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EBOOKS Inventing the House HOUSING INNOVATIONS COLLECTION
SANDERFORD MCCOY ZHAO KOEBEL

FOR THE Andrew R. Sanderford, Andrew P. McCoy
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ENGINEERING Andrew R. Sanderford Andrew P. McCoy
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Create your own Businesses, consumers, industry groups, and governments
understand the importance of innovation for continued
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economic success and improvements in quality of life. However,
Bundlethe more innovation in the housing and residential construction industry
books you buy,
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remains a topic about which little is known while a small but
growing literature is making positive progress. Inventing the House
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discount! Building on the first book in the Housing Innovation
collection, the purpose of this book is to share new research
paradigms that focus on innovation and are, in and of
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themselves, innovative. The first chapters focus on a newly
created diffusion of innovation model and its application to Housing Innovation
the industry while later chapters showcase several innovative
Mechanical techniques that shed new light on housing, residential
& Chemical construction, and policy-making.
Engineering As the second book in the Housing Innovation collection,
Materials Science this book is designed to assist readers as they continue to
& Engineering peel back the complex layers of innovation in housing and
Civil & residential construction.
Environmental Andrew R. Sanderford, PhD, is an assistant professor of
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ISBN: 978-1-60650-566-3
INVENTING THE
HOUSE
INVENTING THE
HOUSE
Housing Innovation
ANDREW R. SANDERFORD,
ANDREW P. MCCOY, DONG ZHAO,
CHARLES T. KOEBEL, MATTHEW J. KEEFE,
TREVOR H. FLANERY,
PERNILLE H. CHRISTENSEN
MOMENTUM PRESS, LLC, NEW YORK

Inventing the House: Case-Specific Studies on Housing Innovation
Copyright Momentum Press, LLC, 2016.
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Abstract
Businesses, consumers, industry groups and governments understand the

importance of innovation for continued economic success and improve-
ments in quality of life. However, innovation in the housing and residen-
tial construction industry remains a topic about which little is known while
a small but growing literature is making positive progress.
Building on the first book in the Housing Innovation collection, the
purpose of this book is to share new research paradigms that focus on inno-
vation and are, in and of themselves, innovative. The first chapters focus
on a newly created diffusion of innovation model and its application to the
industry while later chapters showcase several innovative techniques that
shed new light on housing, residential construction, and policy-making.
As the second book in the Housing Innovation collection, this book is
designed to assist readers as they continue to peel back the complex layers
of innovation in housing and residential construction.
KEYWORDS
adoption and diffusion of innovation, agent-based models, 4D modeling,

climate change, high-performance construction, homebuilding, housing,
sustainability
Contents
List of Figures xi
List of Tables xiii
Preface xv
Acknowledgments xvii
About the Contributors xix
About the Book xxi
1Case-Specific Studies on Housing Innovation 1
Andrew R. Sanderford
1.1Introduction 1
References3
2The Adoption and Diffusion of Innovation in
Housing and Home Building 5
Andrew R. Sanderford, Andrew P. McCoy, and Charles T. Koebel
2.1Introduction 5
2.2 Brief Literature Summary 6
2.3 The Adoption Decision 8
2.4 Attributes of the Adopter 9
2.5Attributes of the Product, Supply Chain,
and Communication Networks 10
2.6 Attributes of the Market 11
2.7Time 12
2.8 Koebels Diffusion Model 12
2.9 Measuring the Adoption Decision 13
viii Contents
2.10Dependent Variable and Potential Statistical

Modeling Techniques 14
2.11 Independent Variables 14
2.12 Regression Modeling 16
2.13Discussion 17
References18
3Demonstrating a Diffusion of Innovation Model:
Patterns of U.S. Homebuilders High Performance
Product Adoption 23
Andrew R. Sanderford and Matthew J. Keefe
3.1 From Conceptual to Empirical Model 23
3.2Data 24
3.3 Empirical Model 29
3.4 Results and Discussion 30
3.5Conclusions 32
References33
4Establishing Builder Confidence for the

Residential Construction Industry 35
Dong Zhao, Andrew P. McCoy, and Andrew R. Sanderford
4.1Introduction 35
4.2 Index Background 36
4.3Methods 38
4.4Findings 43
4.5 Conclusions and Future Work 47
References49
Appendix49
5Computational Housing Research: A Modeling Primer 53

Trevor H. Flanery
5.1Introduction 53
5.2 Social Science Modeling Theory 54
5.3 ABM Resources to Start Modeling 58
5.4 ABM and Housing 60
5.5 Summary: Models, Housing, and Research Boundaries 64
References66
Contents ix
6Understanding the Potential of 4D Geospatial

Modeling to Enhance Flood Mitigation Planning
in Residential Areas 69
Pernille H. Christensen
6.1Introduction 69
6.2Understanding the Impact of Natural Disasters
on the Built Environment 70
6.3Flood Mitigation Planning in the Context
of United States National Policy 74
6.4Improving upon Business as Usual Development
Practices Through Strategic Planning 76
6.5Developing a 4D Data and Geospatial Modeling
Methodology78
6.6How Is This Approach Different to What Cities
Currently Use for Impact Assessment? 82
6.7Applying the Model as Part of a Flood Mitigation
Strategy for Residential Areas 83
References84
Index 87
List of Figures
Figure 2.1. Conceptual model and variables. 13

Figure 3.1. Cumulative adoption of HP piping. 29
Figure 4.1. Distribution of confidence contributors. 46
Figure 4.2.Chart for index tracking comparison between
BCI and HMI. 48
Figure 6.1.Building footprints workflow and datasets used in
development of 3D model. 79
Figure 6.2. Building footprints and 3D buildings. 79
Figure 6.3. Phototexturized 3D model, Belfast. 80
Figure 6.4. Three-meter water course level rise, Belfast. 81
Figure 6.5.Potential flood defense in front of mixed
use development, Belfast. 81
List of Tables
Table 3.1. Attributes of innovation 26

Table 3.2. Internal factors 27
Table 3.3. External factors 28
Table 3.4. Adoption of PEX 31
Table 4.1. Indicator matrix for builder confidence by segment 40
Table 4.2. Summary of survey responses 44
Table 4.3. Summary of builder size in revenue 44
Table 4.4. BCI in year 2014 45
Table 4.5. Confidence indexing by segment 45
Table 4.6. Tracking comparison between BCI and HMI, 2014 47
Table 5.1. Examples of coevolving housing relationships 57
Table 5.2. Some examples of coevolving housing factors 58
Preface
In his foundational investigations of innovation, Rogers traces the history

of the research tradition back to social scientists at the turn of the 20th
century (Rogers 1962, 1995). Noting that by 1995 there were 10 research
traditions employing and using adoption and diffusion as lenses through
which to process qualitative and quantitative innovation data, it is little
surprise to find academic, professional, and popular research and writing
about the topic in many fields. Interest in the topic has grown such that
some innovation scholars, for example, Clayton Christensen, author of the
Innovators Dilemma (Christensen 2013), have become household names
for their contributions to the research conversation.
However, despite the ubiquity of innovation related research and
speculation, there remain a number of fields where little is known about
the process of adoption and diffusion of innovation. Housing and resi-
dential construction are two prime examples. Though there is an emerg-
ing literature surrounding how and why innovation occurs across these
industries, substantial research opportunities exist.
This book and subsequent volumes in the Innovating the House
collection were designed to fill part of this gap. The collection is the
follow-up to a Housing and Urban Development (HUD) funded research
project, Impact of Market Behavior on the Adoption and Diffusion of
Innovative Green Building Technologies (GRANT10814146), conducted
by the Virginia Center for Housing Research. As part of this grant, the
team analyzed the adoption and diffusion of innovation among residen-
tial building firms. More specifically, the project focused on sustainability
and energy efficiency as innovations and the factors that contributed to
their adoption patterns by U.S. home builders. The Housing Innovation
collection seeks to summarize this work and draw together a number of
new resources and voices on innovation within residential construction.
Building on the first book in the collection, Case-Specific Studies
on Housing Innovation provides two perspectives on innovation within
xvi Preface
housing and residential construction. First, it describes and then demon-

strates a newly advanced empirical model of the diffusion of innovation
among home builders. These chapters focus on identifying the factors
associated with the innovation adoption decisions of U.S. home builders.
Then, the next several chapters showcase innovative research techniques
that have been brought to bear on housing to develop new knowledge
about decision making, policy making, and latent concepts such as
confidence. Among these innovative techniques are an agent-based
model, a new 4D dynamic spatial model of climate change risk, and a
new index based on survey responses of home builders and renovation
contractors. The purpose of this bifurcated approach is to highlight the
diversity of ways innovation colors and contributes to the aggregation and
creation of knowledge.
However, while this book demonstrates a number of leading edge
applications of research techniques and offers a discussion of their find-
ings, it is far from an exhaustive summary of the array of innovative ideas
surrounding the field of housing. Instead, we hope that it whets the appetite
of those interested in innovation and can contribute substantively to the
conversation about future opportunities for research and investigation.
Please note that the statements and conclusions contained in this work
are those of the authors and do not necessarily reflect the views or policies
of the U.S. Department of Housing and Urban Development or the U.S.
government. The authors have made every effort to verify the accuracy
and appropriateness of the works content. However, no guarantee of the
accuracy or completeness of the information or acceptability for compli-
ance with any industry standard or mandatory requirement of any code,
law, or regulation is either offered or implied. The products and systems
described in the report are included only as examples of some available
choices. No endorsement, recommendation, or evaluation of these prod-
ucts or their use is given or implied.
REFERENCES
Christensen, C. 2013. The Innovators Dilemma: When New Technologies Cause

Great Firms to Fail. Boston, MA: Harvard Business Review Press.
Rogers, E. 1962. Diffusion of Innovations. New York: Free Press.
Acknowledgments
The Housing Innovation collection, and specifically this book, would not
have been possible without the support, cajoling, and contributions from
a wide array of friends, colleagues, students, mentors, and critics. The
authors wish to acknowledge the contributions of Dr. Hazhir Rahmandad,
Dr. Christopher Franck, Joshua Washburn, Parisa Nikkhoo, Indrojeet
Kharde, and Alexys Wellott without whose work this book would not
have been possible. Also, a deep debt of gratitude is owed to Marilyn
Cavell who both managed the reporting side of the research project and
helped; based on her previous scholarship, provide background to much
of what takes shape here in the pages that follow. Additionally, the authors
thank Dr. Elizabeth Cocke and Dr. Regina Gray in HUDs Office of Policy
Development and Research for their funding, supervision, and construc-
tive criticism of our work.
About the Contributors
Andrew R. Sanderford, PhD is an Assistant Professor of Real Estate

Development and Planning in the College of Architecture, Planning,
and Landscape Architecture (CAPLA) at the University of Arizona. Pre-

viously, Sanderford was a post-doctoral research fellow at the Virginia
Center for Housing Research, a research center within the College of
Architecture and Urban Studies at Virginia Tech.
Andrew P. McCoy, PhD is the Preston and Catharine White Endowed

Fellow and Associate Director of the Myers-Lawson School of Con-
struction (MLSoC) and the Director of the Virginia Center for Housing
Research (VCHR) at Virginia Tech. He is Associate Professor of Building
Construction in the Myers-Lawson School of Construction, a joint venture
of the College of Engineering and the College of Architecture and Urban
Studies which focuses on interdisciplinary, multi-departmental outreach,
research, and education. The School serves the full life-cycle and supply
chain across all sectors of the Industry.
Dong Zhao, PhD, LEED AP is an Assistant Professor of Construction
Management in the School of Planning, Design and Construction (SPDC)
at Michigan State University. He was the a postdoctoral fellow at the
Virginia Center for Housing Research and the Myers-Lawson School of
Construction at Virginia Tech.
Matthew J. Keefe, MS is a PhD student in the Department of Statistics at

Virginia Tech. He earned his M.S. degree in Statistics from Virginia Tech
in 2013. He is an active collaborator in LISA (Virginia Techs Laboratory
for Interdisciplinary Statistical Analysis), where he closely works with
researchers in other fields. Previously, he was a research assistant provid-
ing statistical support for researchers at the Virginia Center for Housing
Research.
xxAbout the Contributors
Charles T. Koebel, PhD is the founder and former director of the Virginia
Center for Housing Research, a research center within the College of
Architecture and Urban Studies at Virginia Tech. At present he serves
as a Senior Researcher at VCHR, contributing regularly to research and
discovery. Previously, Koebel was a Professor of Urban Affairs and Plan-
ning at the College of Architecture and Urban Studies at Virginia Tech.
Dr.Koebel retired from teaching in the Spring of 2015.
Trevor H. Flanery, is a PhD candidate in the College of Architecture and
Urban Studies at Virginia Tech. He has served as a graduate assistant in
Virginia Techs Metropolitan Institute, the Office of Economic Develop-
ment, and is currently serving at the Global Forum on Urban and Regional
Resilience. He is also a visiting student at the Network Dynamics and
Simulation Science Lab at the Virginia Bioinformatics Institute, a research
center at Virginia Tech.
Pernille H. Christensen, PhD is a Senior Lecturer and the Course Direc-

tor for the Bachelor of Property Economics program in the School of Built
Environment at the University of Technology Sydney (UTS). Previously,
Christensen was a Research Associate in the Richard H. Pennell Center for
Real Estate Development (CRED) at Clemson University. Her research
focuses on sustainability at all levels of the built environment and aims
to improve the decision-making processes related to urban resilience for
industry practitioners.
About the Book
The Housing Innovation collection is a series of titles that is both practical

and academic in nature. The series serves two purposes: first as an expan-
sion of current research by authors and second as a place to continue and
advance a larger discussion about innovation-related housing topics. The
series originates from a team of multi-disciplinary researchers who exam-
ined the adoption and diffusion patterns of green and high performance
construction technology innovation among U.S. homebuilders. The col-
lection is designed to speed the dissemination of all research in housing
innovation, though. This larger conversation includes the topics of com-
mercialization, safety, policy, and innovative methodologies for housing
research and analysis.
Inventing the House: Case-Specific Studies on Housing Innova-
tion fits into the Housing Innovation collection as a bridge between the
recent housing innovation work and the exploration of innovative tools
and methodologies, not just in housing but in the academy. In the book,
contributors share the results of their empirical work focused on housing
innovation and innovative research methods for housing. The book begins
with a demonstration of a diffusion of innovation model previously devel-
oped by the series authors. The authors apply this model to a large sample
of proprietary and public data describing homebuilders green technology
selections and discuss those factors that most heavily influence the adop-
tion decision. The later chapters focus on innovative empirical research
techniques applied to housing specific data and phenomena for the acad-
emy. Techniques include agent-based modeling, dynamic 4-D spatial
modeling for development planning, and a new index describing market
confidence among U.S. homebuilders. Together, these chapters help read-
ers gain new insight into the complexities of innovation as it relates to
housing creation, construction, and development, and propose questions
about the next steps for our industry.
CHAPTER 1
Housing Innovation
Andrew R. Sanderford
1.1INTRODUCTION
Nearly 20 years ago, some construction researchers argued that technol-

ogy was changing faster than actors in the homebuilding market perceived
(Toole 1998). Building on prior research (Dibner and Lemer 1992), some in
the construction literature (Slaughter 1998) questioned the long-standing
perception that the construction industry (even more so the homebuilder)
was an innovation laggard and generally resistant to innovation.
Recent research focused on innovation in construction has contin-
ued to question the perspective of the builder as an innovation laggard
by adapting empirically driven diffusion of innovation models to con-
struction data (Kale and Arditi 2005, 2006, 2009; Rose and Manley 2012,
2014) drawing on innovation-focused survey data (Koebel 2008), and
conducting case studies of firms and specific products. Each of these clus-
ters of research added significantly to the prior research that identified the
obstacles to the adoption and diffusion of innovation across the housing
and homebuilding industries. Together, this body of literature has substan-
tially increased our collective understanding of how and why innovation
occurs in building construction.
As the second book in the Housing Innovation collection, Case-
Specific Studies on Housing Innovation, extends the discussion begun in
People, Policies, and Programs Influencing Innovation in Housing. The
authors of the book focused on the history, literature, policy, and climate
of opinion surrounding innovation in the U.S. housing and homebuilding
2INVENTING THE HOUSE
market. Here, following the larger conversation in the research literature,

the primary goal is to analyze and discuss empirical models explaining
patterns of adoption and diffusion of innovative technologies by U.S.
homebuilders. However, it is important to also recognize that there is
exciting and ground breaking research being conducted using innova-
tive methods of analysis to analyze various phenomena in the housing
market. Given this exciting segment of the literature, the second primary
goal of this book is to highlight specific instances of innovative methods
that researchers have developed to analyze housing and housing markets.
In short, Case-Specific Studies on Housing Innovation provides insight
into both innovation-focused housing research and innovative research
focused on housing.
In Chapter 2, Andrew Sanderford, Andrew McCoy, and Charles
Koebel convert the discussion from People, Policies, and Programs
Influencing Innovation in Housing into a theoretical diffusion of inno-
vation model focused on U.S. homebuilders and the decision to adopt
energy efficient (high performance) technologies from among a cluster of
economic substitutes. Sanderford, McCoy, and Koebel describe the cre-
ation of a theoretical model, its operationalization using both proprietary
data and also secondary data from public data sources. The chapter also
describes potential statistical models that can be applied to the innovation
adoption decision.
In Chapter 3, Andrew Sanderford and Matthew Keefe demonstrate
an application of the statistical model operationalized in Chapter 2 to
builders energy efficiency water distribution piping choices using data
from the National Association of Home Builders (NAHB) Home Inno-
vation Research Labs Builders Practices Survey (BPS). Foreshadowing
the results, Sanderford, Koebel, and McCoy find that internal, external,
and technology specific factors are all significant predictors of builders
adoptions decision. Furthermore, policy, climate, and the firms disposi-
tion toward other sustainability-oriented innovations are also significantly
associated with the decision to adopt energy-efficient piping products.
Chapter 4, by Dong Zhao, Andrew McCoy, and Andrew Sanderford,
debuts a new tool for measuring the latent construct home builders con-
fidence. Using existing indices such as the Conference Boards (CB)
Business Confidence Survey as models, this chapter reports the findings
from an exploratory effort to develop a new understanding of market con-
fidence. This effort builds on and seeks to improve the NAHB/Wells Fargo
Housing Market Index (HMI), the other tool measuring latent concepts
such as confidence or sentiment. The index created in this chapter, the
Builder Confidence Index (BCI), separates the market into segments of the
production or custom builders and remodelers or replacement contractors;
Case-Specific Studies on Housing Innovation3
and measures seven important indicators including sales, market, materi-

als, government, and macro economy. Initial findings confirm key differ-
ences between the two types of homebuilders in terms of confidence and
reveal interesting correlations over time.
In Chapter 5, Trevor Flannery describes agent-based models (ABMs)
and discusses how they provide a tool to explore change and possibilities
of change (scenario planning) in housing trends and research. Specifically,
Flannery examines gentrification feedbacks; the adoption and diffusion of
innovative building technology; supply and demand rent mitigation; and
urban form. The chapter begins with a focus on agent-based modeling
software, basic algorithms design, and then moves into the above topics
and how one might approach them using advanced modeling techniques
and tools. The chapter concludes with a discussion of ABMs potential as
an urban housing development coordination tool.
Chapter 6 by Pernille Christensen describes the literature foundation,
and climatological need, and application of a new dynamic geospatial
modeling tool to urban housing development and regulation. This work
suggests significant possibilities in how risk is analyzed in housing markets
and should likely catalyze additional innovation not only in the integration
of spatial and economic data but also in the integration of e nvironmental
risk with housing market analyses.
In short, Case-Specific Studies on Housing Innovation opens a win-
dow into two related innovation-centered areas of scholarship. First, it
highlights the development and application of an empirical diffusion of
innovation model designed to predict U.S. homebuilders energy efficient
technology (and product) adoption decisions. Then, it showcases several
innovative quantitative and spatial techniques that have been developed
to create deeper insight into the housing and homebuilding market place.
Together, these two related tracks help to illustrate how housing research-
ers are adapting techniques from related (and unrelated) fields to shed
new light onto the complexities of the homebuilding process and housing
markets.
REFERENCES
Dibner, D.R., and A.C. Lemer. 1992. The Role of Public Agencies in Fostering
New Technology and Innovation in Building. Washington DC: National
Academies Press.
Kale, S., and D. Arditi. 2005. Diffusion of Computer Aided Design Tech-
nology in Architectural Design Practice. Journal of Construction
Engineering and Management 131, no. 10, pp. 113541. doi:10.1061/
(asce)0733-9364(2005)131:10(1135)
Kale, S., and D. Arditi. 2006. Diffusion of ISO 9000 Certification in the Precast
Concrete Industry. Construction Management and Economics 24, no. 5,
pp.48595. doi:10.1080/01446190600601594
Kale, S., and D. Arditi. 2009. Innovation Diffusion Modeling in the Construction
Industry. Journal of Construction Engineering and Management 136, no. 3,
pp. 32940. doi:10.1061/(asce)co.1943-7862.0000134
Koebel, C.T. 2008. Innovation in Homebuilding and the Future of Hous-
ing. Journal of the American Planning Association 74, no. 1, pp. 4558.
doi:10.1080/01944360701768991
Rose, T.M., and K. Manley. 2012. Adoption of Innovative Products on Australian
Road Infrastructure Projects. Construction Management and Economics 30,
no. 4, pp. 27798. doi:10.1080/01446193.2012.665173
Rose, T.M., and K. Manley. 2014. Revisiting the Adoption of Innovative Products
on Australian Road Infrastructure Projects. Construction Management and
Economics 32, no. 9, pp. 90417. doi:10.1080/01446193.2014.938670
Slaughter, S. 1998. Models of Construction Innovation. Journal of Construc-
tion Engineering and Management 124, no. 3, pp. 22631. doi:10.1061/
(asce)0733-9364(1998)124:3(226)
Toole, T.M. 1998. Uncertainty and Home Builders Adoption of Technological
Innovations. Journal of Construction Engineering and Management 124,
no.4, pp. 32332. doi:10.1061/(asce)0733-9364(1998)124:4(323)
CHAPTER 2
The Adoption and Diffusion

of Innovation in Housing
and Home Building
Andrew R. Sanderford, Andrew P. McCoy,

and Charles T. Koebel
2.1INTRODUCTION
In People, Policies, and Programs Influencing Innovation in Housing,

Koebel observed that, businesses, consumers, industry groups and
governments understand the importance of innovation for continued eco-
nomic success and improvements in quality of life (McCoy et al. 2015b).
Koebels statement illustrates, much in the way one would have predicted
following a read of Schumpeters work, how innovation has become a
zeitgeistinfluencing all manner of goods, services, and policies. Koebel
goes on to argue that while recognizing the importance of innovation,
these same stakeholders also wish to avoid being labeled as innovation
laggards (McCoy et al. 2015b).
These stakeholders seek to avoid this stigma, in large part it seems,
because innovation is an ingredient in a decision-making milieu that has
the capacity to add significant value for those generating it as well as those
adopting it. Outside of the housing industry, Apple is often held out as
an illustration of how to capture extreme value from innovation. In the
years following the introduction of the iPhone, those on staff at Apple
and those owning the stock benefitted greatly from the relentless pursuit
and creation of category-altering products and software. But the future is
uncertain.
Within the research literature, evidence from management and com-

puter science fields reveal a treasure trove of case studies, empirical analy-
ses, and personality analyses of the ways that innovation, in its many forms
and championed by many individuals, has created competitive advantage,
caused introspection, created new categories of products and services, and
changed the global landscape (Ante 2008; Christensen, Anthony, and Roth
2004; Hall 1998). Echoing Martins assertion, innovation does indeed
appear to be everywhere (McCoy et al. 2015).
Yet, despite its prevalence, there remains a great deal about innova-
tion that we do not yet understand and nowhere more so than residential
construction. In fact, the home-building industry and the housing stock are
two related areas where the science of innovation has only begun to reveal
the complex interactions within its many layersbeginning to combat
long-standing supposition that the industries are innovation laggards
(Koebel 2008; Toole 1998).
In light of the growing knowledge base surrounding innovation in
housing, there are substantial opportunities for new analysis. This c hapter
builds on the previous book in the Housing Innovations collection: P eople,
Policies, and Programs Influencing Innovation in Housing and develops the
framework for an empirical adaptation of Rogerss body of work to housing.
The following sections address the research question: What factors
are associated with home builders innovation decisions? In answering
these questions, we describe the many types of data that could be used to
inform diffusion modeling and provide others with a tool to refine industry
models and draw empirical conclusions about builders adoption choices.
This chapter provides a brief summary of the literature on adoption
and diffusion of innovation in housing and home buildingfocusing on
an empirical diffusion of innovation model for home building. Then, it
illustrates the conversion of a conceptual model into a generic statistical
model and discusses how it can assist in the analysis of the adoption of
innovations among U.S. home builders. The chapter provides the intro-
duction and foundation for the following chaptera demonstration of the
application of this conceptual model to home builders choices to adopt
an innovative energy-efficient plumbing product over their traditional
economic substitutes.
2.2BRIEF LITERATURE SUMMARY
Recognizing the central role of innovation to create value in the construc-

tion industry, there has been significant effort put toward the investiga-
tion of the characteristics of the construction industry, particularly the
THE ADOPTION AND DIFFUSION OF INNOVATION7
residential construction industry that facilitate and impede the adoption

and diffusion of innovation (Koebel and McCoy 2006; McCoy et al.
2010a, 2010b). In addition to smaller R&D expenditures, the home-
building industry is shaped by: unique site applications of volume-based
products, asynchronous liability problems, fluctuation of the business
cycle, dominance by several large firms, substantial use of subcontractors,
diverse building codes, and momentum-oriented sources of capital.
Often discussed as a laggard, the construction industry has likely been
shaped by its structural and financial obstacles (Dibner and Lemer 1992;
Laborde and Sanvido 1994; Tatum 1987). Focusing on impediments to
innovation could result in underestimation of actual innovation and there
is evidence to suggest that innovation can and does occur in this industry
(Koebel et al. 2004; Laborde and Sanvido 1994; Toole 1998).
Perhaps, however, being known as an innovation laggard is a legit-
imate criticism. Unlike most consumer goods, buildings are complex,
expensive, large, and reflect the financial and political conditions of
their location (Slaughter 1998). Furthermore, the construction industry
is unusual in that the firm (the builder) acts as an assembler reliant on
multiple subcontractors for subassembly along the supply chain between
the upstream manufacturers and suppliers and the downstream consumer-
occupant (McCoy et al. 2015). Interestingly, builders tend to assert little
formal control over what products are developed upstream by manufac-
turers and are relegated to operate as the agents of technical expertise,
shouldering the liability of installing new products.
Slaughter (1993a) argues that reliance on the tried and true (path
dependency) could hinder successful adoption. For example, she cites
the timing of the commitment to adopt an innovation, the communication
within a project team about the requirements of using an innovative prod-
uct, the degree to which an innovation requires the use of special resources
(or outside expertise), and the levels of supervisory competency each as
drivers and obstacles of innovation in construction (Slaughter 1993a,
1993b). We could argue that the construction industry is an innovation
laggard out of structural necessity, protecting itself through path depen-
dency and specialization in the assembly of complex building components
and systems. However, this argument is merely a lunge toward description
and not an explanation for the muted adoption of innovation across the
construction industry.
The lack of technological innovation in the construction industry in
both the United States and abroad has confounded those in research and
practice (Gann and Salter 2000; Gann, Wang, and Hawkins 1998; Koebel
1999; Woudhuysen and Abley 2004). Moreover, efforts to catalyze inno-
vation adoption (and studies of adoption) have tended to focus on obstacles
to innovation. Recently, with the advent and capture of new types of data,
research from commercial construction illustrates the application of both
Bass and Rogers styled empirical models to the diffusion of various inno-
vative software technologies and heavy construction equipment (Kale
and Arditi 2010; Rose and Manley 2014). Confirming earlier research
(Hartmann 2006; Larsen 2005), these studies reveal that attributes of the
adopter, context, and the innovation are each capable of influencing the
innovation adoption decision.
2.3THE ADOPTION DECISION
Schumpeter described the adoption and diffusion of innovation as a pro-

cess by which new products and services are substituted for older versions
that capture opportunities for new economic profit and competitive advan-
tage (Chesbrough 2004; Schumpeter 1939; Tsai 2001). Given these guide
posts, the research literature has come to describe the adoption decision
as a dichotomous choice (Feder, Just, and Zilberman 1985), or a choice
between two optionsadopt or do not adopt (Mercer 2004). Both logit
and probit models have been deployed to measure binary choices and tobit
and multinomial logit applied to reflect a wider array decision options.
While most use a dichotomous or binary decision framework, others sug-
gest that the adoption decision is not so simple and modeling strategies
based on multiple stages or nested within other decisions (Dimara and
Skuras 2003).
It is important to note that the adoption decision is often focused
on innovation adopting organizations (IAOs) (Blayse and Manley 2004;
Damanpour and Gopalakrishnan 2001; Gambatese and Hallowell 2011;
Greenhalgh et al. 2004; Koebel 2008). The adoption choice made by an
IAO is wholly different than the choice made to commercialize a new
good or service by an innovation generating organization (IGO). While
the commercialization process offers significant opportunity for research,
we focus here on IAOs. Future books in the Housing Innovation collection
will analyze the process of bringing innovations through the commercial-
ization process such that IAOs have the opportunity to select them from a
range of options.
Here, the focus is on IAOs and the clusters of factors that Rogers
identified as explanatory of the adoption decision (Rogers 1995). Rogers
studied thousands of adoption decisions and wrote at length about how
the attributes of the adopter, attributes of the innovation, and attributes of
the context in which the decision is made help predict whether or not an
IAO will adopt a new good or service. More recent research labels these
clusters of factors as internal attributes, or those factors describing the
adopter; external factors, or those factors describing the context in which
the adoption decision is made; and product factors, or attributes of the
innovation.
In the construction industry and particularly the residential sector the
builder is a key IAO, much like the farmer in the agricultural industry
(Koebel 2008). Within the construction industry, the builder is the criti-
cal link between a host of factors (e.g., capital, manufacturing, entrepre-
neurship, geography, and public policy) and the innovation (McCoy et al.
2010, 2015). This chapter provides a new window into the factors associ-
ated with home-builders adoption decisions.
2.4ATTRIBUTES OF THE ADOPTER
Empirical studies on the adoption and diffusion of innovation both in con-

struction and in other fields suggest a wide array of internal or attributes of
the adopter associated with the adoption decision. For example, noncon-
struction research has shown that the adopters characteristics and their
perception of the attributes of the innovation are linked and influence the
duration of the adoption process (Ostlund 1974). Additional influential or
associated traits included: firm size (Dewar and Dutton 1986; Kimberly
and Evanisko 1981); managerial attitude toward change, technical know
ledge resources, administrative intensity, internal or external communi-
cations, centralization (Damanpour 1991), and concerns about reputation
(Gann and Salter 2000).
Within the construction literature, Koebel (2008) highlights the pres-
ence of technology champions and levels of research and development
funding while Damanpour and Schneider (2006) describe the influence of
project manager support for innovation. Further, Hartmann (2006) notes
the centrality of a firms sense of how innovation will create value, whether
they adopt early or later, and the extent to which firms see the availability
of competing innovations. While broad, honing in on the types of influen-
tial factors helps better frame the home-builder adoption decision.
Specific to housing and home building, a 2004 survey of builders
echoed these broad themes related to the internal attributes of the adopter.
Data from the survey showed that national and regional home builders,
multi-family builders, modular, and custom builders were more likely
to adopt innovations than other firms (Koebel et al. 2004). These firms
were likely to: have a technology advocate working for the firm, stress
creativity, employ a technology transfer program (e.g., HUDs PATH),

and leverage union labor at least some of the time. Innovative firms also
recognized the importance of demand for innovative products (from home
buyers) as well as the ability of a manufacturer to stand behind the quality
of their product (Koebel et al. 2004).
Related research points toward firm size as an important attribute of
adopting building firms. Koebel et al. (2004) found that larger builders
tended to be earlier adopters of innovations only when new materials
provide potential cost savings, improvements in production processes,
reductions in call backs, and exposure to liability. These researchers also
found that smaller builders tended to adopt new materials where consumer
awareness of that product was concurrently high and the price of the new
material was superior to its replacement (Koebel et al. 2004).
Industrial economics research reveals that complementarity, or the
adoption of substantively or functionally related innovations, provides
a useful tool for decision contextualization (Cassiman and Veugelers
2006; Freeman 2002; Gilli, Mancinelli, and Mazzanti 2013; Miravete and
Pernias 2006). In the context of home building, for example, if a firm
adopted building information management software (BIM) and sup-
ported the Leadership in Energy and Environmental Design (LEED) cer-
tification of its staff members, it would be plausible to suggest that they
would be more likely to adopt higher energy performance technologies if
circumstances permitted. Further, as the builder is the central focus of this
chapter, it is important to note that they represent and act in, to a degree,
the interests of a home buyer. Therefore, measurement of the attributes of
the potential buyer is also importantthough the literature is opaque on
precise attributes that play significant roles. Speaking to that point, Koebel
and McCoy (2006) argue that not all innovation should be assumed to
provide positive benefits for the firm.
2.5ATTRIBUTES OF THE PRODUCT, SUPPLY

CHAIN, AND COMMUNICATION NETWORKS
The external attributes of the innovation that influence the adoption

decision have been well documented in innovation literature. Condensing
the countless of papers on innovation, Rogers identified five attributes
associated with the adoption of innovation: observability, trialability, rel-
ative advantage, complexity, and compatibility (Rogers 1995). Together,
these attributes relate to the potential adopters ability to see, touch, try,
compare the price and functionality of, and understand the innovation in
their market context (Greenhalgh et al. 2004).
Network theory can also open a window into the adoption decision.
It suggests that there might be network effects based on the density and
proximity of builders on a regional basis reflecting the communication and
contagion characteristics of diffusion. Based on recent research, it seems a
useful strategy in operationalizing communication about innovation is to
utilize a distance decay function reflecting the size and density of both the
market and the home-building industry (Raub and Weesie 1990).
2.6ATTRIBUTES OF THE MARKET
Research shows that contextual (Dale and McQuater 1998) or external

factors influence the adoption of an innovation over time (Rogers 1995).
Among these factors is client orientation to innovation, climate (Andrews
and Krogmann 2009; Kok, McGraw, and Quigley 2011), industry structure
or relationships, attributes of the built environment (Ewing and Hamidi
2013, 2014), communication networks (Rogers 1995), market area control
variables (Koebel 2008); and spillover effects between markets (Simcoe
and Toffel 2011).
Diffusion research and policy suggest that there are a number of
attributes of the market, in which the adoption decision occurs, that are
significant predictors. A study about the decision to adopt the innovation
of eco-labels, including the U.S. Green Building Councils LEED or the
Environmental Protection Agencys Energy Star (ES), found that a signi
ficant percentage of the decision could be predicted using market factors
describing income, unemployment rate, climate, energy prices, and public
policy (Kok, McGraw, and Quigley 2011). Bond and Devine showed that
different types of public policy encouraged the adoption of eco-labels in
multi-housing markets (Bond and Devine 2015).
These market attributes are logical predictors that are regularly used
in the sustainable real estate literature as predictors in hedonic pricing
models. Scholars analyzing both commercial and residential property with
increased environmental performance have used the presence of public
policy, climate, income, employment, energy prices, and relative location
(or urban form attributes) as predictors of green home and building price
premiums (Eichholtz, Kok, and Quigley 2010; Pivo and Fisher 2010;
Wiley, Benefield, and Johnson 2010). It seems rather likely that adoption
decisions are associated with the presence of and variation in public policy
and climate given the geographic variation and availability of policy
(Kontokosta 2011; Simons, Choi, and Simons 2009).
Similarly, many of these same factors are used in models examining
the extent to which environmental innovations and features mitigate
ortgage default (Kaza, Quercia, and Tian 2014; Pivo 2014; Rauterkus,
m
Thrall, and Hangen 2010). These findings are bolstered by evidence from
studies in commercial construction innovation on the role of the govern-
ment policy in promoting the adoption of innovations (Morledge 2011;
Wandahl et al. 2011; Wong, Wong, and Nadeem 2011). Further, urban
design and compactness have been linked to a range of public health and
property-related issues (Ewing and Hamidi 2013; Ewing et al. 2014).
Findings built upon earlier evidence suggest that the primary barriers
to the diffusion of innovation in the construction industry were highly
cyclical markets, a preponderance of small firms (vertical and horizontal
fragmentation), institutional factors such as building and zoning codes,
and unionization (Blackley and Shepard III 1996).
2.7TIME
Besides market attributes, traditional Bass models stress the role of time as
a critical factor in the spread of an innovation into a market (Bass 2004).
Including the effect of time provides researchers with the opportunity to
observe the extent to which bandwagon effects, exogenous shocks such as
recessions, and also unobserved variables that may also contribute to the
adoption decision. In particular, time is an important metric to include in
diffusion models, as the critical task of the model is to determine which
factors, beyond time (most especially given the volatility of the 2000 to
2010 period), influenced adoption decisions.
2.8 KOEBELS DIFFUSION MODEL
Reflecting the literature and nonresearch-based conversations with hous-

ing experts and home builders; we propose the following conceptual model
describing influences on the decision to adopt an innovation (here applied
to a green, energy efficient, or high performance product) (Figure2.1).
The conceptual model, what is tentatively called Koebels Diffusion
of Innovation model, measures the builders decision to adopt of inno-
vation as a function of internal, external, and product attributes. More
specifically, a builders decision to adopt a high performance building
technology innovation is likely a function of: firm characteristics, industry
characteristics, market area characteristics, product characteristics, public
policy, and time effects. In the sections that follow, we describe the com-
ponents of this conceptual model and how we intend to convert it into an
Size
Wealth (income, house value)
Concentration Location within meta spatial system Relative advantage (price,
Supply chain & production logistics Heating & cooling degree days productivity, performance)
Vertical integration (subcontractor Compatibleincompatible (with
relationships) building system)
Horizontal integration Simplecomplex
Testableuntestable
Capitalization
Observableunobservable
Research & development
Adoption
of green
building
technology
Size Federal stimulus expenditures
Organizational capacity and human Green building certifications
resources Utility rebates
R&D investment State and local grants
Technology readiness
Other public incentives to adopt
Technology Champions Launch and take off (acceleration of green building technologies
diffusion)
Chasm between early adopters and
middle adopters
Band-wagon or herd effects
History of continuous improvement
Saturation, challenge and replacement
Figure 2.1. Conceptual model and variables.

Source: McCoy et al. (2015).
empirical regression model using data from the National Association of

Home Builders and public data sources.
2.9 MEASURING THE ADOPTION DECISION
The adoption decision is often described as a dichotomous choice though

some have suggested that a multi-stage or nested dichotomous choice
is also an appropriate description. It seems that crafting the metric of
measurement for adoption decision is best conducted on a case-by-case
basisrelying heavily and unoriginally on the phrase it depends. Both
the binary and the nested choice frameworks have their merits in various
circumstances.
With respect to housing and the choice to adopt various technology
innovations, one additional variation on the adoption decision is the choice
between substitutes. Often, the builder will be faced with the choice of
several options that each plays a similar role and could provide a solution
to the problem or situation with which she is faced. For example, when
selecting a thermostat to control the heating and cooling system in a hous-
ing unit (or even a zone in a housing unit), there are dozens of options, all
economic substitutes or categorically interchangeable products. So, the
builder is faced with the selection of one product from a range of other
similar products that perform the same basic function.
There are, of course, substantive differences between thermostats

and one could argue that a digital unit with internet connectivity and
programmed with smart software is a wholly different product than an
analog dial that one uses to simply set and hold the temperature of a home.
However, the builder is faced with the decision of whether or not to adopt
one or the other to serve the needs of the home occupant. Given this choice
of one from among many, we argue that both the classic dichotomous
choice and the multi-stage adoption frameworks can both be made to fit
this on the ground scenario by expanding such that the no option of
a yesno dichotomous decision includes all of the other products that
are available to the adopter. This seems to mimic the builders choice in
the field.
2.10DEPENDENT VARIABLE AND POTENTIAL

STATISTICAL MODELING TECHNIQUES
Given the choice of one among many products, one way to model the
adoption decision is to describe the dependent variable as the builders
choice to adopt one building technology from a cluster of its economic
substitutes. Such a description could be specified in an empirical model
as a binary, 1 or 0 outcome where the builders adoption of an innova-
tive product from among the cluster could be labeled as 1 while all other
choices would be labeled as 0. With this dependent variable specification,
the binary class of regression models (e.g., logit and probit) seem espe-
cially well suited for analysis. As such, we specify the dependent variable
as a U.S. home builders decision to adopt or not adopt high performance
technology from among a cluster of its traditional economic substitutes.
2.11INDEPENDENT VARIABLES
Drawing from the literature, a cadre of independent variables was

developed to reflect the three primary types of factors that influence the
adoption decision: internal attributes, external attributes, and product

attributes.
With respect to product attributes, relative cost advantage refers
mainly to price and is measured through RS Means 2010 national cost
data. Cost factors that affect the local cost of doing business (based on RS
Means 2010 national cost data) per year is, however, available and was
included in the model.
Internal attributes, or attributes of the adopter, are measured both by

firm characteristics and market area characteristics. Our model includes
measures for company size (using number of houses built annually as
a proxy), and organizational capacity based on diversity of operations
spanning residential building types that include multi-family housing.
Additionally, we include measures of the firms average housing unit size
and average sales price. To test the firms disposition toward adopting
innovation, we include a measure (complementarity index) of whether or
not the firm adopted other types of high performance products during the
same year. R&D investment in the housing industry is notoriously low and
not included. Data on technology champions within each respondent firm
was not available.
External industry characteristics noted in the residential construction
literature include concentration, supply chain, subcontractor networks,
and efficiency. The construction literature discusses the importance of
measuring construction efficiency, which includes the productivity val-
ues for technologies and the cost of insurance. Productivity values are the
expected amount of time to install a product at a national level. Change
in the productivity value could affect the use of product technologies, as
it is an indicator of the labor required at a local level. Within producti
vity, we also consider the subcontractor fragmentation of the industry and
separated work division values that independently affect product use. We
include a measure for worker compensation insurance fees, also separated
by the work division associated with installation of the building product.
Market area characteristics include Core Based Statistical Area
(CBSA)-level measures for population size, median income and median
house value, and location within a network of market areas as an indicator
of the potential for bandwagon effects. These effects were measured using
a distance decay variable based on the product of the CBSAs population
size and the population sizes of all other CBSAs divided by the square of
the distance between the CBSAs (Raub and Weesie 1990). This variable
captures the potential contagion effects (e.g., learning about new technol-
ogies) positively related to market size and inversely related to the square
of distance (an accelerating distance decay effect) (McCoy et al. 2015).
Additionally, to measure supply chain effects, we use proxy measures
on the number of firms at the CBSA level for industry data for construction
materials suppliers from the County Business Patterns series. Similarly
we test subcontractor network effects using a proxy measure for the num-
ber of product related subcontractors at the CBSA level, also from the
County Business Patterns series. For the high efficiency windows model,
we use the number of framing subcontractors in the CBSA. Alternative
s pecifications, of the supply chain and subcontractor network measures,

include the number of larger firms in the CBSA (based on those with 50 or
more employees).
Public policy impacts on innovation and on green building have been
documented in previous research, but the focus has been on buildings and
certifications and not on specific product use by residential builders. We
incorporate measures for federal stimulus funds (state-level American
Re-Investment and Recovery Act [ARRA] Funds Per Capita), green build-
ing certifications, utility rebates, state grants, and a variety of other state
and local incentives for energy efficiency. We also include the states sales
tax as a potential negative impact due to higher costs. Additionally, urban
development compactness is measured via Ewings composite index
(Ewing and Hamidi 2013).
To measure time-related effects, we included year as either a con-
tinuous measure or a discrete dummy variable measure to capture exo
genous shocks and bandwagon effects reflected in changes of the impact
of time on use, innovation chasm reflected in no impact of time beyond the
stage of early adopters, and maturation or peak saturation effects reflected
in negative impacts of time. As noted earlier, our objective is to build a
model that reduces the unexplained variation that might otherwise be
absorbed in the time measure.
2.12 REGRESSION MODELING
To analyze how external parameters support a general shift toward

environmental performance as a central component of diffusion in the
home-building industry, we will fit logistic regression models to the
builders choice questions. The dependent variable will be specified so
that 0describes use of the traditional technology option(s) (e.g., double
paned windows without argon gas filling) and 1 describes the use of at
least one of the high performance economic substitutes (e.g., triple paned
windows).
Where regression models have conflicting goalsparsimony and
explanationresearchers utilize model selection tools to hone in on opti-
mal model specifications. The most common of these tools is known as
stepwise. There, predictors are selected into and out of the model based
on their p-values and preselected threshold alpha value. A less common
approach is to use Least Absolute Shrinkage and Selection Operator
(LASSO) as a variable selection technique. LASSO is a form of continu-
ous variable selection that operates by imposing a constraint on the sum
of the magnitude of regression coefficients (Tibshirani 1996). Where step-

wise tools are constrained by binary decision rules (i.e., in vs. out), the
LASSO is able to partially include variables that have limited predictive
ability over the outcome in question (McCoy et al. 2015). Additionally,
this technique is made more useful when splitting the analysis dataset
into two pieces prior to regression modeling. With a training set and a
re-testing set, it is possible to further push toward both shorter and more
explanatory models.
2.13DISCUSSION
Where innovation is a widely discussed topic, there remains a great deal of

under-studied space relative to housing and home building. This c hapter
summarized a research framework to investigate U.S. home builders
choices to adopt highly efficient innovative housing technologies. It is an
important topic to study as builders sit at a critical juncture in the hous-
ing creation decision chain and can influence how housing units address
change related to energy consumption while also reflecting shifting tech-
nology, demography, and policy landscapes. Home builders have been
known, in many cases, for resisting adoption of new technology, creating
a need for methods that target a divergence from previous firm adoption
patterns through: (1) promoting recent trends in environmental goals and
(2) providing a view into market agility and competitive advantage for
technologies in U.S. housing.
Until now, literature on the role of innovation on economic growth
has argued that firms are engines of growth through innovation. Innovation
studies have been limited to industries with adequate data. This chapter
presented the case for utilizing data available for the residential construc-
tion industry. While U.S. housing has historically been marked by its lack
of change, innovative building technologies have recently diverged from
prior adoption and diffusion patterns. In place of previous path depen-
dency, the construction industry is demonstrating a widening awareness
and likely use of innovative practices and technologies. Little empirical
evidence measures and analyzes the choice of building products, a short-
coming addressed in this project. Based on a review of the adoption, diffu-
sion, technology, construction, real estate, and statistics literature, we have
identified a variety of factors that are likely to be associated with builders
adoption decisions around high performance technologies.
Moving forward, analysis and measurement of green building diffu-
sion can be defined and modeled using the foundation presented in this
chapter. It is now possible for dichotomous use to be measured through

data on product characteristics, firm characteristics, industry character-
istics, market area characteristics, climate, public policy and time. The
logistic regression model described here provides a tool for the measure-
ment of the use of green building technologies based on adoption and
diffusion theory, research on impediments to innovation in construction,
valuation research (hedonic models for price of residential and com-
mercial buildings), and research on adoption of building construction
innovations.
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CHAPTER 3
Demonstrating a
Diffusion of Innovation
Model: Patterns of
U.S. Homebuilders High
Performance Product
Adoption
Andrew R. Sanderford and Matthew J. Keefe
3.1FROM CONCEPTUAL TO EMPIRICAL MODEL
Despite the intense study of innovation in both business and the academy,
in-depth studies of the diffusion innovation in housing and construction
occur rather infrequently (Koebel 2008; Toole 1998) and generally involve
case studies or small surveys; though there are recent exceptions (Kale
and Arditi 2009; Rose and Manley 2014). The frequency of study and
methods of analyzing the diffusion of innovation (the cumulative adoption
decision processes within firms) reveal how fraught with obstacles the
research process is. It is time consuming and requires study participants
to recall choices and opinionsa source of bias. Given this, diffusion of
innovation research has typically focused on applying models from other
disciplines to the identification of factors associated with some adoption
decision outcome.
The purpose of this chapter is to convert discussion from Chapter2
on the adoption of innovation among the U.S. home builders from the
conceptual to the empirical. To do so, we rely on proprietary data from the

National Association of Home Builders (NAHB) and several additional
sources of public and private data (e.g., U.S. Census American Commu-
nity Survey, RS Means cost estimates) to operationalize and test the con-
ceptual model. Our goal is to demonstrate an application of the conceptual
model and to prompt discussion about future needs within both research
and practice. We focus on energy efficiency as an innovation and investi-
gate it through builders decisions to adopt a higher energy performance
technology from among a cluster of economic substitutes between 2000
and 2010.
3.2DATA
Following the framework home builders innovation adoption decision,

we operationalized the dependent variable as binary, single-stage decision
to adopt a higher energy-performance product from a cluster of economic
substitutes. During the spring of 2012, the U.S. Department of Housing
and Urban Development (HUD) proposed 10 energy-performance prod-
ucts that could be leveraged toward affordability: Framing- Optimum
Value Engineering (OVE); Structural Insulated Panel Systems (SIPS);
Insulating Concrete Form Systems (ICFs); Spray Foam Insulation; Install-
ing Heating, Ventilation, and Air-Conditioning (HVAC)and Duct Systems
in Conditioned Space; Customizing the HVAC system; Programmable
Thermostats and Polyethylene Plastic Piping (PEX).
Specifically, we examine U.S. home builders decisions to adopt PEX
or PEX-AL-PEX (a layer of aluminum sandwiched between two layers
of PEX) water distribution piping from among that products cluster of
traditional substitutes or alternatives (e.g., PVC and copper) from 2000 to
2010. An energy innovation, PEX reduces heat loss as water travels from
the water-heating unit to the tap promoting energy efficiency within the
system. Similarly, PEX and PEX-AL-PEX are flexible and are installed to
shorten the distance the water travels from the water-heating unit to the tap.
Data for the dependent variable are from the Builders Practices Sur-
vey (BPS), an annual survey conducted by Home Innovations Research
Lab, a subsidiary of the NAHB. The BPS documents the self-reported
material selections of NAHB member respondents (NAHB 2014). The
survey covers nearly 1,100 products, across more than 40 categories, and
has been conducted since the late 1990s. Our research utilizes data from
2000 to 2010 in the dependent variable specification representing approxi
mately 30,000 builder respondents. We limited the sample to respondents
DEMONSTRATING A DIFFUSION OF INNOVATION MODEL25
that reported operating in the contiguous 48 states during the years 2000
through 2010. With each of these restrictions, the total number of observa-
tions in each model (described below) was approximately 10,000 (Koebel
et al. 2015).
To the best of our knowledge, the BPS is the largest set of cross
sectional data available to analyze research questions focused on build-
ers annual use of individual construction technologies. The BPS is an
annual survey but is neither longitudinal nor fully randomized. How-
ever, comparing the distribution of the BPS to the distribution of home
builders in the U.S. Census County Business Patterns data in randomly
selected years of our analysis period revealed an average correlation of 0.7
(McCoy et al. 2013). In addition to information about our unit of analysis,
the home-building firm, the BPS also includes characteristics of respon-
dent firms including their office location and summary measures of the
number, size, building type, and price of the housing units built during the
previous year.
Based on the literature described in Policies, Programs, and People
that Shape Innovation in Housing and summarized in Chapter 2, we clus-
tered the independent variables into three categories: (1) attributes of the
innovation, (2) attributes of the adopter, and (3) contextual or external
conditions.
Rogers extensive work on the diffusion of innovation identified five
attributes of an innovation associated with product adoption: observabi
lity, trialability, complexity, compatibility, and relative advantage
(Rogers 1995). In this model, we include several of proxy measures that
attempt to measure these attributes. Measures of trialability, complexity,
compatibility, and observability of each of the high performance prod-
ucts were measured through the proxy variables of the count of the total
number of construction wholesalers in the respondents primary mar-
ket area (CBSA) taken from Census County Business Patterns. While
imperfect and reflective of the challenge of adapting diffusion of inno-
vation models to larger data sets, the count serves as a metric of infor-
mation availability for builders. Relative advantage, a function of price,
was measured as a ratio of the price of the dependent variable over the
average price of its economic substitutes. Data for the relative advantage
variable was drawn from RS Means in the year 2010 (Table 3.1). The
ratio specification of relative advantage sought to replicate, coarsely,
how a builder might compare prices in selecting a product among its
substitutes. Anadditional variable describing the cost of construction
in a CBSA was included to control for market-to-market cost variation
(McCoy et al. 2015).
Table 3.1. Attributes of innovation
Variable name Definition Source

# of Construction Total number of construction County Business
wholesale firms wholesaling firms in CBSA Patterns
Relative advantage Average cost per unit of high RS Means
performance technology
or average cost per unit of
economic substitutes
Construction cost Average cost of construction RS Means
in CBSA
Given the size of the data set at the unit of analysis, creating detailed
measures about the attributes of the adopter was impractical. Therefore, the
model does not contain any measures of the firms investment in research
and development, the level of support for innovation among executives,
the presence of an innovation advocate, the potential advocates percep-
tions about innovation, or other related attributes (Sanderford et al. 2015).
However, several descriptive measures are included in the model: firm
size, total number of homes produced as well as the weighted average
home price and weighted average home size produced by the firm. Each
of these variables, drawn from the BPS data, attempts to stand in for many
of the attributes identified in the literature but not available in large sample
data sets (Table 3.2).
Additionally, to stand in for the firms disposition toward high per-
formance innovation, a complementarity index sums the number of
adoptions of other complementary, high performance technologies in
large building systems by the builder. Using the same specification as the
dependent variable, the complementarity index sums respondents choices
to adopt five high performance technologies from among their traditional
economic substitutes. The five technologies are windows, thermostats,
SIPS, ICF, and high performance insulation. Furthermore, where the dif-
fusion of innovation is largely a communicative process, the researchers
also included a variable (Gravity Network Index) describing the poten-
tial linkages or communication networks among single-family builders.
The complementarity index variable was drawn from the BPS data while
data for the Gravity Network Index metric was drawn from the American
Community Survey (McCoy et al. 2015).
Table 3.2. Internal factors

Complementarity index Sum of BPS respondents choices BPS
to adopt high performance
window, framing, foundation,
insulation, and thermostat
technologies over traditional
economic substitutes
Total # of homes built Total # of homes built by BPS
respondent (100s)
% of Multi-family % of MF units built within
housing units respondents annual housing
unit total
Weighted avg. HU size Average of single-family housing BPS
unit size weighted by type:
Starter, Move-up, Luxury.
Type defined by NAHB.
Weighted avg. HU price Average of single-family housing BPS
unit price weighted by type:
Starter, Move-up, Luxury.
Type defined by NAHB.
Gravity-network index Distance decay calculation: Author
Distance and Total # of SF
building contracting firms in
CBSA
External or contextual factors are the third category of independent

variables (Table 3.3). These variables were incorporated into the model as:
economic, climate, regulatory, demographic, industry, and built environ-
ment attributes. Each was collected from public data sources. We specified
data at the level of the CBSA, or in some cases the state which respondent
listed as their primary business address. For example, three public policy
measures from the Environmental Protection Agencys (EPA) Database of
State Incentives for Renewable Energy (DSIRE). In the database, incen-
tives relative to energy efficiency and energy generation are clustered into
various categories. We condensed those categories into the three most
common typologies: rebates, grants, and other incentives (e.g., loans)
(Koebel et al. 2015).
Table 3.3. External factors

2010 Median 2010 Median value of Census
housing value housing units
% Owner occupied 2010 percentage of Census
housing units owner occupied HUs
in CBSA
2010 Med. household Median household Census
income income in CBSA
2010 GDP/Capita 2010 Gross domestic BEA
product/capita of CBSA
2010 Total population Total population in 2010 Census
in CBSA
# of Pluming or Total of plumb and HVAC County
Electrical contractors contracting firms in CBSA Business
Patterns
DSIRE: Energy Count of local, regional EPA
rebates utility energy rebates
available to all parties
in state
DSIRE: Energy Count of energy grants EPA
grants available to all parties
in state
DSIRE: Other Count of other (non rebate EPA
incentives or grant) energy incentives
available to all parties in state
Five year KWH price Medium term average EIA
of electricity prices
by state
ARRA stimulus $/Capita of federal ARRA
funds per capita stimulus funds spent
in state
Heating degree days 30 year average of heating NOAA
degree days in state
Cooling degree days 30 year average of cooling NOAA
degree days in state
Sprawl index Index of compact growth R. Ewing
Data describing climate was also included based on recent research

analyzing the diffusion of energy efficiency within the commercial real
estate market (Kok, McGraw, and Quigley 2011). Following the guidance
of their work, both heating and cooling degree-days, measures of climate
variability, were added. Differing from prior research, we calculated the
mean of both climate measures over a 30-year period, seeking to remove
some of the noise likely to be found in climate data (Kok, McGraw, and
Quigley 2011).
3.3 EMPIRICAL MODEL
With these dependent variables representing the builders adoption

decisions, we analyzed the data first visually through the cumulative
adoption chart and then second using logistic regression (Agresti 2002).
The cumulative adoption chart, more commonly called the diffusion
curve, plots out the cumulative number of adoptions of the high perfor-
mance innovation in a given year. It allows for a visual review of the data.
To create greater understanding of the diffusion curve, we use logistic
regression to identify those variables associated with builders adoption
choices (Figure 3.1).
High performance piping alternative (PEX & PEX-AL-PEX)

Traditional piping alternative (All other piping products)
100
90
80
70
Percentage of users
60
50
40
30
20
10
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Year
Figure 3.1. Cumulative adoption of HP piping.

As the data set contains a large number of predictors, adding addi-

tional factors beyond time is expected to improve model fit; however,
there is risk of producing an over-fit model as well. Toward parsimony and
to defend against over-fitting the model, we utilized the Least Absolute
Shrinkage and Selector Operator (LASSO) tool to guide in model selec-
tion. The LASSO minimizes the residual sum of squares subject to the
constraint that the sum of the absolute values of the independent variable
coefficients is less than some constantresulting in some coefficients
being 0 and leading to a parsimonious and interpretable model (Tibshirani
1996).
3.4 RESULTS AND DISCUSSION
The cumulative adoption plot follows the traditional s-curve shape of other
consumer product diffusion curves. At the beginning of the study period,
those builders adopting the higher performance product accounted for less
than 20 percent of market. Then, from 2007 to 2010, the adoption of high
performance piping products grew quickly and became the market leader.
The logistic regression model goodness of fit statistics reveal a good
deal amount about U.S. home builders behavior relative to the adoption
of high performance innovationswater distribution pipe in particular.
When analyzing adoption solely as a function of time, the model was
slightly more cable of accurately discerning adopters from non-adopters
than a coin flip (c-statistic of 0.52). When including all of the factors and
utilizing the LASSO selection tool, we were able to substantially raise
the capability of the model to satisfactory levels (c-statistic 0.69). The
c-statistics of 0.7 to 79 are considered strong while 0.8 and higher are
considered excellent (Hosmer and Lemeshow 2000).
In addition to time, the two most significant predictors of whether
or not builders adopted high performance piping products in lieu of their
traditional substitutes were the builders other high performance product
choices (complementarity index) and the strength of the economic climate
in their market area (GDP/capita); tracking with prior research in sustain-
able housing and commercial real estate (Table 3.4). Somewhat surpris-
ingly, the price of electricity and relative price of high performance piping
alternatives to their traditional substitutes (relative advantage) were not
selected into the model. Based on prior research, we expected these to play
a stronger role in builders adoption decisions (Rogers 1995).
The complementarity index variable finding reveals a good deal about
the disposition of the builder toward innovation. The greater the n umber
Table 3.4. Adoption of PEX
Variable Odds ratio

Year 1.44
Complementarity index-No PEX 1.32
Total # of homes built 1.04
% of Multi-family HU 1.08
Weighted avg. size 0.97
2010 Total population 0.98
# of Construction wholesale firms 1.00
2010 Med. HH income 1.00
2010 GDP/Capita 0.00
Heating degree days 1.00
Cooling degree days 1.00
Construction cost 0.10
DSIRE: Energy grants 1.00
DSIRE: Other incentives 0.98
% Owner occupied HU 0.97
Sprawl index 0.99
of high performance building products the builder used, the higher the
probability that they adopted PEX or PEX-AL-PEX from among the
available options. In the context of other types of adopters in other indus-
tries, this is a logical finding. It follows that those with a propensity to
use higher technology solutions tend to be likely to adopt other high tech
products. Furthermore, with respect to the other attributes of the adopter,
we found that firm size as measured through the volume of homes built
in a year (total number of homes built) and the degree to which the build-
ers portfolios also included multi-family products were positively asso-
ciated with the decision to adopt PEX. The weighted average size of the
homes built by builders was negatively associated with the adoption of
high performance piping. It is plausible that as homes get larger, there is
less demand for hot water innovation. Larger homes could have multiple
hot water sources. Koebel et al. (2015) found the opposite with builders
high performance window choices.
Several external attributes influenced builders high performance
piping adoption decisions. Both climate and public policy factors revealed
nuanced and mixed messages. In places with cooler climates, those with
more heating degree-days, builders were more likely to adopt PEX. Simi-
larly, in states that made larger numbers of energy grants available, build-
ers were more likely to adopt PEX. However, in states where there were
greater numbers of other incentives available (e.g., loans), builders were
less likely to adopt PEX (Sanderford et al. 2015). Urban form did not
influence the adoption decision heavily.
3.5CONCLUSIONS
The empirical application of the conceptual diffusion of innovation model

to high performance water piping technology reveals that internal, exter-
nal, and attributes of the innovation all played a role in influencing build-
ers adoption decisions from 2000 to 2010. Furthermore, using LASSO
model selection technique produced a more parsimonious model than the
original without losing predictive capability. These broad findings add to
the growing discussion in the construction industry about how and why
builders and building firms adopt innovations.
Two of the most interesting findings from this demonstration are:
(1)the confirmation that builders other high performance product choices
affect whether or not they adopted high performance piping and (2) that
public policy factored in via the state-level incentives. The complemen-
tarity index variables describing other choices made by the builder con-
firm research from outside the construction industry and suggest that the
adopters disposition toward innovation can reveal a great deal about
the probability they will adopt innovative products. Similarly, where the
adoption decision can be affected by policy illustrates that housing regula-
tors should think critically about how best to amplify the diffusion patterns
of those technologies that benefit both the consumer and the environment.
That urban form, a function of policy and market forces, is a weak predic-
tor of adoption suggests there is a need for further research; it is unlikely
that location and form have such limited effect based on prior research.
While these findings are exciting, there remains a great deal of
research still to be done. First, though this chapter has identified the
clusters and broad attributes associated with the adoption of high perfor-
mance technologies, there is a great need for both time series analysis
and also more in-depth interviewing to begin to identify the causal factors
that more robustly define the choices made in the home-building market
place. Only through revision, refining, and more deeply testing the fac-
tors described above, can scholars begin to link the conversation about
adoption and d iffusion patterns back to the new product development

and commercialization conversation. These two research conversations
are important, as there is very likely an iterative or cyclical connection
between them. Developing insight into how builders choose products and
how new p roduct developers bring them to market to meet demand is
critical to improving the environmental performance of the housing stock
and creating more financially and environmentally sustainable housing
markets.
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CHAPTER 4
Establishing Builder
Confidence for the
Residential Construction
Industry
Dong Zhao, Andrew P. McCoy, and Andrew R. Sanderford
4.1INTRODUCTION
Indices describing market participants feelings about latent (unobser

vable) constructs have, for quite some time, provided important signals
to their relevant market places. Latent constructs include concepts such
as confidence, sentiment, or fear (Croushore 2005). Because no instru-
ment can be created to measure these emotions directly, economists and
social scientists tend to craft survey instruments and utilize the data to gain
insight into existing and future trends. These data and analyses also send
important signals on the degree of optimism on the state of economy, the
consumer, commodities, or market security (Casey and Owen 2013).
At present, the National Association of Home Builders (NAHB) and
Wells Fargo publish the Housing Market Index (HMI), a measure of U.S.
home builders sentiment about the market for new housing. Specifically,
the survey asks respondents to rate market conditions for the sale of new
homes at the present time and in the next six months as well as the traffic
of prospective buyers of new homes. The HMI has been suggested to
correlate strongly with new housing starts. Outside of the HMI, there are
more recent constructs meant to measure niche areas of the industry, like
Houzzs Renovation Barometer.
Beyond indices focused on unobservable market phenomena, there

are several housing price indices that draw on transactional data to
describe the trends in the prices home buyers have been willing to pay
both for existing home and new homes. The S&P Case Shiller Home Price
Indices and the Federal Housing Finance Agency Home Price Indices
each provide measures of the changes in price for single-family housing
units. An index by Redfin aims to measure of home buyer activity prior to
purchase. While these indices are often referenced as bellwethers for the
housing sector of the U.S. economy, they are limited in their measurement
and offer room for improvement.
This chapter introduces a new index measuring confidence around
seven dimensions of the homebuilding industry among production
builders, custom builders, remodelers, replacement contractors, and
other U.S. builders. The purpose of this chapter is to establish a hous-

ing view similar to what the Conference Board (CB) does with Business
Confidence (BC), which they also tie to a set of leading Indicators. At
the core of CBs work confidence measures are survey-based. A current
index that is similar in nature for the housing industry is the Wells Fargo/
NAHB HMI. This chapter reports an exploratory effort to provide more
depth and track the market as an improvement from the HMI. Our newly
established Builder Confidence Index (BCI) separates the market into
segments of the production/custom builders and remodelers/replacement
contractors and adds seven important indicators including sales, market,
materials, government, and macroeconomy (Giannone, Reichlin, and
Simonelli 2009).
Contextually, within this book, chapters are focused on measuring
innovation in housing and innovative methods to measure housing. This
chapter falls into the latter category and describes an innovative empirical
lens through which researchers are processing housing data.
4.2INDEX BACKGROUND
For many years, large-scale surveys have been used to measure consumer
confidence in the United States (Curtin 2007). The two significant exam-
ples are the CBs Consumer Confidence Index and the University of
Michigans Index of Consumer Sentiment. The Consumer Confidence
Index combines responses from 5,000 households to five questions about
current and expected future conditions. Opinions on current conditions
account for 40 percent of the index and expectations of future conditions
account for 60 percent. The Index of Consumer Sentiment encapsulates
ESTABLISHING BUILDER CONFIDENCE37
responses from 500 telephone interviewers to 50 core questions about

their attitudes on business conditions. The questions asked cover three
areas of consumer confidence: personal finances, business conditions, and
future buying plans.
An important difference between the two surveys is the period of
future expectations. The CB asks about the short-term expectations over
the next six months while the University of Michigan asks about long-
term expected conditions over the next one to five years. For example, the
five questions of Consumer Confidence Index are:
How would you rate the present general business conditions in your
area?
What would you say about available jobs in your area right now?
Six months from now, do you think general business conditions
will be better, the same, or worse?
Six months from now, do you think there will be more, the same, or
fewer jobs available in your area?
How would you guess your total family income to be six months
from now?
Survey methodologies are also believed suitable to housing research

and market prediction (Emrath 1995). The NAHB has been collecting
monthly data to produce the HMI to measure builder sentiment for a long
time. HMI focuses on the single-family housing market in the United
States from the demand side of the equation. Participants are asked to
rate their experienced and expected housing market conditions in three
categories: good, fair, or poor.
Nevertheless, builder confidence is impacted by multiple factors other
than market conditions only. For example, results from a recent empir-
ical study confirmed that media coverage on the economy might affect
peoples future expectations and thus influence their confidence (Casey
and Owen 2013). Builder confidence should reflect a broader spectrum
of building market participants and dig deeper into the array of factors
that influence their outlooks (Stock and Watson 2011). As a result, the
authors explore the feasibility of improving the HMIs survey instrument
and incorporating additional indicators that will increase our industrys
measurement of housing confidence.
Our ultimate goal is to explore ways of establishing a comprehensive
housing view over time, similar to the CBs BC indicator, which is also
tied to other Leading Indicators. The core of CBs confidence measures is
also survey-based.
Toward that goal, this chapter focuses on two large groups: new home
builders and renovation contractors. Each group plays a strong part in the
housing sector and contributes significantly to the housing component of
gross domestic product. However, as both groups are large, each group
needs to be broken down regionally and into key categories. To start, we
break down the category of new construction into production builders
and custom builders. Then, we further divide these categories by firm size
and type of homes built.
Yet, it is tougher to define the industrys emphasis on locality (local/
regional/national). While one locality may be able to be defined
regional/national can be more difficult; it is more about size than degree of
regionality. For renovation work, we originally decided to break down
the categories into remodelers and replacement contractors with the poten-
tiality to use firm size as well based on number of projects.
The researchers conducted broad confidence questions by audience
segment and then requested six to eight underlying variables that were
similarly scaled by panel. These would provide underlying metrics but
would also over time to give readers the basis of understanding what fac-
tors most influence confidence. These metrics reflect the tenets of urban
economic theory and focus on supply side attributes including land, labor,
capital, and regulation as drivers of the housing construction market. The
metrics also include the role of media coverage and its ability to influ-
ence producer confidence. Initial results suggest media coverage having
an effect on consumer perception of the news.
4.3METHODS
To operationalize the analysis of the latent construct of builders con-

fidence we partnered with Hanley Wood (HW), a U.S.-based, leading
housing market company, to conduct a survey of U.S. home builders and
renovation contractors. Over the course of 2014, HW surveyed builders
and renovation contractors using a survey instrument designed by univer-
sity researchers and economists from HWs Metrostudy division.
4.3.1 INSTRUMENT DESIGN
Given the success of the HMI, the initial concept for the BCI was to utilize
a similar style of questions as NAHB, but improve upon the wording and
add additional questions that investigate deeper, such as what sources
informed your opinion? Please see the appendix of this chapter for a
complete example of the survey instrument. For our work, and due to
limitations of HWs sample group, our survey sample population is more
strongly based in production home builders. They are a leading group in
the homebuilding market and comprise up to 70 percent of some major
markets annually.
Consequently, we asked a complete range of leading home builders to
reply to our survey instrument, the BCI. We also included (as previously
described): a source of information question, a correspondence analysis
question for applying techniques to process data rather than as a diffusion
index, and inclusion of concentration index to measure and control for size.
Once surveyed, we investigated market data signals to produce the
BCI, our new index for working across major types of indicators and
ferreting out signals around market movement to which builders are really
listening. The BCI instrument is concerned with quality and homeowner
satisfaction as they are directly impactful while also adding indirect
impacts such as government and regulatory climate indicators to the
index.
The BCI survey integrates seven metrics to previously accepted
confidence metrics. To validate the additional seven metrics, we used an
industry panel for initial testing of the content and language in the survey.
The panel consisted of 36 production builders, 114 custom builders,
290 remodelers, and 35 replacement contractors. The revised indicators
included indicators of sales, market, materials, government, and macro-
economy (see appendix for additional information of the survey instru-
ment) as follows:
1. New business (NB): The quality and volume of a firms leads and
inquiries regarding new business.
2. Orders and job backlog (OJ): The quality and volume of a firms
present job backlog.
3. Product (PR): The availability and material costs of a firms key
product in the next six months.
4. Labor (LB): The availability of sufficient labor and the cost increase
for a firm in the next six months.
5. Lot inventory (LI): The current supply and available volume of lots
to purchase for a firm in the next six months.
6. Government and regulatory climate (GR): The impacts of gov-
ernment policies and regulations on a firms business in the next
sixmonths.
7. Economy (EC): The influences of recent news about economic
topics to builders confidence about the housing market.
Table 4.1. Indicator matrix for builder confidence by segment
Segment
Indicator PB CB RM RC OB
New business X X X X X
Order or job backlog X X X X X
Product availability X X X X
Labor availability X X X X
Lot inventory X X
Government and regulatory climate X X X X X
Economy X X X X X
Abbreviations: PB, production builders; CB, custom builders;

RM,remodelers; RC, replacement contractors; OB, other builders.
The BCI includes these indicators to achieve an overall confidence

measure among varying respondents across segments of the homebuild-
ing industry. Table 4.1 summarizes the indicator matrix for each segment
group, including: production builder, custom builder, remodeler, and
replacement contractor.
The finalized BCI instrument contained 15 questions related to the
indicators of Table 4.1. Each question was designed to be simple, like
How would you characterize your confidence in the strength of your
business over the next six months? Each measure is based on 10-point
Likert scale rating, for example, 1 indicating least confident and 10 indi-
cating most confident. The 10-point Likert setting was used in an attempt
to generate more precise measures.
4.3.2 SAMPLE SIZE
The minimum sample size was determined as 75 to 150 per segment per
census region (N = 75 to 150) distributed throughout the United States.
Based on HWs strong sample sizes for the housing industry, the authors
were confident in the sample goal, providing solid data for testing and
developing the index.
The survey was distributed through e-mail invitations and com-
pleted online. Assuming a 2 percent participation rate among the counts
provided, our database would yield the following sample sizes for each
segment:
Production builders: 394

Custom builders: 337
Remodelers: 1,712
Replacement contractors: 1,098
4.3.3 DATA ANALYSIS
The BCI calculates the mean of the collected response and presents a level
of confidence within a 1 to 100 scale, on which 1 indicates least confident
while 100 indicates most confident. We also anticipated that collected data
may be influenced by impacts from geographical and seasonal variances.
In an effort to gain more accurate reflection of builders confidence, the
researchers use analytic techniques to minimize these variances. There-
fore, we used both a geographical adjustment and a seasonal adjustment
to estimate the different components of our time series and to understand
underlying trends. The purpose of the adjustments was also to remove
geographical, seasonal, and calendar effects from the time series and break
it down into components with varying dynamic features. The adjusted data
remove the repeated short-term impact of these effects and highlight the
long-term underlying trends. For example, the seasonal adjustment takes
out the impact of irregular events or seasonal variations.
4.3.3.1 Geographical Adjustment
The researchers used iterative proportional fitting (IPF) method to per-

form the geographical adjustment. This IPF method is a process to fit data
from contingency tables to meet a set of predefined constraints. Thus it
has been applied in a wide range of analyses where cross-tabulations are
used, such as demography, engineering, transportation, economics, and
information technology. The resultant data from IPF is a joint probability
distribution of maximum likelihood estimates.
Mathematically, IPF relies on the following algorithms:
Pij ( k )
Pij ( k +1) = Qi (4.1)

j ij(k )
P
Pij ( k +1)
Pij ( k + 2) = Q j (4.2)
i Pij ( k +1)

where,
Pij(k) = matrix element in row i, column j, and iteration k;
Qi = predefined row totals; and
Qj = predefined column totals.
The IPF processes shown in Equations 4.1 and 4.2 are iteratively
repeated until the estimated cell values at iteration K meet both Equations
4.3 and 4.4:

j Pij( K ) = Qi (4.3)

i Pij( K ) = Q j (4.4)
Our work uses the geographical data from U.S. Census Bureau
(USCB) as the predefined constraints and the USCBs nine census divi-
sions to weight collected data throughout the United States.
4.3.3.2 Seasonal Adjustment
We used the USCBs X-13ARIMA-SEATS (short as X-13A-S) program

to perform the seasonal adjustment. This method has been widely used
by the nation to remove seasonal patterns from a time series. Technically,
X-13A-S program integrates merits from two major seasonal adjustment
methods: the autoregressive integrated moving average (ARIMA) and
Time Series Regression with ARIMA noise, Missing values and Outliers;
and Signal Extraction in ARIMA Time Series (TRAMO/SEATS); and
allows users to compare the diagnostic results from them. As a result,
X-13ARIMA-SEATS has been recommended by many analysts and econ-
omists to produce seasonal adjustments.
The algorithm of ARIMA model used in X-13A-S is described in
Equation 4.5.
( B) ( B s )(1 B) d (1 B s ) D X t = ( B)( B s ) t (4.5)

where,
Xt = original series;
B = lag operator, and Xt1 = BXt;
f(B) = regular autoregressive (AR) operator;
(B) = seasonal AR operator;

(B) = regular moving average (MA) operator;
(B) = seasonal MA operator; and
t = white noise.
The algorithm of SEATS model from X-13A-S is described in
Equation 4.6.
log X t = log (Tt St Ct I t ) = log Tt + log St + log Ct + log I t (4.6)

where,
Xt = original series;
Tt = trend-cycle component;
St = seasonal component;
Ct = calendar component; and
It = irregular component.
4.4FINDINGS
4.4.1 DATA DESCRIPTIONS
We distributed the survey over a period of nine months from April 2014
to December 2014. The sample included 4,085 qualified responses. It is
equal to more than 450 responses per month on average. Comparatively,
NAHB obtains approximately 400 responses each month to build HMI.
The relative similarity of the monthly sample sizes suggests that the BCI
sample is of sufficient size from which it is possible to generate empirical
observations.
Table 4.2 summarizes the distribution of responses by segment. Home
builders of new construction account for 31.5 percent while renova-
tion builders account for 56.5 percent. The percentage of new construc-
tion turned out to be higher than our expectation of 21 percent; while the
percentage of renovation was lower. The distribution also reflects the
strength of HWs sample pool with production home builders, as expected.
Table 4.3 exhibits the home builder size in terms of revenue. New
construction (predominantly production) builders are larger in size, 42.5
percent of which have revenue of more than $1.5 million. In contrast,
remodelers/replacement contractors are smaller in size. The majority
(62.1 percent) of them have revenue of less than $500,000.
The survey sample data also align well with the U.S. housing market
characteristics, indicating satisfactory representativeness. For example,
Table 4.2. Summary of survey responses
Segment Responses Percentage (%)

New construction 1,288 31.5
Production builders 407 10.0
Custom builders 881 21.6
Renovation 2,306 56.5
Remodelers 2,095 51.3
Replacement contractors 211 5.2
Other builders 491 12.0
Total 4,085 100.0
Note: Round-off error may apply.
Table 4.3. Summary of builder size in revenue
Remodelers/
New construction replacement
Lower Upper Lower Upper
Revenue (US$) % CI CI % CI CI
<$250,000 7.6 5.7 10.0 37.8 35.6 40.1
$250,000$499,000 13.2 10.8 16.0 24.3 22.4 26.4
$500,000$1,499,999 36.7 33.0 40.4 23.1 21.1 25.1
>$1,500,000 42.5 38.7 46.3 14.8 13.2 16.5
Total 100.0 100.0
in the residential construction market (Zhao, McCoy, and Smoke 2015),

production/custom builders account for smaller proportion in amount,
but produce larger revenue. On the opposite, there are more numbers of
remodelers and replacement contractors, but their average size of project
amount is smaller.
4.4.2INDEXING
Tables 4.4 and 4.5 exhibit the BCI. Our BCI indicates that the overall
builder confidence was stable and positive in the nine-month period, since
BCI stayed between 64 and 67 (50 is the cutoff). The resulting variations
Table 4.4. BCI in year 2014
Month BCI PB CB RM RC OB
April 66 70 62 68 63 66
May 64 68 61 65 68 62
June 67 70 65 67 68 63
July 67 65 64 69 72 64
August 67 69 67 68 68 64
September 66 70 64 67 73 62
October 67 68 62 68 68 68
November 67 71 64 68 69 61
December 67 69 63 68 72 67
Abbreviations: BCI, builders confidence index; PB, production builders;

CB, custom builders; RM, remodelers; RC, replacement contractors;
OB,other builders.
Table 4.5. Confidence indexing by segment
Upper Lower
Segment Mean Std. Dev. Std. Err. 95% 95%
Overall (BCI) 68.9 1.6 0.5 70.2 67.7
New construction 65.5 1.2 0.4 66.4 64.6
Production builders 63.5 1.7 0.6 64.8 62.2
Custom builders 67.5 1.2 0.4 68.4 66.6
Renovation 66.6 1.6 0.5 67.8 65.3
Remodelers 69.0 2.8 0.9 71.1 66.8
Replacement 64.2 2.5 0.8 66.1 62.2
contractors
Other builders 66.4 0.9 0.3 67.1 65.7
shown in Table 4.5 indicate that the confidence from remodelers and
replacement contractors tends to be volatile with bigger standard devi-
ations while production and custom builders are likely to indicate more
stability. Such findings suggest the difference of confidence performance
between the production/custom builders and remodelers/replacement
contractors. Due to the fact that production builders typically have larger
firm sizes and can insulate against variation in external market conditions,
the data suggest that remodelers/replacement contractors are especially
susceptible to negative influences. By extension, smaller builders are
susceptible to external market changes and thus their confidence might be
expected to fluctuate as well.
Figure 4.1 illustrates the influences of the seven metrics/indicators
on builder confidence and suggests three interesting findings. First, home
builders represent strong confidence in products while a lack of confidence
in government and regulatory climate (lower than 5). This finding sug-
gests that government policies can largely influence the housing market
and indirectly impact the confidence of home builders, further confirming
that such indicators are important to be included into a Confidence Index
System. Second, home builders consistently indicate confidence in prod-
ucts while fluctuating among supplies and inventory. Analysis indicates
that builders are confident with their firms productivity and management
while lacking confidence in change external to the firm. This is not surpris-
ing as builders typically control risk internally and cannot control outside
risk, causing resistance to change in the industry. Third, home builders
confidence trends with and align with the economy recovery, a critical
aspect of our index. This finding preliminarily validates the relevance of
BCI, including macroeconomy indicators.
7.5 New business
Job backlog
7
Product
Confidence contribution
6.5 Labor
Lot inventory
6
Government and
regulatory climate
5.5 Economy
4.5
4
Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
Month
Figure 4.1. Distribution of confidence contributors.

4.4.3 TRENDS TRACKING
The following section uses empirical evidence to (1) examine if BCI

tracks housing market trends and (2) compare the tracking performance
with HMI. Two critical variables for housing research are used as empir-
ical data in this study: (1) building permits for new housing units (i.e.,
new permits) and (2) new housing starts. We obtained these data from
the Building Permits Survey by the USCB, and the Survey of Construc-
tion by both the USCB and the U.S. Department of Housing and Urban
Development. Technically, the variable of new permits is less susceptible
to seasonal lags than starts.
Table 4.6 lists the monthly data of BCI, HMI, new permits, and starts
in 2014. BCI shows good tracking capability to new permits and starts.
The comparison between BCI and HMI is demonstrated in Figure 4.2.
Visually, the figure illustrates that BCI is more synchronous with new
permits and starts than HMI, which displays better tracking performance.
4.5 CONCLUSIONS AND FUTURE WORK
Home builder confidence is an important indicator to predict the housing

market and economy. An existing example of tracking builder confidence
is the HMI provided by the NAHB. However, residential construction
industry is highly fragmented and is susceptible to external influences.
Therefore, this chapter reports an attempt to improve the HMI by breaking
Table 4.6. Tracking comparison between BCI and HMI, 2014
Month BCI HMI New permits Starts

April 66 46 1,088 1,063
May 64 45 1,002 984
June 66 49 992 909
July 67 53 1,037 1,098
August 67 55 1,022 963
September 66 59 1,039 1,028
October 67 54 1,102 1,092
November 67 58 1,060 1,015
December 67 58 1,060 1,087
Index tracking 2014

75 1,600
1,400
70
1,200
65
1,000
60
800
55
600
50
400
45 200
40 0
Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
New permit Starts HMI BCI
Figure 4.2. Chart for index tracking comparison between BCI and HMI.
down the market segment and adding more indicators. The newly
established BCI separates the market into segments of the production/
custom builders and remodelers/replacement contractors and adds seven
important indicators including sales, market, materials, government, and
macroeconomy.
In this work we used large-scale survey method and collected more
than 4,000 qualified responses in a nine-month period. The sample data
show excellent quality and quantity for the research. Findings confirm the
difference of the two segmented home builders in terms of confidence and
indicate interesting characteristics of builder trends within the economic
performance of the housing market. Results from the empirical study
suggest that BCI demonstrates better performance than HMI in tracking
housing trends.
This chapter is limited in that it reflects a preliminary effort only
and needs further improvement. For example, index tracking requires
c ontinuously long-term efforts for data collection and analysis. The term
would be years or even tens of years. With such years of sufficient data,
many indexing evaluation research can be done. The future work may
assess the fitness of long-term tracking performance. For example, the
vector autoregression (VAR) model can be applied to gain meaningful
results.
REFERENCES
Casey, G.P., and A.L. Owen. 2013. Good News, Bad News, and Consumer
Confidence. Social Science Quarterly 94, no. 1, pp. 292315. doi:10.1111/
j.1540-6237.2012.00900.x
Croushore, D. 2005. Do Consumer Confidence Indexes Help Forecast Consumer
Spending in Real Time? North American Journal of Economics and Finance
16, no. 3, pp. 43550. doi:10.2139/ssrn.655462
Curtin, R. 2007. Consumer Sentiment Surveys: Worldwide Review and Assess-
ment. Journal of Business Cycle Measurement and Analysis 3, no. 1,
pp.742. doi:10.1787/jbcma-v2007-art2-en
Emrath, P. June 1995. Housing Market Index. Housing Economics, p. 11.
Giannone, D., L. Reichlin, and S. Simonelli. 2009. Nowcasting Euro Area Eco-
nomic Activity in Real Time: The Role of Confidence Indicator. National Insti-
tute Economic Review 210, no. 1, pp. 9097. doi:10.1177/0027950109354413
Stock, J.H., and M.W. Watson. 2011. Dynamic Factor Models. In Oxford Hand-
book on Economic Forecasting, eds. M.P. Clements and D.F. Hendry. Oxford:
Oxford University Press.
Zhao, D., A.P. McCoy, and J. Smoke. 2015. Resilient Built Environment: New
Framework for Assessing the Residential Construction Market. Journal of
Architectural Engineering 21, no. 4: B4015004
APPENDIX
SURVEY QUESTIONS
Q0. What is your firms primary type of construction work?
Production builderbuild more than 25 homes per year (1)

Custom home builderbuild 25 or fewer homes per year (2)
Remodeling contractor (3)
Replacement contractor (4)
None of the above (5)
Q1. Please indicate your confidence in your firms ability to capture new
business in the next six months:
1 2 3 4 5 6 7 8 9 10
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Not at all Extremely
confident confident
Q2. Please indicate your confidence in your firms existing business:
1 2 3 4 5 6 7 8 9 10
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
confident confident
Q3. Please indicate the quality of your firms leads and inquiries regarding
new business:
1 2 3 4 5 6 7 8 9 10
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Poor Excellent
Q4. Please indicate the volume of your firms leads and inquiries regard-
ing new business
1 2 3 4 5 6 7 8 9 10
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Extremely Extremely
low high
Q5. Please indicate the quality of your firms present job backlog:
1 2 3 4 5 6 7 8 9 10
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Poor Excellent
Q6. Please indicate the volume of your firms present job backlog:
1 2 3 4 5 6 7 8 9 10
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Extremely Extremely
low high
Q7. Please indicate the availability of key products your firm needs to
operate over the next six months:
1 2 3 4 5 6 7 8 9 10
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Extremely Extremely
low high
Q8. Please indicate your confidence that, in the next six months, product
and material costs will increase:
1 2 3 4 5 6 7 8 9 10
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
confident confident
Q9. Please indicate your confidence that, in the next six months, your firm
will have sufficient labor or will be able to hire sufficient labor:
1 2 3 4 5 6 7 8 9 10
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
confident confident
Q10. Please indicate your confidence that, in the next six months, labor
costs will increase:
1 2 3 4 5 6 7 8 9 10
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
confident confident
Q11. Please indicate your confidence in your current supply of lots to meet
the needs of your business over the next six months:
1 2 3 4 5 6 7 8 9 10
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
confident confident
Q12. Please indicate the volume of lots you believe will be available for
purchase over the next six months in the primary market where you work:
1 2 3 4 5 6 7 8 9 10
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Extremely Extremely
low high
Q13. Please indicate the impact government policies and regulations of

any kind (local, state, or federal) will have on your firms business in the
next six months.
1 2 3 4 5 6 7 8 9 10
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Very Very
negative positive
Q14. Please indicate how recent news about economic topics (e.g.,
employment, interest rates, etc.) influences your confidence about the
housing market
1 2 3 4 5 6 7 8 9 10
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Very Very
negative positive
Q15. What is your firms annual revenue?
Less than $250,000 (1)

$250,000 to $499,999 (2)
$500,000 to $1,499,999 (3)
$1.5 million or more (4)
CHAPTER 5
Computational Housing
Research: A Modeling
Primer
Trevor H. Flanery
5.1INTRODUCTION
Globally, exploding urban population growth, challenging environmental

dynamics, transformative building technologies, and a plethora of human
behavioral patterns create new contexts and significant opportunities
for innovation in the scholarship and practice of housing and residential
construction. The literature reflects this breadth of interest. However, the
newer and more specialized computational modeling and approaches may
not be broadly understood within the housing research disciplines.
Modeling, or simulation science, has certain epistemological
strengths suited for discovering, layering, or linking different housing
research theories and methodologies. So, any functional literacy gap not
only inhibits experimentation and teaching, but also can form a barrier to
understanding the opportunities, merits, deficiencies, and implications of
the computational research of others. As new software for nonprogram-
mers and supporting explanatory texts are now available, the primary
barriers to broad explorations of the potential for computational housing
research are eroding.
To begin to support modeling familiarity and literacy, this chapter
very briefly introduces and frames some of the important computational
social science concepts, agent-based modeling (ABM) methodology and
research design, and ABM software tools and instruction for nonexperts
in the context of housing planning research. While this chapter is not

intended to provide a comprehensive review of urban modeling literatures
associated with housing, software tools, equipment, or contemporary
ongoing challenges and opportunities within the short scope here, it will
serve as a primer designed to encourage and empower further exploration
for the bold and intrigued.
While much has been learned from regression models and qualitative
research, the complex and layered interactions of locational, aesthetic,
technical, financial, and behavioral factors among others are difficult to
study with sufficient granularity. ABMs give a researcher a tool to imag-
ine and explore the push and pull factors of a multitude of changes to
a house on a single street corner, as well as how those dynamics affect
a neighborhood and beyond in turn. The changes in human behavior in
response to built environmental shifts happen at human scales, and sta-
tistical tools of sufficient population size can dilute or defy clarity and
counterfactuals under the weight of averages, confidence intervals, and
noncausal associations.
5.2 SOCIAL SCIENCE MODELING THEORY
As with any new field, there are a great many new terms and conven-
tions, some of which are repetitive synonyms and others or more nuanced
in definitionforming a barrier to the novice. Proper academic rigor
and specialist conventions are to be respected; however, it is still very
possible to begin to explore modeling without a thorough knowledge of
either jargon or computer programming languages. This is especially true
for those who have access to research collaborators with the necessary
modeling background, but who must still expect a reasonable modeling
theoretical and research design understanding from their social scientist
partners. Whereas housing research has historically been rooted in urban
economics, policy, and construction science, developing tools and the
potential to collaborate with those in computer science radically opens the
possibilities for the creation of new knowledge. Models have been used to
identify policies to control the spread of an epidemic (Epstein 2009). They
have also been utilized to study job search and hiring commuting factors
between residence and employer locations (Tilahun and Levinson 2013).
Still others have been applied to studying nuclear disaster response strat-
egies (Lewis et al. 2013). Though such models can be extremely sophisti-
cated computationally, residential information is a critical variable in such
studies and thus might be much improved with broader collaborations
between disciplines.
Computational Housing Research: A Modeling Primer55
As a unifying principle, Joshua Epstein (2008) notes in his helpful

Why Model essay that anyone and everyone who conceptualizes a
social dynamic is running a model. He continues that for most people such
models are implicit; it can be very unclear what their assumptions, inter-
nal consistency, logical consequences, and relations to real-world data
might be. Epstein explains that explicit modeling requires detailed listing
of assumptions, replicable results, data calibration capacities, and clarifi-
cation of tradeoffs, uncertainties, and sensitivities. All of these issues are
enormously important at the outset when approaching modeling studies.
And they work well to focus the mind of researchers in formulating what,
specifically, they are undertaking when researching social dynamics.
The highly interactive systems of individual, environmental, and market
behaviors involved with housing models in particular stands to benefit
from this rigor and precision capable of generating new insights (Jordan,
Birkin, and Evans 2012).
And this is true for both academics and those who utilize data track-
ing in the private or government sectors. As Lazer et al. (2009) discuss,
new forms and scales of digital data tracking are becoming increasingly
embedded in global corporate services like Google or Facebook. They
term this effort to collect and analyze massive amounts of societal data
computational social science. There is substantial promise to integrate
digital data tracking platforms and digital models to perform a variety
of useful functions from prediction to diagnostics to scenario planning.
Epstein (2008) lists many additional modeling goals, including in part:
explanation, data collection guidance, better understanding core dynamics
and uncertainties, discover new questions, train practitioners, educate the
general public, and reveal the apparently simple to be complex or the very
complex to be simple.
Aside from software literacy and data science, one of the most chal-
lenging hurdles to the broadening of the research community is the issue
of complexity, wherein macro or systemic-level patterns are formed by
potentially vast numbers of interactions at smaller, micro-level scales.
Complex systems are commonly described as nonlinear systems in that
the local interactions are neither chaotic nor predictably ordered systems.
Chaotic systems are completely unpredictable since no consistent inter-
active relationships are identifiable, whereas linear systems of dependent
variables move along a slope line in relation to independent variables.
Instead, relationships in complex systems have mutually interacting vari-
ables that can coevolve in response to one another as conditions in the
system change. There is a substantial literature that argues that urban
areas, among many other social and environmental systems, are nonlinear
complex adaptive systems (Batty and Marshall 2012). Complex adaptive
systems typically exist as interlocking scales of still other complex adap-

tive systems at larger (regional and global) scales and smaller (neighbor-
hood, street, house, etc.) scales. Indeed, the interactions at the smaller
levels form the larger scale patterns.
Axelrod and Cohen (1999, p. 7) briefly describe complex systems
as ones in which there are strong interactions between its component
elements. These interactions often generate variation and selection pres-
sures among elements, which can shift if the larger system environment
experiences change. When a system has a population of active agents
pursuing goal-oriented behaviors or strategies, the strategies that achieve
some success in response to a system reveal adaptation. This then, accord-
ing to Axelrod and Cohen is a complex adaptive system. Housing agent
populations include owners, renter residents, financiers, tax assessors, and
so on and their strategies may be related to change housing values, archi-
tectural and environmental quality, and location as important examples.
The complex adaptation of housing systems remains wide open to further
exploration of these relationships and interactions of the agents, strategies,
settings, and variation and selection dynamics.
To further complicate complexity in the interest of exploring the
potential for modeling, physical environments like houses and other
buildings can also function as agents from a programming standpoint.
Through facades, functional programs, and material conditions, and so
on, a building can attract and retain or repel other agents depending on the
interaction behaviors at work. A building by its nature can attract a use that
in turn attracts its further development and contacts over time. Internal
spatial geometry, economic patterns, weather, and time all can play a role
in peoples use of housing and a houses use of people through what Brand
called a certain coevolving volatility (Brand 1994, p. 164).
Such housing coevolving complexity concerns have existed for some
time by other names. Heideggers Building, Dwelling, Thinking dis-
course on how notions of housing might better define the relationships
between living beings, natural phenomena, and conceptions of livability,
was first written in 1952. His work has even been compared to the ancient
Indian architectural texts, the Vaastu Shastra, written thousands of years
ago (Patra 2006). These works beg the question whether housing is a
commodity, architecture, or something more fundamentally ontological in
need of exposition. Since the processes of coevolution exist on every scale,
dynamics can be explored through such poetic models as Heideggers,
to complexity studies of housing dynamics for an entire country (Rhodes
2007). Hence, the biggest barrier to more housing modeling studies has
perhaps been the research challenges of analyzing coevolution, and huge
number of potential variables for individual behavioral strategies. Many

interesting variables, like income and education for example, are mutu-
ally dependent statistically nonlinear variables that are extremely difficult
to isolate for research purposes since different individuals as well as the
whole system and its individual parts interact bottom-up and top-down
to create, or generate, combined pattern effects found in data outputs. In
order to research the coevolving generation of pattern outcomes requires
what Epstein (2006) calls generative social science. It is meant to answer
the question How could the decentralized local interactions of hetero
geneous autonomous agents generate the given regularity? In other
words, given certain data patterns, can similar data patterns be replicated
via simulation?
For housing, the key strengths of generative simulation include the
capacity to investigate mutually interacting variables such as the inter-
active coevolving relationships listed and described in Table 5.1. Epstein
(2006) points to ABM as a specific subset of modeling for exploring
population, location, and strategy behavioral questions, and these are
exactly the sort of dynamics that complex housing research requires.
Table 5.1. Examples of coevolving housing relationships
Scale relationships individual components (e.g., house) to

rest of system (city) or a subsystem
(neighborhood, economy, ecosystem);
Temporal relationships present to past patterns and potential
future pattern parameters;
Visible relationships a buildings form to its residents as
well aspassing pedestrians in terms of
its information signaling (ornament,
behavior, visibility, etc.);
Social relationships housing to cultural group fashions,
behaviors, and territories (do they
facilitate or inhibit certain social network
practices?);
Functional relationships housing to support lifestyles within
internal spaces; and
Policy information between different social roles (agents)
relationships in housing planning from government
planners, developers, designers, b uilders,
financiers, and dealers to relevant
information and planning participation.
The greatest strength of ABM is the capacity for modeling change

and potential relationships, not just static, linear statistical descriptions
of situational snapshots drawn from whenever data were collected.
Where previously, analyzing semi-dynamic relationships could have been
explored via nested regression and other forms of hierarchical linear mod-
eling, ABM offers a research methodology that is well suited to explore
coevolving interaction patterns that retain spatial, temporal, and variable
data for a full (simulated) population rather than merely a statistical sam-
ple. As Table 5.2 shows, the number of factors with potential mutually
dependent variable relationships with housing dynamics is extensive,
overlapping, variable, and important not to ignore. Modeling can support
both the discovery and communication of coevolution among housing
research variables.
5.3ABM RESOURCES TO START MODELING
ABMs have been defined, in part, by Railsback and Grimm (2012, p.10)
as models where individuals or agents are described as unique and auto
nomous entities that usually interact with each other and their environ-
ment locally. For example, one could create an ABM of a chessboard
and pieces. The pieces could each be programmed with their movement
rules and their interaction rules with other pieces (including sets for both
Table 5.2. Some examples of coevolving housing factors
Building technology Governance

Building stock Informal settlement
Costs or rents Innovation
Decline Markets
Demographics Migration
Density Ownership
Economic change Proximity
Education Public safety or crime
Energy Segregation
Environmental assets Social services
Environmental risks Sprawl
Epidemics Transportation
Ethnicity or culture Water
Finance Zoning planning
History
the same and different colors), which combined would form their overall
behavioral rules. The board could be programmed as an environment of
64 squares of alternating colors. A modeling system like this allows us to
explore how such local interactions between individuals and locational
attributes generate larger patterns of systemic behavior: such as the ongo-
ing death of pawn pieces on our chessboard when positioned diagonal
to one another. These local interactions are fundamental to ABMs uti
lity in exploring complex emergent larger-scale patterns generated from
bottom-up interactions. Local interactions require a way to define and
program some sort of spatial or ordinal relation between components.
Railsback and Grimm (2012) note that agents do not (typically) interact
with every other agent all at once, but with nearby neighboring agents
and environments or perhaps with those to which it is directly connected
through networks of specific links (or edges) and nodes such as locations,
agents, or potentially some form of simulated resource.
These interactive functions support research into dynamics that are
distributed, scalable, and interactive which is particularly important for
many housing studies which must include environmental and behavioral
factors. Railsback and Grimm (2012) explain that a model is an intentional
system simplification for researching problems that concern individuals
and behaviors. To properly design a research model, they recommend a
modeling cycle from formulating a precise question, hypothesis, determin-
ing appropriate elements and parameters, forming the model as a computer
program, and then vetting, testing, and adapting it (pp. 712). Their book,
Agent-Based and Individual-Based Modeling: A Practical Introduction
was among the first simple how-to guides for ABM. The book provides
training for designing models in NetLogo, a software package designed
for simple but powerful ABM creation by Wilensky (1999).
Wilensky and Rand (2015) have also now published another import-
ant resource called Introduction to Agent-Based Modeling: Modeling
Natural, Social, and Engineered Complex Systems with Netlogo that is
also available for modeling beginners. NetLogo has numerous advantages
as an entry point for early-stage modeling exploration. The main strengths
are that it is designed for those with no or limited programming experi-
ence, and it is available as a free download at (https://ccl.northwestern.
edu/netlogo/). In fact, tutorials can provide most researchers a stable grasp
of the software, its organization, and its programming templates sufficient
to begin perusing the vast library of other models that are included with
the software download. Again, many of these additional model programs
and source code materials are open and available for adaptation to other
modeling projects with appropriate attribution.
These two books and the online NetLogo resources such as the exten-
sive and readable Programming Guide, user groups, and other resources
are accessible aids to anyone seeking more direct or personal exposure
to ABM applications and experience, generally. For specific research
relating to overtly spatial environments such as housing, ABM tools like
NetLogo provide important functionality of great importance for contem-
porary research challenges.
5.4ABM AND HOUSING
Epstein (2006, p. 38) argues that ABM is an extremely powerful tool

for understanding spatially distributed systems of heterogeneous auto
nomous actors with bounded information and computing capacity (italics
in original). When thinking about creating a model, it is important to con-
sider the spatial distributions and boundaries, informational signals, and
behavioral rules to begin to construct it. Understanding these factors will
facilitate collaboration with more experienced modelers considerably.
Where housing is a spatially distributed system of different auto
nomous actors all coping with bounded rationality, ABM is structurally
well-suited as a tool. Housing research utilizing this technique can explore
simultaneous impacts of residential mobility, physical condition of com-
munities, family life cycles, and locational choice important for public
housing policy (Jordan, Birkin, and Evans 2012). These findings suggest
that this methodological innovation provides a strong new tool in the tool-
box for housing scholars and practitioners.
For housing researchers new to modeling, NetLogos capacity for
integration with geographical information systems (GIS), such as ESRIs
ArcGIS product line, is a major asset. The technical details for the Net-
Logo GIS toolkit extension as well as data importing and procedures using
ASCII grid files are discussed in detail in several sections of Wilensky
and Rand (2015), but the conceptual elements for modeling behaviors and
other dynamic flows with mapping is what adds complexity.
Complex systems studies, while a growing urban studies topic, are by
no means a dominant or ubiquitous theoretical approach. Perhaps the label
complex is the cause for a certain lack of popularity relative to more
established forms of analysis. Despite this, from the perspective of spatial
ABM systems there are ways to begin to make the complex into a man-
ageable set of principles that organize information, behavioral patterns,
and perception into more familiar visual forms; all while retaining exten-
sive data sets suitable for statistical analysis. A primary tool for this has
been network science and simulation (Barrett et al. 2011). By organizing

information into descriptions of positions and flows through nodes and
edges, we can model where something is, how it is connected to the rest
of the system, and how, where, when, and to what extent exchanges occur.
A fundamental way of summarizing the information patterns these net-
works define would be signals and boundaries. Holland (2012) writes that
complex systems like ecosystems exhibit different, hierarchical levels of
enclosing boundaries that function via matching sets of signals and agents.
Resources and signals move between different boundaries across space
and up and down hierarchical scales through semi-permeable boundar-
ies that make some exchanges easy and others difficult, which can shift
resource concentrations inside and out over time.
The expense and data requirements to study these effects experimen-
tally for actual housing would typically be enormous. However, ABM
offers simple means of experimenting with structural elements in housing.
This is particularly well suited to research gated communities and other
physically or symbolically bounded residential territories. Residents,
visitors, and service providers may be admitted somewhat easily, but
others are excluded or policed (often at substantial resource expense). The
external municipal, county, or state boundaries move resources into and
out of gated communities according to specific signal mechanisms from
taxes to transportation loads. Likewise each household within a commu-
nity exchanges information and resources as signals with other houses and
the rest of the community via network dynamics organized by the signals
and boundary constraints involved. The complexity of the system stems
in part from the many levels and many signals at work at any one time in
any one place, and network theory and simulation systems provide many
tools to conceptualize these for further study, including using GIS network
analysis extensions (Sevtsuk and Mekonnen 2012).
Once the organizing structure of nodes, links, boundaries, and signals
is organized enough to begin thinking about constructing a spatial-based
model, the behaviors of agents are thrust to the forefront. Capturing the
important behavioral patterns as a code is its own challenge, but one made
simpler by the extensive number of models others have already created
and published (e.g., the NetLogo library included within the software
download, Wilensky 1999).
Within ABM, behavioral programs are understood to be feedbacks.
When creating a NetLogo model, one can create the spatial parameters for
the different locational points known as patches, then create the moving
agents known as turtles. At each time interval, agents will check the status
of certain states such as the resource levels of their occupied patch, their
nearest neighboring agents resource level states, or information signals

delivered by any networks to which they are directly linked. An agent
then calculates its behaviors based on these current states, then output
behavioral information from any time interval is fed back into the sys-
tem as the informational input of different component states for the next
time interval.
With a basic understanding of these feedback signal characteristics,
all that is needed to code behavior into a computationally complex behav-
ior algorithm is to specifically define the correlation between an agents
calculations of various signals into a status or state that triggers result-
ing behavior(s). Salingaros (2012) defines an algorithm as a sequence
of prescriptive steps that eventually lead to a result as the solution of a
problem and they can either be constant (always giving the same answer)
or dynamic (adjust to changing data inputs) like feedbacks. In complex
adaptive systems like ABM, these dynamic feedback algorithms are
understood (and in NetLogo specifically programmed) as conditional if/
then signal processing codes (Holland 2012).
For example, in Schellings (1978) classic Segregation Model each
agent calculates the number of like-colored neighbors surrounding them
and compared that value to the threshold at which they are supposed
to move. If an agent is green and four of eight surrounding patches are
also occupied by green agents, then that agent moves if the movement
threshold was set for any value less than 50 percent. NetLogos code
is more involved, but the essential calculation is: If (percentage of like
colored neighbors) < 50 percent, then (move). Using an algorithm that
combines certain values and metrics within the model and matches them
with specific behavioral codes is what make a system computationala
behavior is conditionally calculated.
For certain patterns within complex adaptive systemswhether
real-world or simulated, there are only two dominant types of nonlinear
feedbacks. The first sort of feedback is a reifying or amplifying positive
feedback. Positive feedbacks occur when a signal generates behavioral
responses emphasizing more of the same, and can thus yield exponential
or logarithmic growth or decline. The term positive is thus a value neutral
term, and does not refer to the policy desirability of such feedbacks. For
example, gentrification pressures, where increasing rents can reinforce via
status signals or consumer attraction signals, are a familiar force to be
reckoned with in housing studies. Conversely, job losses, high crime rates,
failing schools, and dropping property values can signal a race to the exits
for mobile residents in a community that can quickly overwhelm many
policy intervention strategies.
The second feedback, negative feedback, functions to keep a systems

dynamic within a limited range. Just as a thermostat functions to keep a
rooms temperature not too high or not too low, or the human body burns
energy or sweats to keep its temperature in a given range. This is done
through thresholds or trigger or tipping points that counter or regulate
behaviors when certain value states are reached. As cut points have been
estimated via logistical regression studies, ABM can explore these pre-
viously identified thresholds to more systematically integrate previous
work as well as isolate key values for further mixed method study and
verification. Negative feedbacks in housing could include the fundamen-
tal supply and demand pricing dynamic or tradeoffs between government
services and taxes, for example. Good services could attract new residents
and growth, but the increasingly high taxes to pay for them would likely
disincentivize continued growth, requiring attracting either richer resi-
dents, lower taxes and services, or some way to lower the costs of those
services.
Existing data sets are also important tools for identifying candidate
variables and validation benchmarks. What ABM allows is a testing of
both potential causative dynamics to identify candidate feedbacks for
further research and validation, as well as explorations of other signals
(and signal distributions within certain boundaries or networks) to deter-
mine potential mitigation dynamics. Such policy development research
has produced surprising discoveries.
In Schellings (1978) Segregation model, he found that even small
changes in a behavioral preference for a specific threshold of like-colored
neighbors (coded according to the percentage of near neighbors of the
same color type) yielded massive difference in the systemic levels of
segregation. His findings are important in terms of complexity in that the
micro behaviors of agents yielded substantial shifts in the macro system
values. Those interested can also explore a version of this ABM among
NetLogos library. Despite its age, the Segregation model still holds some
really interesting implications for housing policy: the least segregated
system levels occur when agents have some of the highest segregated
goals at the micro-level because the homogenous ideal is so geometrically
unachievable that most agents are constantly relocating and, as a result,
constantly mixing.
If/then algorithms that link a systems changes over time as feedbacks
are the drivers of many nonlinear effects like the positive feedback rich
get richer, poor get poorer effects. They are also the source code of imi-
tative feedbacks like swarming behaviors and cascading domino effects.
This has implications for housing studies that explore diffusion and
imitation dynamics. For example, Sanderford et al. (2015) used a diffu-

sion of innovation framework, to explore the role of mortgage lenders as
green building innovation nodes who have the behavioral option to trans-
mit information or not. This sort of research can be expanded by employ-
ing ABM approaches to include multiple agents, with multiple interaction
and signaling options with other agents to provide a test for policies and
planning.
These sorts of simulated behaviors can be helpful for exploring
affordable housing dynamics as well. In addition to exploring rates of
change in rents and new development, researchers have the option to
add different kinds of agents with different kinds of behavioral options
and signals. Of critical importance is the boundaries that define an area.
Ifa particular community finds itself trendy and demand is increasing, is
the area affected delineated by school district boundaries, transportation
costs, or some other culturally or governmentally defined label subject to
change? Could financial feedback policies, such as government proffers or
value capture, fund new affordable housing by linking thresholds in rent
increases or development fees for new upscale residences? What are the
potential effects of these policies? Are gentrification pressures mitigated,
redistributed, or accelerated?
In addition to housing markets, technology diffusion, and policy
exploration, ABM is also an important research approach for exploring
appropriate residential and commercial zoning arrangements by chang-
ing different building densities, transportation links, parks, and shopping
amenities to look at different planning scenarios and community inter-
action dynamics from both agent behavior and network optimization
parameters.
5.5SUMMARY: MODELS, HOUSING, AND

RESEARCH BOUNDARIES
As introduced, ABM software like NetLogo and its supporting mate-

rials can serve as an entry point for learning about the challenges and
opportunities of combining space, behavior, and information dynamics.
Johnston, Kim, and Ayyanger (2007) advocate for ABM as a tool to stim-
ulate bottom-up system thinking by designing them to understand how
individual choices combine to form group-level behaviors. Out of this, an
important feature is often unintended or expected discoveries.
New modeling research continues to advance that empower finer
and larger grain housing research projects. Narahara (2010, 2015) for
example, has been researching models capable of moving agents through

three dimensional simulated architecture. It is easy to imagine architec-
tural facades and forms being coded as street signaling mechanisms that
impact agents visually. Synthetic walking models are improving (Torrens
2012), and potential agent behavior data for such models can draw on
research using smart phone applications or urban images where subjects
code their responses to environmental features that attract, repel, renew,
or stress them (Salesses, Schechtner, and Hidalgo 2013). Epstein (2013)
has even begun developing protocols to simulate neurocognitive func-
tions into ABM. At larger scales, global databases of synthetic populations
that provide demographic data and local maps (but still protect privacy by
redistributing residents randomly, but retaining statistical accuracy) are
being developed and made publicly available for other kinds of research
(Swarup et al. 2013), and housing dynamics are a particularly central com-
ponent of these datasets and models. Interdisciplinary collaborations are
both much empowered and greatly facilitated by the common theoretical
and methodological focus of ABM.
Linear statistical approaches remain important for housing research,
as they are powerful platforms for simplifying and making sense of
data, including data generated by simulations. But as many housing data
sets must retain spatial distribution pattern and nonlinear, coevolving
relationships to be useful for guiding planning and policy, research in
this field is evolving rapidly to utilize computational modeling and data
approaches that can better support these data output goals. Not every
housing scholar or practitioner will find such approaches suitable for
their work, but increasingly there is a need for more literacy, collab-
oration, and curiosity. Recently developed resources and tools should
support and reward initial endeavors, no matter how limited a modeling
background a beginner has.
While computational researchers may continue to be a particular
niche within housing studies for some time, the ability to collaborate
within and across disciplines, teach students, and review ABM studies are
timely skills. The number of publications, laboratories, and grant-funded
research dollars are growing as well. Fortunately, the last few years has
seen the maturation of resources to support those without programming
training, access to datasets, or familiarity with complexity theory to
explore these topics and tools quickly and effectively. As with any new set
of skills, an experienced guide (especially if they have access to fast com-
puting power) is invaluable, but not as valuable as engaging with the tools
and concepts on a personal level. The warning bears repeating, however,
new modelers may expect surprising discoveries.
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CHAPTER 6
Understanding the
Potential of 4D Geospatial
Modeling to Enhance Flood
Mitigation Planning in
Residential Areas
Pernille H. Christensen
6.1INTRODUCTION
Over the past two decades the frequency and magnitude of natural emer-
gencies or disasters has been steadily rising. Globally, natural disasters
have caused more deaths and economic damage than ever before, and it is
widely accepted that this trend is likely to continue (Coleman 2006). The
UN Office for Disaster Risk Reduction (UNISDR) estimated that 64 per-
cent of the worlds population was affected by disasters between 1992 and
2012 with 1.3 million deaths and over US$2 trillion of economic damages
(De Bono et al. 2013), that equates to a growth rate faster than the growth
of gross domestic product (GDP) per capita in OECD countries over the
same period. Cartwrights (2005) review of United States national flood
damage data indicates that severe flood years are increasing at an annual
rate of change estimated at 3.45 percent and that severe flood damage
years (exceeding US$5 billion in damages) are becoming increasingly
common.
Despite the significant increase in frequency and economic losses
from natural disasters, more than 95 percent of humanitarian finance
is still spent responding to disasters and their aftermath, with less than
5percent spent on reducing the risk of disasters (Mitchell 2013, p. 13).
Those tasked with the design, planning, development, and management
of the built environment must become more cognizant of the risk of such
events, and proactively work toward enhancing the sustainability and
resilience of this sector. One way to do this is to develop more effec-
tive, efficient and user-friendly strategies, tools and mechanisms to help
protect the built environment from future hydrological events, thereby
reducing the potential impact that such events might have on real estate
markets and urban areas (Christensen and McIlhatton 2015; McIlhatton
etal. forthcoming).
This chapter presents a dynamic 4D modeling methodology devel-
oped at the University of Ulster that aims to assist professionals to b etter
understand the effect that natural disaster emergencies can generate in
urban areas globally, with a particular emphasis on flooding events in
residential areas, and to demonstrate how the use of dynamic 4D geo-
spatial technology can improve the flood mitigation planning process
in residential areas. In contrast to traditional, static modeling methods
that use geographical information systems (GIS) and other 3D modeling
techniques to demonstrate the impact of flooding at a moment in time,
the 4D modeling methodology presented here enables practitioners to
visualize policy implications, alternative flood adaptation and mitigation
interventions, and assess the potential impacts on the built environments
over time and with varying flooding levels in a dynamic manner before
implementation.
6.2UNDERSTANDING THE IMPACT OF NATURAL

DISASTERS ON THE BUILT ENVIRONMENT
Natural disasters can be broadly classified as biological (e.g., insect

infestation), geophysical (e.g., earthquake), and climate-related (mete-
orological [e.g., tropical storms and droughts], or hydrological [e.g.,
flooding]) (CRED 2009). A study by Leaning and Guha-Sapir (2013)
identified a threefold increase in the number of emergencies related to
natural events when comparing the decades of 1980 to 1989 with 2000 to
2009. Climate-related events account for nearly 80 percent of the increase,
while geophysical events have remained relatively consistent. Further-
more, climate-related eventswhich include both hydrological (e.g.,
flooding, landslides, etc.) and meteorological (e.g., high intensity storms,
extreme weather, drought, and wildfires) related problemsexperienced
UNDERSTANDING THE POTENTIAL71
the highest increase in occurrence over this period, contributing to an

estimated 80percent of the events. Other issues, such as those related to
geophysical factors remained relatively stable between these periods, but
still pose significant risk to the physical, social, and economical security
of real estate markets (Leaning and Guha-Sapir 2013).
More commonplace than other natural climate-related events
(Whittow 1995), hydrological events result in both the highest number of
fatalities (9,819 in 2013) as well as the greatest material losses (US$53.2
billion in damages in 2013) to the built environment, accounting for over
50 percent of all disasters in the past decade (Guha-Sapir, Below, and
Ponserre 2014, Wehrli, Herkendell, and Jol 2010). Data from the Center
for Research on the Epidemiology of Disaster (CRED) Emergency Man-
agement Database (EM-DAT) shows a sevenfold increase in the number
of flood- and storm-related natural disasters since the 1960s, with over
8million deaths and over US$1.7 trillion in economic damages reported
from flood and storm hazards during that time (Guha-Sapir, Below, and
Hoyois 2015). In the United States, national flood damage data indicate
that the number of years experiencing flood damages over US$5 billion
is increasing and that we can expect for severe flood damage years to
become more common (Cartwright 2005; Pielke, Downton, and Miller
2002).
Guha-Sapir, Below, and Ponserre (2014) observe that the global cost
of disasters rises in accordance with the frequency and intensity trend,
although the authors note that there is an imbalance between in where
those damages are incurred. Although almost eight-tenths of all disasters
occur in developing countries (most of which are particularly vulnerable
to the impact of disasters as a consequence of poor access to resources,
financial support, education, and other related factors), developed coun-
tries are the most impacted economically by such eventslikely as a
result of high-value residential and commercial development in higher
risk areas, such as coastal communities. Developed countries account for
nearly two-thirds of global economic losses associated with natural disas-
ters impact (Guha-Sapir, Below, and Ponserre 2014; OBrien et al. 2006).
The U.S. National Weather Service (NWS) reports that between 1984
and 2013, direct flood damages averaged approximately US$7.95 billion
annually and caused an estimated 85 deaths annually (NWS 2014). Sim-
ilarly, the European Environmental Agency estimates that the 213 hydro-
logical emergencies or disasters in Europe between 1998 and 2009 caused
approximately 1,126 deaths, displaced approximately 500,000 people, and
exceeded 52 billion in insured economic losses (Wehrli, Herkendell, and
Jol 2010). Flooding has also become an increasing concern in Australia
where several large-scale events have impacted the three most populous
states with damages exceeding AU$1 billion since 2010. The Brisbane
and Queensland flood of 2010 to 2011 resulted in three-quarters of the
state of Queensland being declared a disaster zone and while 50 Victorian
communities were inundated with significant flooding later that year.
In 2013, both New South Wales and Queensland experienced cyclone-
related flooding resulting in one of the largest evacuations in Australias
history, with over 700 businesses and 2,000 homes affected (Christensen
and Winson-Geideman 2016).
As the worlds population continues to urbanize and cities become
increasingly dense, new residential development will be forced to encroach
further outside urban centers onto greenfield sites. This prompts questions
about how such decisions are made because greenfield sites often include
vulnerable environmental areas such as coastal floodplains, shorelines,
and forested areas. While such sites are considered attractive and desir-
able sites by many homeowners, insurers rate real estate located in these
types of vulnerable areas as being at greater risk from natural hazards,
for example, flooding and bushfires. Although these risks may have a
slightly negative impact on property values, developments built in these
attractive high risk areas most often still experience higher property val-
ues despite the increased hazard risk because of their market appeal (Bin
and Kruse 2006). To mitigate hazards risks, mitigation planning should
be integrated into the development approval decision process for green-
field and environmentally vulnerable sites, rather than being considered a
separate process (Pidot 2013).
The majority of climate-related disasters occur in riverine and coastal
communities where hydrological events (e.g., flooding) are compounded
by meteorological events (e.g., tropical storm). Further compounding the
risk of flood hazards in many coastal communities is an increase in tidal
flooding as a result of sea level rise (brought on by global warming).
More coastal communities in the United States are affected by high
tides today than in decades past for two reasons. First, the shores of coastal
communities are more heavily developed and therefore higher tides have
a greater impact on more people and infrastructure. Secondly, high tides
are now occurring on top of elevated, and rising, sea levels (Collins et al.
2013; Pielke et al. 2008; Spanger-Siegfried, Fitzpatrick, and Dahl 2014).
Tidal flooding frequency and the magnitude of impact is expected to
increase over the next 15 to 30 years, particularly on the East Coast and
the Gulf Coast, as sea levels continue to rise.
Spanger-Siegfried, Fitzpatrick, and Dahl (2014) analyzed 52 coastal
communities along the East and Gulf Coasts and forecast that over half of
the communities investigated will experience over two dozen tidal flood-
ing event annually by 2030, and that over two-thirds of the communities
will see a tripling in the number of tidal flood events experienced annu-
ally within the next 15 years. Furthermore, the report suggests that flood
events will redefine how and where people in affected areas live, work,
and otherwise go about their daily lives (Spanger-Siegfried, Fitzpatrick,
and Dahl 2014). Coastal communities, and the nation as a whole, need to
start planning today to cope with sea level rise and unprecedented tidal
flooding, and to take swift and decisive action to limit longer-term damage
to our coasts.
As noted in the examples earlier, residential areas are often vulnerable
for a variety of reasons. The past two decades have seen an increase in
flood- and storm-related emergency declarations that involve the evacua-
tion from and destruction of residential areas around the world. At the time
of this writing, South Carolina is experiencing a 1,000-year rain event that
has set records across the state and resulted in historic flooding, flooding
entire towns, in the aftermath of Hurricane Joaquin. Parts of the City of
Charleston have reported more than 2 ft of rainfall over three rain-filled
days (equating to more rainfall in some areas than the total rain fall that
parts of California have recorded in the previous two to three years), while
coastal areas just north of the City received as much as three inches of
rain in three hours causing both flash and tidal floods. At least 11 people
have been killed to date, while hundreds have needed to be rescued by
emergency response teams and tens of thousands of residents across the
state have been left without power (Leberfinger 2015). As a result of the
magnitude of these events, the State of South Carolina received a Presi-
dential Declaration of Emergency (EM-3373) on October3, 2015 and then
a Presidential Declaration of Major Disaster (DR-4241) on October5,
2015 (Federal Emergency Management Agency [FEMA] 2015). The dec-
larations in South Carolina are the 25th and 26th Presidential Disaster
Declarations related to flooding in 2015, demonstrating the impact flood-
ing events are having on our communities across the country and the need
for improved flood mitigation planning tools, strategies, and methods. The
methodology in this chapter illustrates and demonstrates the application of
one innovative planning mitigation tool and methodology.
By combining traditional, static 3D modeling tools with gaming tech-
nology, the dynamic, 4D geospatial modeling methodology presented in
this chapter may help professionals to better understand the disruption
that natural disaster emergencies can create in urban areas, generally, and
in residential areas, specifically. While 3D models are not new in the real
estate discipline (particularly in an architectural and planning context),
the use of a 4D methodological approach to help governments develop

strategic policy instruments to enhance local and national prepared-
ness for future hydrological emergencies is a relatively new approach
by facilitating links between data that are currently under-utilized in
the decision-making process. The technology encourages and enables
planning decision makers to run and analyze different real-time flood-
ing scenarios before they potentially occur in the built environment. By
understanding both the positive and negative impacts of alternative adap-
tation and mitigation strategies before implementation, decision makers
can improve maximize the positive impacts of flood adaptation and miti-
gation strategies after implementation. By enabling the design of strategic
policy (preparedness, reconstruction, and recovery) and operational policy
(response) instruments to occur in tandem, decision makers are able to
visualize the physical (and economic) impacts that policies and regula-
tion will have before implementation. This in turn allows strategies to be
refined prior to implementation to ensure that they have the maximum
impact toward reducing potential physical and economic impacts of future
hydrological events.
6.3FLOOD MITIGATION PLANNING IN THE

CONTEXT OF UNITED STATES NATIONAL
POLICY
In the United States disaster mitigation policy includes a combination

of mandates and incentive-based programs that aim to encourage state
and local governments to develop mitigation plans and procedures which
will protect the community against various types of hazards. The creation
and implementation of this policy strategy was first established as part
of the National Flood Insurance Program (NFIP) under the National
Flood Insurance Act of 1968. As part of reforms to the NFIP in 1994,
the Community Rating System (CRS)a voluntary, incentive-based pro-
gram administered by the FEMAwas created. One of the most success-
ful components of federal flood mitigation policy, CRS incentivizes the
creation of localized flood protection and mitigation plans, and recog-
nizes proactive efforts made by insured communities to exceed minimum
mandated requirements set by the NFIP. As of October 2014, 1,313 U.S.
communities were participating in the CRS, representing 69 percent of the
5.5 million NFIP policy holders (McConville 2014).
Community mitigation efforts are classified on a scale of 1 to 10
(1being the best, 10 not participating) and points are earned based on
the completion of 19 creditable activities, organized in four categories:

public information, mapping and regulations, flood damage reduction, and
warning and response. As community compliance with the CRS program
objectives improves, local policy holders qualify for insurance premium
reductions ranging from 5 to 45 percent. Premium reductions are incre-
mentally stepped to correspond with the classifications, such that a one
receives a 45 percent reduction and a nine receives a 5 percent reduction
(NFIP n.d.). The premium reduction reflects the relative flood risk reduc-
tion realized as a result of community efforts toward achieving the three
CRS goals of:
1. Reduced flood damage to insurable property;

2. Strengthened support for the insurance aspects of the NFIP; and
3. The development of a comprehensive approach to floodplain
management.
In 2000, the federal approach to flood planning was expanded to

include a comprehensive disaster preparedness plan as part of the Disaster
Mitigation Act of 2000 (DMA 2000). The new policy includes incentives
that tie preparedness with access to disaster assistance by requiring state
and local governments to create mitigation plans to be eligible for federal
disaster relief funds. A prescriptive planning process is mandated by the
DMA 2000 and guides the development of pre-disaster hazard mitiga-
tion programs, as well as setting new requirements for the national post-
disaster Hazard Mitigation Grant Program (HMGP).
The mitigation planning requirements of the DMA 2000 are further
specified in the FEMA Interim Final Rule (IFR), which sets forth guidance
and regulations under which disaster mitigation plans may be approved
and implemented. The IFR provides detailed descriptions of the required
content of the plans as well as the planning process that states and local-
ities are required to follow. Until a compliant mitigation plan has been
adopted, communities are ineligible for pre- and post-disaster assistance
from FEMA (Christensen and Winson-Geideman 2016).
FEMA provided additional disaster mitigation planning guidance
when it released the Threat and Hazard Identification and Risk Assessment
(THIRA) Guide (FEMA 2013). The THIRA process provides a standard-
ized four-step risk assessment process to help communities identify and
understand potential hazard threats and risks, develop specific capability
targets for each core capability identified in the National Preparedness
Goal, and estimate the resources needed to reach each target (FEMA
2013). It builds on existing Hazard Identification and Risk Assessments
(HIRAs) by: broadening the threats and hazards considered, involving

community members in the planning process, and increasing flexibility to
incorporate community-specific factors.
6.4IMPROVING UPON BUSINESS AS USUAL

DEVELOPMENT PRACTICES THROUGH
STRATEGIC PLANNING
Residential real estate development and the associated infrastructural

changes that follow as a result of development inevitably impact the
natural environment and its processes. However, the type of development
pursued can either intensify or minimize natural disaster threats. Indeed,
Forman (2012) notes that although real estate development can negatively
impact the severity natural disaster effects, it may also play an important
role in ameliorating such threats. While both meteorological and hydro-
logical events can be exacerbated by unsustainable planning and develop-
ment practices, such as land clearing or wetland infill, the most immediate
effects are related to flooding events. This is because the impacts of flood-
ing are often compounded by other meteorological events (e.g., the wide-
spread flooding that occurred in New Orleans after levees were breached
in the aftermath of Hurricane Katrina in 2005).
The social and environmental impacts of residential real estate
development on the local community have historically not been a central
concern for planners as cities struggled with the challenges of rapid urban
growth. Traditional planning, design, development and construction meth-
ods and practices created cities highly susceptible to the consequences of
natural disasters, as evidenced by the steady rise in both intensity and cost
of such events over the past two decades. In response to these events, built
environment practitioners have become more cognizant of the relation-
ship between development and the environment, and specifically about
the impacts that real estate development may have on the natural environ-
ment. There has been a deliberate cultural shift away from the traditional
planning and development practices of the late 19th- and early 20th cen-
turies toward a more holistic urban growth and planning process (Forman
2012). Some researchers postulate that this shift has been caused, at least
partly, by the increased disruption caused by natural disasters over the past
50 years that not only impacted significantly on the urban environment in
areas proximate to both fluvial and pluvial risks and, as result, increased
insurance premiums in high-risk areas.
Despite the development of policy and advancements in engineering

measures aimed at reducing the adverse effects of flooding events, flood-
ing events remain one of the biggest threats to the built environment in
the United States among all natural hazards (Brody et al. 2008; Guha-
Sapir, Below, and Ponserre 2014). Strategic planning (e.g., preserving
wetlands) and preparedness for events (e.g., increased mitigation efforts)
may significantly reduce the impact of flooding on the built environ-
ment (Berke, Lyles, and Smith 2014; Brody et al. 2008; Christensen and
Winson-Geideman 2016). Brody et al. (2008) investigated the impact of
flooding on the built environment in the eastern portion of Texas. Texas
was chosen for the study because it experienced more deaths and damage
from flooding than any other state in the period between 1997 and 2001,
when it suffered 423 flood events and US$320 million in damages. The
study identified specific built environment characteristics that may affect
the severity of property damage from flooding, which include:
1. Timing of precipitationimportant because heavy rainfall often

precedes flooding events by up to one day;
2. Alteration of naturally occurring wetlandsthe most important
indicator of flood damage because it disrupts natural hydrological
systems, thus exacerbating the risk of flooding;
3. Structural solutions (e.g., dams)although effective in reducing
flood damage, the study indicated that wetlands may be more effec-
tive in mitigating property loss over time;
4. Community participation in mitigation programs in line with the
U.S. FEMAs CRS Programmereduced community-wide flood-
ing more than structural solutions;
5. Economic gains from nonstructural mitigation efforts were
identifiedeach unit of increase in the FEMA rating equated to
US$38,989 reduction in total damages or flood event.
Historically, state and federal legislators have responded to high-

impact natural disasters with policy changes and increased regulations,
which have consequently impacted real estate development (Ramroth
2007). There are numerous examples of natural disasters spurring new
legislation and regulation, for example, the first state-wide building code
was passed by the state of Florida in the aftermath of Hurricane Andrew in
1992. To better manage natural disaster events and to enhance resilience
of the real estate and wider built environments, there needs to be well
informed and robust policy responses to counter such phenomena. One
dollar invested in disaster risk reduction in flood-prone areas can save at

least four dollars in relief and rehabilitation costs in the future (Mitchell
2013). A growing number of researchers and scientists assert that the
impact of natural and man-made disasters can be reduced through the uti-
lization of more advanced technology, in the form of infrastructure, build-
ing materials, and weather forecasting and alert systems (Whittow 1995).
The use of 4D modeling and real-time scenario simulation can be a useful
tool in addressing and overcoming some of these challenges by improv-
ing and helping to visualize available data during the decision-making
process.
6.5DEVELOPING A 4D DATA AND GEOSPATIAL

MODELING METHODOLOGY
The purpose of the 4D geospatial modeling platform is to enable real

estate professionals, planners, urban designers, architects, policy makers
and other related stakeholders to visualize the impact that flood events
may have on the built environment. The methodology was developed at
the University of Ulster and emphasizes effective and efficient utilization
of geographic information, GIS, and gaming technology to enable policy
makers to make better informed decisions related to resilience in urban
areas. The methodology used has three stages, each of which is explained
briefly here:
Stage 1. Development of the base 3D data model

Stage 2. Integration with Gaming Technology into a 4D model that
includes temporality
Stage 3. Scenario Testing
6.5.1 DEVELOPMENT OF THE BASE 3D DATA MODEL
A data model methodology was developed that comprises key datasets

required to process the simulated environment and a work flow devel-
oped to ensure accuracy of the final 4D model. The key datasets neces-
sary to build the base 3D model were established through the analysis of
past research and include topographical data, building footprints, stereo
or ortho-imagery and terrestrial imagery (Sadek et al. 2002). Figure 6.1
illustrates the workflow used and the key datasets processed in the devel-
opment of the 3D concept model of Belfast.
The base 3D model was photogrammetrically derived from aerial

photography based on 16 cm digital vertical imagery from 2012. A dig-
ital terrain model was then acquired for the study area, as were building
footprint polygons (Figure 6.2a). The methodology was then employed
to combine the datasets and generate the 3D model for the study area
(Figure 6.2b). For each building, the plan, absolute height and different
roof shapes were identified and generated.
Water courses having a width greater than or equal to 3 m were
captured as closed shapes. Once this workflow was completed, the base
3D urban model was photo-texturized to create a photo-realistic 3D model
of the built environment (Figure 6.3). For more detail on the technical
aspects of developing the 3D model, see McIlhatton et al. (forthcoming).
Topographical data Aerial imagery GIS Data Street level/building imagery
Contours Building Photo

and height Ortho imagery/ footprints capture
data stereo
Image editing
Digital terrain 3D Buildings

model generated and Textured model
processed
3D Terrain
model 3D Terrain and
building model Architectural models
3D Environment for enhancing resilience
Figure 6.1. Building footprints workflow and datasets used in development

of 3D model.
Source: McIlhatton et al. (forthcoming).
(a) (b)
Figure 6.2. Building footprints and 3D buildings.

Figure 6.3. Phototexturized 3D model, Belfast.

Source: McIlhatton et al. (forthcoming).
6.5.2INTEGRATION WITH GAMING TECHNOLOGY AND

SCENARIO TESTING IN THE 4D MODEL
The completed base 3D urban model of the study area was then integrated
into a bespoke RealSim gaming environment built within a Unity 3D
using C# and Java. This allows for the compiling of ortho-imagery, the
digital terrain model and the textured 3D building models into an easy-
to-use simulation environment. The functionality within the graphical
user interface also allows users to accurately depict different weather and
lighting effects on real estate, understand likely shadow impacts on new
development, and measure distances accurately.
Multi-scenario simulations are created by incorporating a dynamic
flooding layer into the 3D geospatial model which enables users to sim-
ulate different flood or sea level rises and visualize the impact that it will
have on the built environment in real time. The dynamic, temporal layer
transitions the base 3D model into an interactive 4D model. A bespoke,
interactive interface empowers users to dynamically test various flooding
scenarios and the impact possible policy or structural interventions may
have on reducing future damages. The ability dynamic change the sce-
nario and immediately visualize the impacts allows users to test the status
quo, identify built environment areas (including buildings, infrastructure,
and open space) that are most at risk in a flood situation, propose flood
modifications for those buildings, as well as demonstrate the potential
mitigation impact(s) of different intervention and flood defense strategies.
The models ability to efficiently model potential new construction and to
identify the impact of potential flood events may have on that new devel-
opment enables policy makers to visualize the impacts of a policy or new
development before it is implemented, thereby helping to develop more
resilient communities over the long term.
Figures 6.4 and 6.5 demonstrate the potentiality of the 4D geospatial
technology in providing a basis for understanding the impact that flooding
may potentially have on real estate and future real estate development.
For more examples of scenario testing related to done flooding, riots and
counter-terrorism in Belfast, see McIlhatton et al. (forthcoming).
Figure 6.4. Three-meter water course level rise, Belfast.
Figure 6.5. Potential flood defense in front of mixed use development, Belfast.
6.6HOW IS THIS APPROACH DIFFERENT TO

WHAT CITIES CURRENTLY USE FOR IMPACT
ASSESSMENT?
Many states now require environmental impact assessments (EIAs) to

analyze the potential impact of new development on the natural environ-
ment. However, Caspary (2008) argues that the traditional EIA approach
has significant limitations when assessing secondary risk, such as the
impact of global environmental challenges (e.g., climate change) on the
project. Because EIAs are limited to individual development projects and
nearby areas immediately affected by the project, they are not suitable to
assessing the larger urban impacts of a project.
There are several alternative assessment approaches that consider the
broader impacts of new development on the natural environment and local
community. One alternative assessment approach that considers cumu-
lative impacts from multiple projects, Cumulative Impact Assessment
(CIA), enables planners to assess large-scale effects from urban develop-
ment (Caspary 2008). Another alternative is a Strategic Impact Assessment
(SIA), which systematically assesses potential impacts of a project(s) at
a regional level, making impact assessment and mitigating planning part
of a broader strategic planning process. Multiple-Criteria Decision Anal-
ysis (MCDA), can aid decision makers in resolving complex decisions
exacerbated by conflicting objectives and multiple stakeholder groups by
combining information from several criteria into a single index of evalua-
tion to inform the planning decision-making process (Regan et al. 2007).
Local, state, and national governments are increasingly utilizing GIS
technology as a tool to increase resiliency against natural and man-made
disasters (Zerger and Smith 2003) as it has demonstrated promise as a
policy-making tool because of its broad applicability. Despite its ability
to identify, map, and analyze key characteristics of urban resiliency (e.g.,
infrastructure, planning controls, environmental conditions), GIS tech-
nology is currently underutilized in terms of its ability to inform more
accurate and effective disaster policy (Jha, Miner, and Stanton-Geddes
2013). Among the challenges of using GIS for disaster impact assessment
is the scale of spatial data and its suitability for making decisions and
the need for temporal detail to support the spatial information in the GIS
model (Zerger and Smith 2003). In most cases, GIS data and 3D model are
static and are therefore unable to visually and dynamically demonstrate
the potential impacts that different flood scenarios might have on the built
environment nor what the potential mitigation impact would be of alter-
native interventions.
The strategy proposed by this research aims to address these concerns

by integrating gaming technology and advanced user functionality with
the traditional 3D model to produce a 4D model that enables users visu-
alize impacts temporally. The 4D technology presented here can be used
as a potential mechanism to reduce the impact that natural and man-made
emergencies can have on the real estate environment by enabling deci-
sion makers to run multiple scenarios, each integrating large amounts of
temporal and spatial data, to improve MCDA decision-making processes.
By understanding how and where flood rise will impact physical space, as
well as understand the areas that will recede quickly and that will sustain
long term flooding, decision makers can decide on the best flood adapta-
tion and mitigation factors to implement to achieve the most significant
overall reduction of financial, social, cultural, and economic impact on
their communities.
6.7APPLYING THE MODEL AS PART OF A FLOOD

MITIGATION STRATEGY FOR RESIDENTIAL
AREAS
With the development of new technologies, such as GIS, communities

and government agencies have begun collecting spatial data in an effort
to prepare for, respond to, reconstruct, and recover from natural and man-
made disasters. New decision-making strategies and software programs
have been developed to assist in this decision process; however, even the
most complex processes currently focus on spatial decisions and unable
to effectively incorporate temporal inputs. The dynamic nature, increased
frequency, and amplified intensity of natural disaster events, in particular
flood-events, over the past two decades requires decision makers to con-
sider a broad range of inputs and simulate multiple scenarios that consider
the physical, social, and economic impacts in both spatial and temporal
realms.
With the residential property sector contributing to the national GDP
via private residential investment and through consumption spending on
housing services, averaging approximately 5 percent and 12 to 13 percent
of the United States GDP, respectively (BEA 2015), housing markets have
a significant impact on both national and global economies. Developing
strategies and policies to protect residential areas is therefore an essential
component to maintain a healthy economy.
The ability to model multiple scenarios and impacts prior to imple-
mentation using 4D the geospatial technology offers a meaningful and
intuitive mechanism for planning and development professionals to under-

stand how flooding may impact current and future residential develop-
ments. By enabling users to visualize different flooding scenarios and their
impacts not only on specific buildings but also on the community, decision
makers can make better decisions about regulatory policies, rezoning of
sites, new development applications, and conservation areas.
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Index
A ASCII grid files, 60

ABM. See agent-based models attributes of innovation
adoption/diffusion of innovation, adoption, 910
i, 518 external, 15
adoption decision, 89 internal, 15
attributes of adoption, 910 market, 1112
attributes of market, 1112 product, 1011, 14
attributes of product, supply Australia flooding, 7172
chains and communication autoregressive integrated moving
networks, 1011 average (ARIMA), 42
summary over, 68
data on, 2429 B
dependent variable, 14 Bass model, 12
independent variable, 1416 BCI. See Builder Confidence
Koebels diffusion model, 1213 Index
measuring adoption decision, biological disaster, 70
1314 BPS. See Builders Practices
regression modeling, 1617 Survey
role of time in, 12 builder size in revenue, 44t
Agent-Based and Individual- Builder Confidence Index (BCI),
Based Modeling: A Practical 3637
Introduction (Railsback and data analysis, 41
Grimm), 59 geographical adjustment,
agent-based models (ABM), i, 4142
5364 seasonal adjustment, 4243
affordable housing dynamics, 64 findings in, 4347
housing and, 6064 data descriptions, 4344
research approach, 64 indexing, 4446
resources to start modeling, trends tracking, 47
5860 in 2014, 45t
algorithm, 62 indicator matrix for, 40t
ArcGIS product line, 60 instrument design, 3840
ARIMA. See autoregressive metrics/indicators on, 46
integrated moving average sample size, 4041
88Index
survey, 3840 Consumer Confidence Index,

vs. HMI, 47t, 48f 3637
Builders Practices Survey (BPS), Core Based Statistical Area
24 (CBSA)-level, 15
building information management CRED. See Center for Research on
(BIM) software, 10 the Epidemiology of Disaster
CRS. See Community Rating
C System
c-statistics, 30 Cumulative Impact Assessment
Case-Specific Studies on Housing (CIA), 82
Innovation, 1 customizing HVAC system, 24
CBSA-level. See Core Based
Statistical Area-level D
Center for Research on the data
Epidemiology of Disaster on adoption and diffusion of
(CRED), 71 innovation, 2429
CIA. See Cumulative Impact BPS, 2425
Assessment for dependent variables, 2425
classic Segregation Model, 62 data analysis, BCI, 41
climate change, i geographical adjustment, 4142
climate-related disaster, 7072 seasonal adjustment, 4243
coevolving housing factors, 58t data sets, existing, 63
coevolving housing relationships, Disaster Mitigation Act of 2000,
57t 75
coevolving volatility, 56, 57t Database of State Incentives for
Community Rating System (CRS), Renewable Energy (DSIRE),
74 27
compatibility measures, 14 decision-making, 5
complementarity index, 26, 3031 dependent variables, 14
complex adaptive systems, 55, 56 diffusion of innovation model,
complexity measures, 14 2333
computational housing research, digital data tracking, 55
5365 DSIRE. See Database of State
ABM and, 6064 Incentives for Renewable
ABM resources to start Energy
modeling, 5860 Duct Systems in Conditioned
ABM software tools, 5354 Space, 24
complexity issues in, 55
digital data tracking and, 55 E
overview of, 5354 economy (EC), 39
signals and boundaries in, 61 EIAs. See environmental impact
social science modeling theory, assessments
5458 Emergency Management Database
computational social science, 55 (EM-DAT), 71
confidence indexing by segment, environmental impact assessments
45t (EIAs), 8283
Index 89
Environmental Protection Agency geophysical disaster, 70

(EPA), 27 GIS. See geographical information
European Environmental Agency, systems
71 government and regulatory climate
Ewings composite index, 16 (GR), 39
external attributes, 14 Gravity Network Index, 26
green building diffusion, 1718
F
Federal Emergency Management H
Agency (FEMA), 7375 Hanley Wood (HW), 38
Federal Housing Finance Agency Hazard Identification and Risk
Home Price Indices, 36 Assessments (HIRAs), 7576
feedback signal characteristics, Hazard Mitigation Grant Program
6163 (HMGP), 75
findings, in builders confidence Heating, Ventilation, and Air-
methods, 4347 Conditioning (HVAC), 24
data descriptions, 4344 high-performance construction, i
indexing, 4446 HIRAs. See Hazard Identification
trends tracking, 47 and Risk Assessments
flood mitigation planning in HMGP. See Hazard Mitigation
residential areas, 6984 Grant Program
4D modeling methodology and, HMI. See Housing Market Index
7881 Home Innovations Research Lab,
emergencies during, 7374 24
environmental impact homebuilding, i
assessments (EIAs), 8283 factors shaping, 7
natural disasters and, 7074 lack of technological innovation
new technologies in, 8384 in, 78
overview of, 6970 confidence building in, 37
strategic planning and index background, 3638
preparedness for events, 7678 housing innovation, i
United States disaster mitigation adoption and diffusion of, 518
policy and, 7476 case-specific studies on, 13
flooding demonstrating diffusion of ,
in Australia, 7172 2333
tidal, 72 on economic growth, 17
4D modeling, i, 7881 focused survey data, 13
base 3D data model and, 7880 laggard, 7
gaming technology and scenario public policy impacts on, 16
testing in, 8081 Housing Innovation, 8
Housing Market Index (HMI), 35
G vs. BCI, 47t, 48f
generative social science, 57 Hurricane Joaquin, 73
geographical adjustment, 4142 HVAC. See Heating, Ventilation,
geographical information systems and Air-Conditioning (HVAC)
(GIS), 60 hydrological disaster, 70, 72
90Index
I Leadership in Energy and

IAOs. See innovation adopting Environmental Design (LEED),
organizations 10
ICFs. See Insulating Concrete Least Absolute Shrinkage and
Form Systems Selection Operator (LASSO),
IFR. See Interim Final Rule 1617
IGO. See innovation generating LEED. See Leadership in Energy
organization and Environmental Design
independent variables, 1416 linear systems, 55
attributes of adopter, 25 lot inventory (LI), 39
attributes of innovation, 25, 26t
contextual/external conditions, M
25 macro system, 63
external factors, 28t market-to-market cost variation,
internal factors, 27t 25
Index of Consumer Sentiment, 36 MCDA. See Multiple-Criteria
index of homebuilding industry, Decision Analysis
3638 micro system, 63
innovation adopting organizations models/modeling
(IAOs), 8 Bass model, 12
innovation generating organization empirical model, 2930
(IGO), 8 Koebels diffusion, 1213
instrument design in BCI, 3840 LASSO model, 1617, 32
Insulating Concrete Form Systems regression, 1617
(ICFs), 24 vector autoregression (VAR)
Interim Final Rule (IFR), 75 model, 49
internal attributes, 15 Multiple-Criteria Decision
internal factors, 27t Analysis (MCDA), 82
Introduction to Agent-Based
Modeling: Modeling Natural, N
Social, and Engineered National Association of Home
Complex Systems with Netlogo Builders (NAHB), 24, 35
(Wilensky and Rand), 59 National Flood Insurance Program
iterative proportional fitting (IPF), (NFIP), 74
41 natural disasters, 7074
in Australia, 7172
K climate-related events, 7071, 72
Koebels diffusion model, 1213 in Europe, 71
greenfield sites and, 72
L Hurricane Joaquin, 73
labor (LB), 39 static 3D modeling tools with
LASSO. See Least Absolute gaming technology and, 7374
Shrinkage and Selection tidal flooding and, 72
Operator negative feedback, 63
Index 91
NetLogo, 59, 60, 62, 64 seasonal adjustment, 4243

new business (NB), 39 semi-permeable boundaries, 61
new home builders, 38 SIA. See Strategic Impact
vs. renovation contractors, 4344 Assessment
NFIP. See National Flood SIPS. See Structural Insulated
Insurance Program Panel Systems
nonlinear systems, 55 social science modeling theory,
5458
O Spray Foam Insulation, 24
observability measures, 14 Strategic Impact Assessment
Optimum Value Engineering (SIA), 82
(OVE), 24 strategic planning, 7678
orders and job backlog (OJ), 39 Structural Insulated Panel Systems
orological disaster, 70 (SIPS), 24
OVE. See Optimum Value subcontractor network effects, 15
Engineering supply chain effects, measurement
of, 15
P survey of U.S. home builders, 38
patches, 61 instrument, 3840
People, Policies, and Programs summary of, 44t
Influencing Innovation in sustainability, i
Housing, 1, 2, 5, 6 synthetic populations, 65
PEX. See Polyethylene Plastic
Piping T
PEX-AL-PEX, 24 10 energy-performance products,
Polyethylene Plastic Piping (PEX), 24
24 Threat and Hazard Identification
population size, 15 and Risk Assessment (THIRA)
positive feedback, 62 Guide, 75
product (PR), 39 thresholds, 63
attributes, 14 tidal flooding, 72
Programmable Thermostats, 24 time, 12
Time Series Regression with
R ARIMA noise, Missing values
regression modeling, 1617 and Outliers; and Signal
relative advantage, 25 Extraction in ARIMA Time
Renovation Barometer, 35 Series (TRAMO/SEATS), 42
renovation contractors, 38 trends tracking, 47
vs. new home builders, 4344 trialability measures, 25
turtles, 61
S
s-curve shape, 30 U
S&P Case Shiller Home Price U.S. Department of Housing and
Indices, 36 Urban Development (HUD), 24
sample size, 4041 U.S. home builders
92Index
adoption of PEX, 3132, 31t United States disaster mitigation

data on, 2429 policy, 7476
empirical model, 2930 urban development compactness,
high performance product 16
adoption, 2333
overview, 2324 V
survey instrument, 3840 Vaastu Shastra, 56
10 energy-performance products, vector autoregression (VAR)
24 model, 49
U.S. National Weather Service
(NWS), 71 X
UN Office for Disaster Risk X-13ARIMA-SEATS (X-13A-S),
Reduction (UNISDR), 69 42
OTHER TITLES IN OUR HOUSING
INNOVATIONS COLLECTION
Andrew P. McCoy, Andrew R. Sanderford, and
C. Theodore Koebel, Editors
Policies, Programs and People That Shape Innovation in Housing

by Andrew Sanderford, Andrew McCoy, C. Theodore Koebel
and Carlos Martin
A Business Framework for International Commercialization

ofInnovativeConstruction Products
by Ali Albassami and Andrew P. McCoy
FORTHCOMING TITLE IN THE HOUSING

INNOVATIONS COLLECTION
Workplace Safety and Control Measures in Residential Construction:
A Systems Engineering Perspective
by Dong Zhao and Andrew P. McCoy
Momentum Press is one of the leading book publishers in the field of engineering,
mathematics, health, and applied sciences. Momentum Press offers over 30 collections,
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EBOOKS Inventing the House HOUSING INNOVATIONS COLLECTION
SANDERFORD MCCOY ZHAO KOEBEL

FOR THE Andrew R. Sanderford, Andrew P. McCoy
Case-Specific Studies on Housing Innovation
and C. Theodore Koebel, Editors
ENGINEERING Andrew R. Sanderford Andrew P. McCoy
LIBRARY Dong Zhao Charles T. Koebel
Create your own Businesses, consumers, industry groups, and governments
understand the importance of innovation for continued
Customized Content
economic success and improvements in quality of life. However,
Bundlethe more innovation in the housing and residential construction industry
books you buy,
the greater your
remains a topic about which little is known while a small but
growing literature is making positive progress. Inventing the House
discount! Building on the first book in the Housing Innovation
collection, the purpose of this book is to share new research
paradigms that focus on innovation and are, in and of
THE CONTENT
Manufacturing
Engineering
themselves, innovative. The first chapters focus on a newly
created diffusion of innovation model and its application to Housing Innovation
the industry while later chapters showcase several innovative
Mechanical techniques that shed new light on housing, residential
& Chemical construction, and policy-making.
Engineering As the second book in the Housing Innovation collection,
Materials Science this book is designed to assist readers as they continue to
& Engineering peel back the complex layers of innovation in housing and
Civil & residential construction.
Environmental Andrew R. Sanderford, PhD, is an assistant professor of
Inventing the House

Engineering real estate development and planning in the College of
Advanced Energy Architecture, Planning, and Landscape Architecture (CAPLA)
Technologies at the University of Arizona.
Andrew P. McCoy, PhD, is the Preston and Catharine White

THE TERMS Endowed Fellow and associate director of the Myers-Lawson
Perpetual access for School of Construction (MLSoC) and the director of the
a one time fee Virginia Center for Housing Research (VCHR) at Virginia Tech.
No subscriptions or He is associate professor of building construction in the
access fees Myers-Lawson School of Construction.
Unlimited Dong Zhao, PhD, LEED, AP, is an assistant professor of
concurrent usage
Downloadable PDFs
construction management in the School of Planning, Design
and Construction (SPDC) at Michigan State University. Andrew R. Sanderford
Free MARC records
Charles T. Koebel, PhD, is the founder and former director of
the Virginia Center for Housing Research, a research center
Andrew P. McCoy
For further information,
a free trial, or to order,
within the College of Architecture and Urban Studies at
Virginia Tech. Recently retired from teaching, he serves as a
Dong Zhao
contact:
sales@momentumpress.net
senior researcher at VCHR. Charles T. Koebel
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EBOOKS Inventing the House HOUSING INNOVATIONS COLLECTION

SANDERFORD MCCOY ZHAO KOEBEL

Inventing the House

Andrew P. McCoy, PhD, is the Preston and Catharine White

MOMENTUM PRESS, LLC, NEW YORK

Copyright Momentum Press, LLC, 2016.

All rights reserved. No part of this publication may be reproduced, stored

First published by Momentum Press, LLC

ISBN-13: 978-1-60650-566-3 (print)

Momentum Press Housing Innovations Collection

Collection ISSN: 2376-4961 (print)

Cover and interior design by Exeter Premedia Services Private Ltd.,

Printed in the United States of America

Businesses, consumers, industry groups and governments understand the

adoption and diffusion of innovation, agent-based models, 4D modeling,

2.10Dependent Variable and Potential Statistical

4Establishing Builder Confidence for the

5Computational Housing Research: A Modeling Primer 53

6Understanding the Potential of 4D Geospatial

Figure 2.1. Conceptual model and variables. 13

Table 3.1. Attributes of innovation 26

In his foundational investigations of innovation, Rogers traces the history

housing and residential construction. First, it describes and then demon-

Christensen, C. 2013. The Innovators Dilemma: When New Technologies Cause

Andrew R. Sanderford, PhD is an Assistant Professor of Real Estate

and Landscape Architecture (CAPLA) at the University of Arizona. Pre-

Andrew P. McCoy, PhD is the Preston and Catharine White Endowed

Matthew J. Keefe, MS is a PhD student in the Department of Statistics at

Pernille H. Christensen, PhD is a Senior Lecturer and the Course Direc-

The Housing Innovation collection is a series of titles that is both practical

Nearly 20 years ago, some construction researchers argued that technol-

market. Here, following the larger conversation in the research literature,

and measures seven important indicators including sales, market, materi-

The Adoption and Diffusion

Andrew R. Sanderford, Andrew P. McCoy,

In People, Policies, and Programs Influencing Innovation in Housing,

Within the research literature, evidence from management and com-

2.2BRIEF LITERATURE SUMMARY

Recognizing the central role of innovation to create value in the construc-

residential construction industry that facilitate and impede the adoption

2.3THE ADOPTION DECISION

Schumpeter described the adoption and diffusion of innovation as a pro-

2.4ATTRIBUTES OF THE ADOPTER

Empirical studies on the adoption and diffusion of innovation both in con-

creativity, employ a technology transfer program (e.g., HUDs PATH),

2.5ATTRIBUTES OF THE PRODUCT, SUPPLY

The external attributes of the innovation that influence the adoption

2.6ATTRIBUTES OF THE MARKET

Research shows that contextual (Dale and McQuater 1998) or external

2.8 KOEBELS DIFFUSION MODEL

Reflecting the literature and nonresearch-based conversations with hous-

Figure 2.1. Conceptual model and variables.

empirical regression model using data from the National Association of

2.9 MEASURING THE ADOPTION DECISION

The adoption decision is often described as a dichotomous choice though

There are, of course, substantive differences between thermostats

2.10DEPENDENT VARIABLE AND POTENTIAL

Drawing from the literature, a cadre of independent variables was

Internal attributes, or attributes of the adopter, are measured both by

s pecifications, of the supply chain and subcontractor network measures,

2.12 REGRESSION MODELING

To analyze how external parameters support a general shift toward

2.10Dependent Variable and Potential Statistical

5Computational Housing Research: A Modeling Primer 53

Figure 2.1. Conceptual model and variables. 13

Table 3.1. Attributes of innovation 26

2.5ATTRIBUTES OF THE PRODUCT, SUPPLY

2.10DEPENDENT VARIABLE AND POTENTIAL

( B) ( B s )(1 B) d (1 B s ) D X t = ( B)( B s ) t (4.5)

log X t = log (Tt St Ct I t ) = log Tt + log St + log Ct + log I t (4.6)