"The efficiency of heating systems in affordable housing is an issue that will take on increasingly more importance as time goes on."
You are to be commended for trying to make this work out. The potential cost savings of energy efficiency are significant for Section 8 tenants.
If you are going to use hot water base board heating, you should consider a 50/60 gallon indirect hot water heater coupled to the boiler. You then have the advantage of a high efficiency boiler providing the dhw instead of the tankless which have lower AFUE. My calculations indicate that the standby losses maybe less important than the efficency difference between the appliances. The tankless are best for "endless" hot water, but I'm not convinced of the actual energy savings.
Your choice between insulation and boiler efficiency should be a straight forward analysis once you have the heat loss study for the building. One additional thing to consider is adding enough radiation so that you can heat the building with lower water temperatures. At lower water temperatures you can consider modulating and condensing gas boilers. Adding "outdoor reset" will adjust circulating water temperature down when its not too cold outside, and will provide additional efficiency and savings in the shoulder seasons.
I don't know if you have a three story building, but it you do there will be significant heat loss differences for different floors. You may be able to leverage off that fact to make the building as a system work in your favor if you supply the heat.