“That’s my old place?!”

The Physical Needs Assessment (or PCA, PCNA, CNA) is a critical document in the life of all affordable housing properties. Every owner relies on them yet they are commonly misunderstood and misused. We thought that its time to talk about the PNA its meaning, its use, its history and most importantly: …how to interpret and use them for rehabilitation purposes as well as capital planning…

HISTORY OF THE PHYSICAL NEEDS ASSESSMENT The first parties to formalize real estate due diligence with a prototypical needs assessment was the life insurance industry. In the 1980s we were looking at properties and writing reports as they invested widely in commercial property. Then, with the Savings and Loan crisis everything changed. “See through” buildings, incomplete. Awareness of due diligence necessity arose. Does anyone remember this:

After that, PNA was used by the lending industry   The so called “bible” of the PNA process is the Fannie Mae DUS underwriting guide   Eventually the ASTM standard was developed which further established the process for completing a PNA inspection and report in a more streamlined approach It’s use has transitioned within various industries (tax credit, acquisitions, long term capital planning)

What is a PNA? Its an inventory of the property systems and conditions. It’s a summary of immediate and short term needs. Its based on visual observations so its limited to what can be seen. Its done in a day so it relies heavily on information provided to the evaluator. It will follow a format. It can be customized. It is a moment in time. It is based on the evaluator’s opinions. It can be heavily biased.

Purpose of the PNA for Rehabilitation Projects The PNA is NOT a Scope of Work! A scope of work for a rehab project starts with the PNA needs and then expands on those. The Scope of Work is a separate analysis and document that includes owner’s program and discretionary work ideas. The Architect and General Contractor should develop the budget and rehab scope of work prior to the PNA to be used as a resource prior to inspection The PNA provider should incorporate the rehab plan into the PNA based on independent analysis of the condition and needs of the Property

Immediate Needs Vs. Short Term     Immediate (Critical) Repairs (0-6 months) Items of health and safety Code compliance concerns For a HUD PCNA format, accessibility deficiencies   Short Term (Non-Critical) Repairs (6 -12 months or more) Items of deferred maintenance Maintenance issues or systems that are in disrepair For most PNA formats accessibility deficiencies  

Other Items to Incorporate Into Rehab Scope Major capital improvements identified in the earlier years of the Physical Needs over the Term - items that are approaching, but not yet at the end of their useful life (years 1-5 +/- of the long term needs) Energy efficiency upgrades (windows, HVAC, plumbing fixtures) Owner opted property upgrades (solar, higher quality finishes) Site specific construction needs (storage, storm water control, fees)  

Long Term Needs - Post Rehabilitation  The items incorporated into the rehab scope of work affect the long term capital needs in the PNA Do more during rehab to keep long term needs and ongoing maintenance cost lower Some work items impact capital needs more than others, why? All major systems that will fall into the “Pre Rehab” Physical Needs term should be considered for replacement during a rehab

Draft Scope of Work and budget Due Diligence Process Site visit by Owner, Architect and General Contractor to begin process of developing rehab scope of work Order Energy Audit / Workbook – incorporate recommendations to the maximum extent needed to obtain obligated points for energy reduction usage Draft Scope of Work and budget Order PNA, Appraisal Revised Scope of Work and Budget to incorporate PNA Findings and Recommendations

Accessibility The PNA evaluator is required to assess the property for ADA for public access areas Uniform Federal Accessibility Standard (UFAS/Section 504) – for HUD, USDA FHAA - units developed after May 1991 Chapter 11 B conformance - for tax credit rehabs What is a “Screening”? How to determine correct remedy for access issues? THIS IS A DESIGN PROCESS! Beyond the scope of a PNA. Not all properties will achieve full conformance due to structural or budget constraints. In these cases, the project Architect must draft a Waiver Request to CTCAC.    

Execution and Transformation