Scattered Site Rental Toolkit:

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V.C. Rehabilitation or New Construction?

As mentioned in the previous section, there are a number of approaches to a successful SSR program and we have seen successful programs that relied primarily on rehabilitation and others were equally successful focusing on new construction. All other factors being equal, we have a prejudice towards rehabilitation, believing rehabilitation better supports sustainable development and can have a greater stabilizing effect on a neighborhood. However, there are other factors to consider and sometimes a mix of the two types is the best approach. The table on the following page looks at this issue from multiple perspectives, and can assist you in determine the approach that will work the best for you.

 

Comparing New Construction and Rehabilitation

The table below explores how various scenarios related to neighborhood, project and organization speak to the type of construction that makes sense for a SSR program.

 

Scenarios

New Construction

Rehabilitation

1.     Have an overabundance of existing housing stock in decent condition

Con – Why build more houses, when a good supply exists?

Pro – Make good use of existing units.

2.     Desire to preserve and reuse existing housing stock

Con – Though may be a place for some infill next to units you are rehabbing.

Pro - Need to determine whether you will do moderate or major rehab

3.     Want houses to fit well with the existing neighborhood

Neutral – With a little care and a good architect, new houses can fit well with the neighborhood’s architecture.

Pro – Houses currently within a neighborhood often fit well with the architecture and feel of the neighborhood.

4.     Trying to encourage historic preservation within a neighborhood.

Con – Sensitively rehabbing a house is always more preserving than building new.

Pro – Need to recognize this can add to the cost and time associated with development.

5.     Have a cheap or volunteer source of skilled labor

Neutral – Volunteer labor can work on both new construction and rehab units.

Pro – Rehab Is more labor intensive and less material intensive than new construction.

6.     Have a cheap or donated source of many materials.

Pro – New construction is more material intensive and less labor intensive than rehab

Neutral – It depends on what the materials are. If they can be used equally well on both new construction and rehab, then it does not matter.

7.     Wish to do green, sustainable development.

Neutral – Energy efficiency is easier to achieve, but cannot take advantage of materials already existing as in rehab.

Neutral – All of the existing materials that can be reused add to sustainability. House may be more difficult to bring to Energy Star.

8.     Existing available houses in very poor condition.

Pro – It may cost more to rehab the houses than it will to build new.

Con – May be able to deconstruct houses and reuse some of the materials

9.     Existing houses too small

Pro – Can build new to the proper size needed by households.

Con – But could consider doing additions to make larger.

10.   Existing houses too big

Pro - Can build new to the proper size needed by households.

Neutral – May be able to convert to multiple units.

11.   Existing houses are poorly configured for the household’s for which you need to provide

Pro – Can design and build to the needed configuration.

Con – but may be able to reconfigure.

12.   Wish to avoid the expense of dealing with hazardous materials

Pro – Can avoid the hassle of lead-based paint and asbestos altogether by building new.

Neutral – Could rehab post 1981 homes and also avoid the hassle altogether, or could bite the bullet and clean up houses that people will likely live in anyways.

13.   Have a lot of vacant infill lots

Pro – May be able to purchase at a good price.

Not applicable.

14.   There are few vacancies in the neighborhood where you want to work

Pro – There is a need for more houses.

Pro – Rehabbed rentals should lease up quickly and achieve sound rents.

15.   Want the units to rent up quickly

Pro – In most markets, well-designed new units rent more quickly than rehabs.  Historic districts are a notable exception.

Neutral – If doing major rehabs on units with character, they may meet or even exceed the lease up rate for new construction.

16.   Wish to get in and out fast with a production builder

Pro – New construction is less labor intensive, so goes quicker.

Con – Unless doing minor rehab.

17.   Need most building components the same for ease of maintenance

Pro – Standardization is much easier with new construction.

Neutral – Difficult to standardize materials with rehab, but it can be accomplished for some materials and via unit selection.

18.   Desire units to be accessible

Pro – Modifications are always easier before it’s built.

Con – Many modifications can be done.

19.   Existing housing is very expensive

Neutral – New construction may also be very expensive.

Con – Projects will costs more from the start.


Next: V.D. Lease Purchase or Traditional Rentals?