Develops actuarial benefit‐cost ratio models of rehabilitation and
new dwelling construction to indicate when investment in public housing
is best diverted from new construction into rehabilitation of existing
dwellings. The data used by the models are based on an empirical study
of the mortality of New Zealand housing stock and assumed schedules of
no depreciation, straight line depreciation, and diminishing value
depreciation of dwelling services. Shows that under conditions of no
depreciation it would be impossible to rehabilitate dwellings fully
within a justifiable budget at market discount rates. The benefitcost
ratios are also overly sensitive to fluctuations in the mortality of the
housing stock. Under the more realistic conditions of straight line and
diminishing value depreciation, the benefit‐cost ratios are insensitive
to fluctuations in mortality and decision making whether to invest in
rehabilitation or new construction is viable.
This paper uses a simulation model to make exploratory estimates of current and potential reductions in national costs to sustain dwelling services due to refurbishment. Data and parameters are based on a typical New Zealand dwelling of lightweight timber framed construction. Dwelling service years provided by a dwelling over one year adjusted for depreciation serve as a proxy for benefits. The costs to construct one dwelling and fractions thereof serve as a proxy for the costs of maintenance, refurbishment, replacement, and new construction. Current levels of refurbishment reduce national average costs to sustain dwelling services by a magnitude of 15%. Potential reductions in national costs are modest (5%) should the housing stock be stationary, but are negligible when the expansion rate of the housing stock is as high as 2.0% per year. A decline in the expansion rate of a housing stock has a greater impact on reducing national costs than an increase in the number of cycles of refurbishment.
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