Human Settlements Review - Parliamentary Monitoring Group

Human Settlements Review, Volume 1, Number 1, 2010
option for the poor. This common assumption
is based on hard facts about what it costs to
construct the physical structure of the house
and related infrastructure, but it ignores the
cost of operating the house over its entire
life-cycle. This is highly problematic in light
of the fact that life-cycle operating costs are
projected to rise faster than inflation due to
declining supply of key input resources.
The objective of this research was to
demonstrate that a life-cycle approach
rather than the more traditional once-off
capital cost approach generates results that
demonstrate that sustainable living is more
affordable for both the household and the tax
base of the city. This has been achieved by
collecting data and information on life-cycle
costs of both minimum standard conventional
housing provision (hereafter referred to as the
“current approach”) as well as a package of
“sustainable living” applications. Conclusions
were reached by measuring and comparing
40-year life-cycle cost effectiveness of the two
alternatives. The results are expressed as net
present values, using a discount rate of 9%.
According to Wrisberg, there are several “lifecycle”
methodologies that are in use in the
world today that have emerged in response
to the global demand for “tools” to determine
the material and energy content of particular
production and consumption processes, as
well as environmental impacts (Wrisberg et al.
2002).
A “life cycle” approach is necessary because
it has become imperative to take into account
the full capital and operational costs of a given
production or consumption process over the
life cycle of the process.
Without this kind of analysis it will not be
possible at the design stage to determine
which process will
contribute most towards achieving a more
sustainable socioecological regime; or
alternatively, which one
will do the least damage. However, a wide
range of life-cycle methodologies have
emerged for different purposes. These
included the following: Life Cycle Assessment,
Material Input per Unit of Service (MIPS),
Environmental Risk Assessment (ERA),
Material Flow Accounting (MFA), Cumulative
Energy Requirements Analysis (CERA),
Environmental Input-Output Analysis (env.
IOA), analytical tools for eco-design, Life
Cycle Costing (LCC), Total Cost Accounting
(TCA), Cost-Benefit Analysis (CBA) and Cost
Effectiveness Analysis (CEA). It is not possible
to describe and analyse these different
methodologies here.
Suffice it to say that a CEA approach has
been adopted because this makes it possible
to compare the “conventional approach” to
housing delivery to a “sustainable living”
alternative across the life-cycle. The essence
of this approach, according to Wrisberg, et al
(2002), is that it does not quantify benefits like
CBA, even though they regard it as a derivative
of CBA. Citing a report by RPA (1998) entitled
Economic Evaluation of Environmental
Policies and Legislation, Final Report for DG
III of the European Commission, Contract
Number: ETD/97/501287, Wrisberg, et al
(2002) states that CEA aims at determining
the least cost option of attaining a predefined
target after the fundamental decision process
has been finalised.
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