Academic journal article Real Estate Economics

Bricks and Behavior: The Repair and Maintenance Costs of Housing for Persons with Mental Illness

Academic journal article Real Estate Economics

Bricks and Behavior: The Repair and Maintenance Costs of Housing for Persons with Mental Illness

Article excerpt

Sandra Newman [*]

Joseph Harkness [**]

Comprehensive data on 153 properties offering independent living for persons with mental illness are used to examine the effects on repair and maintenance (RM) costs of building quality, neighborhood quality, building size, proportion of tenants with mental illness, and management experience with mentally ill tenants. We find an inverted U-shaped relationship between the proportion of mentally ill tenants in a building and its RM costs, which suggests favorable behavioral effects on mentally ill tenants of living in the same building with others who are mentally ill. We also find amenity features are associated with higher RM costs in properties where more tenants are mentally ill.

George Galster [***]

James Reschovsky [****]

Any developer of housing, whether for-profit or nonprofit, specializing in market rate or low-income housing, must estimate revenues and costs in order to assess a project's financial viability. Because estimating these quantities is partly science but partly art, developers often rely on "rules of thumb" derived from personal experience and the accumulated wisdom in the housing field.

Whether these rules of thumb apply to housing for special needs populations, such as the mentally ill, has never been addressed. This question has become increasingly important in the aftermath of deinstitutionalization of the mentally ill and the growing emphasis on independent, community-based housing for this population. [1] There is at least some suggestion in the mental health literature (e.g., Cournos 1987; Depp, Dawkins, Seizer, Briggs, Howe and Toth 1986; Lipton, Nutt and Sabatini 1988; Witheridge and Dincin 1985) that developers' rules of thumb do not apply to the mentally ill, at least with regard to operating costs. For example, because tenants may experience a worsening of symptoms and periods of hospitalization associated with the normal course of their illness (U.S. Department of Health and Human Services 1999, pp. 246,274), standard assumptions may underestimate vacancy rates and turnover. A mentally ill tenant's social skills, personal habits and hygiene, impulsiveness, conflicts with staff or other tenants, and lack of knowledge of how to maintain an apartment (e.g., you don't flush cement down the toilet) may increase operating costs. [2] In the event that there is community opposition to such properties, there may be longer time lags between property acquisition and first occupancy and higher operating expenses. Financing may also differ if, for example, lenders offer less favorable loan terms reflecting their perception of the greater risk associated with housing for this population.

This study offers the first empirical evidence on the effect of mentally ill tenants on repair and maintenance (RM) costs using comprehensive data on 153 privatemarket apartment buildings housing mentally ill tenants. In the next section, we briefly review the literature on the determinants of RM costs of residential rental properties. We then present suggestive theories and evidence from the mental health literature on mentally ill persons' behavioral responses to building size, physical condition, neighborhood attributes, and tenant mix that could affect RM costs. Next, we outline our analysis in which we attempt to empirically test these theories. This is followed by a description of the data, methods, measures, and key methodological issues posed by the analysis. We then present and discuss the findings.

Factors Associated with RM Costs

There is a surprisingly small empirical literature that investigates the specific factors influencing the RM costs of rental housing developments. Only Springer and Waller (1996) undertake a broad exploratory approach similar to that applied here 3 In addition to the empirical literature, theoretical perspectives recognize a multiplicity of factors associated with property maintenance decisions (e. …

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