay more for a ‘mandated’ action. 

Key discussion points included: 

• Social valuation may be considered as the act of maximizing wealth (of the 

community) through regulations or incentives that address factors which are not 

obvious and visible—“internalization of externalities” 

• The multifamily delivery system internalizes external costs for many actors, 

reflecting the difference between a private transaction (such as that for singlefamily house) and a public (regulated) transaction 

• Benefits do not have to go only to society, but can go to the entrepreneur—the 

person who starts the change/takes the initial risk, makes the money—by 

removing regulations and other barriers to innovation 

• On the other hand, regulations are used to compensate for the fact that “natural 

costing” does not automatically account for all costs 

• Lack of agreement on assessment parameters often prevents policy decision 

making—decision makers cannot rely on staying power of policy analysis 

• The home buyer views the product (housing) as a durable asset, internalizing all 

perceived costs 

• Durability of the asset (housing) could and should be better understood by all 

stakeholders 
15 

2.7 How Can the Regulatory System Be Used to Encourage Innovation 

 

John Hall and David Conover, each representing model code developer perspectives, 

introduced the discussion of the use of regulation to encourage innovation. 

Most regulation is intended to advance not affordability, but some other factor, primarily 

safety. Many regulators want to trust what they know works—prescriptive standards—

feeling that performance approaches may undercut effectiveness of standards and may be 

more difficult to evaluate. Innovation may exacerbate performance-based evaluation 

concerns. In addition, lack of a common language is a problem—economists and policy 

makers want to express all concerns in dollars. The key point is that we don’t need less, 

we need better regulation—the advocated approach favors modeling, yielding “smart 

regulation audited with civility.” 

Can the regulatory system be used to encourage innovation? Yes. Factors must be 

identified and explored. What is needed is a baseline level to exceed. For life-safety 

issues, codes and standards typically lag technology development. If non-prescriptive, 

there is no information on which to base approval/acceptance. A recent Washington Post

column7 on regulation cites three needs: 

• Information based on good research 

• Willingness and ability to defend analysis tools 

• Implementation policies that encourage smart life-saving analyses 

Key points in the ensuing discussion included: 

 

• There is no evidence that more innovation occurs under one or the other scheme 

of regulation (performance-based or prescriptive) 

• The presumption is that performance-based requirements may encourage 

innovation through offer of options (such as compliance options in New York) 

• Conversely, a serious vulnerability of the present regulatory structure is 

confidence that prescriptive codes achieve desired purposes/objectives (a 

confidence which may be unwarranted) 

• Looking at other industries for guidance, there is a strong trend that deregulation 

spurs innovation 

• Recommend research to model an insurance-based approach to encouraging 

housing innovation; determine appropriate government roles (analogous to selfamortizing mortgages); determine feasibility 

• However, Type 1 and Type 2 statistical errors have a role in evaluating the 

effectiveness of innovation—there is a need to look at the existence of both 

‘good’ and ‘bad’ innovation 

• Before ‘affordability’ can be defined, ‘safety’ (in terms of “acceptable risk”) 

needs to be defined—there is currently no generally accepted definition 

 

7

 Hahn, Robert and Scott Wallsten, “Whose Life is Worth More? (And Why Is It Horrible to Ask?),” 

Washington Post, June 1, 2003, pp B3. 
16 

• Because it is unclear what the code means in terms of performance (and not 

measurable), innovation will not occur as long as acceptance decision-making 

remains local 

• The fundamental need is to determine what is an “acceptable level of risk” and 

then protect against it through regulatory enforcement 

2.8 Who Should Bear the Costs of New Delivery Systems for Innovative 

Technologies 

Paul Emrath, representing the builder stakeholder group, and Theresa Weston, 

representing product manufacturer perspectives, introduced the discussion of who should 

bear costs of improved product delivery systems. 

Mandated innovation is disproportionately a burden to low-income home buyers. Owners 

are interested in restricting supply to protect the value of their assets. Politicians have an 

interest in protecting asset value as well. In considering a new delivery system, how 

would it be regulated? Would local regulators necessarily lose control of the process? 

Development costs for new delivery systems at whatever scale will get passed to the 

consumer, and, even so, will not be undertaken by intermediate participants if the costs 

are too high. If builders cannot pass on at least part of the costs, they will not buy. The 

question is not who pays, but how costs are distributed. 

Key discussion points included: 

• Builder will pay the costs of the new delivery process at the outset, but will pass 

along to home buyer as soon as possible 

• Government has moved away from any consideration of ‘command and control’ 

strategies (such as ‘operation breakthrough’ in the ‘70s) 

• Today, vertical integration, engineered systems, and modular integration are the 

strongest approaches to changing housing delivery—trades and agencies should 

get together and decide on a course of action 

• A ‘pilot project’ (in an analogy to medical industry practices) would produce not 

total change, but an immediate test of the effects of changes 

• Conversely, a ‘pilot project’ may conflict with existing infrastructure; change may 

be viewed as negative—if the pilot is big, it may be blocked by existing industry 

and a consumer afraid of reduced asset value. 

• Recommend a feasibility study—is there a role for government in a test of 

changing housing delivery? 

• No individual will put up with any cost to change this delivery. Who will pay? 

• Need a delivery system to routinize rehab and reuse—introduce innovation 

through rehab rather than new construction 

• Conversely, while there is a clear need for innovation in the existing housing 

stock, most new products will be for new construction—50 million new buyers 

over the next 50 years will push new development (even though they may enter 

market through purchase of existing stock) 
17 

3 Summary of Stakeholder Perspectives 

Eight stakeholder groups were represented at the meeting. This list of stakeholders is a 

variation on the six identified in section 1.5 of this report. The code officials and 

evaluation services were separated to reflect the different roles that local code officials 

and model code developers play. The “government programs” stakeholder of section 1.5 

was redefined to focus on the perspectives of researchers in both government and 

academia (as opposed to government regulators, housing providers, or emergency 

responders). Added to the list of stakeholders are consultants who play a role in housing 

delivery through their interactions with the other stakeholders. 

 

• Owners: homeowners, representatives of homeowners, and homeowner 

associations who wish to select a particular material, product, or system 

• Builders: home builders, remodelers, developers, and their subcontractors, who 

integrate materials, products, and systems and provide the integrated package to 

homeowners 

• Building Product Manufacturers: innovators, product manufacturers, distributors, 

and retailers who wish to verify that their material, product, or system meets 

affordability 

• Model Codes Developers: those who work in international and national codesand standards-developing bodies 

• Building Code Regulators: local and state government agencies responsible for 

code adoption and implementation 

• Lenders 

• Buildings/Economics Researchers in academia and government 

• Consultants

Following the workshop, comments documented during discussion sessions were sorted 

and reviewed to develop a sense of the perspectives presented for each stakeholder group. 

Each stakeholder comment was judged to refer primarily to one of nine keyword topics 

that recurred across all discussion sessions: 

• Attribute: affordability, durability, safety, etc. (flexibility, substitutability, 

customizability) 

• Barrier/Incentive: (to market acceptance) 

• Delivery system: (for housing and housing products) 

• Market: supply-chain, builder, homebuyer, investor 

• Metric: 1st, annual, life-cycle, time-horizon, units-of-measurement, uncertainty, 

market signal, rating scale 

• Perspective: interest, standing, constituents 

• Product: development, test/evaluation, distribution, sale 

• Segmentation: Multi-family/Single-family, new/existing, low-income/highincome 

• Value: cost, price, benefit [val] 
18 

The following sections highlight key points reflecting the perspectives expressed for each 

stakeholder group over the course of the entire workshop. All documented comments for 

each stakeholder group, arranged by keyword topic, are presented in Appendix B. 

3.1 Owners 

• Community concerns should be considered; they may be the ultimate benefactors 

of innovation 

• High maintenance is not a reliable strategy for low frequency events; need failsafe systems 

• We need to determine what is an “acceptable level of risk” and then protect 

against it 

• ICC and rehab codes are steps in the right direction—going to a statewide code 

increases consistency in enforcement 

• For low-income housing, a 3rd-party has joined the transaction and regulates 

decision-making; that is not present in the private-sector single-family market 

• We need to change terms of reference for risk—a 100 year flood is as likely again 

next year as this year 

• Low-income buyer is a different market; must balance current social taste, income 

limits, performance of home—tradeoffs must be made and high maintenance cost 

is a key issue 

• While housing production cost may not determine selling price, cost will 

determine whether housing is built 

3.2 Lenders 

• The biggest problem is functional obsolescence of housing; today will not be 

tomorrow in all dimensions, including operating cost concerns 

• What is the quality level for ‘affordable’ housing—safer means higher cost; will 

be the same for all attributes 

• Risk-based insurance may have contrary effect of increasing cost to those that can 

least afford it 

• Innovation in lending has led to greater purchasing power (most significant 

contribution to housing affordability over last two decades) 

• While the debt ratio is determinant, the multi-family (MF) delivery system 

explicitly considers age, service life, and condition at resale—must consider the 

viability of the structure (due diligence)—home inspections could serve a similar 

purpose for single-family (SF) delivery 

• A metric is needed to decide between increased regulation and deregulation 

• Codes can only address a minimum level of safety 

• There is a difference between ‘valuing’ and ‘monetizing’ and social value is 

highly subjective 

• Is affordability the “ability to pay” or the “cost to build”? The value of housing is 

“what it will sell for”; it’s a competitive market, but the cost of building 

(production) does not set the price 
19 

• Individual choices do not affect expected resale value (time horizon can be critical 

to decision making) 

• If it is worth something, lenders will underwrite it 

3.3 Builders 

• Interested in minimum health and safety standards 

• Innovation cannot rely on maintenance for operation—product will fail 

• Before you can define ‘affordability’, you need to define ‘safety’ 

• Regulation is the key to ‘affordability’ (represents 30 % of the cost of housing) 

• Today, QC management/business systems and non-building considerations lead in 

importance; 70 % of tradesmen have no employees 

• A big problem for builders is how to train producers/installers (laborers); ability 

to train will be a big component of acceptance of innovation 

• Insurance companies have an opportunity to reduce their own risk through riskbased underwriting (encourage rather than force acceptance) 

• Product evaluation reports are limited only to existing code requirements and do 

not test against purposes of innovation (whatever those may be, such as 

durability) 

• New technology often must completely replace something already out there—a 

tough sell 

• Mandated innovation is disproportionately a burden to low-income buyers of 

housing 

• No individual will put up with any cost to change product delivery 

• Consumer does not want durability, consumer wants upgraded carpet 

o Buyer is buying a complete product package 

o Builder has difficulty in accommodating ‘menu’ of product choices 

(especially for spec building) 

o Buyer expects minimum level of durability 

• Consider concept of ‘durability rating’ system/policy 

o Single number, 0-100 

o Market compensation of rating (higher resale for higher rating) 

• As a rule-of-thumb, builder may want to price at 80 % of buyer’s budget, then add 

unforeseens, and widgets that are wanted (product ‘pull’) 

• Time horizons apply to builders as well; builders are not opposed to LCC analysis 

• Buyers are uncertain of time in home, who will buy, and so use varying discount 

rates 

• It is difficult to argue safety versus economics in a public forum 

• Deterioration takes place over time—it costs $1800/year to maintain housing, 

$237K is the average resale cost of a house; thus, homeowners spend only 1 % of 

house value on their single most valuable asset each year 

• Rental property investor seeks 1 % property + improvement cash flow in stable 

market; delay in maintenance will penalize the seller; how much? (subject of 

study?) 

• Long term interests align regulators and existing building owners 
20 

• Need innovation not in widgets and hard things, but in regulation—such as 

opportunities implicit in implementation of rehab codes 

• We see indications of marketplace changes, but cannot yet confirm 

• Appraised value is a blunt instrument (and should be more sensitive) 

• The question remains—how to value a parameter in order to have a basis to set a 

fee—the consumer views the product (housing) as a durable asset, internalizing 

ALL perceived costs 

3.4 Building Product Manufacturers 

• Regulation typically does not promote or discourage change 

• Code training is part of the product development process 

• Development costs will get passed to the consumer, and, even so, will not be 

undertaken if too high—if builders cannot pass on at least part of the costs, they 

will not buy 

• Builder will pay the costs of a new delivery process at the outset, but will pass 

along as soon as possible 

• Perhaps we should focus on changing delivery of existing stock rehabilitation 

• We identify where ‘pull’ is from and address need; use multiple channels to reach 

the consumer; look at complete LCC, including replacement cycles 

• Applied research is done well privately; basic research is no longer being done by 

the federal government 

• We reduce our risk in introducing new products in four ways: 

o Evolution is manageable; revolution involves unforeseen issues (with 

greater chance of failure) 

o Assessing performance must be addressed in all areas of impact. 

o ASTM standard E 1825 lists things to look at. 

o Should develop installation and delivery system as product is developed 

• Prescriptive standards represent “the way things have been done”—new product 

must test against existing product and evaluate existing product for comparison 

• Goal is to find the hook for the consumer and innovate to the hook 

• Each consumer uses own set of values and beliefs in personal decision-making 

3.5 Building Code Regulators 

• Community interests must be considered; long-term interests matter to lenders 

• Performance-based requirements can encourage innovation through offer of 

options (compliance options in the case of NY State) 

• Local officials need assurance—binding interpretation, although not often done, is 

a useful tool 

• The state and local regulators are interested in both 1st costs and LCC 

• Building regulators are accountable to the political jurisdiction 

• It is a complicated role, but the state owns a lot of property (and has a direct stake 

at least to that extent) 

• Effectiveness of ‘incentive’ v. ‘regulation/mandate’—government must determine 

threshold based on perceived risk or lose public trust 
21 

• Public will reject increased cost until they recognize benefit, then they will 

embrace action 

• Public does not want to pay for a ‘mandated’ action 

• Recent study of contributing factors to fire has found vacancy a strong indicator 

and greater frequency of vacancy in poor areas 

• Innovation costs must be a consideration 

3.6 Model Codes Developers 

• If you ignore maintenance, you are playing probabilities 

• Need more realistic estimates of affordability 

• Most regulation is intended to advance not affordability, but some other factor, 

primarily safety 

• Lack of a common language is a problem—economists and policy makers want to 

express all concerns in dollars 

• We don’t need less, we need better regulation—the advocated approach favors 

modeling, yielding “smart regulation audited with civility” 

• For life-safety issues, codes and standards typically lag technology development 

• If non-prescriptive, there is no information on which to base approval/acceptance 

• Effective regulation requires information based on good research, ability to 

defend analysis tools, and implementation policies that encourage smart lifesaving analyses 

• There are, in fact, mathematical definitions for safety in the codes 

• Regulators provide a function—that function must be acceptable to those being 

regulated in order for the system to work effectively 

• What about improved design, equivalent performance, and innovation? Is delivery 

system capable of flexibility? 

• Recommend going beyond durability—consider a series of scales/indexes with 

differing parameters 

• Uncertainty is the issue for performance measures: 

o Want to align ‘who decides’ with ‘who receives the benefits or pays the 

costs’ 

o Various stakeholders/decision-makers come in at different points in the 

delivery process with different interests 

• While the energy issue was driven by economics and ‘easy’ LCC analysis; LCC is 

more difficult as you move to life-safety and other issues 

• Most stakeholders ignore low probability events—handling quantitative info 

qualitatively 

• Frame cost/benefit against another reference (e.g. value of investment) 

• Type 1 and Type 2 statistical errors have a role in evaluating the effectiveness of 

innovation—need to look at existence of both ‘good’ and ‘bad’ innovation 

• How does each stakeholder decide what to consider—can we affect the process of 

that decision? 

• Regulators come as close as any stakeholder in looking at all considerations 

• Codes are an imperfect but valuable instrument 

• Find a way to keep good products alive long enough to check performance 
22 

• Interactions (among stakeholders) are a key aspect in changing product 

development 

• States should be careful of taking on product certification functions (e.g., Florida 

example); it could increase complexity, uncertainty, and cost 

• Abandonment of property leads to leveraged risk for others 

• Need a delivery system to routinize rehab and reuse—Introduce innovation 

through rehab rather than new construction 

• There is no guarantee that innovation either lowers costs or increases quality 

3.7 Buildings/Economics Researchers 

• ‘Affordability’ is whatever Fannie Mae and Freddie Mac say it is: principal, 

interest, taxes, and insurance (PITI) 

• Home insurance industry is not responsive to efforts to get them to consider 

incentives for durability—great variation from state to state, no rational relation to 

housing quality 

• There are too many gatekeepers; find other ways to protect buyers, such as 

“builders insurance” 

• Suggest that government undertake research/modeling of insurance-based 

approach to housing innovation; determine appropriate government roles 

(analogous to self-amortizing mortgages); determine feasibility 

• The housing industry is so fragmented, no single organization is large enough to 

overcome barriers to innovation 

• Consider a system of binding interpretation to promote consistency in code 

enforcement 

• All products must be sent to a 3rd party for installation—systems integration is 

needed 

• Government has moved away from any consideration of ‘command and control’ 

strategies 

• Product ‘branding’ and ‘bundling’ may stimulate demand 

• It may be possible to interest the consumer to be concerned about the 1st resale 

period, but not the 15th cycle 

• Emphasize the study period for LCC analyses (longer horizons introduce 

additional concerns) 

• Stakeholder variations occur in discount rate, time horizon, and relevance of costs 

• LCC analysis is flexible and provides structure under a wide range of conditions 

• Studies of recapture of costs for storm mitigation indicate a market signal (visible 

innovation) aids market acceptance 

• Risk perception studies indicate consumers cannot differentiate risks 

• Policy makers should consider incentives, such as insurance premium reductions 

or reduced community costs recognized through transfer tax credits if dwelling is 

improved 

• Metrics are not yet available to either estimate or justify increased costs 

• Much of visible innovation is by small companies with low capitalization looking 

to push innovation into market with little testing or success 
23 

• Consider a ‘pilot project’ as an approach (analogy to medical industry); allows not 

total change, but immediate test of change 

• Homeowners are not a homogenous group; 2nd time buyers have much different 

interests than 1st timers 

• There are definite stages of innovation penetration and adoption--how is decisionmaking different from group to group? 

• The delivery system for multifamily housing internalizes external costs for many 

actors--it reflects the difference between a private transaction and a public 

transaction 

• While there is a clear need for innovation in existing housing stock, most new 

products will be for new construction—50 million new buyers over next 50 years 

will push new development even though buyers may enter the market through the 

purchase of existing stock 

• Homebuilders must compete by adding value 

• Housing is the only industry to insist that innovation requires increased costs 

3.8 Consultants 

• Durability measurement has been supported by component manufacturers, 

opposed by materials suppliers, and opposed by builders (because it is already 

factored into markets) 

• The ability to provide customization of components is an advantage for builders 

• We need to ask why we are concerned with social costs: 

o 3rd party effects are fair game for incentives 

o Mandates should not be based on externalities 

o Externalities should be viewed very skeptically 

• Confidence that prescriptive codes achieve desired purposes/objectives may be 

unwarranted 

• Consider a role for government in a test of changing housing delivery 

• Determine how to communicate magnitude, probability, and performance to each 

stakeholder group 

• Product certification should recognize contractual trade influences and impacts
24 
25 

4 Next Steps 

In examining the question of measuring affordability of housing and the impact of 

housing technologies on affordability, it may be helpful to consider several factors in 

addition to the stakeholder perspectives presented in chapter 3. The housing market, its 

delivery system, proposed metrics and attribute characteristics, regulation, and innovation 

all play a part in the affordability of housing. Treatment of these concepts is based on 

questions motivated by the workshop discussions as described in the following sections. 

The answers to these questions, which are largely quantitative, would need to be 

addressed in developing economic measures of housing affordability. The first steps in 

the development of a roadmap for affordability guidelines will be to rank the 

importance/priority of each question, define the sequence in which each should be 

considered, and identify source materials or study references. 

4.1 Housing Market Considerations 

Affordability Guideline Development 

Roadmap Questions Triggering Workshop Comments 

What is the sensitivity of housing prices 

to housing production costs? 

Prices/Pricing are local 

Pretty competitive market, but cost of building 

(production) does not set price 

What is impact of price sensitivity on 

housing supply and demand? (Interest 

rates? Insurance? Taxes?) 

Is affordability the “ability to pay” or the “cost to build” 

There are indirect relationships between the cost of 

production and the supply of housing 

Innovation in lending has led to greater purchasing power 

What are disaggregated costs of housing 

production (land, materials, labor, 

management/administration, marketing, 

financing)? 

How do you introduce efficiencies into product delivery 

system? (QC management/business systems) 

Non-building considerations lead in importance today; 

70 % of tradesmen have no employees 
26 

4.2 Housing Delivery System 

Affordability Guideline Development 

Roadmap Questions Triggering Workshop Comments 

What is the process for housing decisionmaking (during initial design and 

construction and throughout service 

life)? 

Shift buyer emphasis from 1st cost to life cycle costs; look 

at incentives to emphasize LCC 

Homeowner is given no options/choices; upstream 

decision makers decide. 

What are innovation delivery system 

differences between new and existing 

housing? (Single family and 

multifamily?) 

Existing stock dwarfs new construction; delivery systems 

for innovation in new and existing housing are very 

different 

How can existing stock rehabilitation be 

made more efficient (routinized)? 

Could be the subject of study—is there a role for 

government in a test of changing housing delivery? 

Perhaps we should focus on changing delivery of existing 

stock rehabilitation. 

Intent is to make rehab much more frequent (spurring 

innovation) and make delivery easier. 

4.3 Attribute Metrics 

Affordability Guideline Development 

Roadmap Questions Triggering Workshop Comments 

How do stakeholder perspectives, 

actions, and reactions differ? 

How does each stakeholder decide what to consider? 

How are uncertainties...monetized? 

What are/could be important economic 

‘measures of performance’ for each 

stakeholder? 

Frame cost/benefit against another reference (e.g. value 

of investment) 

How should housing quality be 

measured? 

Clarify the role of Type 1 and Type 2 statistical errors in 

evaluating the effectiveness of innovation. Need to look 

at both sides of the issues—existence of both ‘good’ and 

‘bad’ innovation. 
27 

How can parameters of concern be 

integrated into property valuation 

processes? 

Appraised value is a blunt instrument (and should be 

more sensitive) 

How long does housing last and how does 

maintenance affect service life? 

The issue is a mathematical problem and not that difficult 

to understand: $trillion value of stock, divided by the 

number of units, plus annual cost of maintaining times 

service life, divided by service life equals annual cost of 

ownership. 

Concept makes a lot of sense except for characterization 

as “simple” problem—we do not know how long housing 

lasts. Pricing in durability may be useful, but may not. 

What is the relationship of durability 

(and/or other parameters) to costs (1st, 

maintenance, and LCC)? 

Consider concept of ‘durability rating’ system/policy 

Market compensation of rating (higher resale for higher 

rating) 

What is a ‘minimum’ 

acceptable/expected level of durability 

(and/or other parameters)? 

Buyer is buying a complete product package; expects 

minimum level of durability 

Consider series of scales/indexes with differing 

parameters. 

What time horizons should be considered 

for economic decision-making? 

Time horizon can be critical to decision making. 

Community interests must be considered; long-term 

interests matter to lenders. 
28 

4.4 Role of Regulation 

Affordability Guideline Development 

Roadmap Questions Triggering Workshop Comments 

What is impact of regulation on housing 

production costs and pricing? 

Uncertainty is the issue with performance measures 

Suggest “dynamic constrained optimization” 

We need actions to reduce constraints and/or free-up 

constraints 

Regulation is the key (represents 30% of the cost of 

housing) 

What are impacts of externalities on 

housing stakeholder risk? 

From regulator perspective, recent looks at contributing 

factors to fire found vacancy a strong indicator and 

greater frequency of vacancy in poor areas 

Abandonment of property leads to leveraged risk for 

others 

4.5 Innovation 

Affordability Guideline Development 

Roadmap Questions Triggering Workshop Comments 

How does innovation affect quality? 

No guarantee that innovation either lowers costs or 

increases quality 

What factors promote or discourage 

innovation? How? 

Do we have any evidence that more innovation occurs 

under one or the other scheme of regulation? 

 
29 

Appendix A Individual Comments Organized by Discussion Topic 

The NIST/PATH workshop, Measuring and Assessing the Consequences of Technology 

and Innovation for Affordability of Housing, consisted of eight sequential discussions 

over the two-day period. 

Over the course of the workshop, distinct comments by individuals were captured on 

“flip charts” as a running summary of the discussions. Several additional comments by 

individuals were identified through a synthesis review of notes taken by NIST 

participants. After the workshop all the comments were reviewed and sorted in a variety 

of ways to clarify and distill key points and recommendations. 

The discussion sorting process involved the characterization of each documented 

comment in terms of the session and sequence in which it occurred, a keyword describing 

the underlying topic to which it was judged to refer, and the stakeholder perspective the 

individual making the comment was representing. 

The tables below present each comment using the following format: keyword; discussion 

session, sequence of remarks, stakeholder group, remark/item, NIST notes synthesis.

Keywords: The workshop discussions consisted not of direct answers to the questions 

posed to the group but, rather, comments about different aspects of housing, innovation, 

markets, perceptions, etc. After review of all the discussions, individual comments were 

judged to refer primarily to one of nine keyword descriptors. 

• Attribute: affordability, durability, safety, etc. (flexibility, substitutability, 

customizability) [att] 

• Barrier/Incentive: (to market acceptance) [bar] 

• Delivery system: (for housing and housing products) [del] 

• Market: supply-chain, builder, homebuyer, investor [mar] 

• Metric: 1st, annual, life-cycle, time-horizon, units-of-measurement, uncertainty, 

market signal, rating scale [met] 

• Perspective: interest, standing, constituents [per] 

• Product: development, test/evaluation, distribution, sale [pro] 

• Segmentation: MF/SF, new/existing, low-income/high-income [seg] 

• Value: cost, price, benefit [val] 

Discussion Sessions: Eight question-based topics were posed to the group for discussion 

in separate sequential hour-long sessions over the two-day meeting. [Session #2 was 

conducted “out of order” after session #5 due to a schedule conflict.] 

• #1: Who benefits from the housing innovation, both at component scale and at the 

scale of the entire house and its delivery system? [ben] 

• #2: How to “push” innovation benefits to the homeowner, at the scale of housing 

components? [push] 

• #3: How does each stakeholder view and compute life-cycle costs and benefits 
30 

compared to first costs, at both scales? [comp] 

• #4: How does each stakeholder view and compute future benefits that are 

uncertain or contingent on very low probability events, such as protection from 

earthquakes or hurricanes that may never happen, at both scales? [cert] 

• #5: How should the uncertainty and risk associated with using new versus 

traditional technology be addressed, at both scales? [risk] 

• #6: How should society value or monetize the social costs and benefits of 

introducing technology in residential housing, such as energy conservation or 

disaster relief and recovery, at both scales? [soc] 

• #7: Can the regulatory system be used to encourage innovation, and to distinguish 

innovations with net benefits from those with net costs, at both component scale 

and at the scale of the entire house and its delivery system? [reg] 

• #8: Who should bear the costs of development of new delivery systems and new 

infrastructure systems that are needed for innovation to penetrate the market at the 

scale of the entire house and its delivery system? [cost] 

Stakeholder Groups: Eight stakeholder groups were represented at the meeting. 

• Owner [own] 

• Lender [fin] 

• Builder [bld] 

• Building Product Manufacturer [mfr] 

• Building Code Regulator [reg] 

• Model Codes Developers [mcd] 

• Buildings/Economics Research [rch] 

• Consultants [cst] 

Sorts:

Several “sorts” of workshop comments were developed in order to derive 

recommendations across all the discussions. This appendix consists of “Sequential 

Comments” in the order documented in the discussion sessions. The resulting tables 

present, in columns from right to left, the keyword assigned to the comment, the 

sequential identification of the comment, the stakeholder group that made the comment, 

the ‘flip chart’ record of the discussion (items not captured on the flipcharts but recorded 

by NIST are listed as “see notes”), and a synthesis of notes taken by NIST participants. 

Appendix B consists of comments first sorted by stakeholder group affiliations and then 

by keyword topics. 

Discussion session #1: Who benefits from the housing innovation, both at component 

scale and at the scale of the entire house and its delivery system? (ben) Do the 

homebuyers or homeowners benefit? If there is a benefit of reduced first cost, does it pass 

through to the homeowner, or does it go into the pocket of someone in the supply chain 

of the current delivery system? 
31 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

per 1.01 rch 

Stakeholder groups: 

• Homeowners 

• Homebuilders 

• Product manufacturers 

• Complementary groups 

interested in longevity after 

construction—lenders, 

insurers, community, etc. 

Defining: Who benefits from the technology? 

Major stakeholders: 

1. Homeowners 

2. Home builders: affect costs; are key leverage point 

in passing along costs, and bringing technology and 

benefits to home buyers 

3. Product manufacturers 

4. Housing institutions: lenders, insurers, utilities. 

Affected by longevity of house after construction 

and how house is utilized after construction 

Need to look at life-cycle costs (LCC). 

val 1.02 own 

Scales of concern: 

• Materials and components 

• Delivery system/satisfaction of 

broader concerns 

• Both economic and noneconomic factors 

How do we quantify ‘value’? 

Must deal with marketplace issue of 

‘pricing’ (uncertainty of recoupment 

of investment) 

Look at two scales of affordability: 

1. Components and materials 

2. System: at this scale, there is a more 

complex relationship among stakeholders, 

community, homeowners. 

Must consider LCC in affordability. There are 

economic and non-economic factors, but must make 

them as quantified as possible with the components 

and system. The challenge of the question of 

affordability is to define, specify, and guide affordability. 

There is the market issue of pricing, from the raw 

materials to labor to the marketplace. One factor in 

pricing is uncertainty. Therefore, decreasing 

uncertainty may be one way of improving pricing (from 

the affordability standpoint). Is cost (of materials, 

construction) reflected in pricing? 

mar 1.03 rch 

Housing market is not like others: 

• Prices/Pricing are local 

• Not a traditional competitive 

market (builder is part of a 

cartel) 

• Benefits may not pass directly 

to home buyer 

• What happens to industry as a 

result of innovation? 

The housing market is not free. It is not fully 

competitive because it depends on land availability and 

zoning. Therefore, if an innovation is introduced that 

should reduce costs over time, the market may not 

respond. Housing prices are set by location decisions 

about square footage, acreage, and local regulations. 

There are constraints on this market. This is not a fully 

competitive market. Building permits convey market 

power (“a piece of the monopoly”). The question is not 

whether the savings get passed on to the homebuyer, 

because most likely they are not. So must look at what 

the long-run impact of the innovation will be on the 

market regardless of whether the savings get passed 

on to the buyer. Pricing is based on the cost of 

alternative homes in the community (comparables), not 

the cost of materials. 

val 1.04 fin Value of housing is “what it will sell 

for” 

• Pretty competitive market, but 

cost of building (production 

does not set price) 

• Price has little to do with 

Asking price is not related to the cost of building a 

home. It has relatively little to do with the cost of the 

structure compared to market demand. The value of 

the house is what it will sell for. “Cheap” housing can 

become very expensive, because the price has little to 

do with the structure. The market determines the cost. 
32 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

structure 

• Is affordability the “ability to 

pay” or the “cost to build” 

met 1.05 fin 

There are indirect relationships 

between the cost of production and 

the supply of housing 

Cost of materials is related to the price of the house 

because the going level affects how much gets built 

(supply of housing). The cost of building a house 

determines if the house gets built or not. The market 

defines where we go. 

val 1.06 rch 

Homebuilders must compete by 

adding value 

Would like to see builders competing on quality, rather 

than on first cost, that is, based on the value of the 

house rather than its first cost. We are trying to get 

from first costs to LCC. When first costs are 

decreased, LCC are higher and consumers bear the 

burden of this increase. 

val 1.07 own 

Cost will determine whether it is 

built 

In the suburban Maryland community of Montgomery 

Village, there is a requirement that a builder seeking a 

permit must devote 20 % of the construction to 

affordable housing. The county definition of affordable 

housing is based on the rent or purchase price of the 

housing. 

met 1.08 bld 

As a builder, trying to shift buyer 

emphasis from 1st cost to life cycle 

costs 

NIST/HUD/regulators need to look 

at incentives to emphasize LCC 

Need to focus on life-cycle costs. Need incentives to 

shift from first costs to LCC. Housing is not a free 

market. It is defined by policy, zoning, codes, etc. 

Need to establish a baseline for durability instead of 

focusing on first cost. Need incentives to create better 

housing stock rather than the status quo of more 

housing stock. Better housing stock implies lower LCC. 

mar 1.09 mcd Want to shift discussion from macro 

to micro concerns: 

• Anecdote of re-roofing, 

question is not who benefits 

but who receives full-effect? 

• Homeowner does, but is given 

no options/choices; upstream 

decision makers decide. 

The question should not be who benefits from housing 

innovation, but who receives its full effects. But the 

choice of using or not using the innovation is not given 

at time of home purchase. Choices are made for the 

buyer “upstream,” by the producers, not by the party 

(the buyer) that receives the full effects. Homeowners 

only choose the final packaging. But the producers 

make the initial decisions about the use of advanced 

technology and materials (such as for roofing). 

val 1.10 fin Individual choices do not effect 

expected resale value (time horizon 

can be critical to decision making) 

The average homeowner stays in their home about 

5 years. The life cycle is short and affects the choices 

of homeowners, too. The homeowner needs to see the 

net benefit of the product. 

val 1.101 bld 

(see notes) 

The extent this is true depends on whether use of more 

durable components is reflected in resale price of the 

home. 

pro 1.102 fin (see notes) Marketing for product manufacturers plays a big role. 

pro 1.11 bld Too many components/complex 

product 

Making all these choices available would be costly for 

the builder. 

mar 1.12 mcd 

We may be forced to work upstream 

of homeowner 

We do not want to offer unlimited choices to 

homebuyers. But there is a need to work upstream of 

homeowner, need to understand what part of the costs 

and benefits that these groups see. 
33 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

met 1.13 bld 

Consider concept of ‘durability 

rating’ system/policy 

• Single number, 0-100 

• Market compensation of rating 

(higher resale for higher rating) 

In a previous contract with the U.S. Forest Service, a 

durability rating system was discussed. A policy could 

be done by the insurance company. Every house 

would get a number. A house rated 80 would last 

longer than a house rated 60. A rating of 45 would be 

low. A house rated 60 could move up to a 68 if an 

improvement were made to its durability. What rating 

would be acceptable to you? Durability rating will focus 

homeowners on looking at LCC. Homebuyers are 

more focused on the layout of the home. To be 

effective, the rating must mean something to the 

consumer. Policy could play a role here, as could 

lenders, insurers, and code inspectors. The idea is 

consenting to durability rather than incenting to first 

cost. 

mar 1.14 bld 

Consumer does not want durability, 

consumer wants upgraded carpet 

• Buyer is buying a complete 

product package 

• Builder has difficulty in 

accommodating ‘menu’ of 

product choices (especially for 

spec building) 

• Buyer expects minimum level 

of durability 

The homeowner has limited choices in a new home 

unless they have a custom home built. Most people do 

not have the understanding to make choices. Except 

for custom homes, the builder makes decisions about 

the components of the home. Builders mass produce, 

and do not want to give choices to buyers. In any case, 

buyers care about visible quality, such as of cabinets 

and carpeting, not the durability of structure. Most 

people do not have the understanding to make choices. 

NAHB are mainly custom builders. Most subdivisions 

are not usually custom built. Need to provide better 

information to homebuyers about the importance of 

durability. 

met 1.15 mcd 

Go beyond durability. Consider 

series of scales/indexes with 

differing parameters. 

If there were a validated index to let the buyer know the 

durability and this were seen in the price, then if buyers 

make their purchase decisions based on this 

information, then would durability become more 

important in the marketplace? 

met 1.151 bld 

(see notes) 

The index would be difficult to develop. And it would 

have to be credible and meaningful to the homebuyer. 

Sometimes, the buyers do not make the “right” 

decision, even with information. It is difficult to predict 

this behavior. 

met 1.16 reg Folks are working on this/these 

ideas now. 

The Leadership in Energy and Environmental Design 

(LEED) group already doing this, i.e., evaluating 

products based on LCC, not first cost. 

met 1.17 mcd Resignation to “the system is the 

system” will not work The index would be very complex. 

met 1.18 rch May interest consumer in concern 

about the 1st resale period, but not 

the 15th cycle 

Builders are concerned with 

contemporary tastes 

The time an asset is held will determine its value. 

Everyone considers the short run. No one is going to 

focus on LCC currently, with rising real income levels. 

The concern is with the 1st and 2nd resale, but not the 

15th resale. Buyers ask questions such as, “Do I have 

the most current bathroom or kitchen?” Buyers care 
34 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

about aesthetics, floor plan, and curb appeal. Who 

cares about durability? 

seg 1.19 rch 

Homeowners are not a 

homogenous group; 2nd time buyers 

have much different interests than 

1st timers 

There is diversity among buyers. There is a huge 

difference between concerns for 1st-time homebuyers 

and 2nd time buyers. According to a survey, 1st time 

homebuyers look at first cost and location. Second-time 

homebuyers, however, pay more attention to long-term 

durability because of the experiences they may have 

had with their first home. Realtors and appraisers need 

to bring these issues into their discussions. 

att 1.20 reg Community interests must be 

considered; long-term interests 

matter to lenders. 

There is also a community interest in durability and 

what causes widespread adoption of innovations. 

Homes that do not perform become vacant. 

att 1.201 fin (see notes) Financiers also have a stake. 

att 1.202 rch (see notes) Real estate professionals and appraisers must be 

included because they affect the price of the house. 

val 1.21 bld Appraised value is a blunt 

instrument and should be more 

sensitive. 

(see record) 

bar 1.22 mcd Buyers are not getting information 

related to their own interests (see record) 

bar 1.221 reg 

(see notes) 

The long term begins on day 1. Therefore, even if they 

ignore resale value, can still make the point about 

buyer and owner self interest. 

bar 1.23 fin Buyers would consider information if 

informed 

If buyers knew durability affected the underwriting 

decision, durability would matter to them. An example 

is energy-efficient mortgages. 

bar 1.24 rch Contrary evidence—energy 

mortgage has not taken off 

The basic question of who benefits 

needs to be modified 

But energy-efficient mortgages have not taken off and 

are not widely accepted, even 15 years after their 

introduction. 

bar 1.241 rch (see notes) The lesson to be drawn is to look at why. 

bar 1.242 rch 

(see notes) 

The reasons are too complex to be addressed here. 

The questions to be asked must be, what will the 

benefits of the innovation be and who will benefit? If an 

innovation becomes widespread practice, what are its 

impacts? You cannot answer the question on 

affordability unless you know in whose mind. 

Perception changes for the 1st time homebuyer 

att 1.25 mcd 

Which effects/parameters should be 

emphasized? 

Which characteristics of the house purchase are most 

important in a homeowner's or home-buyer's judgment 

that the home is affordable? This may reflect a matter 

of value received for money spent, transparency of the 

cost as part of total cost, or the individual's personal 

involvement in the decision to accept this characteristic. 

Which parties will benefit or be affected affects whether 

the innovation will be available to others. 

bar 1.26 cst The important issue is who 

decides—don’t understand what is 

meant by ‘affordability’ 

This is driven by stakeholders. One example was the 

requirement that all homes in one area be all electric. 

This was a disaster. Cannot sell the consumer short. It 
35 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

• What are policies that affect 

affordability, that affect 

homebuyer and other 

perceptions? 

• How do you get information to 

consumers? 

is LCC. They just need the information. 

att 1.27 fin Biggest problem is functional 

obsolescence 

• Build in flexibility to change 

• Today will not be tomorrow in 

all dimensions, including 

operating cost concerns 

Flexibility of housing design is important. The big 

problem is not structural deterioration of a home. It is 

functional obsolescence. Therefore, need to build 

flexibility into the house and its design for future 

changes, including those not motivated by operating 

costs. 

mar 1.28 bld 

Why would builder be interested in 

putting in new stuff? 

Homeowners are at risk, should 

they also be “accountable”? 

There is resistance to innovation, including among 

builders and renovators. Homeowners need to be held 

accountable for their maintenance actions and 

decisions. They need to clean gutters and maintain the 

home, not just components. Homeowner responsibility 

would be enhanced with a durability rating because this 

responsibility would be rewarded by increases in the 

durability rating, and therefore the market value. We 

need flexibility to change. What is attractive today may 

not be attractive tomorrow. Why would the builder want 

to put something in? The homeowner has a role in 

durability and needs knowledge and information about 

it. 

att 1.29 rch 

‘Affordability’ is whatever 

FNMA/Freddie Mac say it is (PITI) 

The extent and quality of maintenance is already 

captured in the resale value of the home. The 

homeowner is a liable party. The starting point of the 

affordability question is that it is based on whether 

Fannie or Freddie says it is affordable, i.e., can you 

qualify for the mortgage? 

att 1.291 mcd 

(see notes) 

The buyers define what is affordable. Fannie and 

Freddie are secondary players. Buyer perceptions 

define affordability. The question is, what drives those 

perceptions? 

mar 1.30 fin 

Innovation in lending has led to 

greater purchasing power 

The most significant factor improving affordability of 

housing has been automated underwriting. Just a few 

years ago, closing costs on a house averaged 21⁄2 

points. Now, they represent 1⁄2 point, on average. 

Innovations in financing have had the biggest impact on 

affordability. 

att 1.301 mcd (see notes) A house is affordable from the homeowner’s 

perspective. 

att 1.31 cst Durability measurement has been 

supported by component 

manufacturers, opposed by 

materials suppliers, and opposed by 

builders (because already factored 

into markets) 

The market is having trouble swallowing guidelines 

such as durability ratings. Who supported the durability 

standard at ASTM? The components manufacturers. 

Who didn’t? The raw materials suppliers, including 

gypsum producers, assemblers, and builders. These 

groups argued that the market already values 

durability, and therefore do not need more information. 
36 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

There is a need to measure the performance of the 

house. 

met 1.32 mcd 

Uncertainty is the issue with 

performance measures 

• Want to align ‘who decides’ 

with ‘who decides what the 

benefits will be’ 

• Various stakeholders/decisionmakers come in a different 

points with different interests 

Regarding the earlier point about homeowner 

responsibility, as the ceiling is lowered, the floor is 

raised. It is important to align the benefits and 

consequences of choices with those that make the 

choices. In my case, labor poorly installed my shingles, 

but I, the homeowner, had to bear the consequences of 

that poor installation. There is no way to track certain 

points on the development chain, such as 

workmanship, that have a great effect on value. There 

are some checks on this: unions, liability concerns. 

The status quo is a sequential decision-making 

process. When a buyer comes into the process, he 

sees some but not all of the consequences of the 

previous decisions. There is no sword that cuts 

through the Gordian knots. Must leverage each 

decision node in the process. Some innovations lead 

to high expectations. Who determines the benefit? 

The people receiving the benefits (and costs) SHOULD 

be the ones making the choices (but aren't always). 

per 1.33 mcd 

Who (are stakeholders) and why: 

• Labor unions--jobs 

• Testing labs--money, jobs, 

uncertainty, liability 

• Investors--money, liability 

• Political jurisdictions--

constituent service 

Regarding innovations, some groups have stakes. 

There are many people who do not want to see certain 

innovations implemented for various reasons, such as 

lower revenue. For labor unions, at stake are jobs, 

compensation, and liability. For the conformity 

assessment community (quality testing and 

performance testing labs), the stakes are payments for 

services and jobs. For investors and venture 

capitalists, the stake is money. All groups are incented 

by money, some also have liability concerns, too. In 

addition to these groups, the stake of realtors and 

appraisers is money. For government, it is setting 

policy and doing right by its citizens. 

per 1.331 mcd 

(see notes) 

Add to the testing labs’ stake uncertainty and liability 

because of difficulty of designing a test to accurately 

predict performance in realistic situations. 

per 1.332 mcd 

(see notes) 

Being first is costly. Labs will charge higher testing 

fees to test a product that is extremely novel and is 

dissimilar to what is already out there. 

per 1.333 mcd (see notes) If it is willing to do the test at all. 

att 1.34 own Innovation is an invention that 

succeeds in the marketplace; no 

success—no innovation 

The definition of innovation is an invention that 

succeeds in the marketplace. What ensures its 

success? Innovation will only occur if people perceive 

a priori benefit. 

seg 1.35 own Low-income buyer is a different 

market; must balance: 

• Current social taste 

• Income limits 

• Performance of home 

The constraints in purchasing decisions are: style; first 

cost (X % of median income as defined by Fannie and 

Freddie); performance of home (no high maintenance 

requirements, no time bombs). For low-income 

homebuyers, the life cycle is much longer, about 10 
37 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

Tradeoffs must be made and high 

maintenance is a key issue 

years to 15 years, because they do not move as often. 

What is acceptable for the lower-income buyer is the 

first thing to consider. First costs are the second 

consideration, and the performance of the home is 

third. Durability is more important to this group 

because they do not move and they may not be able to 

afford expensive maintenance expenses such as 

replacing a roof. Energy efficiency matters, too. But 

first cost is also very important. 

mar 1.36 own For low-income, a 3rd party has 

joined the transaction and regulates 

decision-making; not present in the 

private-sector commercial market 

The non-profit building sector that the previous speaker 

represents cares about the interest of the homebuyers. 

In the for-profit market, we do not see this. 

mar 1.361 own (see notes) The non-profit builders make decisions in the interest of 

the homebuyers. 

per 1.37 rch Appraisers and realtors are very 

important in private market 

Another problem is that appraisers do not have 

sufficient technical knowledge or do not have 

comparables to value some improvements. 

bar 1.38 mcd 

Suggest “dynamic constrained 

optimization” 

We need actions to reduce 

constraints and/or free-up 

constraints 

We need to set the problem up as a dynamic 

constrained optimization. What now happens is that 

the first cost is either the objective to be minimized, or it 

is a constraint that is so restrictive as to make other 

choices moot. Need something to reduce the 

constraining effect of first cost, so that life-cycle costs 

are the true objectives. 

met 1.381 rch 

(see notes) 

Life-cycle costs are a function of the study period. 

Need to include first costs. Durability to a homebuilder 

is a shorter time period than a homeowner. There is a 

LCC for each, but the time horizon is just increased or 

decreased. In my experience, trades people and 

technicians, even those with little formal education, are 

savvy about LCC. They know that you would not put 

the same products into a house that you rent out 

compared to a house that you live in (example about 

heat pump). 

bar 1.382 rch 

(see notes) 

The contrast between the for-profit and non-profit 

builders is too stark. For speculative builders, the time 

horizon is shorter. But they care about what they build 

to the extent that they want to avoid callbacks and 

liability. Their time horizon may be about 5 years 

(maybe ten in California). The question is, how can the 

time horizon of for-profit builders be extended beyond 

these 5 years to 10 years? Right now, ambulance 

chasers are having this effect. They are forcing 

builders to confront durability in a way not done a few 

years ago, and to choose “tried and true” materials. 

The effect is for the builders to not choose the cheapest 

products, but also not to choose the most innovative 

products, either. 

bar 1.39 cst Is the financing of the first buyer (of Is the financing for the first buyer of the innovation an 
38 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

innovation) an opportunity for 

incentives? 

opportunity for incentives? 

met 1.391 rch 

(see notes) 

How would durability be converted into underwriting 

criteria? To take an example, energy is quantifiable, 

but in spite of this, it is not included. Durability would 

be even more difficult to quantify. 

val 1.40 fin 

If it is worth something, lenders will 

underwrite it. 

The market will price durability. Lenders will not 

because it is not part of the (lending) price. 

Underwriting for single-family homes depends on the 

ability to repay the loan. 

seg 1.41 rch Maybe rating system is more 

suitable/appropriate for ‘existing 

stock; 1st buyers are the least 

constrained segment 

The rating system can fill the information gap and start 

the process. 

mar 1.42 mcd 

Diffusion of innovation—later 

adopters are less risk tolerant 

Certain types of buyers prefer innovation. These early 

adopters accept the risks and all the other aspects of 

being first. But this is pushing to a risk averse, more 

conservative agenda. Innovation may not be targeted 

to new construction, but for rehabilitation of older 

homes. 

att 1.43 own 

Community concerns should be 

considered; they may be the 

ultimate benefactor 

What about the effect of durability on the community? 

Benefits to the community are worth considering 

heavily when deciding the method by which to build. 

More durable housing benefits the community, because 

it lasts longer and retains value. 

bar 1.44 bld Regulation is the key (represents 

30 % of the cost of housing) 

• Recognize that existing stock 

dwarfs new construction 

(replacement is 2 % to 4 % per 

year) 

• Recognize that delivery 

systems for innovation in new 

and existing housing are very 

different 

Regulation accounts for 30 % of the cost of housing. 

Regulation drives a lot of the first cost. These numbers 

are from the Kemp Commission Report. 

bar 1.45 bld (see notes) Land availability and regulations do drive costs. 

bar 1.46 bld 

(see notes) 

A second point is that the existing housing stock dwarfs 

new stock. These older homes are not going away. 

They are just getting older. Even replacing 2 % to 3 % 

of this stock annually means that these houses will be 

around in 20 years, 30 years, 40 years, even 60 years 

from now. How can we extend the dynamic 

constrained optimization to 60 years? Other 

considerations are that the average age of a house 

remodeler is 47, and the average person working in 

construction is not U.S. born. 
39 

Discussion session #2: How to “push” innovation benefits to the homeowner, at the 

scale of housing components? How can we help the homebuyer to see the big picture, 

e.g., benefits as well as costs, especially initial costs? If a benefit comes at added cost, 

can the homeowner trade it off against reduced performance somewhere else in the 

house? Is the production function of housing (the current delivery system) flexible in that 

way to allow for substitutions among component costs, or is every innovation an “extra 

expense”? keyword sequence stakeholder 

‘flip chart’ record NIST notes 

mar 2.01 mfr 

Not ‘push’; identify where ‘pull’ is 

from and address need; use multiple 

channels to reach consumer 

1. Innovation cannot be “pushed.” It is necessary to 

understand where the flaws and core values exist 

to motivate innovation. “If it ain’t broke, don’t fix 

it.” Have to identify and act upon and address a 

“pull.” Must demonstrate that the product satisfies 

a need. 

2. How to communicate with homeowners? Who 

touches homeowners? Real estate agents, the 

Internet, advertising, newspaper articles (popular 

press). Must use these means to disseminate 

information to homeowners. 

val 2.02 bld 

Must have a benefit to sell to 

customer (builder typically) 

Cannot trade off performance from 

one system to another 

Must create value for builder or 

homeowner 

Agree that innovation benefits cannot be “pushed” on 

the consumer. It is necessary to fill a place for 

demand. “Push” is a mistake. The adoption of OSB 

(oriented strand board) and I-joists, for example, are 

done through the builder, by providing lower installation 

costs, better performance, more durability, other cost 

benefits. Innovations must provide some value to the 

homebuilder and homeowner. Trade-offs are possible 

only in energy performance codes. 

mar 2.03 cst How do you identify ‘pull’ rather than 

‘push’? (see record) 

val 2.04 bld Must have some sought after benefit 

for consumer (builder) (see record) 

bar 2.041 cst (see notes) Sprinklers in multifamily homes are now required. 

mar 2.042 mcd (see notes) Must help the homeowners appreciate the benefits. 

mar 2.043 own (see notes) Advertisements for homes do not provide detailed 

information about windows, use of I-joists, etc. that are 

used. They focus on the price of the homes and their 

beauty. 

mar 2.044 bld (see notes) Realtors only care about square footage and street 

address. People will pay for self-cleaning (stainresistant) carpets, but energy efficient renovations did 

not pay back. 

att 2.05 own 

Builder will emphasize touch and 

feel qualities of product 

In most housing ads, houses are sold by things that 

can be “touched,” e.g. cabinets. Things like kitchens, 

bathrooms, decks, basement, fireplace get some (but 

less than 100 %) payback. These are all “touch and 

see” items. Others that are not visible or not 

appreciated as necessary do not get paid back. 
40 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

val 2.06 bld Case study: warm climate retrofit of 

tract home c.’85; cut energy costs 

by 40 %, spent 30 % extra, got 

same price as next door on resale. 

Realtors only care about square footage and street 

address. People will pay for self-cleaning carpet, not 

greater energy efficiency. 

bar 2.07 own Never recover total costs. (see record) 

bar 2.08 bld May not get a nickel of initial costs 

back (see record) 

att 2.09 mcd Are we just left with answering the 

question of whether production 

process allows substitution among 

components? 

We should focus on the third question, that of tradeoffs. 

bar 2.10 rch 

Consumer is responding in certain 

areas to energy star home as a 

marketing tool—first instance of 

label having an impact in housing 

markets 

Builders in some cities have had success with the 

energy-star labeled home, especially those with 

younger populations in the far west (granola crowd). 

This is the first successful attempt where a 

performance label is having an effect, even if it is only 

to a certain segment of the population. Why was it 

successful? 

bar 2.101 man (see notes) Safety and protection are automatic pulls. 

bar 2.102 own (see notes) People assume that the codes have it covered. They 

trust the status quo. 

bar 2.103 cst (see notes) [elaborated on the notion of tradeoffs as he intended 

the question when writing it.] 

bar 2.104 rch, 

bld 

(see notes) No, that tradeoff cannot be done. 

del 2.11 bld 

Some choices may be allowed. 

All builders want to be seen as custom. But in truth, 

most builders will only offer limited choices. But these 

choices tend to be about cosmetic attributes, such as 

counter tops, rather than long-run, performanceenhancing elements. 

del 2.12 mcd What about improved design, 

equivalent performance, and 

innovation? Is delivery system 

capable of flexibility? 

Homebuyers want home designs to be innovative and 

homebuilders to include innovative products without 

increasing the price. How do we get these innovative 

products out there? 

met 2.13 bld 

As a rule-of-thumb, builder may 

want to price at 80 % of buyer’s 

budget, then add unforeseens, and 

widgets that are wanted (product 

‘pull’) 

The way I deal with my clients and give them choices is 

this: I ask my clients what their budget is, and I offer 

them something for 80 % of their budget. This cushion 

allows for things like uncertainty in costs, upgrades, 

etc. Most of the upgrades that my clients opt for, 

however, are for widgets, such as sound systems, 

appliances, central HVAC. 

att 2.14 own 

Buyer wants only see and feel stuff 

Higher income buyers will buy more durable products 

because they look higher quality. People will upgrade 

in things that they can physically perceive as being 

better. Higher income people buy higher quality items. 

att 2.15 rch 

Disagree that structural system 

cannot be changed 

It depends on the product whether it gets adopted even 

if it is not observable to the buyer. For example, 

engineered lumber vs. conventional lumber, or OSB vs. 

plywood. Some of the decisions are not made by the 
41 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

homebuyer. 

bar 2.16 bld 

How do you introduce efficiencies 

into product delivery system: 

• ‘70s—tools 

• ‘80s—hard products/pre-cut 

studs, dimensional shingles 

• ‘90s--technology 

• ‘00s—QC management/ 

business systems 

Non-building considerations lead in 

importance today; 70 % of 

tradesmen have no employees 

This is how I see, very roughly and very generally, the 

recent history of innovations in the housing industry. In 

the 1970s, there were innovations in the tools and 

equipment used in construction. The 1980s saw 

innovations in hard products, such as pre-cut studs, 

OSB, and dimensional shingles. The 1990s saw 

innovations in information and communications 

technology, with the use of the internet and cell 

phones. I predict that in the 2000s, the key innovations 

will be in business systems, organization, structure, 

management, and quality control. Only the big public 

companies will pay attention to management, because 

most construction companies are one-man shops with 

no employees and therefore no management needs. 

As an industry, we have a group that is not business 

savvy. We need to make the tradesmen more efficient. 

bar 2.161 rch (see notes) Or the innovation could be, as was earlier mentioned, 

in engineered systems. 

bar 2.162 rch 

(see notes) 

Improvements in business systems can lead to 

improvements in cycle time. But even with big outfits, 

there are many inefficiencies and no one seems to 

care. 

met 2.17 mcd Should we be looking at ‘grouped 

benefits’? 

Another consideration is that with sprinklers, it was 

seen that housing density could be allowed to increase. 

val 2.171 own 

(see notes) 

Increasing density is the source of the biggest savings. 

Land and infrastructure are expensive. With 

Montgomery Village, MD’s 20 % affordable housing 

rule that someone previously mentioned, you get bonus 

density. 

att 2.18 mcd Yes, such as impacts of distributed 

generation, etc. Regardless of push 

or pull, what are the effective hooks 

for the product/innovation? Should 

look at a menu of innovation. 

Have to identify the hooks to the consumer and builder, 

and identify innovations. Then link the hooks to the 

innovations. Some hooks have been power reliability 

(loss of power is a big concern), indoor air quality (IAQ) 

and comfort, zero or low operating costs (such as lowmaintenance decking), higher security, etc. 

seg 2.19 rch There are definite stages of 

innovation/penetration/adoption 

• How do 2nd and 3rd stage 

adopters make decisions? 

• How is decision-making 

different from group to group? 

o Homeowner 2nd

stage: follow the 

leader 

o Homebuilder 2nd

stage: innovator is 

eating my lunch 

better change 

There are different stages of adopters. Some builders 

like to play with toys. For them, it is not necessarily 

about markets. These are the lead adopters, the risk 

takers. For innovations to diffuse, we must pay 

attention to the next group, which comes after the lead 

adopters but comes before the herd. For this 

intermediate group, what do they respond to? What do 

we and can we know about them? For the 

intermediate homeowner, they are the imitator. For the 

intermediate builder, they are those who respond to the 

competitive advantage that the early adopters get. 

There was an NAHB/Virginia Tech study on diffusion 

that focused mostly on the early adopters. More 

information needs to be collected about the 
42 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

intermediate group that follows the early adopters. 

bar 2.20 bld What are ‘accidental’ 

attributes/barriers to innovation? 

Some see innovations adopted by accident. For 

example, the demand for houses on concrete slabs in 

Phoenix. People there will not accept crawl spaces. 

att 2.21 bld 

Study of density health effects may 

be a lever for higher density. May be 

a pull factor but government must 

lead/drive education. 

There was a New York Times article about zoning as 

an explanation for some of the health and community 

problems in this country. The conclusion was that if 

zoning allowed more density and mixed-use 

neighborhoods, people could walk more and be 

healthier and have a greater community identification. 

Kentlands, a planned community in Montgomery 

County, Maryland, is an example. This could lead to 

more sidewalks and commercial and residential areas 

would not be segregated. This leads to less driving, 

less obesity. 

Health has deteriorated because of zoning. Are people 

healthier in small towns? Could benefits like this pay for 

innovations? 

att 2.211 rch (see notes) Developments such as Kentlands are called the “new 

urbanization.” 

val 2.22 mfr Goal is to find the hook for the 

consumer and innovate to the hook 

The hook in this case is the feeling of isolation, the 

need for community. 

mar 2.23 rch 

‘branding’ and ‘bundling’ may 

stimulate demand 

There are two marketing concepts: branding and 

bundling. Energy Star and Master Builder are brands. 

Is there a greater willingness to pay for these brands? 

With bundling of components and innovations, as the 

auto industry does with the luxury package, could this 

be a method to stimulate demand? 

bar 2.24 bld Must be somewhat cautious; be 

careful of number of innovations 

bundled together 

Must be careful about the number of technological 

innovations that are shown to buyers. Most do not 

want it. 

mar 2.241 mfr (see notes) There is a demand for energy star products. Why has 

Energy Star gone through an up tick recently? 

mar 2.242 rch (see notes) One of the consultants here has worked on this with 

the EPA recently. 

att 2.25 cst 

Ability to provide customization of 

components is an advantage for 

builders 

EPA’s approach to marketing Energy Star was trial and 

error. It began by trying to sell Energy Star using fact 

sheets. This did not work. But when EPA began to 

distribute information about Energy Star using CDROMs, which is a customizable medium that builders 

could use to choose what to compete on and put their 

names on, the label took off. 

att 2.26 cst (see notes) This is an example of a “push.” The electronic 

dissemination of information has become more 

desirable. For example, a builder allowing buyers to do 

a virtual walk-through of a model is a big push. 

att 2.27 bld (see notes) Another push is financial incentive. 

att 2.28 rch (see notes) The problem is what is the incentive of lenders and 

insurance companies to do this? If the benefits go to 

the community, then the community should provide the 
43 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

incentives. 

att 2.29 mcd 

(see notes) 

We need to survey the people to see what they want. 

Packaging matters. An example is marketing light beer 

as “less filling” rather than “less fattening.” They 

marketed not to overweight people, who would respond 

to the second, but to people who drank a lot, who 

respond to the first. 

att 2.30 bld (see notes) With NAHB surveys, we have to be careful in framing 

the questions. 

att 2.31 mfr 

(see notes) 

We spend a lot on market research. We have to do 

multiple studies and take different approaches. Market 

research is a very creative and interpretive business 

because most people do not know what they want. 

Discussion session #3: How does each stakeholder view and compute life-cycle costs 

and benefits compared to first costs, at both scales? keyword sequence stakeholder 

‘flip chart’ record NIST notes 

met 3.01 rch Extending first discussion in terms 

of stakeholders, timeframes, and 

scales 

Emphasize study period for LCC 

(longer horizons introduce additional 

concerns) 

Stakeholder variations occur in 

discount rate, time horizon, and 

relevance of costs 

LCC analysis is flexible, provides 

structure, under a wide range of 

conditions 

• ASTM defines LCC as: total cost of owning, caring for 

(operating), and disposing of a building over a study 

period. 

• Discount rate: How do you value future benefits or 

costs? 

• Which costs are relevant to each stakeholder? 

• What is the appropriate time horizon? 

met 3.02 bld Time horizons apply to builders as 

well; builders are not opposed to 

LCC analysis 

Buyers are uncertain of time in 

home, who will buy, and so use 

varying discount rates 

Different buyer segments behave 

differently: 

Higher income buyers use longer 

time horizon 

Lower income buyers use shorter 

horizon (1st cost emphasis) 

Existing owner (repeat) buyers use 

longer horizon 

Community wants longer horizon 

• Time horizons vary for different stakeholders. 

• Uncertainty leads to a higher discount rate. 

• For the homebuyer there is a tradeoff between 

durability and aesthetics. At one time the homeowner 

argued against life-cycle costs. The existing 

homeowner has the same outlook as a homebuyer. 

• High-income buyers tend to have a longer life cycle 

horizon. Higher income people seem to have a longer 

time horizon. 

• A homebuilder will go by the desires of his customers. 

How well do homebuilders perceive time horizon of 

their customers? 

• In finance industry, the major concern is with first 

costs. 

• State government is concerned with demand for 
44 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

and consideration of consequential 

impacts 

Builder wants to know and meet 

customer wants (enhancing 

reputation) 

Product manufacturers interested in 

long-running markets 

Finance industry primarily interested 

in 1st costs; operating costs not 

factored into lending decisions 

Insurers have a longer horizon; want 

to reduce future claims 

State and local governments have a 

longer horizon focusing on service 

and utility impacts 

Federal agencies emphasize long 

term national policies, social costs, 

and a social discount rate (e.g. OMB 

will suggest discount rates to 

lenders) 

Affordability is now mentioned in the 

IRC, previously exclusively 

concerned with safety 

energy and water and has political concerns. 

• Federal government has more of an interest in 

viewing “society as a whole.” The Federal 

Government’s view is on the people living in the room 

and society as a whole. 

seg 3.03 fin Discussions have had a single 

family emphasis while most 

affordable housing is MF. 

MF delivery system explicitly 

considers age, service life, and 

condition at resale 

Multi-family is the biggest component of affordable 

housing. In this segment, underwriting explicitly takes 

into account the life stage of housing. 

seg 3.031 bld (see notes) The share of condos is 20 %. Tax credit housing is 

33 %. 

per 3.04 mcd 

How does each stakeholder decide 

what to consider? (Can we affect 

the process of that decision?) 

How are uncertainties, such as 

hurricane, fire, etc., dealt with? How 

are they monetized? 

Have to treat manufactured (multi-family?) homes 

differently from single-family homes because Federal 

regulations treat them differently. How does each 

stakeholder determine which costs matter for their 

decision? For occupants, it is the mortgage payment or 

monthly rent. This is currently driven by first cost. It 

need not be. In addition, not all maintenance is the 

same. For example, replacing a roof is not the same 

as fire safety or hurricane protection. Some address a 

certain event (leaky roof) while some address uncertain 

events (fire hazard or hurricane). Some homeowners 

think that these uncertain events will not happen. Also 

the risk of fatality or injury does not show up in 

homeowner’s insurance. We need to know more about 

effective approaches in persuading homeowners to 

factor foreseeable hazards and costs into their 

decision-making. There are approaches with at least 

some success with at least some audiences (e.g. 

hurricanes in Miami). 
45 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

met 3.041 own (see notes) Right now, mortgage payments are based on first 

costs. 

att 3.05 rch Questions will be dealt with in later 

sessions—current research is 

looking at parameters that are/will 

be used. 

Issue with natural hazards shows up in insurance 

payments, not so much in mortgage payments. These 

issues will be addressed more fully in later sessions: 

tomorrow’s session on valuing social costs and benefits 

and this afternoon’s session on low probability events. 

seg 3.06 cst 

SF decision-making much different 

than MF, which involves 3rd party 

concerns. We have not presented 

decision-makers with policy impacts. 

Because there is political accountability, we should not 

expect a change in the regulatory environment. The 

distinction between single-family and multi-family is 

important. Some standards, however, are decided not 

at the policy level, but at the technical level, such as 

codes. In the future, there is a need to provide 

policymakers with choices about performance 

standards and options about the minimums in the 

codes. 

bar 3.07 rch 

Home insurance industry is not 

responsive to efforts to get them to 

consider incentives for durability 

Great variation from state to state, 

no rational relation to housing 

quality 

The most negligent group over the last three to four 

years has been the home insurance industry, in 

ignoring LCC. They resist changing rates to reflect 

construction changes. They should recognize and 

price their product based on durability and disaster 

resistance, but they do not. Premiums in Florida are 

twice those in Pennsylvania. But building for safety 

and disaster resistance does not lower the premium in 

Florida. This is especially true now that the insurance 

companies’ stock portfolios have tanked and they are 

more reliant on underwriting income. In response, 

insurance companies have increased premiums. 

Resistance to changing premiums is greatest in high 

premium states. 

bar 3.071 bld (see notes) Do state regulations play a part in this? 

bar 3.072 rch 

(see notes) 

No. These companies just want to make profit. They 

will support changes in codes without data, but when it 

comes to talking about reducing premiums, they want 

data. 

per 3.08 cst Need to look at insurance business 

model—loss control (see record) 

per 3.09 cst Complex situation; insurance is 

highly regulated for both consumer 

and industry protection issues 

State regulators are political animals. 

per 3.091 rch (see notes) But regulators would not object if insurance companies 

wanted to lower premiums. 

bar 3.10 bld 

No incentives from insurers, though 

insurers want upgraded 

performance through code 

requirements. 

But any decrease would have to be balanced by an 

increase somewhere else. More restrictive codes are 

the easiest way for insurers to protect themselves from 

losses. States control the insurance industry; they 

must allow insurance companies to price on risk. State 

Farm, for example, is a big player. It can influence the 

marketplace. It has threatened to pull out of Texas and 

other states because it was too exposed there. 
46 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

per 3.11 bld Are regulators actually 

stakeholders—do they have a stake 

in housing longevity? 

Are regulators stakeholders? What is their interest? 

Longevity? 

per 3.12 bld 

Political stake only. 

There was one case involving the mayor of Charleston, 

SC. He supported more stringent seismic codes 

because he would be held accountable if he did not 

and an earthquake occurred. The issue of liability 

makes them stakeholders. 

per 3.13 reg Building regulators are accountable 

to political jurisdiction. 

The key is accountability. If a restriction is loosened 

and something happens, then the regulators will be 

asked why the weaker standard was approved. 

per 3.14 cst Code officials are responsible to 

occupants. 

The interest of the regulators becomes parallel with that 

of the homeowners. 

per 3.15 mcd 

Study says regulator not a 

stakeholder: 

Code enforcer responsible to 

occupant, not owner 

Interested in LCC, but may not have 

any leverage in the process 

We have to define “stakeholder.” If it is defined as a 

group having a financial stake in a project, then 

regulators are not stakeholders. If it is defined as a 

group having a stake in the outcome of a project, then 

regulators are. In that case, must define their stake, 

such as in LCC vs. first cost (as far as their view of 

LCC). But some of the mechanisms to affect LCC are 

not available to regulators. 

A code enforcer is a stakeholder by the formal 

definition of the term, but it cannot be inferred or 

assumed that a code enforcer feels any obligation to 

find the most acceptable way for a building project to 

go forward. A code enforcer can live with there being 

no building; it is not clear that any of the other 

stakeholders can. 

per 3.16 reg 

Complicated role, but state owns a 

lot of property (and has a stake at 

least to that extent) 

The state of Maryland may be different in that. In 

addition to its role as code regulator, the state of 

Maryland owns some Maryland homes. The dual role 

as a regulator and owner allows it to achieve some 

objectives. 

met 3.17 reg State/regulator is interested in both 

1st costs and LCC 

The state/regulator is interested in both first costs and 

LCC. 

per 3.171 own 

(see notes) 

One stake is that infrastructure costs are huge, 

monolithic. It affects the local public interest so the 

entire community has a stake when new housing is 

built. 

per 3.18 bld Long term interests align regulators 

and existing building owners 

One issue is that most voters live in existing homes, not 

new homes. Therefore, this group drives policy and 

regulations. 

per 3.19 rch 

Never seen an economics 

discussion at a codes hearing 

(contrary example cited: stair 

geometry cost implications stopped 

adoption) 

In my experience, economics are not discussed at 

proposed code changes, with one exception. In that 

case, about eight or nine years ago, there was a 

proposal to change stair geometry. This proposed 

change would have changed the footprints of most 

townhomes in the United States. Economic analysis 

was commissioned, and the proposal was eventually 

dropped. But the code world in general does not 
47 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

conduct economic assessment of proposed changes 

because the assessments are too expensive. 

met 3.20 mcd 

Disagree; energy issue was driven 

by economics and ‘easy’ LCC 

analysis. LCC is more difficult as 

you move to life-safety and other 

issues 

I disagree. One counterexample is in energy codes 

during the 1970s, which looked at payback periods and 

assumptions about utility price escalation rates. With 

life safety, however, an article in this Sunday’s 

Washington Post described that the value of life 

depended on the age of the individual. Aside from this, 

economics are not in pure safety issues, that is true. 

per 3.21 fin Codes can only address a minimum 

level of safety 

But what is the purpose of the codes? Every ratchet up 

of the code ratchets up the cost. 

met 3.22 bld 

It is difficult to argue safety versus 

economics in a public forum 

Qualitative benefits and costs come together to 

determine the value; insurance companies are not 

interested in adding sprinklers to all buildings because 

of financial costs (projected costs of water damage 

from the sprinklers is too high) 

met 3.23 cst GFCI introduction to codes was 

argued from both standpoints, but 

not in public discussions 

There are two other examples. LCC analysis was done 

on a NIST project on GFCI and on safety glazing, and 

they are now in all codes. 

met 3.24 mcd 

SF home sprinklers cost/benefit is a 

contemporary example: insurance 

companies have not 

recognized/acted on home 

sprinklers, except in gross way that 

smoke alarms are 

recognized/discounted. 

Another example is in fire safety, with sprinklers and 

sprays. There were LCC comparisons of these 

sprinkler requirements. One issue is that insurance 

companies do not offer a discount in premiums for 

home sprinklers. They only offer token discounts, such 

as for deadbolts and smoke detectors. One exception 

of an incentive for sprinklers is for community-wide 

sprinklers that are concentrated in a locality. This 

incentive is due to the fact that this group of houses 

having sprinklers makes building a fire station to 

service that locality unnecessary. The same number of 

houses with sprinklers scattered over a wider 

geographic area would not have the same effect. So 

LCC and first costs are thought about, but not explicitly. 

met 3.241 rch (see notes) If LCC is not treated explicitly, then it is not at all, 

because it is a black box. 

met 3.25 fin Difficulty costing rare events? No, it 

is a known actuarial experience 

base. 

(see record) 

met 3.251 bld 

(see notes) 

LCC analysis is done qualitatively rather than 

quantitatively. Small expense items, such as smoke 

detectors, are more easily added to codes than big 

expense items. 

met 3.252 mcd 

(see notes) 

That is only two of the four boxes. What about the big 

cost/big benefit and low cost/low benefit items? 

Accepting low cost/high benefit and rejecting high 

cost/low benefit changes are no-brainers. 

met 3.253 rch (see notes) This is the purpose of the workshop, to propose a way 

of measuring affordability. 

met 3.254 fin (see notes) One reason this is difficult is because we do not know 

how to price a rare event. 
48 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

met 3.255 cst (see notes) Insurers know how to do this. 

met 3.256 mcd (see notes) The NFPA has data on fatalities and injuries due to fire 

with and without sprinklers. 

met 3.257 fin (see notes) One example is lead paint. It was costly to change. 

per 3.258 bld 

(see notes) 

Insurers do not take a position on home sprinklers 

because the losses due to fire damage and those due 

to water damage are the same. The presence of 

sprinklers makes no difference to their underwriting 

business. 

per 3.26 mcd Insurers look at data, financial 

consequences; life safety may 

change picture 

Regulators come as close as any 

stakeholder that looks at all 

considerations 

The financial decision may be indifferent, but life safety 

is excluded from that. Analysis with life safety is an 

entirely different issue. The regulator is a stakeholder 

that is closest to looking at all these costs and issues in 

LCC. Therefore, it is not a bad place to start. 

met 3.27 cst Smoke detector example: 

production reduced costs from $100 

to $5 and changed the economics 

Several years ago, when smoke detectors cost over 

$100 each, the decision was more difficult. Now that 

they cost a few dollars, nobody objects to their 

inclusion in the code. 

bar 3.271 bld (see notes) The price affected how quickly it was adopted and 

penetrated the market. 

bar 3.28 bld 

Regulators are in place to protect 

public interest, but (“lag v stove bolt 

prescription”) we’ve created a 

stakeholder we did not want. 

Regulators are there to protect the public and not to 

have their own interest. But this is not always how it 

plays out. For example, I had to replace 1⁄2-inch 

(12.7 mm) lag bolts installed with nut and washer with 

3⁄8-inch (9.525 mm) bolts on a cathedral ceiling because 

the code called for the 3⁄8-inch (9.525 mm) bolts, and 

code official demanded this. Replacing these bolts 

took about 10 labor hours and $150 in materials. 

Would there have been a difference in performance if 

the 1⁄2-inch (12.7 mm) lag bolts with nut and washer had 

stayed? 

per 3.29 cst 

Code official is both stakeholder and 

part of production team 

The lag bolt would probably have met the minimum 

performance standard, but the code official may have 

lacked the technical background to know this. This is a 

recognized problem. The problem is that code officials 

are not involved in the design stage and are only 

brought in at the end of the process. When they have 

objections at this point, they are seen as impediments. 

per 3.30 reg Education and professionalism of 

inspectors is important 

This is a timely issue because it will get worse before it 

gets better. Inspectors need to be better trained and 

higher quality. Labor also needs better training. 

bar 3.31 mcd 

“never enough time to do it right; 

always enough time to do it over” 

The thinking is that “There is no time to do it right, but 

always time to do it over.” Code officials will make 

mistakes, but we are better off with them to provide the 

check than we would be without them. 

The manner in which public safety is ensured by having 

some sort of check in housing standards (through 

codes) is important, better than having nothing. 

bar 3.311 cst (see notes) Officials in New York State have stated that adoption of 
49 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

building codes was based on costs and benefits. 

Regulator stakeholders are multidimensional and 

heterogeneous. Political jurisdictions affect this. 

bar 3.32 rch Is there a “durability mortgage”? 

Has been announced, but what is it? 

What is the potential for impact on 

future value of housing condition? 

The question is LCC vs. durability. I have heard that 

Fannie is developing a durability mortgage. What is it? 

Is it similar to the energy-efficient mortgage? What 

does it cover? 

bar 3.33 fin 

May be home keeper mortgage—

borrower is essentially buying 

insurance (on performance.?) 

This could be what is called the “Homekeeper 

Mortgage.” It sets a bar where the bar is an insurance 

policy. The homeowner pays a fee into escrow every 

month. If an element of the home goes bad, then the 

insurance will pay to repair it. It is insurance for 

durability. The fee will determine the effect on the 

mortgage. 

met 3.34 fin 

In MF housing, debt ratio is 

determinant—must consider the 

viability of the structure (due 

diligence) 

Home inspections could serve a 

similar purpose for SF 

This is another example of innovation in mortgage 

lending. Underwriting decisions for SF homes are 

based on creditworthiness of the borrower, not the 

value of the asset. If the consumer values it, they will 

pay for it. With multi-family housing, the situation is 

different. In this case, lenders look at the value of the 

asset, not creditworthiness of the borrower, when 

making underwriting decision. They look at the viability 

of the structure as the ratio of liability to the value of the 

asset. 

met 3.341 own (see notes) With single-family homes, the assumption is that equity 

being built up will pay for maintenance. 

met 3.342 rch (see notes) This is why there are no more FHA inspections. 

met 3.35 mcd Home inspections are an innovation 

in themselves 

Another innovation is the use of home inspectors. 

They are an access point for the borrower. 

met 3.351 bld 

(see notes) 

Home inspectors are used only in some areas. In 

others, people will not pay for them. For example, with 

my mother’s home in southern Virginia, the real estate 

agent was unwilling to have a home inspector. In the 

DC area, on the other hand, where incomes are higher 

and people are willing to pay for it, people expect it. 

met 3.352 mcd 

(see notes) 

As with innovations, the practice has to disseminate 

first. It takes hold where it is most affordable rather 

than where it is most needed. 

seg 3.36 rch Reflects more intense use of 

existing stock; SF transaction very 

different from MF 

Another problem is that few states certify home 

inspectors. 

seg 3.361 cst 

(see notes) 

This is another difference between single-family and 

multi-family housing. With multi-family, inspection is 

considered due diligence. 

met 3.362 rch (see notes) What if defaults on mortgages for single-family homes 

occur? Does the value of the asset still not matter? 

met 3.363 fin 

(see notes) 

Foreclosure is rare: has nothing to do with the actual 

house, but the credit of the individual. Freddie Mac has 

a default rate of less than 1 %, so foreclosure is not a 

factor for most mortgages. The issue is whether the 
50 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

market will move the house. There is no bubble in the 

housing market. 

Discussion session #4: How does each stakeholder view and compute future benefits 

that are uncertain or contingent on very low probability events, such as protection 

from earthquakes or hurricanes that may never happen, at both scales? What 

happens when you add uncertainty to the costs and benefits discussed in session #3? keyword sequence stakeholder 

‘flip chart’ record NIST notes

met 4.01 rch 

Texas Tech blind studies of 

recapture of costs for storm 

mitigation—market signal (visible 

innovation) aided market 

acceptance 

Risk perception (Wharton)—folks 

cannot differentiate risks 

Looking at incentives—insurance 

premium reduction; reduced 

community costs recognized thru 

transfer tax credit if dwelling is 

improved 

• Texas Tex Wind Center conducted an empirical study 

of storm blinds based on a cross section of 6 000 units 

to look at how additional costs are recaptured when the 

house is sold. Market signal because potential buyers 

could see the possible results from upgrading blinds. 

Potential buyers could see the storm blinds and the 

premium associated with it. 

• How do people view risks? According to a risk 

perception study at Wharton: most people can’t 

differentiate between 1/1 000 and 1/1 000 000 

probability – How can we help people understand the 

dangers? 

• If homeowners take steps to protect property, tax 

rebate could be a good incentive. There are economic 

incentives for both parties. There is an insurance 

premium associated with a mortgage. Economic 

incentives can be used to lower reductions in insurance 

premiums. If you improve your dwelling, the less the 

community has to do. Can deduct 1⁄2 % when you 

transfer the property. 

att 4.02 bld 

Interested in minimum health and 

safety standards 

Group 1—low occupancy, low 

value; Group 2,3---residences, 

schools; Group 4—nuclear, 

chemical, 1st responders; event— 

frequent to very rare; magnitude—

small to large 

• The state of South Carolina does not believe their 

earthquake provision is where it should be. Large 

events, such as floods, for example, caused flood 

claims to be changed. Insurance companies go to the 

re-insurer. Premiums are based on worst-case 

scenarios. It’s difficult to figure risk-based premiums. 

Some people will pay more and some will pay less. The 

homeowner who can least afford it, pays the most. 

• Balance magnitude of improbable event and 

magnitude of possible damage. (see table handout) i.e. 

earthquake is less risk tolerant than high winds 

• If a rare event occurs, it makes people perceive that 

the event is more likely to occur again. 

met 4.021 cst 

(see notes) 

What is often ignored is that risk has two dimensions, 

both the probability of the event and the consequences. 

Must balance with magnitude of an improbable event 
51 

keyword sequence stakeholder 

‘flip chart’ record NIST notes

with the magnitude of the possible damage. 

met 4.022 fin 

(see notes) 

The occurrence of an event affects perceptions about 

its probability. If a rare event occurs, it makes people 

perceive that the event is more likely to occur again. 

met 4.03 cst Insurance Services Organization 

(ISO) program to rate communities 

and code enforcement 

The Insurance Services Office (ISO) conducts the 

BCEGS (Building Code Effectiveness Grading 

Schedule) program about the quality of codes and code 

enforcement. The insurance industry uses this data. 

bar 4.04 fin Risk-based insurance may have 

contrary effect of increasing costs to 

those that can least afford 

Insurers pool risk. Premiums are based on worst-case 

scenarios. Insurers’ concern is, what is their exposure? 

Risk premiums are a means of getting rid of the cross 

subsidization of the high risk by the low risk. If risk 

premiums were used, we would probably see the 

lowest income owners paying the highest premiums. 

Also, underwriting would be much more difficult. It 

would have to be done on a case-by-case basis. 

per 4.05 cst 

How do you communicate 

magnitude, probability, and 

performance to each stakeholder 

group 

Magnitude of a loss is based on the magnitude of the 

initial event. Risk of building falling down comes from 

how well the initial design was equipped to handle 

wind, for example. Certain embedded assumptions as 

to how to make decisions. People are trying to 

understand quantitative data on a qualitative level. 

People’s normal lifetime experiences do not allow them 

to factor for extreme events. Consideration of life loss 

vs. economic loss – larger corporations are concerned 

with investment and maintaining the ability to continue 

running. 

met 4.06 mcd 

Fire does not fit matrix well—most 

start small and not from externality 

but from human action 

Most stakeholders ignore low 

magnitude events—handling 

quantitative info qualitatively 

How are hazards addressed? Some 

keep building in flood plains despite 

regular reminders 

Matrix works well for natural 

hazards (eq, storms, etc.) but not for 

high frequency events (“impossible” 

v. “intolerable”) 

Fire does not fit well into the matrix in the handout, 

which is good for seismic risks. The matrix assumes 

that the way to affect performance is by moderating 

consequences, with no control over the occurrence of 

the event. In the case of fire, however, the event is 

usually caused by humans. Action is not only in 

damage control, but also in prevention. Sometimes, it 

is possible that there is no flaw in a design, but there is 

a flaw in the process of executing or building the 

design. Basically, there are two categories of hazards: 

impossible, and intolerable. The day after an event, it 

switches categories. There are also assumptions about 

what is allowable and who would prevent it. For 

example, there are people who do not think about fire 

hazards. And people built in flood plains until flood 

insurance was mandated. When life events do not 

provide a good basis for subjective probability 

assessment, people do not know how to perceive risk. 

Also, if events occur that run counter to their 

expectations, the response is distrust of the source of 

the information about risk rather than acknowledgement 

that the information was misunderstood. 

met 4.07 own Need to change terms of reference The perception of risk is that a 100 year flood cannot 
52 

keyword sequence stakeholder 

‘flip chart’ record NIST notes

for risk—100 year flood as likely 

again next year as this year 

happen two years in a row. There is no recognition that 

the probabilities are independent from one year to the 

next. When speaking of the 100 year flood, there is the 

same probability at 2003 as 2004. 

met 4.071 mcd 

(see notes) 

If there were two floods in 2 years, the homeowner 

would think they had gotten bad information or have 

been lied to. 

att 4.08 cst 

• Information used quite different 

among groups 

• How communicated is very 

important (easier to deal with 

dollars than life-safety of 

specific event) 

• Commerce looked closely at 

business interruption impacts 

There is a role for financiers and insurers. FEMA is 

funding the Applied Technology Council (ATC) 58 

project. Some of the results are that the sophistication 

with which the point is made matters, such as it is in 

terms of life losses or economic losses. People can 

deal much better with economic losses in terms of 

annualized expected loss associated with a choice or 

action, rather than an event. Larger corporations are 

concerned with investment and maintaining the ability 

to continue running. For example, if it were presented 

as probability of minor damage vs. probability of major 

damage. People’s normal lifetime experiences do not 

allow them to factor for extreme events. 

met 4.09 mcd 

Return to question of uncertainty—

low maintenance v. high 

performance: 

• Attracted to low uncertainty 

because of focus on 

maintenance costs 

• Attracted to even high 

uncertainty because value of 

high performance is important 

• Attracted to focus on first cost 

only 

• Ostriches 

There are two types of approaches to mitigation. The 

first is high performance, but requires more 

maintenance. Whether the maintenance takes place is 

a source of uncertainty that affects the likely 

performance of the measure. The second is something 

that has mediocre performance, but is idiot proof. 

There are three groups of individuals: One will choose 

mediocre performance because they want to avoid the 

uncertainty and maintenance, even at a cost of lower 

performance. A second will choose the high 

performance option if the uncertainty is controllable by 

their own actions. A third may choose the high 

performance/high uncertainty option because they care 

only about first cost. 

att 4.10 bld Cannot rely on maintenance for 

operation—product will fail 

The typical homebuyer prefers zero maintenance. 

Most are in the first category. 

att 4.101 mcd 

(see notes) 

They may be in the first or the third, and may make 

choices without thinking about maintenance and the 

consequences of those choices. 

seg 4.102 bld 

(see notes) 

Multi-family housing is different because of liability, 

insurance, and the presence of dedicated maintenance 

personnel. 

att 4.11 mcd What about analogy to 

automobiles—a defined 

maintenance regime? 

Why not same attributes for 

maintaining homes and system 

performance? 

In the case of autos, maintenance is key to 

performance, and people do it because it is easy to say 

yes to it, with remainders and streamlined procedures. 

met 4.12 bld $1 800 per year maintenance 

compared to $235K price—less 

Most deterioration of homes occurs over time and is not 

instantaneous. But realization of deterioration is 
53 

keyword sequence stakeholder 

‘flip chart’ record NIST notes

than 1 % per year; national “close 

your storm windows day” at 

Thanksgiving”? 

sudden. For a loan-to-value (LTV) loan of 80 %, taxes 

and insurance are escrowed. A mortgage company 

wants to protect its investments. A Harvard study 

found that the average annual expenditure on home 

maintenance is $1 800. The average resale price of a 

house is $237 000. This small amount spent each year 

to maintain what for most people is the single largest 

repository of their personal assets is less than 1 % of 

the value of the house. To get the housing stock 

maintainable for 60 years, it may be necessary to 

mandate certain requirements. There needs to be 

something to encourage and remind homeowners 

about maintenance, such as “National Storm Window 

Day” on Thanksgiving, and “National Screen Day” on 

Memorial Day. 

per 4.121 fin 

(see notes) 

Maintenance is a major concern relating to the person 

who is paying for it at the moment that it occurs. 

Consider 1 % of purchase price + costs of 

improvements every year to stabilize the community. 

per 4.122 cst 

(see notes) 

How does a neighbor become a stakeholder is your 

house? When something significant occurs to a single 

home, it affects the entire neighborhood (in way of 

market value). 

met 4.13 mcd 

Frame cost/benefit against another 

reference (e.g. value of investment) 

It would be helpful to frame the importance of 

maintenance not in abstract terms, such as LCC, but in 

more tangible terms, such as the number of mortgage 

payments. Currently, maintenance is not thought of as 

an investment choice, but as an expenditure choice. 

att 4.14 bld Banks require property tax escrow 

(banks protect investment by forcing 

compliance), why not similar 

approach for maintenance? 

Mortgage lenders build in escrow for property tax and 

insurance premiums. The same could be done for 

maintenance if believe that personal responsibility is 

not reliable. 

bar 4.141 mcd (see notes) Or draw from the auto analogy, where a warranty 

requires adherence to a maintenance schedule. 

per 4.142 mcd 

(see notes) 

Another example is the mandatory annual safety 

inspection for vehicles in Virginia. But autos are not a 

good analogy because it is possible to spend more 

maintaining a car (as a percentage of value) than on a 

house. 

bar 4.143 bld 

(see notes) 

Educating people is the key. People do not read 

instruction manuals. For example, I know someone 

who refuses to and therefore cannot operate the VCR. 

met 4.15 fin 

It’s a time horizon consideration—if 

beyond mine, I don’t care. 

LCC is not a good approach because time horizons are 

short. The thinking is that a homeowner can forego 

maintenance for 5 years because the consequences 

will not be observable in that time, and can sell with no 

penalty. 

att 4.16 mcd If you ignore maintenance, you are 

playing probabilities. People are playing the odds. 

att 4.17 own High maintenance is not a reliable A problem is that there are infrequent tests of 
54 

keyword sequence stakeholder 

‘flip chart’ record NIST notes

strategy for low frequency events; 

need fail-safe systems 

performance with these low probability events. If 

there’s a low probability, then there’s no reason to do 

high maintenance. There’s a need to look at a fail-safe 

system that gives warnings whenever the system is not 

in shape. 

met 4.171 mcd 

(see notes) 

With maintenance, there is a shift in uncertainty from 

one that they cannot control, the realization of an event, 

with one that they can control, maintenance. 

met 4.18 bld Rental property investor seeks 1 % 

property + improvement cash flow in 

stable market; delay in maintenance 

will penalize the seller; how 

much?—subject of study? 

The investment standard is 1 % of purchase plus 

improvement per month in a stable or ascending 

neighborhood. If maintenance is deferred, it penalizes 

the seller. The market will adjust at the time of 

transaction. 

met 4.181 cst (see notes) If the penalty is less than the cost of maintenance, then 

the incentive to maintain is not there. 

att 4.19 own 

Especially for “high-frequency” 

events? 

We need to focus on low frequency, low probability 

events. Flooding drains, mildew, and fires are more 

frequent. Low probability events need to be treated 

differently. 

att 4.20 cst 

Hurricane protection relies on 

maintenance rather than 

passive/fail-safe approach. 

With hurricanes, there are three mitigation approaches 

that are seen as equivalent by the codes. 

1. Build hurricane shutters, and the only 

maintenance required is to close them before 

the hurricane hits. 

2. Install impact-resistant windows, and the only 

maintenance is to close them before the 

storm. 

3. Stack plywood, and the maintenance action is 

to put it up when the hurricane warning 

comes. 

Whether high maintenance or low maintenance, there 

are options to satisfy the need for protection. The 

codes recognize that some prefer low maintenance and 

some high. 

Standards are met if you are building in a low frequency 

event area. 

pro 4.21 bld Storm shutters useless if not 

deployed. 

Hurricane shutters are only effective if someone closes 

them before the storm. 

seg 4.22 reg 

From regulator perspective, recent 

looks at contributing factors to fire 

found vacancy a strong indicator 

and greater frequency of vacancy in 

poor areas 

From the perspective of regulators, they looked at fire 

hazards when setting codes. There are factors aside 

from the structure and maintenance that affect this 

hazard. For example, the vacant building factor and 

low-income factor contribute to both the probability of a 

fire and the probability that a fire will result in a fatality. 

These factors came into play when it came time to set 

the codes. 

seg 4.23 mcd Untreated wood shingles create 

increased risk for surrounding 

dwellings; how should it be dealt 

with? By insurers, by codes? 

There is a special case with fire. If a homeowner uses 

untreated wood shingles, then he increases the risk of 

a fire to his neighbors. 
55 

keyword sequence stakeholder 

‘flip chart’ record NIST notes

seg 4.231 own (see notes) Codes are driven by the rule that “one shalt not burn 

your neighbor’s home.” 

seg 4.24 reg Commercial use next to vacancy 

unable to get insurance; two 

buildings away, double the cost. 

For buildings next door to vacant buildings, it is 

impossible to get fire insurance. 

seg 4.241 rch (see notes) Is the risk pooled or not? 

seg 4.242 reg (see notes) This was for commercial buildings. 

seg 4.243 own (see notes) If one person leaves the house burned down and does 

not rebuild, then the entire neighborhood suffers. 

att 4.25 fin Northridge quake: soft-story 

collapse was the problem. 

Earthquake insurance was withdrawn for condos in 

southern California after the Northridge earthquake. 

What was the technical impact? 

att 4.251 bld (see notes) Now can’t build in some places. 

att 4.252 own (see notes) Many buildings were retrofitted. 

att 4.26 cst 

Many SF homes with cripple walls 

have the same problem. 

There were some retrofits, such as the Parapet 

program and unreinforced masonry buildings (URMB). 

It is difficult to get these programs in place. There 

needs to be a public outcry. 

att 4.261 fin (see notes) Or outcry from the insurers. 

att 4.262 cst 

(see notes) 

I have no seismic insurance even though I live in 

California because any policy with a reasonable 

premium has a deductible of $40 000. This creates an 

incentive for me to build better. 

seg 4.27 mcd Getting back to vacancy 

implications, abandonment of 

property leads to leveraged risk for 

others 

One person’s choice to not protect can, if an event 

occurs, affect the neighborhood. Vacant houses, for 

instance as a result of a fire, cause rot in the 

neighborhood. One vacant house soon becomes two 

vacant houses, etc. 

per 4.271 bld 

(see notes) 

But the insurance payout must be used to rebuild the 

damaged house, unless the insurance company takes 

possession of the damaged property. Typically, an 

insurance payout cannot be used to build or buy a 

house in an entirely different location. 

per 4.28 reg There is a historic 

model/precedence for government 

role in property rights 

There is already precedent for government regulation of 

home maintenance: historical homes. 

per 4.281 own (see notes) Homeowners’ associations also play a role in 

monitoring maintenance. 

per 4.282 fin (see notes) How does this relate to affordability? 

att 4.29 mcd Need more realistic estimate of 

affordability 

What is needed is a notion of how affordable houses 

are now and connect all the components of affordability 

back to the house. 

att 4.31 fin 

What is quality level for ‘affordable’ 

housing? Safer means higher cost; 

will be the same for all attributes. 

Stricter codes reduce affordability. There is a lot of 

housing that is affordable that is unlivable. What is the 

minimum standard? Here, we are talking about 

increasing the minimum standard. Can you achieve the 

performance with less expensive materials? What is 

the quality level to be achieved? Houses are better 

built now and cost less. It is necessary to change costs 
56 

keyword sequence stakeholder 

‘flip chart’ record NIST notes

to reflect the value of the housing. Increasing 

standards would increase costs greatly, which would 

lead to a decrease in the availability of affordable 

housing. 

met 4.32 rch Metrics not there to either estimate 

or justify increased costs 

Need a predictable metric to get the consumer to incur 

the cost. 

met 4.321 cst (see notes) Or wait for an event to occur to make them want to 

incur it. 

met 4.322 mcd 

(see notes) 

An event would lead to discrete changes in choices, 

building codes, and new building technologies. 

Experiences are flawed metrics and not rational. 

att 4.33 own 

Adherence to enhanced code raised 

costs post-Andrew; adherence to 

pre-Andrew code reduced losses. 

Adherence produces better houses. 

In the case of Hurricane Andrew in Florida, the worst hit 

part of a newly constructed area was where there had 

been an agreement between the builder and inspectors 

for self-enforcement of the codes. The selfenforcement did not work, and the codes were not 

enforced. But there was no attention paid to this 

reason as the explanation for the damage in this area. 

Instead, there was political hue and cry for more 

stringent and more idiot-proof codes. But in other 

areas, where existing codes were enforced, the homes 

withstood the hurricane. 

att 4.331 fin (see notes) A HUD study also showed this with seismic events. 

att 4.332 mcd 

(see notes) 

What if the code changes being demanded were more 

idiot proof? For example, in the case of the Rhode 

Island nightclub fire, there was lack of adherence to the 

code. If sprinklers, a more foolproof device, had been 

in place, it would have made a big difference. 

att 4.333 fin 

(see notes) 

If these changes were to be made, one effect would be 

to increase the hurdle rate of the house and make 

ownership less affordable. 

att 4.334 bld (see notes) Codes are merely an agreed minimal acceptable 

standard. 

per 4.34 mcd Codes are an imperfect but valuable 

instrument 

Even if imperfectly enforced, codes are better than 

nothing. 

per 4.35 rch 

Why will insurers push for code 

changes, but have no interest in 

QA/QC for homebuilders? 

Why do codes and changes in existing codes not target 

individual housing more directly? 

Code changes in Florida occurred in part due to a push 

by insurance companies. Why do they not also push 

for enforcement and deal with the quality of the house, 

which matters much more for affordability and their risk 

exposure? 

bar 4.36 bld Future benefits uncertain or 

contingent on future actions (e.g. 

zoning) impediments to affordable 

product. Correlation to increased 

cost and reduced risk. 

There is a need to consider affordability impacts when 

going from a small lot to a large lot. An example is 

consequences of septic failure on ground water quality. 

Does the reduction in risk correlate to increase in cost? 

What is a reasonable tradeoff for risk? Insurance 

companies pushed for changes to double lot sizes. 

bar 4.361 cst (see notes) Zoning is an issue. 

bar 4.362 bld (see notes) There are a number of positive incentives in improving
57 

keyword sequence stakeholder 

‘flip chart’ record NIST notes

and following codes and zoning. The improvement 

may trade off with other incentives. 

met 4.37 rch Analogy to materials research—

better performance at lower cost—

need to get discussion back to 

innovation. 

Is it possible to increase innovation and decrease cost 

at higher quality? Can innovation make the house 

more affordable (not the quality of the house)? Better 

performance, better cost. 

met 4.371 mcd (see notes) Must ask whether cost of quality improvement is 

justified by the improvement. 

met 4.372 fin (see notes) Can we increase quality and performance while 

reducing cost? 

met 4.373 rch 

(see notes) 

New technology introduction costs must be borne 

initially, but the benefits will eventually be realized. 

High performance concrete is an example. 

val 4.38 rch 

Housing only industry to insist that 

innovation requires increased costs. 

Housing is the only industry that focuses only on the 

increase in initial or early costs associated with 

innovation. This is not true in other industries. In the 

housing market, initial costs always increase with 

increased innovations. Innovation costs more in the 

long term. Pulte improved the quality in its framing. 

val 4.39 reg Costs must be considered. There is little R&D investment in the housing industry. 

val 4.40 mcd No guarantee that innovation either 

lowers costs or increases quality 

Innovation may reduce cost, but may also reduce 

quality. All we know about an innovation is that it is 

new (there is uncertainty). 

val 4.41 cst (see notes) EIFS reduced quality. 

val 4.42 cst 

(see notes) 

The problem with EIFS is that it was misapplied. It 

came from Europe and was used in the U.S. without 

good understanding of how it should be used here. 

Discussion session #5: How should the uncertainty and risk associated with using 

new versus traditional technology be addressed, at both scales? keyword sequence stakeholder 

‘flip chart’ record NIST notes 

met 5.01 fin What types of uncertainties? 

• Unforeseen costs 

• Durability of value 

• Consistency of measurement 

capability 

What types of affordability? 

• Interaction between uncertainty and affordability 

components. 

• Issue: Will the value be maintained in the long run? 

Will the house hold its value if the component falls out 

of trend or physically falls out? 

• Do all innovations have to be held to the same 

affordability standards? 

pro 5.02 mfr How do we reduce our risk in 

introducing new product? 

• Evolution is manageable; 

revolution involves unforeseen 

issues (with greater chance of 

• How to mitigate risks and introduce a product 

appropriately into the market? Dupont mitigates risk by 

the things that they do not envision or focus on. 

• E1825 of the ASTM Standard gives a list of what to do 

before putting in a new system. 
58 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

failure) 

• Assessing performance must 

be addressed in all areas of 

impact. 

• ASTM standard E1825 lists 

things to look at. 

• Should develop installation and 

delivery system as product is 

developed. 

• How to prepare for those risks that you do not initially 

envision? – One has to look at all other aspects of 

something specific could possibly impact. 

• Concurrently one must look at the delivery system 

when testing a new product. The delivery system 

needs to look at the innovation of the material 

• It helps to look beyond first costs to LCC (costs of 

owning and operating). They do look for a combination 

of installation costs and materials costs. They try to 

reduce the cost of owning and operating. 

val 5.03 rch How do you treat cost of substitute 

products? 

Is affordability a factor in marketing decisions at your 

company? 

met 5.04 mfr We look at complete LCC, including 

replacement cycles. 

Not in the first cost, but the cost of materials, 

installation costs, callback costs, energy savings, and 

durability. 

met 5.05 rch Are consumers becoming more 

sophisticated/sensitive to LCC? 

Yes. 

Do the customers know this? 

met 5.051 mfr (see notes) Builder customers are pretty sophisticated. Training 

and education are also part of the package. 

per 5.06 rch NES ‘look beyond code’ push 2 

years ago; manufacturers wanted 

nothing to do with it. 

Other manufacturers may not be interested in testing 

and assessment. 

pro 5.07 mcd Manufacturers were looking only for 

market-pull demand for any aspect 

of product characteristics 

There is no point in showing characteristics of products 

that no one cares about. 

pro 5.08 rch 

Lots of visible innovation is by small 

companies with low capitalization 

looking to push innovation into 

market with little testing or success. 

The concern is this, truly innovative producers are very 

small-scale producers, who may not have the 

resources to test and are the worst when it comes to 

assessing products before market introduction. 

Massive industry failures are documented on PATH’s 

website. HUD did a study of EIFS and engineered Ijoists. With EIFS, which was a failure, it was produced 

by small, fly-by-night producers who did not do 

homework on the proper application of the technology. 

With engineered I-joists, which was a success, the 

producers were big companies who had performed 

long, comprehensive analysis of the product and 

process. There is a riskiness to new products that is 

inherent that is not addressed by producers. In the ICC 

Evaluation Service guide to innovations, the idea is 

“getting the technology accepted.” 

bar 5.09 own Code can be a barrier; may be used 

by existing manufacturers to block 

products. 

Codes can be used by incumbent producers to block 

new products. 

pro 5.10 mfr Prescriptive standards represent 

“the way things have been done”—

new product must test against 

existing product and evaluate 

existing product for comparison. 

Some code elements that are prescriptive are based on 

tradition and have not been tested. To introduce a new 

product that satisfies the same purpose, it is necessary 

to not only test the new product, but to test the existing 

method as well, for a comparison. This is very costly. 
59 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

pro 5.101 rch (see notes) How much does this manufacturer use the ICC 

Evaluation Service? 

pro 5.102 mfr (see notes) We use it. 

pro 5.11 mcd Armstrong testing, “no surprises”, at 

one end; other extreme, “kitchen 

only sprinkler” emphasizing/ 

distorting kitchen risk. 

How should evaluation be done—

staged, as in drug development 

analogy? 

Testing, more testing, then wait for 

time before it gets out. 

Find a way to keep good products 

alive long enough to check 

performance. 

Beta testing/trial market: 

1. Assessment by manufacturer 

2. Controlled assessment by a 

limited population 

3. General distribution 

Some of this discussion belongs in discussion session 

7 later. At the fire testing college at Armstrong, the 

mantra is “no surprises.” How can the uncertainty about 

new products be reduced to better predict performance, 

so the good innovations will get through, but the bad 

ones will not? How do you get a system where the 

good innovations get out while the bad are stopped 

quickly? There are three stages of assessments: 

1. Manufacturer’s assessment 

2. Controlled assessment using a limited population 

(such as beta testing with electronics) 

3. Widespread, general distribution 

This staged process is used in the pharmaceutical 

approval process. It requires a great deal of time and 

money, but with limited exposure to people. Some 

disapprove of this process. 

pro 5.111 rch 

(see notes) 

The drug industry is a poor example. The FDA is a 

notorious bottleneck, and the process drives up the 

cost of drugs. 

pro 5.112 mcd (see notes) I wanted to refer to drugs as an example of a staged 

approval process. 

del 5.12 rch 

Problem is materials must be sent to 

“Fred”/3rd party to put in place. 

Systems integration is needed. 

Capital intensive—engineered 

product is the answer. 

We need testing under realistic, standard conditions. It 

is extremely capital intensive to test products until 

people start to buy them. One problem is that there are 

disparate actors in the assembly process. It is not just 

the design of the product. It will fail if there is no 

systems integration. Must also consider Fred the 

manufacturer, assembler, contractor. Products with 

integration challenges are more likely to fail. 

Engineered products will be superior to assembled 

products. It will happen in the housing industry in the 

next 5 years to 10 years. Big companies doing this will 

succeed. 

pro 5.13 mcd Interactions (among stakeholders) 

are a key aspect in changing 

product development 

To carry the drug analogy to this, the issue is drug 

interactions. Is the product sensitive to assembly 

issues? 

pro 5.131 mfr 

(see notes) 

“Controlled assessment” is already done, through test 

marketing (or beta testing, for some industries). These 

assessments are done now, but not to code, because 

the code is just a minimum standard to market trial. My 

company sets up early trials so that the odds of a 

successful market trial are close to 50/50. A better 

analogy may be the auto industry as an assembler of a 

system. Quality is outsourced to first-tier suppliers. 

pro 5.132 rch (see notes) With autos, though, the components are highly 

engineered. 
60 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

pro 5.133 bld (see notes) Testing is costly. A builder with just a few lots cannot 

spread the costs among many units. 

del 5.14 bld Group is making a great argument 

for manufactured housing/modular 

housing. Low-pitched roofs are a 

response to bridge height 

restrictions (not pretty). 

This is an argument for manufactured housing. The 

current perspective, however, is that onsite-assembled 

housing is superior to pre-manufactured housing 

elements. 

del 5.15 mcd Design is an issue that lessens the 

appeal of manufactured housing. 

The problem with manufactured housing is that the 

designs are unattractive. 

del 5.151 own Perhaps should focus all our efforts 

on manufactured housing. 

Transportation system limits design. 

Weather limits design. Site 

assembly will continue to exist. 

Part of the explanation for that is cost. For example, 

the roofs must have a low pitch in order to be 

transported cheaply on highways (to pass under 

bridges). But they are not pretty. 

del 5.152 mcd 

(see notes) 

With a traditional home, presumably affordability is not 

the primary concern the way it is with manufactured 

housing. 

del 5.153 bld (see notes) There is a need to expand the testing that is in place, to 

streamline it. 

pro 5.154 mfr 

(see notes) 

This is true. The issue of time is huge. There must be 

quality assurance, but this adds time to the process. It 

takes 17 years to get a patent, and then the company 

owns the technology only for a few years. Can’t put 

more time between patenting and marketing of a 

product. Testing must be streamlined to minimize this 

time. 

pro 5.16 rch Are manufacturers willing to take 

risk that consumer will buy a higher 

priced product? 

What are the steps in the introduction of new products? 

Does your company introduce new products knowing 

that they initially will have a higher cost than the 

incumbent, but with adoption, the cost may fall? 

pro 5.17 mfr 

Performance should/will pull product 

to higher production volume, 

reducing cost. Many of our 

innovations look closely at a minor 

portion of costs (e.g. flashing for 

windows). 

Yes, most of our products are like this. Take flashing 

as an example. We produce a better product that is 

highest performing. The idea is that the customer gets 

what he or she pays for. So the product is more 

expensive on a first cost basis. The company conducts 

market research to value the products under 

development. As more users come on, the cost will 

flatten and there will be labor savings in general as time 

goes on. 

pro 5.171 mcd 

(see notes) 

This flashing, if I am thinking about the one you are 

talking about, involves some labor savings in 

installation and involves more foolproof installation as 

well. 

pro 5.172 mfr 

(see notes) 

An additional factor is that flashing does not represent 

a high percentage of the price of an entire window 

package. 

pro 5.18 own We must determine what the 

tendencies to failure are and test 

those aspects of the product. 

There is a three-stage process. As Donald Rumsfeld 

said, the worst thing is the “unknown unknown.” 

pro 5.181 mfr (see notes) My company tests new products for robustness to 
61 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

installation by brainstorming about possible installation 

mistakes, such as picking the six worst ways to mess 

something up and try to work with it. Not all companies 

will do this. 

del 5.19 bld Prevent innovation adoption—target 

of marketing/product purchase; 

decision is ‘no’ if equal or greater 

cost than what it is substituting for. 

Manufacturers sometimes target the wrong agent to 

promote a product, that is, the purchasing agent, who is 

taught to say no if the product costs more. It should be 

the sales and marketing folks. 

del 5.191 mfr 

(see notes) 

The problem is potentially worse if there is a value 

chain. The retailer may not want to take a risk on 

stocking an item if it does not know whether the 

subcontractor will want it. 

del 5.192 bld Retailer may not want to stock (e.g. 

additional sked space/sku’s). New 

technology often must completely 

replace something already out 

there. Tough sell. 

Also, a new product is another SKU number that the 

retailer will have to keep track of for inventory. 

Retailers resist change. 

att 5.20 own 

Standard of acceptance—code 

compliance/acceptance is very 

important. 

Without thinking about it, house buyers are hyperconservative about new innovations. For them, 

perception is reality. What matters is cost, location, 

and style. They trust the code without exploring it. 

Normally house buyers are happy enough assuming 

that the code has been followed and that this 

constitutes safety. If they see an innovation being 

used, however, then it will raise their concern about its 

code adherence. 

pro 5.21 mcd For new products: 

• Manufacturer will 

underestimate risk 

• Consumer will overestimate 

risk 

• Both will try to shift risk to 

someone else 

• Ultimate consumer probably 

least able to afford risk 

Is there a way to get better 

information to all? 

There are three problems: 

1. Manufacturers champion new products and 

underestimate the risk. 

2. Homeowners overestimate the risk of new products. 

3. All hope risk will fall on someone else, to displace 

the risk to another party. 

To address the question, must address all three 

problems, not just any one. The sufferer of problem #3 

will probably end up being the homeowner. Is there a 

better way to address risk? 

pro 5.211 reg (see notes) Is there a way to have groups look more objectively at 

innovations? 

pro 5.212 mfr 

(see notes) 

To go back to the auto analogy, one factor there is 

ease of recall. In the building industry, there is not an 

easy recall system. If a builder or manufacturer sent 

out a notice, it would probably be faced with lawsuits. 

This makes the issue of trying to implement new 

innovations more difficult. 

pro 5.213 bld (see notes) Homes are more heterogeneous than cars. This 

makes recall more difficult. 

pro 5.214 mcd (see notes) Also, component manufacturers are shallow pockets. 

They can’t afford to pay for recalls. 

pro 5.215 rch (see notes) Need risk insurance or vertical integration. 
62 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

bar 5.22 bld Big problem for builder is how to 

train producers/installers (laborers); 

ability to train will be a big 

component of acceptance. (internet 

opportunity?) 

Need education/training and uniform installation. There 

is a lack of consensus about the proper method. The 

ability to train is not there. How can this training be 

delivered? Must simplify delivery of content (such as 

through the Internet). 

bar 5.221 mcd (see notes) The earlier idea of an engineered, integrated solution 

would get around this problem. 

bar 5.23 rch Labor problems have only gotten 

worse over last 40 years. 

The labor problem has only gotten worse and will 

continue to do so. 

per 5.231 reg (see notes) Is there a way to have groups look more objectively at 

innovations? 

bar 5.232 mfr 

(see notes) 

There is no effective recall system for homes. This 

makes the issue of trying to implement new innovations 

more difficult. 

bar 5.24 bld 

Supply-chain liability will/should fix 

problem. 

It is the supply chain that will eventually improve the 

testing and research situations. The solution must be 

found in the supply and distribution chain because that 

is where the liability lies. It is where the supply and 

labor interface. There has been a decline of vocational 

training in the U.S. It has been taken out of high 

schools. The unions are not providing or requiring it. 

They do not know how to put things in. So who will 

benefit from labor improvements? Use the supply 

chain as a risk management method. 

att 5.25 mcd 

Other industries focus on QC—

McDonalds. 

McDonalds is an example of an organization that has 

managed to achieve quality control and labor 

standardization across many countries, cultures, and 

languages. 

bar 5.26 cst Over-emphasis of regulated side of 

costs; should we shift focus to nonregulated side? We no longer invest 

in basic research. 

There is insufficient basic research in the public sector 

that leads to innovation. Also, have to look at the 

unregulated components of housing. 

per 5.27 mfr Applied research is done well 

privately; basic research is no 

longer being done by the feds. 

(see record) 

per 5.28 mcd Worldwide problem. This is a global phenomenon. Almost all the fire labs in 

the world are now privatized. 

per 5.281 cst (see notes) Just look at old National Bureau of Standards (NBS) 

publications. It used to all be basic research. 

per 5.29 rch 

Housing improvement has never 

been an objective of government. 

With agriculture, the public sector funds a great deal of 

basic research, with the motivation and rationale that 

what benefits the farmers will benefit society. Except 

for Operation Breakthrough in 1968-1972, there has 

been a lack of motivation in the case of building 

research parallel to agriculture. 

att 5.30 cst When they say “affordability”, 

respond with “basic research”. Even 

basic “affordability” is beyond code 

compliance requirements. 

As a country, we do not invest much in basic research 

and testing in the housing industry (in the public 

sector). In general, basic affordability is beyond the 

code minimums. 

We have to keep in mind that nobody would buy a 
63 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

code-minimum house. Such a house has no wall 

board, no paint, no carpet. The market prevents codeminimum houses. Most of the affordability equation is 

beyond the code. Therefore, must look at the 

unregulated component of housing. 

Discussion session #6: How should society value or monetize the social costs and 

benefits of introducing technology in residential housing, such as energy 

conservation or disaster relief and recovery, at both scales? What happens when you 

add social costs and benefits to the discussion? keyword sequence stakeholder 

‘flip chart’ record NIST notes 

per 6.01 fin 

There is a difference between 

‘valuing’ and ‘monetizing’ 

In terms of stakeholder values—

there is difference between ‘general 

stakeholders’ (e.g. regulators and 

repairmen) and ‘stakeholders with 

standing’ 

In terms of distribution of costs and 

benefits—FNMA is far more 

concerned with negative impacts on 

low-income segments (much more 

susceptible to adverse effects) 

In terms of social costs—at what 

geographic/political level are they 

considered? 

Social value is highly subjective—

New York City studied costs that 

accrued to the city—city bore costs 

disproportionately; benefits were 

more widespread. How do you value 

benefits like self-esteem? 

• Is it possible to make a quantitative judgment 

based on a qualitative factor? 

• Should regulators be considered stakeholders? 

They are not necessarily stakeholders when 

considering costs. 

• Do you consider costs to repairmen as new 

technologies are implemented? 

• Fannie Mae is concerned with regulations having 

negative impacts towards low-income housing 

(crime, education). Fannie Mae is more interested 

in increased cost on lower income families – this is 

the group where negative externalities are 

greatest. 

• For social costs and benefits, you need to know 

what area you are talking about? Every 

stakeholder places different values on social 

costs. Every person/place places a different value 

on a social outcome. 

• Cost savings on criminal justice system in New 

York City is support of housing for the homeless 

was instated – how do you determine the value of 

a quality like self-esteem? No value for selfesteem has been determined for giving shelter to 

the homeless. 

per 6.02 reg Complete re-write of state building 

codes has been done—touches on 

issues of how to value innovation in 

housing. 

• Agree that regulators are not a 

direct stakeholder, in terms of 

costs and benefits, but key 

player/actors. 

• How does society value innovation? 

• New York State recently updated/changed building 

codes 

• Government is not necessarily a stakeholder: role 

is to strike a balance and express this through 

building codes. 

• 1984 – the New York Code Council turned its back 

for almost 16 years on the public’s needs by not 
64 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

• State looked to balance costs 

and benefits that ‘mandated’ or 

‘incentivized’—must be done in 

cooperation with industry and 

society. The code was last 

revamped in 1984 and industry 

had grown beyond it; it became 

an impediment to building with 

the state. 

Effectiveness of ‘incentive’ v. 

‘regulation/mandate’: government 

must determine threshold based on 

true and perceived risk or lose 

public trust. 

Public will reject increased cost until 

they recognize benefit, then they will 

embrace action 

Public does not want to pay more 

for a ‘mandated’ action. 

considering new technologies. The council 

became obsolete because of not keeping up with 

trends. Government and society must work 

together. 

• Incentives vs. regulations: if government regulates 

without input, they lose public trust. 

• An incentive-based environment would give the 

public time to place a value on technology. 

• Mandated regulations are rejected by the public 

because they are likely to increase costs across 

the board. 

att 6.03 mcd 

Different take on session, based 

primarily on an economic 

discussion—maximizing wealth (of 

the community) through 

regulation/incentives that address 

factors which are not obvious and 

visible—“internalization of 

externalities”. 

The presence of externalities leads to the need to 

create a pricing system more in keeping with social 

costs (monetizing social costs) so that the externalities 

are internalized. Under an ideal situation, society 

makes choices, and through these choices, the best 

pricing will occur for society as a whole. For example, 

the price of solid waste does not include the cost to 

society of its disposal, so a person making a purchase 

choice does not have to consider the cost of disposal in 

his decision. An alternative to incentives is regulation. 

The downside of regulation is that it is a static system, 

and will not create incentives to innovate around the 

(negative) externalities. You’re prohibiting or directing 

actions. 

seg 6.04 rch 

We have not articulated the 

differences between SF and MF 

delivery. MF internalizes external 

costs for many actors. It is the 

difference between a private 

transaction and a public transaction. 

Additional R&D on the private side 

may be an effective approach. 

Removal of barriers to innovation is 

another. 

Multi-family housing does best at internalizing (Fannie 

Mae). Because it is an investment, there is an 

incentive for long-term concern on the part of mortgage 

lenders. With single-family housing, the issue is 

creditworthiness, so this incentive to have concern 

about the long term is not there. Monetizing social 

benefits becomes irrelevant. Need to determine the 

constraints that exist in the housing system and get 

them out of the way. Regulators should not be a 

stakeholder group. They should be surrogates. To 

what degree is the regulatory system a barrier to 

innovation? How can the regulatory system improve 

the health and safety of individuals? One proposal is to 

provide the council of evaluations a more 

comprehensive evaluation system to better know these 

costs to those with long-term financial interests. With 

single-family homes, these are private, unregulated 
65 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

transactions between two parties that do not have longterm financial interests. It is very different from multifamily housing. 

seg 6.05 rch No, we should not use MF as the 

model—we should employ taxes, 

fees, and fines for 5 year first use 

and 20 year expected service life (it 

realistically may be 100 years) 

Decoupling the product from the credit to pay for it 

leads to this outcome. If a durability fee were to get 

added to the production function, then will capture the 

costs to society. 

seg 6.051 rch (see notes) This would not get done without regulation. 

per 6.06 bld Goes back to question of distribution 

of benefits—need innovation not in 

widgets and hard things, but in 

regulation—opportunities in 

implementation of rehab codes. 

The entrepreneur sees opportunity, 

takes risk, should benefit—there has 

been a 40 % increase in permits 

since implementation of the New 

Jersey Rehabilitation Code 

(primarily in vacant urban, mature 

suburban, and decaying rural 

properties) 

The key is the distribution of benefits, as a participant 

suggested. The beneficiaries of rehab codes may not 

be society. They may go to the private sector, such as 

entrepreneurs. For example, risk takers buy low and 

sell at higher market value. There are three places 

where older buildings are found: urban, suburban, and 

rural. This has happened with change in the New 

Jersey Rehabilitation Code, because barriers were 

removed and the regulatory system changed to allow 

these innovations. 

bar 6.07 rch Should we remove regulatory 

intervention? There are too many 

gatekeepers; find other ways to 

protect buyers, such as “builders 

insurance”? 

The change in the regulations is key. There are too 

many gatekeepers. We should try to remove as many 

barriers as possible. If there is a valid program of 

builders’ insurance and consumer product safety, then 

the regulations can be scaled back. 

seg 6.08 mcd This is not the topic for this session; 

we should discuss, for example, 

‘redevelopment’ v. ‘new 

development’ 

We need to shift back. Infrastructure and social 

services are examples of social costs that are truly 

borne by the beneficiaries. 

seg 6.081 rch (see notes) Impact fees can capture these costs. 

bar 6.09 rch 

We should be looking at incentives 

(for solar, flood, hazard mitigation, 

etc.) based on social benefits and 

costs. 

There are incentives for social costs and benefits at the 

level of individual homeowners in some areas, such as 

for weather hazards. For example, the homeowners 

would only be eligible for flood insurance if they took 

certain precautions. It is also necessary to focus on 

owner-occupied housing. 

seg 6.091 rch (see notes) We can’t apply lessons from multifamily housing to 

single-family housing. 

bar 6.10 bld 

We should focus on positive 

incentives, like tax credits, etc. 

Mitigation is purely regulation 

Insurance companies have an 

opportunity to reduce their own risk 

through risk-based underwriting 

(encourage rather than force 

acceptance) 

There are government incentives, including tax credits 

and land use (higher density, cost of land). Some of 

the mitigation that was just described is mandatory, not 

incentive-based. Insurance can provide incentives with 

lower premiums in some areas to reflect risk, but it is 

regulated by states. States have an opportunity to 

affect this. We need a metric to measure these 

technologies (which one is better?). Social benefits will 

come from what the government recognizes as 

important (for example, provide a free thermostat). 
66 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

Encourage, rather than enforce, through different costs. 

bar 6.11 cst 

We need to ask why we are 

concerned with social costs: 

• 3rd party effects are fair 

game for incentives 

• Mandates should not be 

based on externalities 

• Externalities should be 

viewed very skeptically. 

Why are we even trying to monetize costs and 

benefits? There are two extreme motivations. The first 

is to promote technology development with enlightened 

policies. If we are trying to do this, then monetize costs 

and benefits. The second is to provide justification for 

more regulations. If this is the case, then will lead to 

more skepticism. A problem is that everything is an 

externality. They can be seen everywhere, and the 

exercise of monetizing them would never end. In any 

case, with regard to the example of solid waste 

disposal, I have to pay a waste disposal fee every year. 

bar 6.111 fin 

(see notes) 

But the cost of the disposal is not internalized at the 

time of purchase of the product because the purchase 

price is separate from the end-of-year disposal fee. 

bar 6.12 mcd 

We need to address issues in terms 

of economic and government 

regulation theory 

Often the disposal fee is a flat fee and does not depend 

on the volume of trash generated. This is a justification 

for regulations. Regulations are used to adjust and 

compensate for the fact that “natural costing” does not 

automatically account for all costs. 

bar 6.13 cst Regulation is often an adaptation to 

real circumstances 

We need to focus on reforming regulations which 

improve affordability for everybody, not just removing 

regulations. 

bar 6.131 rch 

(see notes) 

With the New Jersey Rehabilitation Code, reforms 

turned out to have the same effect as removal. It 

lightened the burden. 

bar 6.132 cst (see notes) The assumption in code reform is that the original 

regulations were right. 

bar 6.133 rch 

(see notes) 

It is possible to internalize externalities in many ways, 

such as tax credits, insurance incentives. Do we want 

to do it all? 

met 6.14 fin How do you choose between 

regulation and not—you need a 

metric to decide. 

Assume that technology produces some good. What is 

the metric to link these two? 

met 6.15 mcd 

Peer pressure, education, and 

branding may be the most effective 

options; example of ‘ruffs’ and ‘riffs’ 

(resource utilization v. resource 

impact, such as embodied energy 

metric) precursor to energy codes. 

Created huge battle between 

electric and gas (in terms of BTUs 

[1 055 joules]). Could not drive 

technical decision because of lack 

of agreement on parameters. 

Upshot is that players cannot plan 

on staying power of analysis. 

Another incentive is branding, labeling, reputation. 

There is an example from many years ago from energy: 

RUF (resource utilization factor) vs. RIF (resource 

impact factor). NIST wrote a way to compare the 

energy performance of different alternatives. The 

energy codes created a gas/electric battle. The 

question arose as to whether should count BTU (1 055 

joules) at the source. The RUF was computed as the 

reciprocal of plant energy usage. The RIF was needed 

because not all BTUs are the same. It needed to be 

based on “embodied” energy as well as all social costs 

and benefits, such as sustainability, health care, etc. 

This effort fell apart and died because it could not drive 

a technical decision, and everything was valued 

differently. Could look at this question by costs. The 

problem is that the price does not reflect social costs. 
67 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

Need to pass the burden of determining social costs to 

Department of Energy. These values change and 

make the designs, regulations, etc. obsolete. 

val 6.16 bld Question remains how to value a 

parameter in order to have a basis 

to set a fee—the consumer views 

the product (housing) as a durable 

asset, internalizing ALL perceived 

costs. 

This obsolescence only applies to regulations. With 

incentives, people will adapt. How do you assign value 

to these? 

val 6.17 mfr Each consumer (including speaker) 

uses own set of values and beliefs 

in personal decision-making. 

Values differ from individual to individual, based on 

their own life experiences. Heterogeneity makes 

valuing these social costs and benefits difficult, even 

impossible. 

met 6.18 bld 

The issue is a mathematical 

problem and not that difficult to 

understand: value of stock 

measured in trillions of dollars, 

divided by the number of units, plus 

annual cost of maintaining times 

service life, divided by service life 

equals annual cost of ownership. 

The incentive is to push durability by distributing first 

cost. When R&D comes in, it will be implemented more 

easily. Longevity is the missing piece. There are no 

data projecting durability or longevity of housing. I 

propose a formula to compute the annual cost of 

ownership of a home which falls with the longevity of 

the home: annual cost = (initial cost + maintenance + 

operating costs)/longevity of the home. It disperses the 

first cost over a longer time horizon. The social cost 

that is reduced with increase in longevity is the need to 

rebuild “10 year” homes every ten years. 

met 6.19 bld Concept makes a lot of sense 

except for characterization as 

“simple” problem—we do not know 

how long housing lasts. Pricing in 

durability may be useful, but may 

not. 

The problem is that this would not be simple because 

we do not know how long the housing stock lasts to 

develop a meaningful relationship based on durability. 

The government does not collect data on component 

changes or demolition permits anymore. Therefore, we 

do not know. We would have to overcome a credibility 

problem with the consumer. 

per 6.191 bld (see notes) The stakeholder has a stake in making the component 

last. 

met 6.20 rch Like elegance of relying on 

mathematical formula, but how do 

you factor in uncertainty of 

manufacturer claims. 

The consumer or the manufacturer? We need data on 

reliability. For example, my “20 year roof” had to be 

replaced after only 4 years. 

met 6.201 bld 

(see notes) 

Without a durability rating index, a bunch of 

disconnected people only see the first costs. There 

needs to be some linkage between them. 

met 6.202 mcd 

(see notes) 

Not all social costs and benefits lend themselves to 

time-to-repair metrics. But for those that do, this index 

would be great. 

met 6.203 bld (see notes) Who enforces this formula? It should be the 

underwriting industry. 

met 6.204 cst (see notes) Like fuel efficiency for automobiles. 

per 6.21 cst 

Many stakeholders have an 

inordinate fear of regulation 

NIST developed durability performance standards 

purely based on technical considerations. It led to 

paranoia. This was fought by, among others, 

homebuilders, at ASTM meetings. 
68 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

per 6.211 rch (see notes) The paranoia is justified because the fear is that an 

intellectual exercise will lead to the easy “fallback” 

approach: regulation. 

per 6.212 bld (see notes) Even with an index, the consumer may still ignore it. If 

this happened, it would prompt regulation. 

met 6.22 fin The durability equation as outlined 

does not address social costs (the 

key parameter of this session). 

The equation also would not address social costs, such 

as environmental costs. 

met 6.23 bld (see notes) There would be trouble monetizing these social costs. 

met 6.24 bld 

(see notes) 

The formula is already done in a quasi-method. The 

buyer gets information about the age of the roof, energy 

costs, etc. of the prospective home. 

Discussion session #7: Can the regulatory system be used to encourage innovation, 

and to distinguish innovations with net benefits from those with net costs, at both 

component scale and at the scale of the entire house and its delivery system? keyword sequence stakeholder 

‘flip chart’ record NIST notes 

att 7.01 mcd 

Most regulation is intended to 

advance not affordability, but some 

other factor, primarily safety. Many 

regulators want to trust what they 

know works—prescriptive 

standards—feeling that performance 

approaches may undercut 

effectiveness of standards and may 

be more difficult to evaluate. 

Innovation may exacerbate 

performance-based evaluation 

concerns. In addition, lack of a 

common language is a problem—

economists and policy makers want 

to express all concerns in dollars. 

Key point is that we don’t need less, 

we need better regulation—the 

advocated approach favors 

modeling, yielding “smart regulation 

audited with civility” 

• Prescriptive requirements are antagonistic towards 

new innovations. 

• 2 ways of employing materials: To trust what you 

know works is prescriptive and to prove it works is 

performance based. 

o performance approach: test new 

technologies; there is no long-term field 

experience. 

o prescriptive approach; trust what you 

know works 

• Performance approach is difficult: does not always 

consider reliability. If you open up requirements, 

you may introduce unreliability. 

• If you only allow performance equivalence for 

components, not for a whole design, you limit how 

innovative a product you'll consider, but you also 

limit how far from common experience and 

comfort-zone you have to go. 

• Lack of a common language -- not everyone is 

comfortable expressing everything in money terms 

-- is a barrier to acceptance of performance 

approach. 

• Economics measures costs. We need different 

regulation. Flexibility is where we want to go. 

• We want flexibility in achieving social objectives 
69 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

(the enforcers' role) in ways that are more 

affordable or better in other ways. That means 

different regulations but is not a reason to make all 

decisions purely economic decisions. 

att 7.02 mcd Factors must be identified and 

explored. Should such a system be 

a basis for regulation? What is 

needed is a baseline level to 

exceed. For life-safety issues, codes 

and standards typically lag 

technology development. If nonprescriptive, there is no information 

on which to base approval/ 

acceptance. 

Washington Post column8 on 

regulation cites 3 needs: 

• Information based on good 

research 

• Ability to defend analysis tools 

• Implementation policies that 

encourage smart life-saving 

analyses 

• We can encourage innovation, but the manner in 

which this will happen must be carefully 

considered. It leads to the regulatory system 

making decisions. Whoever is using the 

innovation makes the decision. 

• Establish the minimums at the state level: this 

baseline will establish a framework for 

considerations of new materials. 

• Codes/standards tend to lag technological 

developments. 

• In the absence of specific technology references in 

the code, it is more difficult to implement the 

technology. 

bar 7.03 own Las Vegas as a model—regulators 

must be open-minded to allow range 

of designs in place 

Regulators need to play a major role. 

bar 7.04 mcd 

Codes must be a mix of prescriptive 

and performance-based 

requirements to avoid ‘first-time’ 

pitfalls (redundancy/alternatives?) 

Prescriptive codes require regulators to be very 

knowledgeable and sophisticated enough to adapt to 

changing technology. With PBC (performance-based 

codes) , on the other hand, there is no stable ground. 

Therefore, we need some middle ground. Australia and 

New Zealand are examples. 

bar 7.05 rch Do we have any evidence that more 

innovation occurs under one or the 

other scheme of regulation 

(performance versus prescriptive 

codes)? 

Is there any empirical evidence about the amount of 

innovation that has occurred under prescriptive regimes 

vs. PBC? 

bar 7.06 mfr 

Regulation typically does not 

promote or discourage change. 

It is doubtful that there would be data on this. I am not 

sure if the regulatory system encourages or 

discourages innovation. Sometimes, you have to know 

how to develop “around the code.” Regulation may 

pose a barrier to adoption, but not to innovation. 

Sometimes, codes encourage innovation if the code 

becomes more restrictive. Manufacturers then need to 

innovate to satisfy those restrictions. Take carbon 

monoxide detectors, smoke alarms, energy codes, etc. 

bar 7.07 reg New York State, prior to most recent New York is an example. The code was too 

 

8

 Hahn, Robert and Scott Wallsten, “Whose Life is Worth More? (And Why Is It Horrible to Ask?),” 

Washington Post, June 1, 2003, pp B3. 
70 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

re-write, was opposite of Las 

Vegas—said ‘no’ too often. 

Performance-based requirements 

can encourage innovation through 

offer of options (compliance options 

in the case of New York State). 

prescriptive, and did not provide enough flexibility, and 

led to higher costs to developers trying to get around 

the regulations. Now, the provisions of the code 

provide compliance options and are more successful. 

Regulations cannot be created that cover everything. 

Therefore, need a combination of prescriptive and 

performance-based codes. 

att 7.08 mfr 

First paragraph of IRC gives 

opportunity for flexibility in 

performance compliance with the 

code 

Chapter 1 of the code, titled “Alternative Methods,” of 

the Evaluation Service, is most encouraging of 

innovation. Changes in code represent a dislocation of 

the system, which spurs innovation. There is an 

analogy in chemistry: need to scratch a surface in order 

for crystals to form. 

bar 7.09 rch 

Industry is so fragmented, no single 

organization is large enough to 

overcome barriers to innovation. 

Why is housing the only industry 

that can not/ will not benefit from 

innovation? 

Until risk-based insurance is 

available, innovation will not be 

approved/adopted. 

We need to link comprehensive 

evaluation to a push for risk-based 

insurance underwriting. 

One issue is the lack of market power of any builders in 

the housing industry. In the long run, stimulating 

development in housing is good, because it will benefit 

society as a whole. But the housing industry is still not 

totally geared in this direction. The home building 

industry is more resistant to innovation than in other 

industries. They perceive themselves in this way. 

They do not buy it (innovation). Why can’t the home 

building industry be more like other industries in this 

way? Why do they not reduce the barriers to 

innovation? The ICC Evaluation Service did not 

perform very well before. Using these evaluation 

services, there needed to be an insurance program for 

innovation to bridge the gap in reliability, uncertainty, 

risk of system failure associated with new products. 

The missing element is an insurance program for 

innovation. In the current situation, local enforcers will 

be held accountable for failure. With insurance, there 

would be a cover for the homebuilder and component 

manufacturer to encourage innovation and adoption. 

bar 7.091 mfr 

(see notes) 

The evaluation services, as they stand today, do not 

give any insurance. A third-party, if so inclined, may 

want to take the results of an evaluation and then 

proceed with some insurance against failure to protect 

"early users" 

bar 7.092 rch (see notes) You have to combine evaluations systems and 

insurance in order to help increase development. 

bar 7.10 bld Want to reinforce notion of looking 

at other industries for guidance: 

there is a strong trend that 

deregulation spurs innovation 

With homebuilding, can look at whether regulations 

have an effect on innovation. There are many 

regulated industries that became deregulated. Could 

see whether a spurt of innovation followed the 

deregulation. 

bar 7.11 rch Suggest that government undertake 

research/modeling of insurancebased approach to housing 

innovation; determine appropriate 

government roles (analogous to 

With the insurance idea, need to do the following. First, 

do research and model what the insurance would look 

like. Second, would the insurance industry be willing to 

offer the product? And lastly, if the insurance industry 

would not offer it, then who would? The government? 
71 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

self-amortizing mortgages); 

determine feasibility. 

An example is the FHA and self-amortizing insurance. 

Would need to do feasibility studies. 

del 7.12 cst 

Look at entire regulatory system—

currently consists of prescriptive 

frailty with alternative options. 

(liability/technical issues go beyond 

the capability of the field code 

official) Frailty is the confidence that 

prescriptive codes achieve desired 

purposes/objectives. Tons of 

innovation is just not used. Need to 

better understand frailties and 

impediments. 

The status quo is a prescriptive system with an 

allowance for alternatives. Allowance has frailty 

because it is subject to human acceptance. Any 

solution would have to address this frailty. Examples of 

solutions would be liability, education and technical 

training, access to technical information. Another frailty 

is whether the current prescriptive codes are on the 

mark. With the hybrid, as one of the model code 

developers discussed, there would still be liability and 

education frailties. Another consideration is that many 

innovations are not being used. They need selling and 

marketing, but the performance side is harder to cover 

liability. There would need to be understanding of the 

components of the system. Lack of existing standards 

can be a bigger barrier than regulations. 

met 7.13 mcd Want to clarify one aspect of 

discussion, the role of Type 1 and 

Type 2 statistical errors in 

evaluating the effectiveness of 

innovation. Need to look at both 

sides of the issues—existence of 

both ‘good’ and ‘bad’ innovation. 

Have to worry about both “Type 1” and “Type 2” 

statistical errors with innovations. What about 

innovations that are accepted but fail? These are the 

types of concerns of code officials that have to be 

addressed to get the changes in. 

att 7.14 bld 

Before you can define ‘affordability’, 

you need to define ‘safety’ 

(“acceptable risk”?). There is 

currently no accepted credible 

definition; nothing to push off from. 

Local code officials do not know 

what the code means in terms of 

performance. Until decision-making 

approval is removed, innovation will 

not occur. 

Before you define affordability, must define the 

standard for safety. Should it be “no injury or death”? 

This is a barrier. There is no measure to bounce 

affordability off of. Only the nuclear power industry has 

specific criteria about safety. As with the energy code, 

until there was a standard, it was not possible to assess 

the relationship between affordability and energy 

efficiency. The lack of credible standards makes it 

impossible to enforce. Without a clear definition of 

safety (and/or affordability, for instance) in the context 

of a prescriptive set of code provisions, the introduction 

and use of performance criteria may decrease. 

Determining compliance with performance type 

regulations can be more difficult and require additional 

training for the code official. Also, many local officials 

do not understand the codes they are trying to enforce. 

They do not want to take a chance on a new product. 

bar 7.15 mfr 

We do code training as part of 

product development process. 

There should be a continuing education and training 

requirement for code officials. My company includes 

training costs for code officials when it determines its 

budget for developing a new product. It sees training 

as part of the new product introduction process. 

bar 7.16 mcd We (ICC) do code official 

certification training. 

Some states have certification and training for code 

officials. But access and transportation are two issues. 

bar 7.17 rch Why not a system of binding 

interpretation to promote (see record) 
72 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

consistency in code enforcement 

(as used in some states with 

statewide codes)? 

bar 7.18 bld 

Only occurs through appeals 

process—practitioners realize that 

you cannot truly build to code. 

I have found that state-level code people in one 

Midwest state are responsive if local officials are 

resistant. In some other states, the only remedy if a 

local code official disagrees or resists is the appeals 

process. The truth is that strict adherence to the code 

is impossible. 

bar 7.19 cst That’s a disappointing point of view. That perspective is disappointing. 

att 7.20 mcd There are, in fact, mathematical 

definitions for safety in the codes. 

Back to the absence of a definition of affordability: 

There is no definition of affordability in the codes that 

address it. This needs to be a mathematical formula. 

att 7.21 own We need to determine what is an 

“acceptable level of risk” and then 

protect against it—code officials are 

not stakeholders, but do have an 

interest (fear of responsibility for 

building failure?) 

What constitutes acceptable risk? The building 

community and the fire safety people do not agree on 

this. The regulator is not a stakeholder in the financial 

sense, but they do have something to lose with any 

code that is not prescriptive because they may be held 

accountable if they make a mistake. 

att 7.211 bld (see notes) Must encourage use of the evaluation services for this. 

The inspector should not have to make the decision. 

bar 7.22 cst 10-point ISO rating system looks 

comprehensively at code 

enforcement. Do they look at use of 

NES reports? 

A participant earlier mentioned the 10-point ISO 

certification rating system on the adoption, provision, 

number of inspectors, training, of inspectors, of code. 

Could build on this tool. With this rating, did they use 

evaluation service reports (ESRs)? 

bar 7.23 cst 

Short answer is no, but do not put 

all eggs in one basket—I accept 

NES reports only if I agree; I rely on 

multiple sources of information. 

No. They might, they might not. Evaluation reports are 

not always accepted. I might not accept one that I do 

not agree with, because evaluation is also subject to 

human error. I am as receptive toward products with 

ESRs as I am toward those without them. The lack of a 

report should not always be viewed as a barrier to 

acceptance. 

bar 7.24 mfr 

Never had an NES report turned 

down, but it takes work. 

I have never had an ESR denied by a code official. 

Some have required them. Others have accepted the 

data submitted to the evaluation services if an ESR is 

pending. 

bar 7.25 bld Some code officials do not even use 

code language, much less NES 

reports in making decisions. 

Some code officials disagree with the code and will not 

adhere. 

bar 7.251 bld (see notes) Schenectady is one example. 

bar 7.252 rch (see notes) Dallas is another. 

bar 7.26 bld Reports are limited only to existing 

code requirements and do not test 

against purposes of innovation 

(whatever those may be, such as 

durability); do not rely only on 

reports. 

There are limits to ESRs. They do not address 

durability or affordability. The evaluations are only for 

the adherence to the codes that are existing. The 

code/evaluation process calls for extraneous testing 

that is not appropriate for the material in many cases. 

pro 7.27 mfr Product must be equivalent to 

alternative materials. 

In the “alternative methods” clause, durability is 

included. 
73 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

bar 7.28 bld Some AHJs require engineering 

certification for each installation—a 

very expensive burden. 

For some officials, if you get the engineer’s seal on the 

design, then you can use it. But this is costly. So this 

is still a barrier to adoption of new technology. 

bar 7.29 cst 

Barriers at local level may be 

politically based. 

Officials want to offload risk; they do not want the 

liability. For example, EIFS. You could get a political 

barrier. Maybe a union will not let a code change in, 

and they are told not to improve it or will fight to keep 

new technology out when code changes are proposed. 

Even in spite of scientific justification for a component’s 

use, there may be politically motivated resistance. An 

example is steel framing and the influence of California 

unions on local officials. Political issues may similarly 

arise with respect to code language and interpretations 

of the code. 

bar 7.30 bld Risk insurance coverage (for 

manufacturer, builder, or owner) 

could overcome many of these 

problems. 

(see record) 

bar 7.31 mcd Higher level issue is involved here—

what should regulators do differently 

than they do now? Regulators are 

there to provide a function—that 

function must be acceptable to 

those being regulated in order for 

the system to work effectively. 

Can the regulatory system be used to encourage 

innovation? What can be done differently? Regulators 

have a specific function. If manufacturers do not think 

the goals are legitimate and do not respect the 

regulators’ intellectual capability, then they will not get 

far in improving the system. 

bar 7.311 rch (see notes) Is there research showing resistance of local building 

code officials to innovation? 

bar 7.312 mcd (see notes) Also, some builders resist innovation. Each actor has 

reasons to resist innovation. 

bar 7.32 mfr What can be positively said to 

encourage acceptance of 

innovation? 

How do you change the outlook of code officials to 

encourage more interest in acceptance of housing 

innovation? 

bar 7.33 own The ICC and New Jersey 

Rehabilitation Codes are steps in 

the right direction. 

The ICC and the New Jersey Rehabilitation Code are 

good examples. They are steps in the right direction. 

There is a need for regulations. 

bar 7.34 own Going to statewide code increases 

consistency in enforcement. 

If there were a move to state-wide codes, there would 

be better enforcement. 

bar 7.341 own (see notes) And predictability. 

bar 7.35 reg 

Local officials need assurance—NY 

can issue binding interpretations, 

although not often done: it is a 

useful tool. 

Local building officials need some certainty, for 

someone else to be accountable, that individual 

interpretation will not provide. They don’t want the 

decision to come back and bite them. One solution is 

for the government to issue a binding interpretation to 

take the interpretation out of the building officials’ 

hands. 

pro 7.36 mcd States should be careful of taking on 

product certification functions (see 

Florida example); it could increase 

complexity, uncertainty, and cost. 

Need to be careful with product approval and 

conformity. There is a difference between uniformity in 

interpretation (such as in Virginia) and conformity in 

assessment (Florida). The latter leads to creation of a 

new bureaucracy and another check and balance. 
74 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

There are already enough checks and balances. 

pro 7.37 cst Certification needs to recognize 

contractual trade influences and 

impacts. 

(see record) 

Discussion session #8: Who should bear the costs of development of new delivery 

systems and new infrastructure systems that are needed for innovation to penetrate 

the market at the scale of the entire house and its delivery system? keyword sequence stakeholder 

‘flip chart’ record NIST notes 

del 8.01 bld Mandated innovation is 

disproportionately a burden to lowincome buyers of housing. 

Owners are interested in restricting 

supply to protect the value of their 

assets. 

Politicians have an interest in 

protecting asset value as well. 

Should builders bear some of the 

cost, especially for innovations that 

the buyer is not expressly interested 

in? 

Concentration in the building 

industry (SF) is already occurring; 

do we want it to accelerate? Would 

that promote innovation (in a less 

competitive marketplace)? Mediumsized builders are a key segment of 

homebuilders. 

If considering a new delivery 

system, how would it be regulated? 

Would local regulators necessarily 

lose control of the process? 

• To an extent this is obvious: the manufacturer will 

end up paying for innovations. 

• It is easy to pass costs on to the first time house 

buyer. 

• People that own existing homes are possible 

bearers of cost: it is in their interest to restrict the 

supply in order to increase house value. 

• Homebuilders are in a position to pass on to 

consumer, except if consumers show no interest in 

the specific innovation. 

• If we have a market with fewer large innovators, 

do more costs get passed on to the consumer? 

• Is there a viable place for the medium sized 

producer? 

• New delivery system: do local officials lose control 

of the system? 

del 8.02 mfr 

Development costs will get passed 

to the consumer, and, even so, will 

not be undertaken if too high. 

If builders cannot pass on at least 

part of the costs, they will not buy. 

Question is not who pays, but how 

costs are distributed. 

• Materials manufacturer will pass on increased 

costs to the consumer. 

• If a builder cannot pass on direct costs, they will 

stop the innovation. 

• Everyone along the line is going to pay some 

share for the innovation, the question is: How is 

the total cost divided among the different groups? 

• Initial cost is going to be borne by the initial 

innovator. 

del 8.03 cst We are asked to look at these 

issues at material/component scale 

and at product delivery scale. 

It was proposed that we look at technology at two 

scales, the components/materials scale and the whole 

house and delivery system scale. 
75 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

bar 8.031 mcd 

(see notes) 

The builder has trouble developing/justifying the use of 

innovative resources because they will benefit all of 

society, but they may not see all of their initial 

investment coming back. 

del 8.04 mfr Builder will pay the costs of the new 

delivery process at the outset, but 

will pass along as soon as possible. 

No one entity will bear the costs of innovation. 

del 8.05 own This is what operation breakthrough 

was supposed to do in the early 

70s. 

One example is the systems analysts at HUD with 

Operation Breakthrough, where the government bore 

some of the costs of innovation. 

del 8.06 rch 

Government has moved away from 

any consideration of ‘command and 

control’ strategies; public benefits of 

improved housing have been 

dismissed; tax breaks and R&D 

have been eliminated. 

Except for the command and control nature of 

Operation Breakthrough, this is a good example. 

Where is the government part in these costs? There 

are many public benefits to society of some of these 

development costs. For example, NIH and 

pharmaceuticals. This is now inadequate. Need tax 

subsidies, research and development, risk coverage 

(coinsurance), education, and marketing. As was 

previously mentioned, 30 years ago, BFRL was a major 

source of basic research. 

del 8.07 cst 

Should a change in the form of 

ownership be considered? 

FHA mortgage insurance in the U.S. in the 1930s 

through 1950s created the current housing delivery 

system. Participants have given other examples of 

innovations in the housing delivery system. One 

possibility would be to change the form of 

homeownership. 

del 8.071 rch (see notes) This would never happen. Encouraging home 

ownership has been the policy of every administration. 

del 8.072 cst (see notes) If housing were a service rather than property, then it 

could be different. 

del 8.08 mcd 

Vertical integration, engineered 

systems, modular integration are 

strongest approaches; trades and 

agencies should get together and 

decide on a course of action. 

Based on the reading of the question, need to move 

toward vertical integration, engineered solutions as a 

participant earlier suggested. NIST and HUD need to 

define some concepts to bring new methods of delivery, 

such as vertical integration and modularization. The 

builder has trouble developing/justifying the use of 

innovative resources because they will benefit all of 

society, but they may not see all of their initial 

investment coming back. 

del 8.09 bld 

Question of who pays remains; what 

of the suggested changes would be 

paid by actors? By feds? 

This goes to externalities. To internalize these, need 

the Federal government. The Federal government is 

the appropriate bearer for the cost of such innovations 

that increase the general social welfare. Education and 

training address a different market failure. 

del 8.091 rch 

(see notes) 

What about labeling, such as Energy Star? New York 

State has done more on this than any other state, to 

decrease energy consumption. The construction 

industry wants to publicize these risks and expenses 

(i.e., have these risks and expenses borne by the 

public). 
76 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

del 8.092 mfr (see notes) The construction industry does not devote as much 

resources to R&D. 

del 8.093 rch (see notes) It does not look for public help, either. 

del 8.094 mfr 

(see notes) 

Everyone will see the benefits of increased home 

ownership over time, but taxpayers will be the group 

paying the price. 

del 8.10 rch Substantial public investment is not 

a consideration. (see record) 

per 8.11 bld Current federal policy asserts that 

“ownership improves housing”. 

The benefit of home ownership is the long-run stake in 

the asset. 

pro 8.12 rch Have not heard ‘pilot project’ as an 

approach (analogy to medical 

industry); allows not total change, 

but immediate test of change. 

What about pilot projects with interface between private 

and public/government entities? Should not be all or 

nothing. Deep-pocketed publicly owned companies 

have to be the first movers of new innovations, with 

some help from government. 

pro 8.121 rch (see notes) Only peanuts go into these projects. 

pro 8.122 rch (see notes) Even if small scale, it may be helpful for a specific area, 

such as flood plains in Iowa. 

pro 8.123 mcd (see notes) Acorns, to grow into trees. 

pro 8.13 rch ‘Pilot project’ may not work well 

because of conflict with existing 

infrastructure; change may be 

viewed as negative—if the pilot is 

big, it may be blocked by existing 

industry and consumer afraid of 

reduced asset value. 

There must be a limited role for government. There are 

parties who will be losers with these changes. If you 

cut the cost by 30 %, that is fundamentally disruptive to 

the market price for homes. 

pro 8.131 own 

(see notes) 

Existing communities would prevent the lower-cost 

housing from being built in the neighborhood. It would 

be too disruptive 

pro 8.132 rch 

(see notes) 

The first mover probably would price without cutting by 

30 % and would capture economic rents. It will be 

deep pocket publicly held companies doing this. 

del 8.14 cst 

Could be the subject of study—is 

there a role for government in a test 

of changing housing delivery? 

There was a NSF project funded by Alcoa, Gulf, and 

Westinghouse (General Electric), which followed 

Operation Breakthrough to ask whether there was a 

role for these types of companies in housing delivery. 

The answer they arrived at was, probably not. Now, 

Fannie and Freddie have come, the National Evaluation 

Service and others have developed. Given these 

changes, is there a role now? In today’s market, is 

there a role for major home producers? 

bar 8.15 mcd 

Why did 40s innovation occur? It did 

not threaten existing stockowners; 

more optimistic about buyer/ 

customer reaction to change. 

After World War II, there was a huge growth of 

affordable housing. Why was there no objection then? 

The reasons are: they were built in other areas, there 

was great need, and they were not seen as 30 % 

cheaper because of the balance between cost and 

attribute was not challenged. Why could this not 

happen again? 

bar 8.16 bld There was less regulation (in the 

40s). 

The combination of affordability and other 

characteristics provides a historical precedent from the 
77 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

period immediately following World War II. 

bar 8.17 bld 

Current attitudes toward resisting 

change are relatively rigid. 

Also, to add another perspective, this construction 

happened after the Great Depression, which saw 

widespread price deflation. Therefore, cheaper homes 

were not seen as a threat. 

bar 8.171 mcd (see notes) There is some precedent in how large-scale 

innovations in product and delivery were adopted. 

bar 8.172 bld 

(see notes) 

Now, homeowners’ associations object to changes (on 

the basis of change to the character of the community). 

Post-World War II history was unusual. 

bar 8.173 rch 

(see notes) 

Also, at that time, they were building for everyone, the 

mass market. Now, the builders are building for the 

high end of the market, not mass market. 

bar 8.174 rch (see notes) Because there is an existing housing stock. 

bar 8.175 mcd 

(see notes) 

The closer we move to a situation in which the kids 

can’t afford a home, the closer you move to the time 

when this situation becomes intolerable. 

del 8.18 mfr 

Perhaps we should focus on 

changing delivery of existing stock 

rehabilitation. 

What will the nature of the new delivery system be? 

Will the existing suburbs of the 1950s be rehabilitated? 

Will this be the new delivery system? For many people, 

their first home is an old suburban home. Or will it be 

an entirely new delivery system? 

del 8.19 bld 

No individual will put up with any 

cost to change product delivery. 

Who will pay? A demo project could 

prove concept. Entrepreneur will 

then move to rental side because 

lender will not incent builder directly. 

ROI could be changed by 5 % by 

assuming risk of utility/energy costs. 

Relying on rehabilitated housing would take too much 

time. Areas like Johnstown and Schenectady, NY were 

built during the 1920s and 1930s. There is now a lot of 

vacancy there. The problem with these areas is that 

they are past desirability, and that is a barrier to 

rehabilitation. Regarding an earlier comment about the 

cost of infrastructure, I am now demonstrating and 

developing a project using renewable energy. Some 

people can find ways of capturing economic rents. I 

make an 18 % return on investment (ROI), five 

percentage points higher than I would have, by 

capturing the savings. Some people do not even make 

five percent ROI. 

seg 8.20 mcd Imagine easy ways to change how 

you use your house. Need a 

delivery system to routinize rehab 

and reuse. Introduce innovation 

through rehab rather than new 

construction. 

Back to the earlier comment about rehabilitation as an 

alternative delivery system: Could you make renovated 

houses a place to implement innovations? Now, there 

is a rash of people in my neighborhood adding rooms 

or second stories. If this were easier to do, what would 

happen? How about rehabilitation and expanded 

capacity as an innovative system of delivery? 

seg 8.21 rch 

Suburban 1st home means “lawns 

and commutes”—should we focus 

on a different 1st home model? 

One must consider the current housing market. The 

problem is the need to match preferences over the first 

home with what is available. My first home was in the 

suburbs. It did not match my preferences. There was 

a yard that I did not want to have to maintain. I had a 

long commute. Need to address the demographic of 

first-time homebuyers that do not want lawn 

maintenance and long commutes. How about 
78 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

rehabilitating loft apartments in the urban core? 

seg 8.22 bld We see indications of marketplace 

changes, but cannot yet confirm. 

seg 8.221 mfr 

(see notes) 

The community where I live is on the edge of the urban 

core, about 5 min to downtown. It is an area where 

there are many first-time homebuyers. 

seg 8.23 rch Reconfigure low-density 

neighborhoods to high density. 

Hope 6 is an example, but it is already on publicly 

owned property. 

seg 8.24 rch Most new homes will be sprawl and 

SF on periphery of urban areas; 

clearly need is for innovation in 

existing housing stock, but most 

new products will be for new 

construction. 50 million new buyers 

over next 50 years will push new 

development even though they may 

enter market through purchase of 

existing stock. 

For most, the sprawl and new construction will 

continue. People want new construction. In the next 

25 years, existing housing will go primarily to 

immigrants, so there will a number of new housing 

starts. 

seg 8.241 mfr (see notes) The reason I hear people want to do this is for new 

schools. The schools in my area are not good. 

seg 8.242 rch 

(see notes) 

There is a lack of technology directed at the existing 

housing stock. Most of the products are targeted to 

new homes. This will affect who pays and bears the 

costs of new product development. 

bar 8.25 bld In-fill development runs into 

titling/subdivision problems; do not 

understand suggested spur to 

innovation. 

The choice is between new homes or rehabbing old 

homes. Infill development is made difficult by land use 

requirements. Regarding a previous comment, I am 

not sure how rehabilitation is connected to the 

introduction of new technologies). 

bar 8.26 mcd Intent is to make rehab much more 

frequent (spurring innovation) and 

make delivery easier. 

The concern is how it would happen. It was just an 

unconventional idea. An important concern is to make 

renovations easily available to the housing public. 

del 8.27 own 

See opportunity to do local pilot 

projects. 

The systems for acceptance of new developments lie 

with the local government. There is good potential for 

local government to get involved in this new delivery 

system. For example, San Diego, CA spent resources 

to streamline the regulatory system. Montgomery 

County, MD is also doing this. These are big budget 

jurisdictions that can afford to do this. 

bar 8.28 cst 

Planned development approaches 

allow flexibility in zoning. Is it time 

now to plan for future use by adding 

flexibility to be adaptable to and 

facilitate future rehab. 

Resistance to modular housing at 

local level cannot be explained by 

differences over time. 

Must look at the role of zoning, density, and cost. In a 

new market, see planned residential/housing 

developments (PRD/PHD). Are these viable and 

durable, or will they decay and people will move? Also, 

can we plan for 30 years to 40 years from now by 

reorienting the layout of a home? Systems-wide 

engineering could be used to facilitate future rehab. 

For example, to be able to move a load-bearing wall to 

change the floor plan to satisfy future tastes, needs, 

and preferences. Use more partitions. Make the 

kitchen a module that can be plugged in or unplugged 
79 

keyword sequence stakeholder 

‘flip chart’ record NIST notes 

and moved. 

pro 8.29 bld 

Market is responding by seeking 

opportunities for future change (e.g. 

blocking for grab rails in baths). 

Is it possible to look forward to rehabbing current 

housing in approximately 20 years? Would a viable 

new delivery system be movable walls and developing 

housing today with “exchangeable” rooms? The market 

is addressing the question of flexibility, but not on that 

scale. Some of the things being done now are to, 

instead of installing grab bars in the tub ahead of time, 

putting blocking in the wall so that they can receive 

bars when they do become needed when the 

homeowner gets older. 

att 8.30 rch 

Flexibility related to addressing 

sprawl may be effective. 

This flexibility is found in commercial office space. 

NIST North is leased, is it not? Commercial space 

must be flexible because the tenants change and so do 

their needs. To go back to the zoning and local 

regulation issues, my organization sees sprawl as a 

pejorative. The example of Montgomery County, MD’s 

budget is unusual, and it will tighten. Everywhere, local 

budgets are tight, and this has to be dealt with. If local 

governments do not get involved, urban sprawl will 

eventually force them to do so. 

bar 8.301 bld 

(see notes) 

There is little interest in having land available for more 

new housing at this time: in NJ, 63 % of the public 

voted to restrict 50 % of orphan land then designated 

for housing development out of use. They voted 

against new housing. The yearly charge/cost of a 

house is base on: 

• Inventory value 

• Maintenance costs 

• Operating costs 

• Durability (currently no rating scale/little data) 

Durability and maintenance values are closely related. 

bar 8.31 mcd People want things for reasons that 

are in inherent conflict. 

The vote may have been motivated by different things. 

They did not necessarily want less housing. 

bar 8.32 rch (see notes) It’s orphan land. People don’t want a long commute. 

bar 8.33 cst 

(see notes) 

Regarding the acceptance or resistance to modules, 

the resistance is based on historical experience 

because there may be different or reduced standards in 

one house compared to the house next door. 

Modularization would lead to loss of local control. 

bar 8.34 bld 

(see notes) 

California addressed this question in 1980 by allowing 

manufactured units in existing areas as long as the look 

and character of the area was preserved. 

bar 8.35 cst (see notes) Was it a hard or easy swallow for local officials? 

bar 8.36 bld (see notes) There was a cost. 
80 
81 

Appendix B Individual Comments Organized by Stakeholder 

Group and Keyword 

Appendix B consists of comments first sorted by stakeholder group affiliations and then 

by keyword topics. The resulting tables present, in columns from left to right, the 

discussion session topic in which the statement was made, the sequential identification of 

the comment, the ‘flip chart’ record of the discussion, and a synthesis of notes taken by 

NIST participants. 

Discussion Session Topics: Eight question-based topics were posed to the group for 

discussion in separate hour-long sessions. 

• #1: Who benefits from the housing innovation, both at component scale and at the 

scale of the entire house and its delivery system? [ben] 

• #2: How to “push” innovation benefits to the homeowner, at the scale of housing 

components? [push] 

• #3: How does each stakeholder view and compute life-cycle costs and benefits 

compared to first costs, at both scales? [comp] 

• #4: How does each stakeholder view and compute future benefits that are 

uncertain or contingent on very low probability events, such as protection from 

earthquakes or hurricanes that may never happen, at both scales? [cert] 

• #5: How should the uncertainty and risk associated with using new versus 

traditional technology be addressed, at both scales? [risk] 

• #6: How should society value or monetize the social costs and benefits of 

introducing technology in residential housing, such as energy conservation or 

disaster relief and recovery, at both scales? [soc] 

• #7: Can the regulatory system be used to encourage innovation, and to distinguish 

innovations with net benefits from those with net costs, at both component scale 

and at the scale of the entire house and its delivery system? [reg] 

• #8: Who should bear the costs of development of new delivery systems and new 

infrastructure systems that are needed for innovation to penetrate the market at the 

scale of the entire house and its delivery system? [cost] 

The material presented in this appendix is designed to provide a comprehensive 

compilation of each stakeholder group’s perspectives on housing affordability-related 

issues. By focusing on a single stakeholder group’s perspectives, representatives of each 

of the key stakeholder groups (e.g., readers and workshop attendees) gain insights that 

will be useful in identifying areas of consensus that will facilitate the production of a set 

of affordability guidelines for owner-occupied housing. This approach does, however, 

place a slight additional burden on the reader. The richness of the discussions and 

dynamic nature of the comments over the course of the two-day workshop often meant 

that a given stakeholder group (e.g., owner) was responding to a comment by a different 

stakeholder group (e.g., lender). Thus, the context of the original comment may 

sometimes be unclear. The authors have addressed this issue through the use of sequence 

numbers. Because each comment has a unique sequence number, if the reader wishes 

clarification on the context or implied meaning of a specific comment, they can refer to 

Appendix A, find the sequence number of the comment of interest, and trace the 
82 

evolution of the discussion leading up to that comment. 

Owners 

• Attribute: affordability, durability, safety, etc. (flexibility, substitutability, 

customizability) discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.34 Innovation is an invention that 

succeeds in the marketplace; no 

success—no innovation 

The definition of innovation is an invention that 

succeeds in the marketplace. What ensures its 

success? Innovation will only occur if people perceive 

a priori benefit. 

ben 1.43 

Community concerns should be 

considered; they may be the 

ultimate benefactor 

What about the effect of durability on the community? 

Benefits to the community are worth considering 

heavily when deciding the method by which to build. 

More durable housing benefits the community, 

because it lasts longer and retains value. 

push 2.05 

Builder will emphasize touch and 

feel qualities of product 

In most housing ads, houses are sold by things that 

can be “touched,” e.g. cabinets. Things like kitchens, 

bathrooms, decks, basement, fireplace get some (but 

less than 100 %) payback. These are all “touch and 

see” items. Others that are not visible or not 

appreciated as necessary do not get paid back. 

push 2.14 

Buyer wants only see and feel stuff 

Higher income buyers will buy more durable products 

because they look higher quality. People will upgrade 

in things that they can physically perceive as being 

better. Higher income people buy higher quality items. 

cert 4.17 

High maintenance is not a reliable 

strategy for low frequency events; 

need fail-safe systems 

A problem is that there are infrequent tests of 

performance with these low probability events. If 

there’s a low probability, then there’s no reason to do 

high maintenance. There’s a need to look at a fail-safe 

system that gives warnings whenever the system is not 

in shape. 

cert 4.19 

Especially for “high-frequency” 

events? 

We need to focus on low frequency, low probability 

events. Flooding drains, mildew, and fires are more 

frequent. Low probability events need to be treated 

differently. 

cert 4.252 (see notes) Many buildings were retrofitted. 

cert 4.33 

Adherence to enhanced code raised 

costs post-Andrew; adherence to 

pre-Andrew code reduced losses. 

Adherence produces better houses. 

In the case of Hurricane Andrew in Florida, the worst 

hit part of a newly constructed area was where there 

had been an agreement between the builder and 

inspectors for self-enforcement of the codes. The selfenforcement did not work, and the codes were not 

enforced. But there was no attention paid to this 

reason as the explanation for the damage in this area. 

Instead, there was political hue and cry for more 

stringent and more idiot-proof codes. But in other 

areas, where existing codes were enforced, the homes 

withstood the hurricane. 
83 

discussion session sequence 

‘flip chart’ record NIST notes 

risk 5.20 

Standard of acceptance—code 

compliance/acceptance is very 

important. 

Without thinking about it, house buyers are hyperconservative about new innovations. For them, 

perception is reality. What matters is cost, location, 

and style. They trust the code without exploring it. 

Normally house buyers are happy enough assuming 

that the code has been followed and that this 

constitutes safety. If they see an innovation being 

used, however, then it will raise their concern about its 

code adherence. 

reg 7.21 We need to determine what is an 

“acceptable level of risk” and then 

protect against it—code officials are 

not stakeholders, but do have an 

interest (fear of responsibility for 

building failure?) 

What constitutes acceptable risk? The building 

community and the fire safety people do not agree on 

this. The regulator is not a stakeholder in the financial 

sense, but they do have something to lose with any 

code that is not prescriptive because they may be held 

accountable if they make a mistake. 

• Barrier/Incentive: (to market acceptance) discussion session sequence 

‘flip chart’ record NIST notes 

push 2.07 Never recover total costs. (see record) 

push 2.102 (see notes) People assume that the codes have it covered. They 

trust the status quo. 

risk 5.09 Code can be a barrier; may be used 

by existing manufacturers to block 

products. 

Codes can be used by incumbent producers to block 

new products. 

reg 7.03 Las Vegas as a model—regulators 

must be open-minded to allow 

range of designs in place 

Regulators need to play a major role. 

reg 7.33 The ICC and New Jersey 

Rehabilitation Codes are steps in 

the right direction. 

The ICC and the New Jersey Rehabilitation Code are 

good examples. They are steps in the right direction. 

There is a need for regulations. 

reg 7.34 Going to statewide code increases 

consistency in enforcement. 

If there were a move to statewide codes, there would 

be better enforcement. 

reg 7.341 (see notes) And predictability. 

• Delivery system: (for housing and housing products) discussion session sequence 

‘flip chart’ record NIST notes 

risk 5.151 Perhaps should focus all our efforts 

on manufactured housing. 

Transportation system limits design. 

Part of the explanation for that is cost. For example, 

the roofs must have a low pitch in order to be 

transported cheaply on highways (to pass under 
84 

discussion session sequence 

‘flip chart’ record NIST notes 

Weather limits design. Site 

assembly will continue to exist. 

bridges). But they are not pretty. 

cost 8.05 This is what operation breakthrough 

was supposed to do in the early 

70s. 

One example is the systems analysts at HUD with 

Operation Breakthrough, where the government bore 

some of the costs of innovation. 

cost 8.27 

See opportunity to do local pilot 

projects. 

The systems for acceptance of new developments lie 

with the local government. There is good potential for 

local government to get involved in this new delivery 

system. For example, San Diego, CA spent resources 

to streamline the regulatory system. Montgomery 

County, MD is also doing this. These are big budget 

jurisdictions that can afford to do this. 

• Market: supply-chain, builder, homebuyer, investor discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.36 For low-income, a 3rd party has 

joined the transaction and regulates 

decision-making; not present in the 

private-sector commercial market 

The non-profit building sector that the previous 

speaker represents cares about the interest of the 

homebuyers. In the for-profit market, we do not see 

this. 

ben 1.361 (see notes) The non-profit builders make decisions in the interest 

of the homebuyers. 

push 2.043 (see notes) Advertisements for homes do not provide detailed 

information about windows, use of I-joists, etc. that are 

used. They focus on the price of the homes and their 

beauty. 

• Metric: 1st, annual, life-cycle, time-horizon, units-of-measurement, uncertainty, 

market signal, rating scale discussion session sequence 

‘flip chart’ record NIST notes 

comp 3.041 (see notes) Right now, mortgage payments are based on first 

costs. 

comp 3.341 (see notes) With single-family homes, the assumption is that 

equity being built up will pay for maintenance. 

cert 4.07 

Need to change terms of reference 

for risk—100 year flood as likely 

again next year as this year 

The perception of risk is that a 100 year flood cannot 

happen two years in a row. There is no recognition 

that the probabilities are independent from one year to 

the next. When speaking of the 100 year flood, there 

is the same probability at 2003 as 2004. 
85 

• Perspective: interest, standing, constituents discussion session sequence 

‘flip chart’ record NIST notes 

comp 3.171 

(see notes) 

One stake is that infrastructure costs are huge, 

monolithic. It affects the local public interest so the 

entire community has a stake when new housing is 

built. 

cert 4.281 (see notes) Homeowners’ associations also play a role in 

monitoring maintenance. 

• Product: development, test/evaluation, distribution, sale discussion session sequence 

‘flip chart’ record NIST notes 

risk 5.18 We must determine what the 

tendencies to failure are and test 

those aspects of the product. 

There is a three-stage process. As Donald Rumsfeld 

said, the worst thing is the “unknown unknown.” 

cost 8.131 

(see notes) 

Existing communities would prevent the lower-cost 

housing from being built in the neighborhood. It would 

be too disruptive 

• Segmentation: MF/SF, new/existing, low-income/high-income discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.35 

Low-income buyer is a different 

market; must balance: 

• Current social taste 

• Income limits 

• Performance of home 

Tradeoffs must be made and high 

maintenance is a key issue 

The constraints in purchasing decisions are: style; first 

cost (X % of median income as defined by Fannie and 

Freddie); performance of home (no high maintenance 

requirements, no time bombs). For low-income 

homebuyers, the life cycle is much longer, about 10 

years to 15 years, because they do not move as often. 

What is acceptable for the lower-income buyer is the 

first thing to consider. First costs are the second 

consideration, and the performance of the home is 

third. Durability is more important to this group 

because they do not move and they may not be able to 

afford expensive maintenance expenses such as 

replacing a roof. Energy efficiency matters, too. But 

first cost is also very important. 

cert 4.231 (see notes) Codes are driven by the rule that “one shalt not burn 

your neighbor’s home.” 

cert 4.243 (see notes) If one person leaves the house burned down and does 

not rebuild, then the entire neighborhood suffers. 
86 

• Value: cost, price, benefit discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.02 

Scales of concern: 

• Materials and components 

• Delivery system/satisfaction of 

broader concerns 

• Both economic and noneconomic factors 

How do we quantify ‘value’? 

Must deal with marketplace issue of 

‘pricing’ (uncertainty of recoupment 

of investment) 

Look at two scales of affordability: 

1. Components and materials 

2. System: at this scale, there is a more 

complex relationship among stakeholders, 

community, homeowners. 

Must consider LCC in affordability. There are 

economic and non-economic factors, but must make 

them as quantified as possible with the components 

and system. The challenge of the question of 

affordability is to define, specify, and guide 

affordability. There is the market issue of pricing, from 

the raw materials to labor to the marketplace. One 

factor in pricing is uncertainty. Therefore, decreasing 

uncertainty may be one way of improving pricing (from 

the affordability standpoint). Is cost (of materials, 

construction) reflected in pricing? 

ben 1.07 

Cost will determine whether it is 

built 

In the suburban Maryland community of Montgomery 

Village, there is a requirement that a builder seeking a 

permit must devote 20 % of the construction to 

affordable housing. The county definition of affordable 

housing is based on the rent or purchase price of the 

housing. 

push 2.171 

(see notes) 

Increasing density is the source of the biggest savings. 

Land and infrastructure are expensive. With 

Montgomery Village, MD’s 20 % affordable housing 

rule that someone previously mentioned, you get 

bonus density. 

Lenders 

• Attribute: affordability, durability, safety, etc. (flexibility, substitutability, 

customizability) discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.201 (see notes) Financiers also have a stake. 

ben 1.27 Biggest problem is functional 

obsolescence 

• Build in flexibility to change 

• Today will not be tomorrow in 

all dimensions, including 

operating cost concerns 

Flexibility of housing design is important. The big 

problem is not structural deterioration of a home. It is 

functional obsolescence. Therefore, need to build 

flexibility into the house and its design for future 

changes, including those not motivated by operating 

costs. 
87 

discussion session sequence 

‘flip chart’ record NIST notes 

cert 4.25 Northridge quake: soft-story 

collapse was the problem. 

Earthquake insurance was withdrawn for condos in 

southern California after the Northridge earthquake. 

What was the technical impact? 

cert 4.261 (see notes) Or outcry from the insurers. 

cert 4.31 

What is quality level for ‘affordable’ 

housing? Safer means higher cost; 

will be the same for all attributes. 

Stricter codes reduce affordability. There is a lot of 

housing that is affordable that is unlivable. What is the 

minimum standard? Here, we are talking about 

increasing the minimum standard. Can you achieve 

the performance with less expensive materials? What 

is the quality level to be achieved? Houses are better 

built now and cost less. It is necessary to change 

costs to reflect the value of the housing. Increasing 

standards would increase costs greatly, which would 

lead to a decrease in the availability of affordable 

housing. 

cert 4.331 (see notes) A HUD study also showed this with seismic events. 

cert 4.333 

(see notes) 

If these changes were to be made, one effect would be 

to increase the hurdle rate of the house and make 

ownership less affordable. 

• Barrier/Incentive: (to market acceptance) discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.23 Buyers would consider information 

if informed 

If buyers knew durability affected the underwriting 

decision, durability would matter to them. An example 

is energy-efficient mortgages. 

comp 3.33 

May be home keeper mortgage—

borrower is essentially buying 

insurance (on performance.?) 

 This could be what is called the “Homekeeper 

Mortgage.” It sets a bar where the bar is an insurance 

policy. The homeowner pays a fee into escrow every 

month. If an element of the home goes bad, then the 

insurance will pay to repair it. It is insurance for 

durability. The fee will determine the effect on the 

mortgage. 

cert 4.04 Risk-based insurance may have 

contrary effect of increasing costs 

to those that can least afford 

Insurers pool risk. Premiums are based on worst-case 

scenarios. Insurers’ concern is, what is their 

exposure? Risk premiums are a means of getting rid 

of the cross subsidization of the high risk by the low 

risk. If risk premiums were used, we would probably 

see the lowest income owners paying the highest 

premiums. Also, underwriting would be much more 

difficult. It would have to be done on a case-by-case 

basis. 

soc 6.111 

(see notes) 

But the cost of the disposal is not internalized at the 

time of purchase of the product because the purchase 

price is separate from the end-of-year disposal fee. 
88 

• Delivery system: (for housing and housing products) 

No comments. 

• Market: supply-chain, builder, homebuyer, investor Discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.30 

Innovation in lending has led to 

greater purchasing power 

The most significant factor improving affordability of 

housing has been automated underwriting. Just a few 

years ago, closing costs on a house averaged 21⁄2 

points. Now, they represent 1⁄2 point, on average. 

Innovations in financing have had the biggest impact 

on affordability. 

• Metric: 1st, annual, life-cycle, time-horizon, units-of-measurement, uncertainty, 

market signal, rating scale discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.05 

There are indirect relationships 

between the cost of production and 

the supply of housing 

Cost of materials is related to the price of the house 

because the going level affects how much gets built 

(supply of housing). The cost of building a house 

determines if the house gets built or not. The market 

defines where we go. 

comp 3.25 Difficulty costing rare events? No, it 

is a known actuarial experience 

base. 

(see record) 

comp 3.254 (see notes) One reason this is difficult is because we do not know 

how to price a rare event. 

comp 3.257 (see notes) One example is lead paint. It was costly to change. 

comp 3.34 

In MF housing, debt ratio is 

determinant—must consider the 

viability of the structure (due 

diligence) 

Home inspections could serve a 

similar purpose for SF 

This is another example of innovation in mortgage 

lending. Underwriting decisions for SF homes are 

based on creditworthiness of the borrower, not the 

value of the asset. If the consumer values it, they will 

pay for it. With multi-family housing, the situation is 

different. In this case, lenders look at the value of the 

asset, not creditworthiness of the borrower, when 

making underwriting decision. They look at the 

viability of the structure as the ratio of liability to the 

value of the asset. 

comp 3.363 

(see notes) 

Foreclosure is rare: has nothing to do with the actual 

house, but the credit of the individual. Freddie Mac 

has a default rate of less than 1 %, so foreclosure is 

not a factor for most mortgages. The issue is whether 

the market will move the house. There is no bubble in 
89 

discussion session sequence 

‘flip chart’ record NIST notes 

the housing market. 

cert 4.022 

(see notes) 

The occurrence of an event affects perceptions about 

its probability. If a rare event occurs, it makes people 

perceive that the event is more likely to occur again. 

cert 4.15 

It’s a time horizon consideration—if 

beyond mine, I don’t care. 

LCC is not a good approach because time horizons 

are short. The thinking is that a homeowner can 

forego maintenance for 5 years because the 

consequences will not be observable in that time, and 

can sell with no penalty. 

cert 4.372 (see notes) Can we increase quality and performance while 

reducing cost? 

risk 5.01 What types of uncertainties? 

• Unforeseen costs 

• Durability of value 

• Consistency of measurement 

capability 

What types of affordability? 

• Interaction between uncertainty and affordability 

components. 

• Issue: Will the value be maintained in the long run? 

Will the house hold its value if the component falls out 

of trend or physically falls out? 

• Do all innovations have to be held to the same 

affordability standards? 

soc 6.14 How do you choose between 

regulation and not—you need a 

metric to decide. 

Assume that technology produces some good. What 

is the metric to link these two? 

soc 6.22 The durability equation as outlined 

does not address social costs (the 

key parameter of this session). 

The equation also would not address social costs, 

such as environmental costs. 

• Perspective: interest, standing, constituents discussion session sequence 

‘flip chart’ record NIST notes 

comp 3.21 Codes can only address a minimum 

level of safety 

But what is the purpose of the codes? Every ratchet 

up of the code ratchets up the cost. 

cert 4.121 

(see notes) 

Maintenance is a major concern relating to the person 

who is paying for it at the moment that it occurs. 

Consider 1 % of purchase price + costs of 

improvements every year to stabilize the community. 

cert 4.282 (see notes) How does this relate to affordability? 

soc 6.01 There is a difference between 

‘valuing’ and ‘monetizing’ 

In terms of stakeholder values—

there is difference between ‘general 

stakeholders’ (e.g. regulators and 

repairmen) and ‘stakeholders with 

standing’ 

In terms of distribution of costs and 

benefits—FNMA is far more 

concerned with negative impacts on 

low-income segments (much more 

• Is it possible to make a quantitative judgment 

based on a qualitative factor? 

• Should regulators be considered stakeholders? 

They are not necessarily stakeholders when 

concerning costs. 

• Do you consider costs to repairmen as new 

technologies are implemented? 

• Fannie Mae is concerned with regulations having 

negative impacts towards low-income housing 

(crime, education). Fannie Mae is more 

it tdi i d t l i
90 

discussion session sequence 

‘flip chart’ record NIST notes 

susceptible to adverse effects) 

In terms of social costs—at what 

geographic/political level are they 

considered? 

Social value is highly subjective—

New York City studied costs that 

accrued to the city—city bore costs 

disproportionately; benefits were 

more widespread. How do you 

value benefits like self-esteem? 

interested in increased cost on lower income 

families – this is the group where negative 

externalities are greatest. 

• For social costs and benefits, you need to know 

what area you are talking about? Every 

stakeholder places different values on social 

costs. Every person/place places a different 

value on a social outcome. 

• Cost savings on criminal justice system in New 

York City is support of housing for the homeless 

was instated – how do you determine the value of 

a quality like self-esteem? No value for selfesteem has been determined for giving shelter to 

the homeless. 

• Product: development, test/evaluation, distribution, sale discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.102 (see notes) Marketing for product manufacturers plays a big role. 

• Segmentation: MF/SF, new/existing, low-income/high-income discussion session sequence 

‘flip chart’ record NIST notes 

comp 3.03 Discussions have had a single 

family emphasis while most 

affordable housing is MF 

MF delivery system explicitly 

considers age, service life, and 

condition at resale 

Multi-family is the biggest component of affordable 

housing. In this segment, underwriting explicitly takes 

into account the life stage of housing. 

• Value: cost, price, benefit discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.04 Value of housing is “what it will sell 

for” 

• Pretty competitive market, but 

Asking price is not related to the cost of building a 

home. It has relatively little to do with the cost of the 

structure compared to market demand. The value of 
91 

discussion session sequence 

‘flip chart’ record NIST notes 

cost of building (production 

does not set price) 

• Price has little to do with 

structure 

• Is affordability the “ability to 

pay” or the “cost to build” 

the house is what it will sell for. “Cheap” housing can 

become very expensive, because the price has little to 

do with the structure. The market determines the cost. 

ben 1.10 Individual choices do not effect 

expected resale value (time horizon 

can be critical to decision making) 

The average homeowners stays in their home about 

5 years. The life cycle is short and affects the choices 

of homeowners, too. The homeowner needs to see 

the net benefit of the product. 

ben 1.40 

If it is worth something, lenders will 

underwrite it. 

The market will price durability. Lenders will not 

because it is not part of the (lending) price. 

Underwriting for single-family homes depends on the 

ability to repay the loan. 

Builders 

• Attribute: affordability, durability, safety, etc. (flexibility, substitutability, 

customizability) discussion session sequence 

‘flip chart’ record NIST notes 

push 2.21 

Study of density health effects may 

be a lever for higher density. May 

be a pull factor but government 

must lead/drive education. 

There was a New York Times article about zoning as 

an explanation for some of the health and community 

problems in this country. The conclusion was that if 

zoning allowed more density and mixed-use 

neighborhoods, people could walk more and be 

healthier and have a greater community identification. 

Kentlands, a planned community in Montgomery 

County, Maryland, is an example. This could lead to 

more sidewalks and commercial and residential areas 

would not be segregated. This leads to less driving, 

less obesity. 

Health has deteriorated because of zoning. Are people 

healthier in small towns? Could benefits like this pay 

for innovations? 

push 2.27 (see notes) Another push is financial incentive. 

push 2.30 (see notes) With NAHB surveys, we have to be careful in framing 

the questions. 

cert 4.02 Interested in minimum health and 

safety standards 

Group 1—low occupancy, low 

value; Group 2,3---residences, 

schools; Group 4—nuclear, 

chemical, 1st responders; event— 

frequent to very rare; magnitude—

• The state of South Carolina does not believe their 

earthquake provision is where it should be. Large 

events, such as floods, for example, caused flood 

claims to be changed. Insurance companies go to the 

re-insurer. Premiums are based on worst-case 

scenarios. It’s difficult to figure risk-based premiums. 

Some people will pay more and some will pay less. 
92 

discussion session sequence 

‘flip chart’ record NIST notes 

small to large The homeowner who can least afford it, pays the most. 

• Balance magnitude of improbable event and 

magnitude of possible damage. (see table handout) i.e. 

earthquake is less risk tolerant than high winds 

• If a rare event occurs, it makes people perceive that 

the event is more likely to occur again. 

cert 4.10 Cannot rely on maintenance for 

operation—product will fail 

The typical homebuyer prefers zero maintenance. 

Most are in the first category. 

cert 4.14 Banks require property tax escrow 

(banks protect investment by forcing 

compliance), why not similar 

approach for maintenance? 

Mortgage lenders build in escrow for property tax and 

insurance premiums. The same could be done for 

maintenance if believe that personal responsibility is 

not reliable. 

cert 4.251 (see notes) Now can’t build in some places. 

cert 4.334 (see notes) Codes are merely an agreed minimal acceptable 

standard. 

reg 7.14 

Before you can define ‘affordability’, 

you need to define ‘safety’ 

(“acceptable risk”?). There is 

currently no accepted credible 

definition; nothing to push off from. 

Local code officials do not know 

what the code means in terms of 

performance. Until decision-making 

approval is removed, innovation will 

not occur. 

Before you define affordability, must define the 

standard for safety. Should it be “no injury or death”? 

This is a barrier. There is no measure to bounce 

affordability off of. Only the nuclear power industry has 

specific criteria about safety. As with the energy code, 

until there was a standard, it was not possible to 

assess the relationship between affordability and 

energy efficiency. The lack of credible standards 

makes it impossible to enforce. Without a clear 

definition of safety (and/or affordability, for instance) in 

the context of a prescriptive set of code provisions, the 

introduction and use of performance criteria may 

decrease. Determining compliance with performance 

type regulations can be more difficult and require 

additional training for the code official. Also, many 

local officials do not understand the codes they are 

trying to enforce. They do not want to take a chance 

on a new product. 

reg 7.211 (see notes) Must encourage use of the evaluation services for this. 

The inspector should not have to make the decision. 

 

• Barrier/Incentive: (to market acceptance) discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.44 Regulation is the key (represents 

30 % of the cost of housing) 

• Recognize that existing stock 

dwarfs new construction 

(replacement is 2 % to 4 % per 

year) 

• Recognize that delivery

Regulation accounts for 30 % of the cost of housing. 

Regulation drives a lot of the first cost. These 

numbers are from the Kemp Commission Report. 
93 

discussion session sequence 

‘flip chart’ record NIST notes 

systems for innovation in new 

and existing housing are very 

different 

ben 1.45 (see notes) Land availability and regulations do drive costs. 

ben 1.46 

(see notes) 

A second point is that the existing housing stock 

dwarfs new stock. These older homes are not going 

away. They are just getting older. Even replacing 

2 % to 3 % of this stock annually means that these 

houses will be around in 20 years, 30 years, 40 years, 

even 60 years from now. How can we extend the 

dynamic constrained optimization to 60 years? Other 

considerations are that the average age of a house 

remodeler is 47, and the average person working in 

construction is not U.S. born. 

push 2.08 May not get a nickel of initial costs 

back (see record) 

push 2.16 

How do you introduce efficiencies 

into product delivery system: 

• ‘70s—tools 

• ‘80s—hard products/pre-cut 

studs, dimensional shingles 

• ‘90s--technology 

• ‘00s—QC management/ 

business systems 

Non-building considerations lead in 

importance today; 70 % of 

tradesmen have no employees 

This is how I see, very roughly and very generally, the 

recent history of innovations in the housing industry. 

In the 1970s, there were innovations in the tools and 

equipment used in construction. The 1980s saw 

innovations in hard products, such as pre-cut studs, 

OSB, and dimensional shingles. The 1990s saw 

innovations in information and communications 

technology, with the use of the internet and cell 

phones. I predict that in the 2000s, the key 

innovations will be in business systems, organization, 

structure, management, and quality control. Only the 

big public companies will pay attention to 

management, because most construction companies 

are one-man shops with no employees and therefore 

no management needs. As an industry, we have a 

group that is not business savvy. We need to make 

the tradesmen more efficient. 

push 2.20 What are ‘accidental’ attributes/ 

barriers to innovation? 

Some see innovations adopted by accident. For 

example, the demand for houses on concrete slabs in 

Phoenix. People there will not accept crawl spaces. 

push 2.24 Must be somewhat cautious; be 

careful of number of innovations 

bundled together 

Must be careful about the number of technological 

innovations that are shown to buyers. Most do not 

want it. 

comp 3.071 (see notes) Do state regulations play a part in this? 

comp 3.10 

No incentives from insurers, though 

insurers want upgraded 

performance through code 

requirements. 

But any decrease would have to be balanced by an 

increase somewhere else. More restrictive codes are 

the easiest way for insurers to protect themselves 

from losses. States control the insurance industry; 

they must allow insurance companies to price on risk. 

State Farm, for example, is a big player. It can 

influence the marketplace. It has threatened to pull 

out of Texas and other states because it was too 

exposed there. 

comp 3.271 (see notes) The price affected how quickly it was adopted and 
94 

discussion session sequence 

‘flip chart’ record NIST notes 

penetrated the market. 

comp 3.28 

Regulators are in place to protect 

public interest, but (“lag v stove bolt 

prescription”) we’ve created a 

stakeholder we did not want. 

Regulators are there to protect the public and not to 

have their own interest. But this is not always how it 

plays out. For example, I had to replace 1⁄2-inch 

(12.7 mm) lag bolts installed with nut and washer with 

3⁄8-inch (9.525 mm) bolts on a cathedral ceiling 

because the code called for the 3⁄8-inch (9.525 mm) 

bolts, and code official demanded this. Replacing 

these bolts took about 10 labor hours and $150 in 

materials. Would there have been a difference in 

performance if the 1⁄2-inch (12.7 mm) lag bolts with nut 

and washer had stayed? 

cert 4.143 

(see notes) 

Educating people is the key. People do not read 

instruction manuals. For example, I know someone 

who refuses to and therefore cannot operate the VCR. 

cert 4.36 

Future benefits uncertain or 

contingent on future actions (e.g. 

zoning) impediments to affordable 

product. Correlation to increased 

cost and reduced risk. 

There is a need to consider affordability impacts when 

going from a small lot to a large lot. An example is 

consequences of septic failure on ground water 

quality. Does the reduction in risk correlate to 

increase in cost? What is a reasonable tradeoff for 

risk? Insurance companies pushed for changes to 

double lot sizes. 

cert 4.362 

(see notes) 

There are a number of positive incentives in improving 

and following codes and zoning. The improvement 

may trade off with other incentives. 

risk 5.22 Big problem for builder is how to 

train producers/ installers 

(laborers); ability to train will be a 

big component of acceptance. 

(internet opportunity?) 

Need education/training and uniform installation. 

There is a lack of consensus about the proper 

method. The ability to train is not there. How can this 

training be delivered? Must simplify delivery of 

content (such as through the Internet). 

risk 5.24 

Supply-chain liability will/should fix 

problem. 

It is the supply chain that will eventually improve the 

testing and research situations. The solution must be 

found in the supply and distribution chain because 

that is where the liability lies. It is where the supply 

and labor interface. There has been a decline of 

vocational training in the U.S. It has been taken out of 

high schools. The unions are not providing or 

requiring it. They do not know how to put things in. 

So who will benefit from labor improvements? Use 

the supply chain as a risk management method. 

soc 6.10 

We should focus on positive 

incentives, like tax credits, etc. 

Mitigation is purely regulation 

Insurance companies have an 

opportunity to reduce their own risk 

through risk-based underwriting 

(encourage rather than force 

acceptance) 

There are government incentives, including tax credits 

and land use (higher density, cost of land). Some of 

the mitigation that was just described are mandatory, 

not incentive-based. Insurance can provide 

incentives with lower premiums in some areas to 

reflect risk, but it is regulated by states. States have 

an opportunity to affect this. We need a metric to 

measure these technologies (which one is better?). 

Social benefits will come from what the government 

recognizes as important (for example, provide a free 
95 

discussion session sequence 

‘flip chart’ record NIST notes 

thermostat). Encourage, rather than enforce, through 

different costs. 

reg 7.10 Want to reinforce notion of looking 

at other industries for guidance: 

there is a strong trend that 

deregulation spurs innovation 

With homebuilding, can look at whether regulations 

have an effect on innovation. There are many 

regulated industries that became deregulated. Could 

see whether a spurt of innovation followed the 

deregulation. 

reg 7.18 

Only occurs through appeals 

process—practitioners realize that 

you cannot truly build to code. 

I have found that state-level code people in one 

Midwest state are responsive if local officials are 

resistant. In some other states, the only remedy if a 

local code official disagrees or resists is the appeals 

process. The truth is that strict adherence to the code 

is impossible. 

reg 7.25 Some code officials do not even 

use code language, much less NES 

reports in making decisions. 

Some code officials disagree with the code and will 

not adhere. 

reg 7.251 (see notes) Schenectady is one example. 

reg 7.26 Reports are limited only to existing 

code requirements and do not test 

against purposes of innovation 

(whatever those may be, such as 

durability); do not rely only on 

reports. 

There are limits to ESRs. They do not address 

durability or affordability. The evaluations are only for 

the adherence to the codes that are existing. The 

code/evaluation process calls for extraneous testing 

that is not appropriate for the material in many cases. 

reg 7.28 Some AHJs require engineering 

certification for each installation—a 

very expensive burden. 

For some officials, if you get the engineer’s seal on 

the design, then you can use it. But this is costly. So 

this is still a barrier to adoption of new technology. 

reg 7.30 Risk insurance coverage (for 

manufacturer, builder, or owner) 

could overcome many of these 

problems. 

(see record) 

cost 8.16 There was less regulation (in the 

40s). 

The combination of affordability and other 

characteristics provides a historical precedent from 

the period immediately following World War II. 

cost 8.17 

Current attitudes toward resisting 

change are relatively rigid. 

Also, to add another perspective, this construction 

happened after the Great Depression, which saw 

widespread price deflation. Therefore, cheaper 

homes were not seen as a threat. 

 8.172 

(see notes) 

Now, homeowners’ associations object to changes 

(on the basis of change to the character of the 

community). Post-World War II history was unusual. 

cost 8.25 In-fill development runs into 

titling/subdivision problems; do not 

understand suggested spur to 

innovation. 

The choice is between new homes or rehabbing old 

homes. Infill development is made difficult by land 

use requirements. Regarding a previous comment, I 

am not sure how rehabilitation is connected to the 

introduction of new technologies). 

cost 8.301 

(see notes) 

There is little interest in having land available for more 

new housing at this time: in NJ, 63 % of the public 

voted to restrict 50 % of orphan land then designated 

for housing development out of use. The voted 

against new housing. The yearly charge/cost of a 
96 

discussion session sequence 

‘flip chart’ record NIST notes 

house is base on: 

• Inventory value 

• Maintenance costs 

• Operating costs 

• Durability (currently no rating scale/little 

data) 

Durability and maintenance values are closely related. 

cost 8.34 

(see notes) 

California addressed this question in 1980 by allowing 

manufactured units in existing areas as long as the 

look and character of the area was preserved. 

cost 8.36 (see notes) There was a cost. 

• Delivery system: (for housing and housing products) discussion session sequence 

‘flip chart’ record NIST notes 

push 2.11 

Some choices may be allowed. 

All builders want to be seen as custom. But in truth, 

most builders will only offer limited choices. But these 

choices tend to be about cosmetic attributes, such as 

counter tops, rather than long-run, performanceenhancing elements. 

risk 5.14 Group is making a great argument 

for manufactured housing/modular 

housing. Low-pitched roofs are a 

response to bridge height 

restrictions (not pretty). 

This is an argument for manufactured housing. The 

current perspective, however, is that onsite-assembled 

housing is superior to pre-manufactured housing 

elements. 

risk 5.153 (see notes) There is a need to expand the testing that is in place, 

to streamline it. 

risk 5.19 Prevent innovation adoption—target 

of marketing/product purchase; 

decision is ‘no’ if equal or greater 

cost than what it is substituting for. 

Manufacturers sometimes target the wrong agent to 

promote a product, that is, the purchasing agent, who 

is taught to say no if the product costs more. It should 

be the sales and marketing folks. 

risk 5.192 Retailer may not want to stock (e.g. 

additional sked space/sku’s). New 

technology often must completely 

replace something already out 

there. Tough sell. 

Also, a new product is another SKU number that the 

retailer will have to keep track of for inventory. 

Retailers resist change. 

cost 8.01 Mandated innovation is 

disproportionately a burden to lowincome buyers of housing. 

Owners are interested in restricting 

supply to protect the value of their 

assets. 

Politicians have an interest in 

protecting asset value as well. 

Should builders bear some of the 

• To an extent this obvious: the manufacturer will 

end up paying for innovations. 

• It is easy to pass costs on to the first time house 

buyer. 

• People that own existing homes are possible 

bearers of cost: it is in their interest to restrict the 

supply in order to increase house value. 

• Homebuilders are in a position to pass on to 

consumer, except if consumers show no interest 
97 

discussion session sequence 

‘flip chart’ record NIST notes 

cost, especially for innovations that 

the buyer is not expressly interested 

in? 

Concentration in the building 

industry (SF) is already occurring; 

do we want it to accelerate? Would 

that promote innovation (in a less 

competitive marketplace)? Mediumsized builders are a key segment of 

homebuilders. 

If considering a new delivery 

system, how would it be regulated? 

Would local regulators necessarily 

lose control of the process? 

in the specific innovation. 

• If we have a market with fewer large innovators, 

do more costs get passed on to the consumer? 

• Is there a viable place for the medium sized 

producer? 

• New delivery system: do local officials lose control 

of the system? 

cost 8.09 

Question of who pays remains; 

what of the suggested changes 

would be paid by actors? By feds? 

This goes to externalities. To internalize these, need 

the Federal government. The Federal government is 

the appropriate bearer for the cost of such innovations 

that increase the general social welfare. Education 

and training address a different market failure. 

cost 8.19 

No individual will put up with any 

cost to change product delivery. 

Who will pay? A demo project could 

prove concept. Entrepreneur will 

then move to rental side because 

lender will not incent builder directly. 

ROI could be changed by 5 % by 

assuming risk of utility/energy costs. 

Relying on rehabilitated housing would take too much 

time. Areas like Johnstown and Schenectady, NY 

were built during the 1920s and 1930s. There is now a 

lot of vacancy there. The problem with these areas is 

that they are past desirability, and that is a barrier to 

rehabilitation. Regarding an earlier comment about the 

cost of infrastructure, I am now demonstrating and 

developing a project using renewable energy. Some 

people can find ways of capturing economic rents. I 

make an 18 % return on investment (ROI), five 

percentage points higher than I would have, by 

capturing the savings. Some people do not even make 

5 % ROI. 

 

• Market: supply-chain, builder, homebuyer, investor [mar] discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.14 Consumer does not want durability, 

consumer wants upgraded carpet 

• Buyer is buying a complete 

product package 

• Builder has difficulty in 

accommodating ‘menu’ of 

product choices (especially for 

spec building) 

• Buyer expects minimum level 

of durability 

The homeowner has limited choices in a new home 

unless they have a custom home built. Most people do 

not have the understanding to make choices. Except 

for custom homes, the builder makes decisions about 

the components of the home. Builders mass produce, 

and do not want to give choices to buyers. In any 

case, buyers care about visible quality, such as of 

cabinets and carpeting, not the durability of structure. 

Most people do not have the understanding to make 

choices. NAHB are mainly custom builders. Most 
98 

discussion session sequence 

‘flip chart’ record NIST notes 

subdivisions are not usually custom built. Need to 

provide better information to homebuyers about the 

importance of durability. 

ben 1.28 

Why would builder be interested in 

putting in new stuff? 

Homeowners are at risk, should 

they also be “accountable”? 

There is resistance to innovation, including among 

builders and renovators. Homeowners need to be held 

accountable for their maintenance actions and 

decisions. They need to clean gutters and maintain 

the home, not just components. Homeowner 

responsibility would be enhanced with a durability 

rating because this responsibility would be rewarded 

by increases in the durability rating, and therefore the 

market value. We need flexibility to change. What is 

attractive today may not be attractive tomorrow. Why 

would the builder want to put something in? The 

homeowner has a role in durability and needs 

knowledge and information about it. 

push 2.044 (see notes) Realtors only care about square footage and street 

address. People will pay for self-cleaning (stainresistant) carpets, but energy efficient renovations did 

not pay back. 

• Metric: 1st, annual, life-cycle, time-horizon, units-of-measurement, uncertainty, 

market signal, rating scale discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.08 

As a builder, trying to shift buyer 

emphasis from 1st cost to life cycle 

costs 

NIST/HUD/regulators need to look 

at incentives to emphasize LCC 

Need to focus on life-cycle costs. Need incentives to 

shift rom first costs to LCC. Housing is not a free 

market. It is defined by policy, zoning, codes, etc. 

Need to establish a baseline for durability instead of 

focusing on first cost. Need incentives to create better 

housing stock rather than the status quo of more 

housing stock. Better housing stock implies lower 

LCC. 

ben 1.13 

Consider concept of ‘durability 

rating’ system/policy 

• Single number, 0-100 

• Market compensation of rating 

(higher resale for higher rating) 

In a previous contract with the U.S. Forest Service, a 

durability rating system was discussed. A policy could 

be done by the insurance company. Every house 

would get a number. A house rated 80 would last 

longer than a house rated 60. A rating of 45 would be 

low. A house rated 60 could move up to a 68 if an 

improvement were made to its durability. What rating 

would be acceptable to you? Durability rating will 

focus homeowners on looking at LCC. Homebuyers 

are more focused on the layout of the home. To be 

effective, the rating must mean something to the 

consumer. Policy could play a role here, as could 

lenders, insurers, and code inspectors. The idea is 
99 

discussion session sequence 

‘flip chart’ record NIST notes 

consenting to durability rather than incenting to first 

cost. 

ben 1.151 

(see notes) 

The index would be difficult to develop. And it would 

have to be credible and meaningful to the homebuyer. 

Sometimes, the buyers do not make the “right” 

decision, even with information. It is difficult to predict 

this behavior. 

push 2.13 

As a rule-of-thumb, builder may 

want to price at 80 % of buyer’s 

budget, then add unforeseens, and 

widgets that are wanted (product 

‘pull’) 

The way I deal with my clients and give them choices 

is this: I ask my clients what their budget is, and I offer 

them something for 80 % of their budget. This 

cushion allows for things like uncertainty in costs, 

upgrades, etc. Most of the upgrades that my clients 

opt for, however, are for widgets, such as sound 

systems, appliances, central HVAC. 

comp 3.02 Time horizons apply to builders as 

well; builders are not opposed to 

LCC analysis 

Buyers are uncertain of time in 

home, who will buy, and so use 

varying discount rates 

Different buyer segments behave 

differently: 

Higher income buyers use longer 

time horizon 

Lower income buyers use shorter 

horizon (1st cost emphasis) 

Existing owner (repeat) buyers use 

longer horizon 

Community wants longer horizon 

and consideration of consequential 

impacts 

Builder wants to know and meet 

customer wants (enhancing 

reputation) 

Product manufacturers interested in 

long-running markets 

Finance industry primarily 

interested in 1st costs; operating 

costs not factored into lending 

decisions 

Insurers have a longer horizon; 

want to reduce future claims 

State and local governments have a 

longer horizon focusing on service 

and utility impacts 

Federal agencies emphasize long 

term national policies, social costs, 

and a social discount rate (e.g. 

OMB will suggest discount rates to 

lenders) 

Affordability is now mentioned in the 

• Time horizons vary for different stakeholders. 

• Uncertainty leads to a higher discount rate. 

• For the homebuyer there is a tradeoff between 

durability and aesthetics. At one time the homeowner 

argued against life-cycle costs. The existing 

homeowner has the same outlook as a homebuyer. 

• High-income buyers tend to have a longer life cycle 

horizon. Higher income people seem to have a 

longer time horizon. 

• A homebuilder will go by the desires of his 

customers. How well do homebuilders perceive time 

horizon of their customers? 

• In finance industry, the major concern is with first 

costs. 

• State government is concerned with demand for 

energy and water and have political concerns. 

• Federal government has more of an interest in 

viewing “society as a whole.” The Federal 

Government’s view is on the people living in the room 

and society as a whole. 
100 

discussion session sequence 

‘flip chart’ record NIST notes 

IRC, previously exclusively 

concerned with safety 

comp 3.22 

It is difficult to argue safety versus 

economics in a public forum 

Qualitative benefit and costs come together to 

determine the value; insurance companies are not 

interested in adding sprinklers to all buildings because 

of financial costs (projected costs of water damage 

from the sprinklers in too high) 

comp 3.251 

(see notes) 

LCC analysis is done qualitatively rather than 

quantitatively. Small expense items, such as smoke 

detectors, are more easily added to codes than big 

expense items. 

comp 3.351 

(see notes) 

Home inspectors are used only in some areas. In 

others, people will not pay for them. For example, 

with my mother’s home in southern Virginia, the real 

estate agent was unwilling to have a home inspector. 

In the DC area, on the other hand, where incomes are 

higher and people are willing to pay for it, people 

expect it. 

cert 4.12 

$1 800 per year maintenance 

compared to $235K price—less 

than 1 % per year; national “close 

your storm windows day” at 

Thanksgiving? 

Most deterioration of homes occurs over time and is 

not instantaneous. But realization of deterioration is 

sudden. For a loan-to-value (LTV) loan of 80 %, taxes 

and insurance are escrowed. A mortgage company 

wants to protects its investments. A Harvard study 

found that the average annual expenditure on home 

maintenance is $1 800. The average resale price of a 

house is $237 000. This small amount spent each 

year to maintain what for most people is the single 

largest repository of their personal assets is less than 

1 % of the value of the house. To get the housing 

stock maintainable for 60 years, it may be necessary 

to mandate certain requirements. There needs to be 

something to encourage and remind homeowners 

about maintenance, such as “National Storm Window 

Day” on Thanksgiving, and “National Screen Day” on 

Memorial Day. 

cert 4.18 Rental property investor seeks 1 % 

property + improvement cash flow 

in stable market; delay in 

maintenance will penalize the seller; 

how much?—subject of study? 

The investment standard is 1 % of purchase plus 

improvement per month in a stable or ascending 

neighborhood. If maintenance is deferred, it penalizes 

the seller. The market will adjust at the time of 

transaction. 

soc 6.18 

The issue is a mathematical 

problem and not that difficult to 

understand: value of stock 

measured in trillions of dollars, 

divided by the number of units, plus 

annual cost of maintaining times 

service life, divided by service life 

equals annual cost of ownership. 

The incentive is to push durability by distributing first 

cost. When R&D comes in, it will be implemented 

more easily. Longevity is the missing piece. There 

are no data projecting durability or longevity of 

housing. I propose a formula to compute the annual 

cost of ownership of a home which falls with the 

longevity of the home: annual cost = (initial cost + 

maintenance + operating costs)/longevity of the home. 

It disperses the first cost over a longer time horizon. 

The social cost that is reduced with increase in 

longevity is the need to rebuild “10 year” homes every
101 

discussion session sequence 

‘flip chart’ record NIST notes 

ten years. 

soc 6.19 Concept makes a lot of sense 

except for characterization as 

“simple” problem—we do not know 

how long housing lasts. Pricing in 

durability may be useful, but may 

not. 

The problem is that this would not be simple because 

we do not know how long the housing stock lasts to 

develop a meaningful relationship based on durability. 

The government does not collect data on component 

changes or demolition permits anymore. Therefore, 

we do not know. We would have to overcome a 

credibility problem with the consumer. 

soc 6.201 

(see notes) 

Without a durability rating index, a bunch of 

disconnected people only see the first costs. There 

needs to be some linkage between them. 

soc 6.203 (see notes) Who enforces this formula? It should be the 

underwriting industry. 

soc 6.23 (see notes) There would be trouble monetizing these social costs. 

soc 6.24 

(see notes) 

The formula is already done in a quasi-method. The 

buyer gets information about the age of the roof, 

energy costs, etc. of the prospective home. 

• Perspective: interest, standing, constituents discussion session sequence 

‘flip chart’ record NIST notes 

comp 3.11 Are regulators actually 

stakeholders—do they have a stake 

in housing longevity? 

Are regulators stakeholders? What is their interest? 

Longevity? 

comp 3.12 

Political stake only. 

There was one case involving the mayor of 

Charleston, SC. He supported more stringent seismic 

codes because he would be held accountable if he did 

not and an earthquake occurred. The issue of liability 

makes them stakeholders. 

comp 3.18 Long term interests align regulators 

and existing building owners 

One issue is that most voters live in existing homes, 

not new homes. Therefore, this group drives policy 

and regulations. 

comp 3.258 

(see notes) 

Insurers do not take a position on home sprinklers 

because the losses due to fire damage and those due 

to water damage are the same. The presence of 

sprinklers makes no difference to their underwriting 

business. 

cert 4.271 

(see notes) 

But the insurance payout must be used to rebuild the 

damaged house, unless the insurance company takes 

possession of the damaged property. Typically, an 

insurance payout cannot be used to build or buy a 

house in an entirely different location. 

soc 6.06 Goes back to question of 

distribution of benefits—need 

innovation not in widgets and hard 

things, but in regulation—

The key is the distribution of benefits, as a participant 

suggested. The beneficiaries of rehab codes may not 

be society. They may go to the private sector, such as 

entrepreneurs. For example, risk takers buy low and 
102 

discussion session sequence 

‘flip chart’ record NIST notes 

opportunities in implementation of 

rehab codes. 

The entrepreneur sees opportunity, 

takes risk, should benefit—there 

has been a 40 % increase in 

permits since implementation of the 

New Jersey Rehabilitation Code 

(primarily in vacant urban, mature 

suburban, and decaying rural 

properties) 

sell at higher market value. There are three places 

where older buildings are found: urban, suburban, and 

rural. This has happened with change in the New 

Jersey Rehabilitation Code, because barriers were 

removed and the regulatory system changed to allow 

these innovations. 

soc 6.191 (see notes) The stakeholder has a stake in making the component 

last. 

soc 6.212 (see notes) Even with an index, the consumer may still ignore it. If 

this happened, it would prompt regulation. 

cost 8.11 Current federal policy asserts that 

“ownership improves housing”. 

The benefit of home ownership is the long-run stake in 

the asset. 

• Product: development, test/evaluation, distribution, sale discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.11 Too many components/complex 

product 

Making all these choices available would be costly for 

the builder. 

cert 4.21 Storm shutters useless if not 

deployed. 

Hurricane shutters are only effective if someone closes 

them before the storm. 

risk 5.133 (see notes) Testing is costly. A builder with just a few lots cannot 

spread the costs among many units. 

risk 5.213 (see notes) Homes are more heterogeneous than cars. This 

makes recall more difficult. 

cost 8.29 

Market is responding by seeking 

opportunities for future change (e.g. 

blocking for grab rails in baths). 

Is it possible to look forward to rehabbing current 

housing in approximately 20 years? Would a viable 

new delivery system be movable walls and developing 

housing today with “exchangeable” rooms? The 

market is addressing the question of flexibility, but not 

on that scale. Some of the things being done now are 

to, instead of installing grab bars in the tub ahead of 

time, putting blocking in the wall so that they can 

receive bars when they do become needed when the 

homeowner gets older. 

• Segmentation: MF/SF, new/existing, low-income/high-income 
103 

discussion session sequence 

‘flip chart’ record NIST notes 

comp 3.031 (see notes) The share of condos is 20 %. Tax credit housing is 

33 %. 

cert 4.102 

(see notes) 

Multi-family housing is different because of liability, 

insurance, and the presence of dedicated 

maintenance personnel. 

cost 8.22 We see indications of marketplace 

changes, but cannot yet confirm. 

• Value: cost, price, benefit [val] discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.101 

(see notes) 

The extent this is true depends on whether use of 

more durable components is reflected in resale price of 

the home. 

ben 1.21 Appraised value is a blunt 

instrument and should be more 

sensitive. 

(see record) 

push 2.02 

Must have a benefit to sell to 

customer (builder typically) 

Cannot trade off performance from 

one system to another 

Must create value for builder or 

homeowner 

Agree that innovation benefits cannot be “pushed” on 

the consumer. It is necessary to fill a place for 

demand. “Push” is a mistake. The adoption of OSB 

(oriented strand board) and I-joists, for example, are 

done through the builder, by providing lower 

installation costs, better performance, more durability, 

other cost benefits. Innovations must provide some 

value to the homebuilder and homeowner. Trade-offs 

are possible only in energy performance codes. 

push 2.04 Must have some sought after 

benefit for consumer (builder) (see record) 

push 2.06 Case study: warm climate retrofit of 

tract home c.’85; cut energy costs 

by 40 %, spent 30 % extra, got 

same price as next door on resale. 

Realtors only care about square footage and street 

address. People will pay for self-cleaning carpet, not 

greater energy efficiency. 

soc 6.16 Question remains how to value a 

parameter in order to have a basis 

to set a fee—the consumer views 

the product (housing) as a durable 

asset, internalizing ALL perceived 

costs. 

This obsolescence only applies to regulations. With 

incentives, people will adapt. How do you assign 

value to these? 

Building Product Manufacturers 

• Attribute: affordability, durability, safety, etc. (flexibility, substitutability, 

customizability) 
104 

discussion session sequence 

‘flip chart’ record NIST notes 

push 2.31 

(see notes) 

We spend a lot on market research. We have to do 

multiple studies and take different approaches. Market 

research is a very creative and interpretive business 

because most people do not know what they want. 

reg 7.08 

First paragraph of IRC gives 

opportunity for flexibility in 

performance compliance with the 

code 

Chapter 1 of the code, titled “Alternative Methods,” of 

the Evaluation Service, is most encouraging of 

innovation. Changes in code represent a dislocation of 

the system, which spurs innovation. There is an 

analogy in chemistry: need to scratch a surface in 

order for crystals to form. 

• Barrier/Incentive: (to market acceptance) discussion session sequence 

‘flip chart’ record NIST notes 

push 2.101 (see notes) Safety and protection are automatic pulls. 

risk 5.232 

(see notes) 

There is no effective recall system for homes. This 

makes the issue of trying to implement new 

innovations more difficult. 

reg 7.06 

Regulation typically does not 

promote or discourage change. 

It is doubtful that there would be data on this. I am not 

sure if the regulatory system encourages or 

discourages innovation. Sometimes, you have to know 

how to develop “around the code.” Regulation may 

pose a barrier to adoption, but not to innovation. 

Sometimes, codes encourage innovation if the code 

becomes more restrictive. Manufacturers then need to 

innovate to satisfy those restrictions. Take carbon 

monoxide detectors, smoke alarms, energy codes, etc. 

reg 7.091 

(see notes) 

The evaluation services, as they stand today, do not 

give any insurance. A third-party, if so inclined, may 

want to take the results of an evaluation and then 

proceed with some insurance against failure to protect 

“early users” 

reg 7.15 

We do code training as part of 

product development process. 

There should be a continuing education and training 

requirement for code officials. My company includes 

training costs for code officials when it determines its 

budget for developing a new product. It sees training 

as part of the new product introduction process. 

reg 7.24 

Never had an NES report turned 

down, but it takes work. 

I have never had an ESR denied by a code official. 

Some have required them. Others have accepted the 

data submitted to the evaluation services if an ESR is 

pending. 

reg 7.32 What can be positively said to 

encourage acceptance of 

innovation? 

How do you change the outlook of code officials to 

encourage more interest in acceptance of housing 

innovation? 
105 

• Delivery system: (for housing and housing products) discussion session sequence 

‘flip chart’ record NIST notes 

risk 5.191 

(see notes) 

The problem is potentially worse if there is a value 

chain. The retailer may not want to take a risk on 

stocking an item if it does not know whether the 

subcontractor will want it. 

cost 8.02 

Development costs will get passed 

to the consumer, and, even so, will 

not be undertaken if too high. 

If builders cannot pass on at least 

part of the costs, they will not buy. 

Question is not who pays, but how 

costs are distributed. 

• Materials manufacturer will pass on increased 

costs to the consumer. 

• If a builder cannot pass on direct costs, they will 

stop the innovation. 

• Everyone along the line is going to pay some 

share for the innovation, the question is: How is 

the total cost divided among the different groups? 

• Initial cost is going to be borne by the initial 

innovator. 

cost 8.04 Builder will pay the costs of the new 

delivery process at the outset, but 

will pass along as soon as possible. 

No one entity will bear the costs of innovation. 

cost 8.092 (see notes) The construction industry does not devote as much 

resources to R&D. 

cost 8.094 

(see notes) 

Everyone will see the benefits of increased home 

ownership over time, but taxpayers will be the group 

paying the price. 

cost 8.18 

Perhaps we should focus on 

changing delivery of existing stock 

rehabilitation. 

What will the nature of the new delivery system be? 

Will the existing suburbs of the 1950s be rehabilitated? 

Will this be the new delivery system? For many 

people, their first home is an old suburban home. Or 

will it be an entirely new delivery system? 

• Market: supply-chain, builder, homebuyer, investor discussion session sequence 

‘flip chart’ record NIST notes 

push 2.01 

Not ‘push’; identify where ‘pull’ is 

from and address need; use 

multiple channels to reach 

consumer 

1. Innovation cannot be “pushed.” It is 

necessary to understand where the flaws 

and core values exist to motivate innovation. 

“If it ain’t broke, don’t fix it.” Have to identify 

and act upon and address a “pull.” Must 

demonstrate that the product satisfies a 

need. 

2. How to communicate with homeowners? 

Who touches homeowners? Real estate 

agents, the Internet, advertising, newspaper 

articles (popular press). Must use these 

means to disseminate information to 
106 

discussion session sequence 

‘flip chart’ record NIST notes 

homeowners. 

push 2.241 (see notes) There is a demand for energy star products. Why has 

Energy Star gone through an up tick recently? 

• Metric: 1st, annual, life-cycle, time-horizon, units-of-measurement, uncertainty, 

market signal, rating scale discussion session sequence 

‘flip chart’ record NIST notes 

risk 5.04 We look at complete LCC, including 

replacement cycles. 

Not in the first cost, but the cost of materials, 

installation costs, callback costs, energy savings, and 

durability. 

risk 5.051 (see notes) Builder customers are pretty sophisticated. Training 

and education are also part of the package. 

• Perspective: interest, standing, constituents discussion session sequence 

‘flip chart’ record NIST notes 

risk 5.27 Applied research is done well 

privately; basic research is no 

longer being done by the feds. 

(see record) 

• Product: development, test/evaluation, distribution, sale discussion session sequence 

‘flip chart’ record NIST notes 

risk 5.02 How do we reduce our risk in 

introducing new product? 

• Evolution is manageable; 

revolution involves unforeseen 

issues (with greater chance of 

failure) 

• Assessing performance must 

be addressed in all areas of 

impact. 

• ASTM standard E1825 lists 

things to look at. 

• Should develop installation and 

• How to mitigate risks and introduce a product 

appropriately into the market? Dupont mitigates risk by 

the things that they do not envision or focus on. 

• E1825 of the ASTM Standard gives a list of what to 

do before putting in a new system. 

• How to prepare for those risks that you do not initially 

envision? – One has to look at all other aspects of 

something specific could possibly impact. 

• Concurrently one must look at the delivery system 

when testing a new product. The delivery system 

needs to look at the innovation of the material 

• It helps to look beyond first costs to LCC (costs of 
107 

discussion session sequence 

‘flip chart’ record NIST notes 

delivery system as product is 

developed. 

owning and operating). They do look for a combination 

of installation costs and materials costs. They try to 

reduce the cost of owning and operating. 

risk 5.10 Prescriptive standards represent 

“the way things have been done”—

new product must test against 

existing product and evaluate 

existing product for comparison. 

Some code elements that are prescriptive are based 

on tradition and have not been tested. To introduce a 

new product that satisfies the same purpose, it is 

necessary to not only test the new product, but to test 

the existing method as well, for a comparison. This is 

very costly. 

risk 5.102 (see notes) We use it. 

risk 5.131 

(see notes) 

“Controlled assessment” is already done, through test 

marketing (or beta testing, for some industries). These 

assessments are done now, but not to code, because 

the code is just a minimum standard to market trial. 

My company sets up early trials so that the odds of a 

successful market trial is close to 50/50. A better 

analogy may be the auto industry as an assembler of a 

system. Quality is outsourced to first-tier suppliers. 

risk 5.154 

(see notes) 

This is true. The issue of time is huge. There must be 

quality assurance, but this adds time to the process. It 

takes 17 years to get a patent, and then the company 

owns the technology only for a few years. Can’t put 

more time between patenting and marketing of a 

product. Testing must be streamlined to minimize this 

time. 

risk 5.17 

Performance should/will pull product 

to higher production volume, 

reducing cost. Many of our 

innovations look closely at a minor 

portion of costs (e.g. flashing for 

windows). 

Yes, most of our products are like this. Take flashing 

as an example. We produce a better product that is 

highest performing. The idea is that the customer gets 

what he or she pays for. So the product is more 

expensive on a first cost basis. The company 

conducts market research to value the products under 

development. As more users come on, the cost will 

flatten and there will be labor savings in general as 

time goes on. 

risk 5.172 

(see notes) 

An additional factor is that flashing does not represent 

a high percentage of the price of an entire window 

package. 

risk 5.181 

(see notes) 

My company tests new products for robustness to 

installation by brainstorming about possible installation 

mistakes, such as picking the six worst ways to mess 

something up and try to work with it. Not all companies 

will do this. 

risk 5.212 

(see notes) 

To go back to the auto analogy, one factor there is 

ease of recall. In the building industry, there is not an 

easy recall system. If a builder or manufacturer sent 

out a notice, it would probably be faced with lawsuits. 

This makes the issue of trying to implement new 

innovations more difficult. 

reg 7.27 Product must be equivalent to 

alternative materials. 

In the “alternative methods” clause, durability is 

included. 
108 

• Segmentation: MF/SF, new/existing, low-income/high-income discussio n session sequence 

‘flip chart’ record NIST notes 

cost 8.221 

(see notes) 

The community where I live is on the edge of the urban 

core, about 5 min to downtown. It is an area where 

there are many first-time homebuyers. 

cost 8.241 (see notes) The reason I hear people want to do this is for new 

schools. The schools in my area are not good. 

• Value: cost, price, benefit discussion session sequence 

‘flip chart’ record NIST notes 

push 2.22 Goal is to find the hook for the 

consumer and innovate to the hook 

The hook in this case is the feeling of isolation, the 

need for community. 

soc 6.17 Each consumer (including speaker) 

uses own set of values and beliefs 

in personal decision-making. 

Values differ from individual to individual, based on 

their own life experiences. Heterogeneity makes 

valuing these social costs and benefits difficult, even 

impossible. 

Building Code Regulators 

• Attribute: affordability, durability, safety, etc. (flexibility, substitutability, 

customizability) discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.20 Community interests must be 

considered; long-term interests 

matter to lenders. 

There is also a community interest in durability and 

what causes widespread adoption of innovations. 

Homes that do not perform become vacant. 

• Barrier/Incentive: (to market acceptance) discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.221 

(see notes) 

The long term begins on day 1. Therefore, even if they 

ignore resale value, can still make the point about 

buyer and owner self interest. 
109 

discussion session sequence 

‘flip chart’ record NIST notes 

reg 7.07 New York State, prior to most 

recent re-write, was opposite of Las 

Vegas—said ‘no’ too often. 

Performance-based requirements 

can encourage innovation through 

offer of options (compliance options 

in the case of New York State). 

New York is an example. The code was too 

prescriptive, and did not provide enough flexibility, and 

led to higher costs to developers trying to get around 

the regulations. Now, the provisions of the code 

provide compliance options and are more successful. 

Regulations cannot be created that cover everything. 

Therefore, need a combination of prescriptive and 

performance-based codes. 

reg 7.35 

Local officials need assurance—NY 

can issue binding interpretations, 

although not often done: it is a 

useful tool. 

Local building officials need some certainty, for 

someone else to be accountable, that individual 

interpretation will not provide. They don’t want the 

decision to come back and bite them. One solution is 

for the government to issue a binding interpretation to 

take the interpretation out of the building officials’ 

hands. 

• Delivery system: (for housing and housing products) 

No comments. 

• Market: supply-chain, builder, homebuyer, investor 

No comments. 

• Metric: 1st, annual, life-cycle, time-horizon, units-of-measurement, uncertainty, 

market signal, rating scale discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.16 Folks are working on this/these 

ideas now. 

The Leadership in Energy and Environmental Design 

(LEED) group already doing this, i.e., evaluating 

products based on LCC, not first cost. 

comp 3.17 State/regulator is interested in both 

1st costs and LCC 

The state/regulator is interested in both first costs and 

LCC. 

• Perspective: interest, standing, constituents discussion session sequence 

‘flip chart’ record NIST notes 

comp 3.13 Building regulators are accountable 

to political jurisdiction. 

The key is accountability. If a restriction is loosened 

and something happens, then the regulators will be 
110 

discussion session sequence 

‘flip chart’ record NIST notes 

asked why the weaker standard was approved. 

comp 3.16 

Complicated role, but state owns a 

lot of property (and has a stake at 

least to that extent) 

The state of Maryland may be different in that. In 

addition to its role as code regulator, the state of 

Maryland owns some Maryland homes. The dual role 

as a regulator and owner allows it to achieve some 

objectives. 

comp 3.30 Education and professionalism of 

inspectors is important 

This is a timely issue because it will bet worse before it 

gets better. Inspectors need to be better-trained and 

higher quality. Labor also needs better training. 

cert 4.28 There is a historic 

model/precedence for government 

role in property rights 

There is already precedent for government regulation 

of home maintenance: historical homes. 

risk 5.231 (see notes) Is there a way to have groups look more objectively at 

innovations? 

soc 6.02 Complete re-write of state building 

codes has been done—touches on 

issues of how to value innovation in 

housing. 

• Agree that regulators are not a 

direct stakeholder, in terms of 

costs and benefits, but key 

player/actors. 

• State looked to balance costs 

and benefits that ‘mandated’ or 

‘incentivized’—must be done in 

cooperation with industry and 

society. The code was last 

revamped in 1984 and industry 

had grown beyond it; it 

become an impediment to 

building with the state. 

Effectiveness of ‘incentive’ v. 

‘regulation/mandate’: government 

must determine threshold based on 

true and perceived risk or lose 

public trust. 

Public will reject increased cost until 

they recognize benefit, then they 

will embrace action 

Public does not want to pay more 

for a ‘mandated’ action. 

• How does society value innovation? 

• New York State recently updated/changed 

building codes 

• Government is not necessarily a stakeholder: role 

is to strike a balance and express this through 

building codes. 

• 1984 – New York Code Council turned its back 

for almost 16 years on the public’s needs by not 

considering new technologies. The council 

became obsolete because of not keeping up with 

trends. Government and society must work 

together. 

• Incentives vs. regulations: if government 

regulates without input, they lose public trust. 

• An incentive-based environment would give the 

public time to place a value on technology. 

• Mandated regulations are rejected by the public 

because they are likely to increase costs across 

the board. 

• Product: development, test/evaluation, distribution, sale discussion session sequence 

‘flip chart’ record NIST notes 

risk 5.211 (see notes) Have groups look more objectively at innovations. 
111 

• Segmentation: MF/SF, new/existing, low-income/high-income discussion session sequence 

‘flip chart’ record NIST notes 

cert 4.22 

From regulator perspective, recent 

looks at contributing factors to fire 

found vacancy a strong indicator 

and greater frequency of vacancy in 

poor areas 

From the perspective of regulators, they looked at fire 

hazards when setting codes. There are factors aside 

from the structure and maintenance that affect this 

hazard. For example, the vacant building factor and 

low-income factor contribute to both the probability of a 

fire and the probability that a fire will result in a fatality. 

These factors came into play when it came time to set 

the codes. 

cert 4.24 Commercial use next to vacancy 

unable to get insurance; two 

buildings away, double the cost. 

For buildings next door to vacant buildings, it is 

impossible to get fire insurance. 

cert 4.242 (see notes) This was for commercial buildings. 

• Value: cost, price, benefit discussion session sequence 

‘flip chart’ record NIST notes 

cert 4.39 Costs must be considered. There is little R&D investment in the housing industry. 

Model Codes Developers 

• Attribute: affordability, durability, safety, etc. (flexibility, substitutability, 

customizability) discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.25 

Which effects/parameters should be 

emphasized? 

Which characteristics of the house purchase are most 

important in a homeowner's or homebuyer's judgment 

that the home is affordable? This may reflect a matter 

of value received for money spent, transparency of the 

cost as part of total cost, or the individual's personal 

involvement in the decision to accept this 

characteristic. Which parties will benefit or be affected 

affects whether the innovation will be available to 

others. 

ben 1.291 

(see notes) 

The buyers define what is affordable. Fannie and 

Freddie are secondary players. Buyer perceptions 

define affordability. The question is, what drives those 

perceptions? 

ben 1.301 (see notes) A house is affordable from the homeowner’s 
112 

discussion session sequence 

‘flip chart’ record NIST notes 

perspective. 

push 2.09 Are we just left with answering the 

question of whether production 

process allows substitution among 

components? 

We should focus on the third question, that of 

tradeoffs. 

push 2.18 

Yes, such as impacts of distributed 

generation, etc. Regardless of push 

or pull, what are the effective hooks 

for the product/innovation? Should 

look at a menu of innovation. 

Have to identify the hooks to the consumer and 

builder, and identify innovations. Then link the hooks 

to the innovations. Some hooks have been power 

reliability (loss of power is a big concern), indoor air 

quality (IAQ) and comfort, zero or low operating costs 

(such as low-maintenance decking), higher security, 

etc. 

push 2.29 

(see notes) 

We need to survey the people to see what they want. 

Packaging matters. An example is marketing light 

beer as “less filling” rather than “less fattening.” They 

marketed not to overweight people, who would 

respond to the second, but to people who drank a lot, 

who respond to the first. 

cert 4.101 

(see notes) 

They may be in the first or the third, and may make 

choices without thinking about maintenance and the 

consequences of those choices. 

cert 4.11 What about analogy to 

automobiles—a defined 

maintenance regime? 

Why not same attributes for 

maintaining homes and system 

performance? 

In the case of autos, maintenance is key to 

performance, and people do it because it is easy to 

say yes to it, with remainders and streamlined 

procedures. 

cert 4.16 If you ignore maintenance, you are 

playing probabilities. People are playing the odds. 

cert 4.29 Need more realistic estimate of 

affordability 

What is needed is a notion of how affordable houses 

are now and connect all the components of 

affordability back to the house. 

cert 4.332 

(see notes) 

What if the code changes being demanded were more 

idiot proof? For example, in the case of the Rhode 

Island nightclub fire, there was lack of adherence to 

the code. If sprinklers, a more foolproof device, had 

been in place, it would have made a big difference. 

risk 5.25 

Other industries focus on QC—

McDonalds. 

McDonalds is an example of an organization that has 

managed to achieve quality control and labor 

standardization across many countries, cultures, and 

languages. 

soc 6.03 Different take on session, based 

primarily on an economic 

discussion—maximizing wealth (of 

the community) through 

regulation/incentives that address 

factors which are not obvious and 

visible—“internalization of 

externalities”. 

The presence of externalities leads to the need to 

create a pricing system more in keeping with social 

costs (monetizing social costs) so that the externalities 

are internalized. Under an ideal situation, society 

makes choices, and through these choices, the best 

pricing will occur for society as a whole. For example, 

the price of solid waste does not include the cost to 

society of its disposal, so a person making a purchase 

choice does not have to consider the cost of disposal 
113 

discussion session sequence 

‘flip chart’ record NIST notes 

in his decision. An alternative to incentives is 

regulation. The downside of regulation is that it is a 

static system, and will not create incentives to innovate 

around the (negative) externalities. You’re prohibiting 

or directing actions. 

reg 7.01 

Most regulation is intended to 

advance not affordability, but some 

other factor, primarily safety. Many 

regulators want to trust what they 

know works—prescriptive 

standards—feeling that 

performance approaches may 

undercut effectiveness of standards 

and may be more difficult to 

evaluate. Innovation may 

exacerbate performance-based 

evaluation concerns. In addition, 

lack of a common language is a 

problem—economists and policy 

makers want express all concerns 

in dollars. 

Key point is that we don’t need less, 

we need better regulation—the 

advocated approach favors 

modeling, yielding “smart regulation 

audited with civility” 

• Prescriptive requirements are antagonistic 

towards new innovations. 

• 2 ways of employing materials: To trust what you 

know works is prescriptive and to prove it works is 

performance based. 

o performance approach: test new 

technologies; there is no long-term field 

experience. 

o prescriptive approach; trust what you 

know works 

• Performance approach is difficult: does not 

always consider reliability. If you open up 

requirements, you may introduce unreliability. 

• If you only allow performance equivalence for 

components, not for a whole design, you limit how 

innovative a product you'll consider, but you also 

limit how far from common experience and 

comfort-zone you have to go. 

• Lack of a common language -- not everyone is 

comfortable expressing everything in money 

terms -- is a barrier to acceptance of performance 

approach. 

• Economics measures costs. We need different 

regulation. Flexibility is where we want to go. 

• We want flexibility in achieving social objectives 

(the enforcers' role) in ways that are more 

affordable or better in other ways. That means 

different regulations but is not a reason to make 

all decisions purely economic decisions. 

reg 7.02 Factors must be identified and 

explored. Should such a system be 

a basis for regulation? What is 

needed is a baseline level to 

exceed. For life-safety issues, 

codes and standards typically lag 

technology development. If nonprescriptive, there is no information 

on which to base 

approval/acceptance. 

A Washington Post column9 on 

regulation cites 3 needs: 

• We can encourage innovation, but the manner in 

which this will happen must be carefully 

considered. It leads to the regulatory system 

making decisions. Whoever is using the 

innovation makes the decision. 

• Establish the minimums at the state level: this 

baseline will establish a framework for 

considerations of new materials. 

• Codes/standards tend to lag technological 

developments. 

• In the absence of specific technology references 

in the code, it is more difficult to implement the 

 

9

 Hahn, Robert and Scott Wallsten, “Whose Life is Worth More? (And Why Is It Horrible to Ask?),” 

Washington Post, June 1, 2003, pp B3. 
114 

discussion session sequence 

‘flip chart’ record NIST notes 

• Information based on good 

research 

• Ability to defend analysis tools 

• Implementation policies that 

encourage smart life-saving 

analyses 

technology. 

reg 7.20 There are, in fact, mathematical 

definitions for safety in the codes. 

Back to the absence of a definition of affordability: 

There is no definition of affordability in the codes that 

address it. This needs to be a mathematical formula. 

• Barrier/Incentive: (to market acceptance) discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.22 Buyers are not getting information 

related to their own interests (see record) 

ben 1.38 

Suggest “dynamic constrained 

optimization” 

We need actions to reduce 

constraints and/or free-up 

constraints 

We need to set the problem up as a dynamic 

constrained optimization. What now happens is that 

the first cost is either the objective to be minimized, or 

it is a constraint that is so restrictive as to make other 

choices moot. Need something to reduce the 

constraining effect of first cost, so that life-cycle costs 

are the true objectives. 

comp 3.31 

“never enough time to do it right; 

always enough time to do it over” 

The thinking is that “There is no time to do it right, but 

always time to do it over.” Code officials will make 

mistakes, but we are better off with them to provide 

the check than we would be without them. 

The manner in which public safety is ensured by 

having some sort of check in housing standards 

(through codes) is important, better than having 

nothing. 

cert 4.141 (see notes) Or draw from the auto analogy, where a warranty 

requires adherence to a maintenance schedule. 

risk 5.221 (see notes) The earlier idea of an engineered, integrated solution 

would get around this problem. 

soc 6.12 

We need to address issues in terms 

of economic and government 

regulation theory 

Often the disposal fee is a flat fee and does not 

depend on the volume of trash generated. This is a 

justification for regulations. Regulations are used to 

adjust and compensate for the fact that “natural 

costing” does not automatically account for all costs. 

reg 7.04 

Codes must be a mix of prescriptive 

and performance-based 

requirements to avoid ‘first-time’ 

pitfalls (redundancy/alternatives?) 

Prescriptive codes require regulators to be very 

knowledgeable and sophisticated enough to adapt to 

changing technology. With PBC (performance-based 

codes) , on the other hand, there is no stable ground. 

Therefore, we need some middle ground. Australia 

and New Zealand are examples. 
115 

discussion session sequence 

‘flip chart’ record NIST notes 

reg 7.16 We (ICC) do code official 

certification training. 

Some states have certification and training for code 

officials. But access and transportation are two 

issues. 

reg 7.31 Higher level issue is involved 

here—what should regulators do 

differently than they do now? 

Regulators are there to provide a 

function—that function must be 

acceptable to those being regulated 

in order for the system to work 

effectively. 

Can the regulatory system be used to encourage 

innovation? What can be done differently? Regulators 

have a specific function. If manufacturers do not think 

the goals are legitimate and do not respect the 

regulators’ intellectual capability, then they will not get 

far in improving the system. 

reg 7.312 (see notes) Also, some builders resist innovation. Each actor has 

reasons to resist innovation. 

cost 8.031 

(see notes) 

The builder has trouble developing/justifying the use of 

innovative resources because they will benefit all of 

society, but they may not see all of their initial 

investment coming back. 

cost 8.15 

Why did 40s innovation occur? It 

did not threaten existing 

stockowners; more optimistic about 

buyer/customer reaction to change. 

After World War II, there was a huge growth of 

affordable housing. Why was there no objection then? 

The reasons are: they were built in other areas, there 

was great need, and they were not seen as 30 % 

cheaper because of the balance between cost and 

attribute was not challenged. Why could this not 

happen again? 

cost 8.171 (see notes) There is some precedent in how large-scale 

innovations in product and delivery were adopted. 

cost 8.175 

(see notes) 

The closer we move to a situation in which the kids 

can’t afford a home, the closer you move to the time 

when this situation becomes intolerable. 

cost 8.26 Intent is to make rehab much more 

frequent (spurring innovation) and 

make delivery easier. 

The concern is how it would happen. It was just an 

unconventional idea. An important concern is to make 

renovations easily available to the housing public. 

cost 8.31 People want things for reasons that 

are in inherent conflict. 

The vote may have been motivated by different things. 

They did not necessarily want less housing. 

• Delivery system: (for housing and housing products) discussion session sequence 

‘flip chart’ record NIST notes 

push 2.12 What about improved design, 

equivalent performance, and 

innovation? Is delivery system 

capable of flexibility? 

Homebuyers want home designs to be innovative and 

homebuilders to include innovative products without 

increasing the price. How do we get these innovative 

products out there? 

risk 5.15 Design is an issue that lessens the 

appeal of manufactured housing. 

The problem with manufactured housing is that the 

designs are unattractive. 

risk 5.152 (see notes) With a traditional home, presumably affordability is not 

the primary concern the way it is with manufactured 
116 

discussion session sequence 

‘flip chart’ record NIST notes 

housing. 

cost 8.08 

Vertical integration, engineered 

systems, modular integration are 

strongest approaches; trades and 

agencies should get together and 

decide on a course of action. 

Based on the reading of the question, need to move 

toward vertical integration, engineered solutions as a 

participant earlier suggested. NIST and HUD need to 

define some concepts to bring new methods of 

delivery, such as vertical integration and 

modularization. The builder has trouble 

developing/justifying the use of innovative resources 

because they will benefit all of society, but they may 

not see all of their initial investment coming back. 

• Market: supply-chain, builder, homebuyer, investor discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.09 Want to shift discussion from macro 

to micro concerns: 

• Anecdote of re-roofing, 

question is not who benefits 

but who receives full-effect? 

• Homeowner does, but is given 

no options/choices; upstream 

decision makers decide. 

The question should not be who benefits from housing 

innovation, but who receives its full effects. But the 

choice of using or not using the innovation is not given 

at time of home purchase. Choices are made for the 

buyer “upstream,” by the producers, not by the party 

(the buyer) that receives the full effects. Homeowners 

only choose the final packaging. But the producers 

make the initial decisions about the use of advanced 

technology and materials (such as for roofing). 

ben 1.12 

We may be forced to work upstream 

of homeowner 

We do not want to offer unlimited choices to 

homebuyers. But there is a need to work upstream of 

homeowner, need to understand what part of the costs 

and benefits that these groups see. 

ben 1.42 

Diffusion of innovation—later 

adopters are less risk tolerant 

Certain types of buyers prefer innovation. These early 

adopters accept the risks and all the other aspects of 

being first. But this is pushing to a risk averse, more 

conservative agenda. Innovation may not be targeted 

to new construction, but for rehabilitation of older 

homes. 

push 2.042 (see notes) Must help the homeowners appreciate the benefits. 

• Metric: 1st, annual, life-cycle, time-horizon, units-of-measurement, uncertainty, 

market signal, rating scale Discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.15 Go beyond durability. Consider If there were a validated index to let the buyer know 
117 

Discussion session sequence 

‘flip chart’ record NIST notes 

series of scales/indexes with 

differing parameters. 

the durability and this were seen in the price, then if 

buyers make their purchase decisions based on this 

information, then would durability become more 

important in the marketplace? 

ben 1.17 Resignation to “the system is the 

system” will not work The index would be very complex. 

ben 1.32 

Uncertainty is the issue with 

performance measures 

• Want to align ‘who decides’ 

with ‘who decides what the 

benefits will be’ 

• Various stakeholders/decisionmakers come in a different 

points with different interests 

Regarding the earlier point about homeowner 

responsibility, as the ceiling is lowered, the floor is 

raised. It is important to align the benefits and 

consequences of choices with those that make the 

choices. In my case, labor poorly installed my 

shingles, but I, the homeowner, had to bear the 

consequences of that poor installation. There is no 

way to track certain points on the development chain, 

such as workmanship, that have a great effect on 

value. There are some checks on this: unions, liability 

concerns. The status quo is a sequential decisionmaking process. When a buyer comes into the 

process, he sees some but not all of the 

consequences of the previous decisions. There is no 

sword that cuts through the Gordian knots. Must 

leverage each decision node in the process. Some 

innovations lead to high expectations. Who 

determines the benefit? The people receiving the 

benefits (and costs) SHOULD be the ones making the 

choices (but aren't always). 

push 2.17 Should we be looking at ‘grouped 

benefits’? 

Another consideration is that with sprinklers, it was 

seen that housing density could be allowed to 

increase. 

comp 3.20 

Disagree; energy issue was driven 

by economics and ‘easy’ LCC 

analysis. LCC is more difficult as 

you move to life-safety and other 

issues 

I disagree. One counterexample is in energy codes 

during the 1970s, which looked at payback periods 

and assumptions about utility price escalation rates. 

With life safety, however, an article in this Sunday’s 

Washington Post described that the value of life 

depended on the age of the individual. Aside from 

this, economics are not in pure safety issues, that is 

true. 

comp 3.24 

SF home sprinklers cost/benefit is a 

contemporary example: insurance 

companies have not 

recognized/acted on home 

sprinklers, except in gross way that 

smoke alarms are 

recognized/discounted. 

Another example is in fire safety, with sprinklers and 

sprays. There were LCC comparisons of these 

sprinkler requirements. One issue is that insurance 

companies do not offer a discount in premiums for 

home sprinklers. They only offer token discounts, 

such as for deadbolts and smoke detectors. One 

exception of an incentive for sprinklers is for 

community-wide sprinklers that are concentrated in a 

locality. This incentive is due to the fact that this 

group of houses having sprinklers makes building a 

fire station to service that locality unnecessary. The 

same number of houses with sprinklers scattered over 

a wider geographic area would not have the same 

effect. So LCC and first costs are thought about, but 
118 

Discussion session sequence 

‘flip chart’ record NIST notes 

not explicitly. 

comp 3.252 

(see notes) 

That is only two of the four boxes. What about the big 

cost/big benefit and low cost/low benefit items? 

Accepting low cost/high benefit and rejecting high 

cost/low benefit changes are no-brainers. 

comp 3.256 (see notes) The NFPA has data on fatalities and injuries due to 

fire with and without sprinklers. 

comp 3.35 Home inspections are an innovation 

in themselves 

Another innovation is the use of home inspectors. 

They are an access point for the borrower. 

comp 3.352 

(see notes) 

As with innovations, the practice has to disseminate 

first. It takes hold where it is most affordable rather 

than where it is most needed. 

cert 4.06 

Fire does not fit matrix well—most 

start small and not from externality 

but from human action 

Most stakeholders ignore low 

magnitude events—handling 

quantitative info qualitatively 

How are hazards addressed? Some 

keep building in flood plains despite 

regular reminders 

Matrix works well for natural 

hazards (eq, storms, etc.) but not 

for high frequency events 

(“impossible” v. “intolerable”) 

Fire does not fit well into the matrix in the handout, 

which is good for seismic risks. The matrix assumes 

that the way to affect performance is by moderating 

consequences, with no control over the occurrence of 

the event. In the case of fire, however, the event is 

usually caused by humans. Action is not only in 

damage control, but also in prevention. Sometimes, it 

is possible that there is no flaw in a design, but there 

is a flaw in the process of executing or building the 

design. Basically, there are two categories of 

hazards: impossible, and intolerable. The day after 

an event, it switches categories. There are also 

assumptions about what is allowable and who would 

prevent it. For example, there are people who do not 

think about fire hazards. And people built in flood 

plains until flood insurance was mandated. When life 

events do not provide a good basis for subjective 

probability assessment, people do not know how to 

perceive risk. Also, if events occur that run counter to 

their expectations, the response is distrust of the 

source of the information about risk rather than 

acknowledgement that the information was 

misunderstood. 

cert 4.071 

(see notes) 

If there were two floods in 2 years, the homeowner 

would think they had gotten bad information or have 

been lied to. 

cert 4.09 Return to question of uncertainty—

low maintenance v. high 

performance: 

• Attracted to low uncertainty 

because of focus on 

maintenance costs 

• Attracted to even high 

uncertainty because value of 

high performance is important 

• Attracted to focus on first cost 

only 

• Ostriches 

There are two types of approaches to mitigation. The 

first is high performance, but requires more 

maintenance. Whether the maintenance takes place 

is a source of uncertainty that affects the likely 

performance of the measure. The second is 

something that has mediocre performance, but is idiot 

proof. 

There are three groups of individuals: One will choose 

mediocre performance because they want to avoid the 

uncertainty and maintenance, even at a cost of lower 

performance. A second will choose the high 

performance option if the uncertainty is controllable by 
119 

Discussion session sequence 

‘flip chart’ record NIST notes 

their own actions. A third may choose the high 

performance/high uncertainty option because they 

care only about first cost. 

cert 4.13 

Frame cost/benefit against another 

reference (e.g. value of investment) 

It would be helpful to frame the importance of 

maintenance not in abstract terms, such as LCC, but 

in more tangible terms, such as the number of 

mortgage payments. Currently, maintenance is not 

thought of as an investment choice, but as an 

expenditure choice. 

cert 4.171 

(see notes) 

With maintenance, there is a shift in uncertainty from 

one that they cannot control, the realization of an 

event, with one that they can control, maintenance. 

cert 4.322 

(see notes) 

An event would lead to discrete changes in choices, 

building codes, and new building technologies. 

Experiences are flawed metrics and not rational. 

cert 4.371 (see notes) Must ask whether cost of quality improvement is 

justified by the improvement. 

soc 6.15 

Peer pressure, education, and 

branding may be the most effective 

options; example of ‘ruffs’ and ‘riffs’ 

(resource utilization v. resource 

impact, such as embodied energy 

metric) precursor to energy codes. 

Created huge battle between 

electric and gas (in terms of Btus). 

Could not drive technical decision 

because of lack of agreement on 

parameters. Upshot is that players 

cannot plan on staying power of 

analysis. 

Another incentive is branding, labeling, reputation. 

There is an example from many years ago from 

energy: RUF (resource utilization factor) vs. RIF 

(resource impact factor). NIST wrote a way to 

compare the energy performance of different 

alternatives. The energy codes created a gas/electric 

battle. The question arose as to whether should count 

BTU (1 055 joules) at the source. The RUF was 

computed as the reciprocal of plant energy usage. 

The RIF was needed because not all BTUs are the 

same. It needed to be based on “embodied” energy 

as well as all social costs and benefits, such as 

sustainability, health care, etc. This effort fell apart 

and died because it could not drive a technical 

decision, and everything was valued differently. Could 

look at this question by costs. The problem is that the 

price does not reflect social costs. Need to pass the 

burden of determining social costs to Department of 

Energy. These values change and make the designs, 

regulations, etc. obsolete. 

soc 6.202 

(see notes) 

Not all social costs and benefits lend themselves to 

time-to-repair metrics. But for those that do, this index 

would be great. 

reg 7.13 Want to clarify one aspect of 

discussion, the role of Type 1 and 

Type 2 statistical errors in 

evaluating the effectiveness of 

innovation. Need to look at both 

sides of the issues—existence of 

both ‘good’ and ‘bad’ innovation. 

Have to worry about both “Type 1” and “Type 2” 

statistical errors with innovations. What about 

innovations that are accepted but fail? These are the 

types of concerns of code officials that have to be 

addressed to get the changes in. 
120 

• Perspective: interest, standing, constituents discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.33 

Who (are stakeholders) and why: 

• Labor unions--jobs 

• Testing labs--money, jobs, 

uncertainty, liability 

• Investors--money, liability 

• Political jurisdictions--

constituent service 

Regarding innovations, some groups have stakes. 

There are many people who do not want to see certain 

innovations implemented for various reasons, such as 

lower revenue. For labor unions, at stake are jobs, 

compensation, and liability. For the conformity 

assessment community (quality testing and 

performance testing labs), the stakes are payments for 

services and jobs. For investors and venture 

capitalists, the stake is money. All groups are 

incented by money, some also have liability concerns, 

too. In addition to these groups, the stake of realtors 

and appraisers is money. For government, it is setting 

policy and doing right by its citizens. 

ben 1.331 

(see notes) 

Add to the testing labs’ stake uncertainty and liability 

because of difficulty of designing a test to accurately 

predict performance in realistic situations. 

ben 1.332 

(see notes) 

Being first is costly. Labs will charge higher testing 

fees to test a product that is extremely novel and is 

dissimilar to what is already out there. 

ben 1.333 (see notes) If it is willing to do the test at all. 

comp 3.04 

How does each stakeholder decide 

what to consider? (Can we affect 

the process of that decision?) 

How are uncertainties, such as 

hurricane, fire, etc., dealt with? How 

are they monetized? 

Have to treat manufactured (multi-family?) homes 

differently from single-family homes because Federal 

regulations treat them differently. How does each 

stakeholder determine which costs matter for their 

decision? For occupants, it is the mortgage payment 

or monthly rent. This is currently driven by first cost. It 

need not be. In addition, not all maintenance is the 

same. For example, replacing a roof is not the same 

as fire safety or hurricane protection. Some address a 

certain event (leaky roof) while some address 

uncertain events (fire hazard or hurricane). Some 

homeowners think that these uncertain events will not 

happen. Also the risk of fatality or injury does not 

show up in homeowner’s insurance. We need to know 

more about effective approaches in persuading 

homeowners to factor foreseeable hazards and costs 

into their decision-making. There are approaches with 

at least some success with at least some audiences 

(e.g. hurricanes in Miami). 

comp 3.15 

Study says regulator not a 

stakeholder: 

Code enforcer responsible to 

occupant, not owner 

Interested in LCC, but may not 

have any leverage in the process 

We have to define “stakeholder.” If it is defined as a 

group having a financial stake in a project, then 

regulators are not stakeholders. If it is defined as a 

group having a stake in the outcome of a project, then 

regulators are. In that case, must define their stake, 

such as in LCC vs. first cost (as far as their view of 

LCC). But some of the mechanisms to affect LCC are 

not available to regulators. 

A code enforcer is a stakeholder by the formal 
121 

discussion session sequence 

‘flip chart’ record NIST notes 

definition of the term, but it cannot be inferred or 

assumed that a code enforcer feels any obligation to 

find the most acceptable way for a building project to 

go forward. A code enforcer can live with there being 

no building; it is not clear that any of the other 

stakeholders can. 

comp 3.26 Insurers look at data, financial 

consequences; life safety may 

change picture 

Regulators come as close as any 

stakeholder that looks at all 

considerations 

The financial decision may be indifferent, but life 

safety is excluded from that. Analysis with life safety 

is an entirely different issue. The regulator is a 

stakeholder that is closest to looking at all these costs 

and issues in LCC. Therefore, it is not a bad place to 

start. 

cert 4.142 

(see notes) 

Another example is the mandatory annual safety 

inspection for vehicles in Virginia. But autos is not a 

good analogy because it is possible to spend more 

maintaining a car (as a percentage of value) than on a 

house. 

cert 4.34 Codes are an imperfect but 

valuable instrument 

Even if imperfectly enforced, codes are better than 

nothing. 

risk 5.28 Worldwide problem. This is a global phenomenon. Almost all the fire labs 

in the world are now privatized. 

• Product: development, test/evaluation, distribution, sale discussion session sequence 

‘flip chart’ record NIST notes 

risk 5.07 Manufacturers were looking only for 

market-pull demand for any aspect 

of product characteristics 

There is no point in showing characteristics of products 

that no one cares about. 

risk 5.11 Armstrong testing, “no surprises”, at 

one end; other extreme, “kitchen 

only sprinkler” 

emphasizing/distorting kitchen risk. 

How should evaluation be done—

staged, as in drug development 

analogy? 

Testing, more testing, then wait for 

time before it gets out. 

Find a way to keep good products 

alive long enough to check 

performance. 

Beta testing/trial market: 

1. Assessment by manufacturer 

2. Controlled assessment by a 

limited population 

3. General distribution 

Some of this discussion belongs in discussion session 

7 later. At the fire testing college at Armstrong, the 

mantra is “no surprises.” How can the uncertainty 

about new products be reduced to better predict 

performance, so the good innovations will get through, 

but the bad ones will not? How do you get a system 

where the good innovations get out while the bad are 

stopped quickly? There are three stages of 

assessments: 

1. Manufacturer’s assessment 

2. Controlled assessment using a limited population 

(such as beta testing with electronics) 

3. Widespread, general distribution 

This staged process is used in the pharmaceutical 

approval process. It requires a great deal of time and 

money, but with limited exposure to people. Some 

disapprove of this process. 

risk 5.112 (see notes) I wanted to refer to drugs as an example of a staged 
122 

discussion session sequence 

‘flip chart’ record NIST notes 

approval process. 

risk 5.13 Interactions (among stakeholders) 

are a key aspect in changing 

product development 

To carry the drug analogy to this, the issue is drug 

interactions. Is the product sensitive to assembly 

issues? 

risk 5.171 

(see notes) 

This flashing, if I am thinking about the one you are 

talking about, involves some labor savings in 

installation and involves more foolproof installation as 

well. 

risk 5.21 For new products: 

• Manufacturer will 

underestimate risk 

• Consumer will overestimate 

risk 

• Both will try to shift risk to 

someone else 

• Ultimate consumer probably 

least able to afford risk 

Is there a way to get better 

information to all? 

There are three problems: 

1. Manufacturers champion new products and 

underestimate the risk. 

2. Homeowners overestimate the risk of new products. 

3. All hope risk will fall on someone else, to displace 

the risk to another party. 

To address the question, must address all three 

problems, not just any one. The sufferer of problem #3 

will probably end up being the homeowner. Is there a 

better way to address risk? 

risk 5.214 (see notes) Also, component manufacturers are shallow pockets. 

They can’t afford to pay for recalls. 

reg 7.36 States should be careful of taking 

on product certification functions 

(see Florida example); it could 

increase complexity, uncertainty, 

and cost. 

Need to be careful with product approval and 

conformity. There is a difference between uniformity in 

interpretation (such as in Virginia) and conformity in 

assessment (Florida). The latter leads to creation of a 

new bureaucracy and another check and balance. 

There are already enough checks and balances. 

cost 8.123 (see notes) Acorns, to grow into trees. 

• Segmentation: MF/SF, new/existing, low-income/high-income discussion session sequence 

‘flip chart’ record NIST notes 

cert 4.23 Untreated wood shingles create 

increased risk for surrounding 

dwellings; how should it be dealt 

with? By insurers, by codes? 

There is a special case with fire. If a homeowner uses 

untreated wood shingles, then he increases the risk of 

a fire to his neighbors. 

cert 4.27 Getting back to vacancy 

implications, abandonment of 

property leads to leveraged risk for 

others 

One person’s choice to not protect can, if an event 

occurs, affect the neighborhood. Vacant houses, for 

instance as a result of a fire, cause rot in the 

neighborhood. One vacant house soon becomes two 

vacant houses, etc. 

soc 6.08 This is not the topic for this session; 

we should discuss, for example, 

‘redevelopment’ v. ‘new 

development’ 

We need to shift back. Infrastructure and social 

services are examples of social costs that are truly 

borne by the beneficiaries. 
123 

discussion session sequence 

‘flip chart’ record NIST notes 

soc 8.20 Imagine easy ways to change how 

you use your house. Need a 

delivery system to routinize rehab 

and reuse. Introduce innovation 

through rehab rather than new 

construction. 

Back to the earlier comment about rehabilitation as an 

alternative delivery system: Could you make renovated 

houses a place to implement innovations? Now, there 

is a rash of people in my neighborhood adding rooms 

or second stories. If this were easier to do, what would 

happen? How about rehabilitation and expanded 

capacity as an innovative system of delivery? 

• Value: cost, price, benefit discussion session sequence 

‘flip chart’ record NIST notes 

cert 4.40 No guarantee that innovation either 

lowers costs or increases quality 

Innovation may reduce cost, but may also reduce 

quality. All we know about an innovation is that it is 

new (there is uncertainty). 

Buildings/Economics Researchers 

• Attribute: affordability, durability, safety, etc. (flexibility, substitutability, 

customizability) discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.202 (see notes) Real estate professionals and appraisers must be 

included because they affect the price of the house. 

ben 1.29 

‘Affordability’ is whatever 

FNMA/Freddie Mac say it is (PITI) 

The extent and quality of maintenance is already 

captured in the resale value of the home. The 

homeowner is a liable party. The starting point of the 

affordability question is that it is based on whether 

Fannie or Freddie says it is affordable, i.e., can you 

qualify for the mortgage? 

push 2.15 

Disagree that structural system 

cannot be changed 

It depends on the product whether it gets adopted 

even if it is not observable to the buyer. For example, 

engineered lumber vs. conventional lumber, or OSB 

vs. plywood. Some of the decisions are not made by 

the homebuyer. 

push 2.211 (see notes) Developments such as Kentlands are called the “new 

urbanization.” 

push 2.28 (see notes) The problem is what is the incentive of lenders and 

insurance companies to do this? If the benefits go to 

the community, then the community should provide 

the incentives. 
124 

discussion session sequence 

‘flip chart’ record NIST notes 

comp 3.05 

Questions will be dealt with in later 

sessions—current research is 

looking at parameters that are/will 

be used. 

Issue with natural hazards shows up in insurance 

payments, not so much in mortgage payments. These 

issues will be addressed more fully in later sessions: 

tomorrow’s session on valuing social costs and 

benefits and this afternoon’s session on low probability 

events. 

cost 8.30 

Flexibility related to addressing 

sprawl may be effective. 

This flexibility is found in commercial office space. 

NIST North is leased, is it not? Commercial space 

must be flexible because the tenants change and so 

do their needs. To go back to the zoning and local 

regulation issues, my organization sees sprawl as a 

pejorative. The example of Montgomery County’s 

budget is unusual, and it will tighten. Everywhere, 

local budgets are tight, and this has to be dealt with. If 

local governments do not get involved, urban sprawl 

will eventually force them to do so. 

• Barrier/Incentive: (to market acceptance) discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.24 Contrary evidence—energy 

mortgage has not taken off 

The basic question of who benefits 

needs to be modified 

But energy-efficient mortgages have not taken off and 

are not widely accepted, even 15 years after their 

introduction. 

ben 1.241 (see notes) The lesson to be drawn is to look at why. 

ben 1.242 

(see notes) 

The reasons are too complex to be addressed here. 

The questions to be asked must be, what will the 

benefits of the innovation be and who will benefit? If 

an innovation becomes widespread practice, what are 

its impacts? You cannot answer the question on 

affordability unless you know in whose mind. 

Perception changes for the 1st time homebuyer 

ben 1.382 

(see notes) 

The contrast between the for-profit and non-profit 

builders is too stark. For speculative builders, the time 

horizon is shorter. But they care about what they build 

to the extent that they want to avoid callbacks and 

liability. Their time horizon may be about 5 years 

(maybe ten in California). The question is, how can 

the time horizon of for-profit builders be extended 

beyond these 5 years to 10 years? Right now, 

ambulance chasers are having this effect. They are 

forcing builders to confront durability in a way not done 

a few years ago, and to choose “tried and true” 

materials. The effect is for the builders to not choose 

the cheapest products, but also not to choose the 

most innovative products, either. 
125 

discussion session sequence 

‘flip chart’ record NIST notes 

push 2.10 

Consumer is responding in certain 

areas to energy star home as a 

marketing tool—first instance of 

label having an impact in housing 

markets 

Builders in some cities have had success with the 

energy-star labeled home, especially those with 

younger populations in the far west (granola crowd). 

This is the first successful attempt where a 

performance label is having an effect, even if it is only 

to a certain segment of the population. Why was it 

successful? 

push 2.104 (see notes) No, that tradeoff cannot be done. 

push 2.161 (see notes) Or the innovation could be, as was earlier mentioned, 

in engineered systems. 

push 2.162 

(see notes) 

Improvements in business systems can lead to 

improvements in cycle time. But even with big outfits, 

there are many inefficiencies and no one seems to 

care. 

comp 3.07 

Home insurance industry is not 

responsive to efforts to get them to 

consider incentives for durability 

Great variation from state to state, 

no rational relation to housing 

quality 

The most negligent group over the last three to four 

years has been the home insurance industry, in 

ignoring LCC. They resist changing rates to reflect 

construction changes. They should recognize and 

price their product based on durability and disaster 

resistance, but they do not. Premiums in Florida are 

twice those in Pennsylvania. But building for safety 

and disaster resistance does not lower the premium in 

Florida. This is especially true now that the insurance 

companies’ stock portfolios have tanked and they are 

more reliant on underwriting income. In response, 

insurance companies have increased premiums. 

Resistance to changing premiums is greatest in high 

premium states. 

comp 3.072 

(see notes) 

No. These companies just want to make profit. They 

will support changes in codes without data, but when it 

comes to talking about reducing premiums, they want 

data. 

comp 3.32 Is there a “durability mortgage”? 

Has been announced, but what is 

it? What is the potential for impact 

on future value of housing 

condition? 

The question is LCC vs. durability. I have heard that 

Fannie is developing a durability mortgage. What is 

it? Is it similar to the energy-efficient mortgage? What 

does it cover? 

risk 5.23 Labor problems have only gotten 

worse over last 40 years. 

The labor problem has only gotten worse and will 

continue to do so. 

soc 6.07 Should we remove regulatory 

intervention? There are too many 

gatekeepers; find other ways to 

protect buyers, such as “builders 

insurance”? 

The change in the regulations is key. There are too 

many gatekeepers. We should try to remove as many 

barriers as possible. If there is a valid program of 

builders’ insurance and consumer product safety, then 

the regulations can be scaled back. 

soc 6.09 

We should be looking at incentives 

(for solar, flood, hazard mitigation, 

etc.) based on social benefits and 

costs. 

There are incentives for social costs and benefits at 

the level of individual homeowners in some areas, 

such as for weather hazards. For example, the 

homeowners would only be eligible for flood insurance 

if they took certain precautions. It is also necessary to 

focus on owner-occupied housing. 
126 

discussion session sequence 

‘flip chart’ record NIST notes 

soc 6.131 

(see notes) 

With the New Jersey Rehabilitation Code, reforms 

turned out to have the same effect as removal. It 

lightened the burden. 

soc 6.133 

(see notes) 

It is possible to internalize externalities in many ways, 

such as tax credits, insurance incentives. Do we want 

to do it all? 

reg 7.05 Do we have any evidence that more 

innovation occurs under one or the 

other scheme of regulation 

(performance versus prescriptive 

codes)? 

Is there any empirical evidence about the amount of 

innovation that has occurred under prescriptive 

regimes vs. PBC? 

reg 7.09 

Industry is so fragmented, no single 

organization is large enough to 

overcome barriers to innovation. 

Why is housing the only industry 

that can not/ will not benefit from 

innovation? 

Until risk-based insurance is 

available, innovation will not be 

approved/adopted. 

We need to link comprehensive 

evaluation to a push for risk-based 

insurance underwriting. 

One issue is the lack of market power of any builders 

in the housing industry. In the long run, stimulating 

development in housing is good, because it will benefit 

society as a whole. But the housing industry is still not 

totally geared in this direction. The home building 

industry is more resistant to innovation than in other 

industries. They perceive themselves in this way. 

They do not buy it (innovation). Why can’t the home 

building industry be more like other industries in this 

way? Why do they not reduce the barriers to 

innovation? The ICC Evaluation Service did not 

perform very well before. Using these evaluation 

services, there needed to be an insurance program for 

innovation to bridge the gap in reliability, uncertainty, 

risk of system failure associated with new products. 

The missing element is an insurance program for 

innovation. In the current situation, local enforcers will 

be held accountable for failure. With insurance, there 

would be a cover for the homebuilder and component 

manufacturer to encourage innovation and adoption. 

reg 7.092 (see notes) You have to combine evaluations systems and 

insurance in order to help increase development. 

reg 7.11 Suggest that government undertake 

research/modeling of insurancebased approach to housing 

innovation; determine appropriate 

government roles (analogous to 

self-amortizing mortgages); 

determine feasibility. 

With the insurance idea, need to do the following. 

First, do research and model what the insurance 

would look like. Second, would the insurance industry 

be willing to offer the product? And lastly, if the 

insurance industry would not offer it, then who would? 

The government? An example is the FHA and selfamortizing insurance. Would need to do feasibility 

studies. 

reg 7.17 Why not a system of binding 

interpretation to promote 

consistency in code enforcement 

(as used in some states with 

statewide codes)? 

(see record) 

reg 7.252 (see notes) Dallas is another. 

reg 7.311 (see notes) Is there research showing resistance of local building 

code officials to innovation? 

cost 8.173 (see notes) Also, at that time, they were building for everyone, the 
127 

discussion session sequence 

‘flip chart’ record NIST notes 

mass market. Now, the builders are building for the 

high end of the market, not mass market. 

cost 8.174 (see notes) Because there is an existing housing stock. 

cost 8.32 (see notes) It’s orphan land. People don’t want a long commute. 

• Delivery system: (for housing and housing products) discussion session sequence 

‘flip chart’ record NIST notes 

risk 5.12 

Problem is materials must be sent 

to “Fred”/3rd party to put in place. 

Systems integration is needed. 

Capital intensive—engineered 

product is the answer. 

We need testing under realistic, standard conditions. It 

is extremely capital intensive to test products until 

people start to buy them. One problem is that there 

are disparate actors in the assembly process. It is not 

just the design of the product. It will fail if there is no 

systems integration. Must also consider Fred the 

manufacturer, assembler, contractor. Products with 

integration challenges are more likely to fail. 

Engineered products will be superior to assembled 

products. It will happen in the housing industry in the 

next 5 years to 10 years. Big companies doing this will 

succeed. 

cost 8.06 

Government has moved away from 

any consideration of ‘command and 

control’ strategies; public benefits of 

improved housing have been 

dismissed; tax breaks and R&D 

have been eliminated. 

Except for the command and control nature of 

Operation Breakthrough, this is a good example. 

Where is the government part in these costs? There 

are many public benefits to society of some of these 

development costs. For example, NIH and 

pharmaceuticals. This is now inadequate. Need tax 

subsidies, research and development, risk coverage 

(coinsurance), education, and marketing. As was 

previously mentioned, 30 years ago, BFRL was a 

major source of basic research. 

cost 8.071 (see notes) This would never happen. Encouraging home 

ownership has been the policy of every administration. 

cost 8.091 

(see notes) 

What about labeling, such as Energy Star? New York 

State has done more on this than any other state, to 

decrease energy consumption. The construction 

industry wants to publicize these risks and expenses 

(i.e., have these risks and expenses borne by the 

public). 

cost 8.093 (see notes) It does not look for public help, either. 

cost 8.10 Substantial public investment is not 

a consideration. (see record) 
128 

• Market: supply-chain, builder, homebuyer, investor discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.03 

Housing market is not like others: 

• Prices/Pricing are local 

• Not a traditional competitive 

market (builder is part of a 

cartel) 

• Benefits may not pass directly 

to home buyer 

• What happens to industry as a 

result of innovation? 

The housing market is not free. It is not fully 

competitive because it depends on land availability and 

zoning. Therefore, if an innovation is introduced that 

should reduce costs over time, the market may not 

respond. Housing prices are set by location decisions 

about square footage, acreage, and local regulations. 

There are constraints on this market. This is not a fully 

competitive market. Building permits convey market 

power (“a piece of the monopoly”). The question is not 

whether the savings get passed on to the homebuyer, 

because most likely they are not. So must look at what 

the long-run impact of the innovation will be on the 

market regardless of whether the savings get passed 

on to the buyer. Pricing is based on the cost of 

alternative homes in the community (comparables), not 

the cost of materials. 

push 2.23 

‘branding’ and ‘bundling’ may 

stimulate demand 

There are two marketing concepts: branding and 

bundling. Energy Star and Master Builder are brands. 

Is there a greater willingness to pay for these brands? 

With bundling of components and innovations, as the 

auto industry does with the luxury package, could this 

be a method to stimulate demand? 

push 2.242 (see notes) One of the consultants here has worked on this with 

the EPA recently. 

• Metric: 1st, annual, life-cycle, time-horizon, units-of-measurement, uncertainty, 

market signal, rating scale discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.18 

May interest consumer in concern 

about the 1st resale period, but not 

the 15th cycle 

Builders are concerned with 

contemporary tastes 

The time an asset is held will determine its value. 

Everyone considers the short run. No one is going to 

focus on LCC currently, with rising real income levels. 

The concern is with the 1st and 2nd resale, but not the 

15th resale. Buyers ask questions such as, “Do I have 

the most current bathroom or kitchen?” Buyers care 

about aesthetics, floor plan, and curb appeal. Who 

cares about durability? 

ben 1.381 

(see notes) 

Life-cycle costs are a function of the study period. 

Need to include first costs. Durability to a homebuilder 

is a shorter time period than a homeowner. There is a 

LCC for each, but the time horizon is just increased or 

decreased. In my experience, trades people and 

technicians, even those with little formal education, 
129 

discussion session sequence 

‘flip chart’ record NIST notes 

are savvy about LCC. They know that you would not 

put the same products into a house that you rent out 

compared to a house that you live in (example about 

heat pump). 

ben 1.391 

(see notes) 

How would durability be converted into underwriting 

criteria? To take an example, energy is quantifiable, 

but in spite of this, it is not included. Durability would 

be even more difficult to quantify. 

comp 3.01 Extending first discussion in terms 

of stakeholders, timeframes, and 

scales 

Emphasize study period for LCC 

(longer horizons introduce 

additional concerns) 

Stakeholder variations occur in 

discount rate, time horizon, and 

relevance of costs 

LCC analysis is flexible, provides 

structure, under a wide range of 

conditions 

• ASTM defines LCC as: total cost of owning, caring 

for (operating), and disposing of a building over a 

study period. 

• Discount rate: How do you value future benefits or 

costs? 

• Which costs are relevant to each stakeholder? 

• What is the appropriate time horizon? 

comp 3.241 (see notes) If LCC is not treated explicitly, then it is not at all, 

because it is a black box. 

comp 3.253 (see notes) This is the purpose of the workshop, to propose a way 

of measuring affordability. 

comp 3.342 (see notes) This is why there are no more FHA inspections. 

comp 3.362 (see notes) What if defaults on mortgages for single-family homes 

occur? Does the value of the asset still not matter? 

cert 4.01 

Texas Tech blind studies of 

recapture of costs for storm 

mitigation—market signal (visible 

innovation) aided market 

acceptance 

Risk perception (Wharton)—folks 

cannot differentiate risks 

Looking at incentives—insurance 

premium reduction; reduced 

community costs recognized thru 

transfer tax credit if dwelling is 

improved 

• Texas Tex Wind Center conducted an empirical 

study of storm blinds based on a cross section of 

6 000 units to look at how additional costs are 

recaptured when the house is sold. Market signal 

because potential buyers could see the possible 

results from upgrading blinds. Potential buyers could 

see the storm blinds and the premium associated with 

it. 

• How do people view risks? According to a risk 

perception study at Wharton: most people can’t 

differentiate between 1/1 000 and 1/ 1 000 000 

probability – How can we help people understand the 

dangers? 

• If homeowners take steps to protect property, tax 

rebate could be a good incentive. There are economic 

incentives for both parties. There is an insurance 

premium associated with a mortgage. Economic 

incentives can be used to lower reductions in 

insurance premiums. If you improve your dwelling, the 

less the community has to do. Can deduct 1⁄2 % when 

you transfer the property. 

cert 4.32 Metrics not there to either estimate 

or justify increased costs 

Need a predictable metric to get the consumer to incur 

the cost. 
130 

discussion session sequence 

‘flip chart’ record NIST notes 

cert 4.37 Analogy to materials research—

better performance at lower cost—

need to get discussion back to 

innovation. 

Is it possible to increase innovation and decrease cost 

at higher quality? Can innovation make the house 

more affordable (not the quality of the house)? Better 

performance, better cost. 

cert 4.373 

(see notes) 

New technology introduction costs must be borne 

initially, but the benefits will eventually be realized. 

High performance concrete is an example. 

risk 5.05 Are consumers becoming more 

sophisticated/sensitive to LCC? 

Yes. 

Do the customers know this? 

soc 6.20 Like elegance of relying on 

mathematical formula, but how do 

you factor in uncertainty of 

manufacturer claims. 

The consumer or the manufacturer? We need data on 

reliability. For example, my “20 year roof” had to be 

replaced after only 4 years. 

• Perspective: interest, standing, constituents discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.01 

Stakeholder groups: 

• Homeowners 

• Homebuilders 

• Product manufacturers 

• Complementary groups 

interested in longevity after 

construction—lenders, 

insurers, community, etc. 

Defining: Who benefits from the technology? 

Major stakeholders: 

1. Homeowners 

2. Home builders: affect costs; are key leverage point 

in passing along costs, and bringing technology 

and benefits to home buyers 

3. Product manufacturers 

4. Housing institutions: lenders, insurers, utilities. 

Affected by longevity of house after construction 

and how house is utilized after construction 

Need to look at life-cycle costs (LCC). 

ben 1.37 Appraisers and realtors are very 

important in private market 

Another problem is that appraisers do not have 

sufficient technical knowledge or do not have 

comparables to value some improvements. 

comp 3.091 (see notes) But regulators would not object if insurance 

companies wanted to lower premiums. 

comp 3.19 

Never seen an economics 

discussion at a codes hearing 

(contrary example cited: stair 

geometry cost implications stopped 

adoption) 

In my experience, economics are not discussed at 

proposed code changes, with one exception. In that 

case, about eight or nine years ago, there was a 

proposal to change stair geometry. This proposed 

change would have changed the footprints of most 

townhomes in the United States. Economic analysis 

was commissioned, and the proposal was eventually 

dropped. But the code world in general does not 

conduct economic assessment of proposed changes 

because the assessments are too expensive. 

cert 4.35 Why will insurers push for code 

changes, but have no interest in 

Why do codes and changes in existing codes not 

target individual housing more directly? 
131 

discussion session sequence 

‘flip chart’ record NIST notes 

QA/QC for homebuilders? Code changes in Florida occurred in part due to a 

push by insurance companies. Why do they not also 

push for enforcement and deal with the quality of the 

house, which matters much more for affordability and 

their risk exposure? 

risk 5.06 NES ‘look beyond code’ push 2 

years ago; manufacturers wanted 

nothing to do with it. 

Other manufacturers may not be interested in testing 

and assessment. 

risk 5.29 

Housing improvement has never 

been an objective of government. 

With agriculture, the public sector funds a great deal of 

basic research, with the motivation and rationale that 

what benefits the farmers will benefit society. Except 

for Operation Breakthrough in 1968-1972, there has 

been a lack of motivation in the case of building 

research parallel to agriculture. 

soc 6.211 (see notes) The paranoia is justified because the fear is that an 

intellectual exercise will lead to the easy “fallback” 

approach: regulation. 

• Product: development, test/evaluation, distribution, sale discussion session sequence 

‘flip chart’ record NIST notes 

risk 5.08 

Lots of visible innovation is by small 

companies with low capitalization 

looking to push innovation into 

market with little testing or success. 

The concern is this, truly innovative producers are very 

small-scale producers, who may not have the 

resources to test and are the worst when it comes to 

assessing products before market introduction. 

Massive industry failures are documented on PATH’s 

website. HUD did a study of EIFS and engineered Ijoists. With EIFS, which was a failure, it was produced 

by small, fly-by-night producers who did not do 

homework on the proper application of the technology. 

With engineered I-joists, which was a success, the 

producers were big companies who had performed 

long, comprehensive analysis of the product and 

process. There is a riskiness to new products that is 

inherent that is not addressed by producers. In the 

ICC Evaluation Service guide to innovations, the idea 

is “getting the technology accepted.” 

risk 5.101 (see notes) How much does this manufacturer use the ICC 

Evaluation Service? 

risk 5.111 

(see notes) 

The drug industry is a poor example. The FDA is a 

notorious bottleneck, and the process drives up the 

cost of drugs. 

risk 5.132 (see notes) With autos, though, the components are highly 

engineered. 

risk 5.16 Are manufacturers willing to take 

risk that consumer will buy a higher 

What are the steps in the introduction of new 

products? Does your company introduce new 
132 

discussion session sequence 

‘flip chart’ record NIST notes 

priced product? products knowing that they initially will have a higher 

cost than the incumbent, but with adoption, the cost 

may fall? 

risk 5.215 (see notes) Need risk insurance or vertical integration. 

cost 8.12 Have not heard ‘pilot project’ as an 

approach (analogy to medical 

industry); allows not total change, 

but immediate test of change. 

What about pilot projects with interface between 

private and public/government entities? Should not be 

all or nothing. Deep-pocketed publicly owned 

companies have to be the first movers of new 

innovations, with some help from government. 

cost 8.121 (see notes) Only peanuts go into these projects. 

cost 8.122 (see notes) Even if small scale, it may be helpful for a specific 

area, such as flood plains in Iowa. 

cost 8.13 ‘Pilot project’ may not work well 

because of conflict with existing 

infrastructure; change may be 

viewed as negative—if the pilot is 

big, it may be blocked by existing 

industry and consumer afraid of 

reduced asset value. 

There must be a limited role for government. There 

are parties who will be losers with these changes. If 

you cut the cost by 30 %, that is fundamentally 

disruptive to the market price for homes. 

cost 8.132 

(see notes) 

The first mover probably would price without cutting by 

30 % and would capture economic rents. It will be 

deep pocket publicly held companies doing this. 

• Segmentation: MF/SF, new/existing, low-income/high-income discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.19 

Homeowners are not a 

homogenous group; 2nd time buyers 

have much different interests than 

1st timers 

There is diversity among buyers. There is a huge 

difference between concerns for 1st-time homebuyers 

and 2nd time buyers. According to a survey, 1st time 

homebuyers look at first cost and location. Secondtime homebuyers, however, pay more attention to 

long-term durability because of the experiences they 

may have had with their first home. Realtors and 

appraisers need to bring these issues into their 

discussions. 

ben 1.41 Maybe rating system is more 

suitable/appropriate for ‘existing 

stock; 1st buyers are the least 

constrained segment 

The rating system can fill the information gap and start 

the process. 

push 2.19 There are definite stages of 

innovation/penetration/adoption 

• How do 2nd and 3rd stage 

adopters make decisions? 

• How is decision-making 

different from group to group? 

o Homeowner 2nd

There are different stages of adopters. Some builders 

like to play with toys. For them, it is not necessarily 

about markets. These are the lead adopters, the risk 

takers. For innovations to diffuse, we must pay 

attention to the next group, which comes after the 

lead adopters but comes before the herd. For this 

intermediate group, what do they respond to? What 
133 

discussion session sequence 

‘flip chart’ record NIST notes 

stage: follow the 

leader 

o Homebuilder 2nd

stage: innovator is 

eating my lunch 

better change 

do we and can we know about them? For the 

intermediate homeowner, they are the imitator. For 

the intermediate builder, they are those who respond 

to the competitive advantage that the early adopters 

get. There was an NAHB/Virginia Tech study on 

diffusion that focused mostly on the early adopters. 

More information needs to be collected about the 

intermediate group that follows the early adopters. 

comp 3.36 Reflects more intense use of 

existing stock; SF transaction very 

different from MF 

Another problem is that few states certify home 

inspectors. 

cert 4.241 (see notes) Is the risk pooled or not? 

soc 6.04 

We have not articulated the 

differences between SF and MF 

delivery. MF internalizes external 

costs for many actors. It is the 

difference between a private 

transaction and a public transaction. 

Additional R&D on the private side 

may be an effective approach. 

Removal of barriers to innovation is 

another. 

Multi-family housing does best at internalizing (Fannie 

Mae). Because it is an investment, there is an 

incentive for long-term concern on the part of 

mortgage lenders. With single-family housing, the 

issue is creditworthiness, so this incentive to have 

concern about the long term is not there. Monetizing 

social benefits becomes irrelevant. Need to 

determine the constraints that exist in the housing 

system and get them out of the way. Regulators 

should not be a stakeholder group. They should be 

surrogates. To what degree is the regulatory system 

a barrier to innovation? How can the regulatory 

system improve the health and safety of individuals? 

One proposal is to provide the council of evaluations a 

more comprehensive evaluation system to better 

know these costs to those with long-term financial 

interests. With single-family homes, these are private, 

unregulated transactions between two parties that do 

not have long-term financial interests. It is very 

different from multi-family housing. 

soc 6.05 No, we should not use MF as the 

model—we should employ taxes, 

fees, and fines for 5 year first use 

and 20 year expected service life (it 

realistically may be 100 years) 

Decoupling the product from the credit to pay for it 

leads to this outcome. If a durability fee were to get 

added to the production function, then will capture the 

costs to society. 

soc 6.051 (see notes) This would not get done without regulation. 

soc 6.081 (see notes) Impact fees can capture these costs. 

soc 6.091 (see notes) We can’t apply lessons from multifamily housing to 

single-family housing. 

cost 8.21 

Suburban 1st home means “lawns 

and commutes”—should we focus 

on a different 1st home model? 

One must consider the current housing market. The 

problem is the need to match preferences over the 

first home with what is available. My first home was in 

the suburbs. It did not match my preferences. There 

was a yard that I did not want to have to maintain. I 

had a long commute. Need to address the 

demographic of first-time homebuyers that do not 

want lawn maintenance and long commutes. How 

about rehabilitating loft apartments in the urban core? 
134 

discussion session sequence 

‘flip chart’ record NIST notes 

cost 8.23 Reconfigure low-density 

neighborhoods to high density. 

Hope 6 is an example, but it is already on publicly 

owned property. 

cost 8.24 Most new homes will be sprawl and 

SF on periphery of urban areas; 

clearly need is for innovation in 

existing housing stock, but most 

new products will be for new 

construction. 50 million new buyers 

over next 50 years will push new 

development even though they may 

enter market through purchase of 

existing stock. 

For most, the sprawl and new construction will 

continue. People want new construction. In the next 

25 years, existing housing will go primarily to 

immigrants, so there will a number of new housing 

starts. 

cost 8.242 

(see notes) 

There is a lack of technology directed at the existing 

housing stock. Most of the products are targeted to 

new homes. This will affect who pays and bears the 

costs of new product development. 

• Value: cost, price, benefit discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.06 

Homebuilders must compete by 

adding value 

Would like to see builders competing on quality, rather 

than on first cost, that is, based on the value of the 

house rather than its first cost. We are trying to get 

from first costs to LCC. When first costs are 

decreased, LCC are higher and consumers bear the 

burden of this increase. 

cert 4.38 

Housing only industry to insist that 

innovation requires increased costs. 

Housing is the only industry that focuses only on the 

increase in initial or early costs associated with 

innovation. This is not true in other industries. In the 

housing market, initial costs always increase with 

increased innovations. Innovation costs more in the 

long term. Pulte improved the quality in its framing. 

risk 5.03 How do you treat cost of substitute 

products? 

Is affordability a factor in marketing decisions at your 

company? 

Consultants 

• Attribute: affordability, durability, safety, etc. (flexibility, substitutability, 

customizability) 
135 

discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.31 

Durability measurement has been 

supported by component 

manufacturers, opposed by 

materials suppliers, and opposed by 

builders (because already factored 

into markets) 

The market is having trouble swallowing guidelines 

such as durability ratings. Who supported the 

durability standard at ASTM? The components 

manufacturers. Who didn’t? The raw materials 

suppliers, including gypsum producers, assemblers, 

and builders. These groups argued that the market 

already values durability, and therefore do not need 

more information. There is a need to measure the 

performance of the house. 

push 2.25 

Ability to provide customization of 

components is an advantage for 

builders 

EPA’s approach to marketing Energy Star was trial 

and error. It began by trying to sell Energy Star using 

fact sheets. This did not work. But when EPA began 

to distribute information about Energy Star using CDROMs, which is a customizable medium that builders 

could use to choose what to compete on and put their 

names on, the label took off. 

push 2.26 (see notes) This is an example of a “push.” The electronic 

dissemination of information has become more 

desirable. For example, a builder allowing buyers to 

do a virtual walk-through of a model is a big push. 

cert 4.08 

• Information used quite different 

among groups 

• How communicated is very 

important (easier to deal with 

dollars than life-safety of 

specific event) 

• Commerce looked closely at 

business interruption impacts 

There is a role for financiers and insurers. FEMA is 

funding the Applied Technology Council (ATC) 58 

project. Some of the results are that the sophistication 

with which the point is made matters, such as it is in 

terms of life losses or economic losses. People can 

deal much better with economic losses in terms of 

annualized expected loss associated with a choice or 

action, rather than an event. Larger corporations are 

concerned with investment and maintaining the ability 

to continue running. For example, if it were presented 

as probability of minor damage vs. probability of major 

damage. People’s normal lifetime experiences do not 

allow them to factor for extreme events. 

cert 4.20 

Hurricane protection relies on 

maintenance rather than 

passive/fail-safe approach. 

With hurricanes, there are three mitigation approaches 

that are seen as equivalent by the codes. 

1. Build hurricane shutters, and the only 

maintenance required is to close them before 

the hurricane hits. 

2. Install impact-resistant windows, and the 

only maintenance is to close them before the 

storm. 

3. Stack plywood, and the maintenance action 

is to put it up when the hurricane warning 

comes. 

Whether high maintenance or low maintenance, there 

are options to satisfy the need for protection. The 

codes recognize that some prefer low maintenance 

and some high. 

Standards are met if you are building in a low 

frequency event area. 

cert 4.26 Many SF homes with cripple walls There were some retrofits, such as the Parapet 
136 

discussion session sequence 

‘flip chart’ record NIST notes 

have the same problem. program and unreinforced masonry buildings (URMB). 

It is difficult to get these programs in place. There 

needs to be a public outcry. 

cert 4.262 

(see notes) 

I have no seismic insurance even though I live in 

California because any policy with a reasonable 

premium has a deductible of $40 000. This creates an 

incentive for me to build better. 

risk 5.30 

When they say “affordability”, 

respond with “basic research”. Even 

basic “affordability” is beyond code 

compliance requirements. 

As a country, we do not invest much in basic research 

and testing in the housing industry (in the public 

sector). In general, basic affordability is beyond the 

code minimums. 

We have to keep in mind that nobody would buy a 

code-minimum house. Such a house has no wall 

board, no paint, no carpet. The market prevents codeminimum houses. Most of the affordability equation is 

beyond the code. Therefore, must look at the 

unregulated component of housing. 

• Barrier/Incentive: (to market acceptance) discussion session sequence 

‘flip chart’ record NIST notes 

ben 1.26 The important issue is who 

decides—don’t understand what is 

meant by ‘affordability’ 

• What are policies that affect 

affordability, that affect 

homebuyer and other 

perceptions? 

• How do you get information to 

consumers? 

This is driven by stakeholders. One example was the 

requirement that all homes in one area be all-electric. 

This was a disaster. Cannot sell the consumer short. 

It is LCC. They just need the information. 

ben 1.39 Is the financing of the first buyer (of 

innovation) an opportunity for 

incentives? 

Is the financing for the first buyer of the innovation an 

opportunity for incentives? 

push 2.041 (see notes) Sprinklers in multifamily homes are now required. 

push 2.103 (see notes) [elaborated on the notion of tradeoffs as he intended 

the question when writing it.] 

comp 3.311 

(see notes) 

Officials in New York State have stated that adoption 

of building codes was based on costs and benefits. 

Regulator stakeholders are multidimensional and 

heterogeneous. Political jurisdictions affect this. 

cert 4.361 (see notes) Zoning is an issue. 

risk 5.26 Over-emphasis of regulated side of 

costs; should we shift focus to nonregulated side? We no longer invest 

in basic research. 

There is insufficient basic research in the public sector 

that leads to innovation. Also, have to look at the 

unregulated components of housing. 
137 

discussion session sequence 

‘flip chart’ record NIST notes 

soc 6.11 

We need to ask why we are 

concerned with social costs: 

• 3rd party effects are fair 

game for incentives 

• Mandates should not be 

based on externalities 

• Externalities should be 

viewed very skeptically. 

Why are we even trying to monetize costs and 

benefits? There are two extreme motivations. The 

first is to promote technology development with 

enlightened policies. If we are trying to do this, then 

monetize costs and benefits. The second is to provide 

justification for more regulations. If this is the case, 

then will lead to more skepticism. A problem is that 

everything is an externality. They can be seen 

everywhere, and the exercise of monetizing them 

would never end. In any case, with regard to the 

example of solid waste disposal, I have to pay a waste 

disposal fee every year. 

soc 6.13 Regulation is often an adaptation to 

real circumstances 

We need to focus on reforming regulations which 

improve affordability for everybody, not just removing 

regulations. 

soc 6.132 (see notes) The assumption in code reform is that the original 

regulations were right. 

reg 7.19 That’s a disappointing point of view. That perspective is disappointing. 

reg 7.22 10-point ISO rating system looks 

comprehensively at code 

enforcement. Do they look at use of 

NES reports? 

A participant earlier mentioned the 10-point ISO 

certification rating system on the adoption, provision, 

number of inspectors, training, of inspectors, of code. 

Could build on this tool. With this rating, did they use 

evaluation service reports (ESRs)? 

reg 7.23 

Short answer is no, but do not put 

all eggs in one basket—I accept 

NES reports only if I agree; I rely on 

multiple sources of information. 

No. They might, they might not. Evaluation reports 

are not always accepted. I might not accept one that I 

do not agree with, because evaluation is also subject 

to human error. I am as receptive toward products 

with ESRs as I am toward those without them. The 

lack of a report should not always be viewed as a 

barrier to acceptance. 

reg 7.29 

Barriers at local level may be 

politically based. 

Officials want to offload risk; they do not want the 

liability. For example, EIFS. You could get a political 

barrier. Maybe a union will not let a code change in, 

and they are told not to improve it or will fight to keep 

new technology out when code changes are proposed. 

Even in spite of scientific justification for a 

component’s use, there may be politically motivated 

resistance. An example is steel framing and the 

influence of California unions on local officials. 

Political issues may similarly arise with respect to code 

language and interpretations of the code. 

cost 8.28 Planned development approaches 

allow flexibility in zoning. Is it time 

now to plan for future use by adding 

flexibility to be adaptable to and 

facilitate future rehab. 

Resistance to modular housing at 

local level cannot be explained by 

differences over time. 

Must look at the role of zoning, density, and cost. In a 

new market, see planned residential/housing 

developments (PRD/PHD). Are these viable and 

durable, or will they decay and people will move? 

Also, can we plan for 30 years to 40 years from now 

by reorienting the layout of a home? Systems-wide 

engineering could be used to facilitate future rehab. 

For example, to be able to move a load-bearing wall to 

change the floor plan to satisfy future tastes, needs, 
138 

discussion session sequence 

‘flip chart’ record NIST notes 

and preferences. Use more partitions. Make the 

kitchen a module that can be plugged in or unplugged 

and moved. 

cost 8.33 

(see notes) 

Regarding the acceptance or resistance to modules, 

the resistance is based on historical experience 

because there may be different or reduced standards 

in one house compared to the house next door. 

Modularization would lead to loss of local control. 

cost 8.35 (see notes) Was it a hard or easy swallow for local officials? 

• Delivery system: (for housing and housing products) discussion session sequence 

‘flip chart’ record NIST notes 

reg 7.12 

Look at entire regulatory system—

currently consists of prescriptive 

frailty with alternative options. 

(liability/technical issues go beyond 

the capability of the field code 

official) Frailty is the confidence that 

prescriptive codes achieve desired 

purposes/objectives. Tons of 

innovation is just not used. Need to 

better understand frailties and 

impediments. 

The status quo is a prescriptive system with an 

allowance for alternatives. Allowance has frailty 

because it is subject to human acceptance. Any 

solution would have to address this frailty. Examples 

of solutions would be liability, education and technical 

training, access to technical information. Another 

frailty is whether the current prescriptive codes are on 

the mark. With the hybrid, as one of the model code 

developers discussed, there would still be liability and 

education frailties. Another consideration is that many 

innovations are not being used. They need selling and 

marketing, but the performance side is harder to cover 

liability. There would need to be understanding of the 

components of the system. Lack of existing standards 

can be a bigger barrier than regulations. 

cost 8.03 We are asked to look at these 

issues at material/component scale 

and at product delivery scale. 

It was proposed that we look at technology at two 

scales, the components/materials scale and the whole 

house and delivery system scale. 

cost 8.07 

Should a change in the form of 

ownership be considered? 

FHA mortgage insurance in the U.S. in the 1930s 

through 1950s created the current housing delivery 

system. Participants have given other examples of 

innovations in the housing delivery system. One 

possibility would be to change the form of 

homeownership. 

cost 8.072 (see notes) If housing were a service rather than property, then it 

could be different. 

cost 8.14 

Could be the subject of study—is 

there a role for government in a test 

of changing housing delivery? 

There was a NSF project funded by Alcoa, Gulf, and 

Westinghouse (General Electric), which followed 

Operation Breakthrough to ask whether there was a 

role for these types of companies in housing delivery. 

The answer they arrived at was, probably not. Now, 

Fannie and Freddie have come, the National 

Evaluation Service and others have developed. Given 
139 

discussion session sequence 

‘flip chart’ record NIST notes 

these changes, is there a role now? In today’s 

market, is there a role for major home producers? 

• Market: supply-chain, builder, homebuyer, investor discussion session sequence 

‘flip chart’ record NIST notes 

push 2.03 How do you identify ‘pull’ rather 

than ‘push’? (see record) 

• Metric: 1st, annual, life-cycle, time-horizon, units-of-measurement, uncertainty, 

market signal, rating scale discussion session sequence 

‘flip chart’ record NIST notes 

comp 3.23 GFCI introduction to codes was 

argued from both standpoints, but 

not in public discussions 

There are two other examples. LCC analysis was 

done on a NIST project on GFCI and on safety 

glazing, and they are now in all codes. 

comp 3.255 (see notes) Insurers know how to do this. 

comp 3.27 Smoke detector example: 

production reduced costs from $100 

to $5 and changed the economics 

Several years ago, when smoke detectors cost over 

$100 each, the decision was more difficult. Now that 

they cost a few dollars, nobody objects to their 

inclusion in the code. 

cert 4.021 

(see notes) 

What is often ignored is that risk has two dimensions, 

both the probability of the event and the 

consequences. Must balance with magnitude of an 

improbable event with the magnitude of the possible 

damage. 

cert 4.03 

Insurance Services Organization 

(ISO) program to rate communities 

and code enforcement 

The Insurance Services Office (ISO) conducts the 

BCEGS (Building Code Effectiveness Grading 

Schedule) program about the quality of codes and 

code enforcement. The insurance industry uses this 

data. 

cert 4.181 (see notes) If the penalty is less than the cost of maintenance, 

then the incentive to maintain is not there. 

cert 4.321 (see notes) Or wait for an event to occur to make them want to 

incur it. 

soc 6.204 (see notes) Like fuel efficiency for automobiles. 
140 

• Perspective: interest, standing, constituents discussion session sequence 

‘flip chart’ record NIST notes 

comp 3.08 Need to look at insurance business 

model—loss control (see record) 

comp 3.09 Complex situation; insurance is 

highly regulated for both consumer 

and industry protection issues 

State regulators are political animals. 

comp 3.14 Code officials are responsible to 

occupants. 

The interest of the regulators becomes parallel with 

that of the homeowners. 

comp 3.29 

Code official is both stakeholder 

and part of production team 

The lag bolt would probably have met the minimum 

performance standard, but the code official may have 

lacked the technical background to know this. This is 

a recognized problem. The problem is that code 

officials are not involved in the design stage and are 

only brought in at the end of the process. When they 

have objections at this point, they are seen as 

impediments. 

cert 4.05 

How do you communicate 

magnitude, probability, and 

performance to each stakeholder 

group 

Magnitude of a loss is based on the magnitude of the 

initial event. Risk of building falling down comes from 

how well the initial design was equipped to handle 

wind, for example. Certain embedded assumptions as 

to how to make decisions. People are trying to 

understand quantitative data on a qualitative level. 

People’s normal lifetime experiences do not allow 

them to factor for extreme events. Consideration of 

life loss vs. economic loss – larger corporations are 

concerned with investment and maintaining the ability 

to continue running. 

cert 4.122 

(see notes) 

How does a neighbor become a stakeholder is your 

house? When something significant occurs to a single 

home, it affects the entire neighborhood (in way of 

market value). 

risk 5.281 (see notes) Just look at old National Bureau of Standards (NBS) 

publications. It used to all be basic research. 

soc 6.21 

Many stakeholders have an 

inordinate fear of regulation 

NIST developed durability performance standards 

purely based on technical considerations. It led to 

paranoia. This was fought by, among others, 

homebuilders, at ASTM meetings. 

• Product: development, test/evaluation, distribution, sale discussion session sequence 

‘flip chart’ record NIST notes 

reg 7.37 Certification needs to recognize 

contractual trade influences and 

impacts. 

(see record) 
141 

• Segmentation: MF/SF, new/existing, low-income/high-income discussion session sequence 

‘flip chart’ record NIST notes 

comp 3.06 

SF decision-making much different 

than MF, which involves 3rd party 

concerns. We have not presented 

decision-makers with policy 

impacts. 

Because there is political accountability, we should not 

expect a change in the regulatory environment. The 

distinction between single-family and multi-family is 

important. Some standards, however, are decided not 

at the policy level, but at the technical level, such as 

codes. In the future, there is a need to provide 

policymakers with choices about performance 

standards and options about the minimums in the 

codes. 

comp 3.361 

(see notes) 

This is another difference between single-family and 

multi-family housing. With multi-family, inspection is 

considered due diligence. 

• Value: cost, price, benefit discussion session sequence 

‘flip chart’ record NIST notes 

cert 4.41 (see notes) EAFs reduced quality. 

cert 4.42 

(see notes) 

The problem with EAFs is that it was misapplied. It 

came from Europe and was used in the U.S. without 

good understanding of how it should be used here. 
142 
143 

Appendix C Schematic Durability Rating System and Valuation 

The relationship of durability to housing affordability was a recurring theme in workshop 

discussions. A builder stakeholder outlined one concept for development of a durability 

rating system that would project and value the residual durability of housing components 

and systems over time. The rating system is sketched in the following five diagrams. The 

first diagram suggests computation of total housing value as a combination of annualized 

inventory value, maintenance costs, operating costs, and durability rating parameters. 

t, time

Annualized value over time = [(#1) + (#2 x #4) + (#3 x #4)] / (#4)

total 

value

SUMMARY VALUE OVER TIME

Parameter #1, inventory value, would be determined for a base year and change as 

housing stock and average housing value fluctuated. Current rough estimates of 100 

million units at an average value of $150 000 yields a $15 trillion dollar housing stock 

value. 

t, time

# units x average value

#1 = INVENTORY X VALUE

~$15 Trillion, today

(~100M x $150K)

existing as of today

new after today
144 

Parameter #2, maintenance cost, would consist of expected annual upkeep punctuated by 

periodic component replacement. In the diagram, anticipated cumulative maintenance 

cost is expressed as a percentage of average housing value. 

t, time

cumulative costs 

per unit 

(%, average unit cost)

#2 = MAINTENANCE COST, f(t)

10%

20%

30%

40%

50%

scheduled replacements

Parameter #3, operating cost, would consist primarily of the expected consumption and 

prices of energy and utilities. Annual operating cost could be expanded to include other 

expenses, such as communications and insurance. 

t, time

annual costs 

per unit 

#3 = OPERATING COST, f(t)

$1K

$2K

$3K

$4K

$5K

heat

electric

water

sewer
145 

Parameter #4, the durability rating, would be the key element of the system. The rating 

could, perhaps, value the number of years of relatively ‘maintenance-free’ operation that 

could be expected given the present condition of a property. Objectives could be set to 

increase the rating over time, while deferred maintenance could be expected to decrease 

the rating. 

More timely maintenance can improve the durability of a structure. Extending the 

longevity of a structure reduces its annualized first cost of construction because it is 

spread out over a greater number of years. 

t, time

unit rating

(years)

#4 = DURABILITY RATING, f(t)

2 years

4 years

6 years

8 years

10 years

current 

practices

regular maintenance?

scheduled replacements?

improvements?

goal

? ?
146 
147 

Appendix D Workshop Agenda 

MEASURING AND ASSESSING THE CONSEQUENCES OF TECHNOLOGY AND 

INNOVATION FOR AFFORDABILITY OF HOUSING 

June 4-5, 2003, NIST North, Lecture Room 152

AGENDA 

Wednesday, June 4, 2003 

9:00 am Welcome and Introductions Jack Snell, NIST, and Carlos Martín, HUD 

9:15 Historic Federal Role in Housing Affordability Carlos E. Martín 

9:30 Affordability Guidelines and Workshop Objectives Robert Chapman, NIST 

9:45 Discussion session* #1: Who benefits from the housing innovation, both at 

component scale and at the scale of the entire house and its delivery 

system? Do the homebuyers or homeowners benefit? If there is a benefit of 

reduced first cost, does it pass through to the homeowner, or does it go into the 

pocket of someone in the supply chain of the current delivery system? 

 Leads: Richard Wright and Carlos Martín 

10:45 Break 

11:00 Discussion session #3: How does each stakeholder view and compute lifecycle costs and benefits compared to first costs, at both scales? 

 Leads: Robert Chapman and Paul Emrath 

12:00 Lunch 

1:00pm Discussion session #4: How does each stakeholder view and compute future 

benefits that are uncertain or contingent on very low probability events, 

such as protection from earthquakes or hurricanes that may never happen, 

at both scales? What happens when you add uncertainty to the costs and 

benefits discussed in session #3? Leads: Ed Sutton and Robert Chapman 

2:00 Discussion session #5: How should the uncertainty and risk associated with 

using new versus traditional technology be addressed, at both scales? 

 Leads: Theresa Weston and Michelle McDonough 

3:00 Break 

3:30 Discussion session #2: How to “push” innovation benefits to the 

homeowner, at the scale of housing components? How can we help the 

homebuyer to see the big picture, e.g., benefits as well as costs, especially initial 

costs? If a benefit comes at added cost, can the homeowner trade it off against 

reduced performance somewhere else in the house? Is the production function 
148 

of housing (the current delivery system) flexible in that way to allow for 

substitutions among component costs, or is every innovation an “extra 

expense”? Leads: Ed Sutton and Theresa Weston 

4:30 Recess 

Thursday, June 5, 2003 

8:30am Reconvene 

8:45 Discussion session #6: How should society value or monetize the social costs 

and benefits of introducing technology in residential housing, such as 

energy conservation or disaster relief and recovery, at both scales? What 

happens when you add social costs and benefits to the discussion? 

 Leads: Ron Piester and Michelle McDonough 

9:45 Discussion session #7: Can the regulatory system be used to encourage 

innovation, and to distinguish innovations with net benefits from those with 

net costs, at both component scale and at the scale of the entire house and 

its delivery system? 

 Leads: David Conover and John Hall

10:45 Break 

11:00 Discussion session #8: Who should bear the costs of development of new 

delivery systems and new infrastructure systems that are needed for 

innovation to penetrate the market at the scale of the entire house and its 

delivery system? 

 Leads: Paul Emrath and Theresa Weston 

12:00 Lunch 

1:00pm Affordability Guidelines Roadmap: Summary recommendations from each 

discussion session; roadmap for affordability guideline development. 

 Leads: Robert Chapman and David Engel 

2:45 Closing Remarks: Next Steps Robert Chapman and David Engel 

3:00 Adjourn 

(*Each discussion session will be led by two individuals who will briefly set the stage 

(≈10 min) of possible positions; followed by facilitated discussion of subordinate 

questions among the full group (≈45 min); and a 5 min summary of recommendations. 

Leads will be asked to pose divergent initial positions, as possible. Leads and/or 

facilitators will ensure that relationships to affordability guidelines roadmap development 

are considered as part of the discussion and recommendations. ) 
149 

Appendix E List of Attendees 

(*‘Affordability in Housing’ Discussion Leads) 

PATRICIA H. ADKINS 

Home Safety Council 

1725 Eye Street, NW, Suite 300 

Washington, DC 20006 

202-349 1100 

patricia.adkins@homesafetycouncil.org

WILLIAM ASDAL 

Asdal Builders 

76 Rt. 24 

Chester, NJ 07930 

908-879-4427 

asdal@rcn.com 

CHRISTINE BRANCHE 

CDC (unintentional injuries) 

4770 Beaufort Highway, NE 

Mail Box K63 

Atlanta, GA 30341 

404 639 3311 

cbranch@cdc.gov (olsen@cds.gov) 

DONALD BRADLEY 

Director, Housing Economics, Freddie Mac 

8200 Jones Branch Drive, MS 484 

McLean, VA 22102 

703-903-3716 

donald_bradley@freddiemac.com 

ROBERT CHAPMAN* 

NIST Building Fire and Research Laboratory 

Building 226, Rm B226 

Gaithersburg, MD 20899-8603 

301-975-2723 

robert.chapman@nist.gov 

DAVID CONOVER* 

International Code Council 

5203 Leesburg Pike, Suite 600 

Falls Church, VA 22041-3401 

703-931-2187 

dconover@iccsafe.org

DAVID DACQUISTO 

Newport Partners LLC 

3760 Tanglewood Lane 

Davidsonville, MD 21035 

301.889.0017 

DavidDacquisto@NewportPartnersLLC.com

WILLIAM DUNCAN 

Enterprise Foundation 

10227 Wincopin Circle, Suite 500 

Columbia, MD 21044 

bduncan@ennterprisefoundation.org 

PAUL EMRATH* 

National Association of Homebuilders 

1201 15th Street, NW 

Washington, DC 20005 

202-266-8449 

pemrath@nahb.com

DAVID ENGEL* 

HUD/Office of Policy Development and 

Research 

451 7th Street, SW 

Washington, DC 20410 

202-708-4370 

david.engel@hud.gov

NICK FARR 

Executive Director 

National Center for Healthy Housing 

10227 Wincopin Circle 

Columbia, MD 21044 

ROBERT FULLER 

NAHBRC 

400 Prince Georges’ Blvd. 

Upper Marlboro, MD 20774 

301-430-6216 

bfuller@nahbrc.org
150 

JOHN HALL* 

NFPA 

1 Batterymarch Park 

Quincy, MA 02269-9101 

617-770-3000x7460 

jhall@nfpa.org

DAVID HATTIS 

Building Technology Incorporated 

1109 Spring Street, Suite 409 

Silver Spring, MD 20910 

301-588-5020 

dbhattis@bldgtechnology.com 

JENNIFER HELGESON 

NIST Building and Fire Research Laboratory 

Building 226, Rm B226 

Gaithersburg, MD 20899-8603 

301-975-8517 

jennifer.helgeson@nist.gov

JOHNS HOPKINS 

State of Maryland DHCD 

Maryland Revitalization Center 

1201 West Pratt Street Suite D 

Baltimore, MD 21223 

410 209 5815 

hopkins@dhce.state.md.us

CHRIS IZZO 

NIST Building Fire and Research Laboratory 

100 Bureau Drive, Building 226, Stop 8603 

Gaithersburg, MD 20899-8603 

301-975-6057 

cizzo@nist.gov 

TED KOEBEL 

Center for Housing 

Virginia Tech 

Blacksburg. VA 

540-231-3993 

tkoebel@vt.edu

CHI LENG 

NIST Building Fire and Research Laboratory 

100 Bureau Drive, Building 226, Stop 8603 

Gaithersburg, MD 20899-8603 

301-975-4522 

chi.leng@nist.gov

HAROLD MARSHALL 

NIST Building Fire and Research Laboratory 

100 Bureau Drive, Building 226, Stop 8603 

Gaithersburg, MD 20899-8603 

301-975-6131 

harold.marshall@nist.gov

CARLOS MARTIN* 

HUD/Office of Policy Development and 

Research 

451 7th Street, SW 

Washington, DC 20410 

202-708-4370, x5726 

carlos_e._martin@hud.gov 

MICHELLE McDONOUGH* 

FNMA 

Policy Analyst 

3900 Wisconsin Avenue, NW 

Washington, DC 20016 

202-752-3669 

michelle_k_mcdonough@fanniemae.com

MAUREEN MCNULTY 

D&R International, Ltd. 

1300 Spring Street, Suite 500 

Silver Spring, MD 20910 

301-588-9387 

mmcnulty@drintl.com 

RICARDO MERLO 

HUD/Office of Policy Development and 

Research 

451 7th Street, SW 

Washington, DC 20410 

202-708-0770, x5845 

ricardo_l._merlo@hud.gov 
151 

REBECCA MORLEY 

Executive Director 

National Center for Healthy Housing 

10227 Wincopin Circle 

Columbia, MD 21044 

410-772-2774 

rmorley@enterprisefoundation.org 

RON PIESTER (for DOTTIE HARRIS)* 

New York Department of State 

41 State Street 

Albany, NY 12231 

518-474-4073 (518-486-9888) 

rpiester@dos.state.ny.us 

(dharris@dos.state.ny.us ) 

ANDY SCHOLZ 

Genesis Homes 

2701 Cambridge Court, Suite 220 

Auburn Hills, MI 48326 

248-276-1459 

ascholz@genesishomes.com

RON NICKSON 

NMHC 

1850 M Street, NW, Suite 450 

Washington, DC 20036 

202-979-2327 

rnickson@nmhc.org

JACK SNELL 

NIST Building and Fire Research Laboratory 

Building 226, Rm B216 

Gaithersburg, MD 20899-8600 

301-975-6850 

jack.snell@nist.gov

BARRY STEFFEN 

HUD/Office of Policy Development and 

Research 

451 7th St. SW, Room 8110 

Washington, DC 20410-6000 

202-708-1537 x5926 

barry_l._steffen@hud.gov 

EDGAR SUTTON* 

National Association of Homebuilders 

1201 15th Street, NW 

Washington, DC 20005 

202-266-xxxx 

esutton@nahb.com

JON TRAW 

Traw Associates Consulting 

14435 Eastridge Drive 

Whittier, CA 90602-2745 

562-789-7583 

trawassoc@hotmail.com 

THERESA WESTON* 

DuPont Nonwovens, Spruance Plant 

P.O. Box 27001 

Richmond, VA 23261 

804 383-4031 

fax 804 383-3109 

theresa.a.weston@usa.dupont.com

WILLIAM WHIDDON 

Building Technology Incorporated 

1109 Spring Street, Suite 409 

Silver Spring, MD 20910 

301-588-5020 

wwhiddon@bldgtechnology.com

RICHARD WRIGHT* 

20081 Doolittle Street 

Montgomery Village, MD 20886-1354 

301 977 9049 

Fax: 301 963 1809 

dickwrig@erols.com

ZOPHIA ZAGER 

Director, Office of Building Code Services 

County of Fairfax Virginia, 12055 

Government Center Parkway 

Fairfax, VA 22035-5504 

703-324-1980 

szager@fairfaxcounty.gov