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GAO and HUD Take a Closer Look at Physical Inspections.

Along with our partners, the National Housing Trust is deeply troubled when we hear about HUD-assisted properties in poor condition.  The long-term preservation of affordable housing is premised upon an assumption that the housing is stable, in good physical and financial condition, and most importantly, meets the needs of residents.  We know that the vast majority of privately owned, federally assisted housing is maintained in good condition, but we are deeply concerned about the outlier examples of properties that have been neglected by negligent owners while residents suffer in unhealthy and unsafe conditions.

NHT and the national Preservation Working Group have long called upon HUD to utilize its enforcement tools consistently and forcefully to protect residents and properties.  We are pleased that both the U.S. General Accountability Office (GAO) and HUD are taking a closer look at the Department’s inspection practices, which we hope will lead to greater consistency and, ultimately, improved living conditions for residents.

In March, the GAO released its report, Real Estate Assessment Center (REAC): HUD Should Improve Physical Inspection Process and Oversight of Inspectors,  for which Congress called in the 2017 Consolidated Appropriations Act.  Among other things, the report discusses REAC’s process for identifying physical deficiencies as well as its selection, training, and monitoring of contract inspectors and its own quality assurance inspectors.  GAO reviewed HUD documents and data related to REAC’s physical inspection process, use of contract and quality assurance inspectors, and enforcement processes.  GAO also interviewed HUD officials and housing industry stakeholder groups and conducted discussion groups with contract and quality assurance inspectors.

The GAO found that REAC’s standardized process to identify physical deficiencies at HUD multifamily properties has some weaknesses and makes 14 recommendations to improve REAC’s physical inspection process and its selection, training, and monitoring of contract and quality assurance inspectors.  Among other things, GAO recommended that HUD:

  • Conduct a comprehensive review of the physical inspection process;
  • Develop comprehensive documentation of REAC’s sampling methodology and a process to ensure that documentation is maintained going forward;
  • Track on a routine basis whether REAC is conducting inspections of multifamily properties in accordance with federal guidelines;
  • Create a process to verify candidate qualifications for contract inspectors which considers whether certain types of other inspections satisfy REAC’s requirements; and
  • Develop a process to evaluate the effectiveness of REAC’s training program.

HUD agreed with 11 of GAO’s recommendations and noted that it has been examining how it can develop, pilot, and evaluate an alternate approach to its inspection model that will address issues raised in the report.  The Department acknowledged, however, that given its limited resources, it will be unable to simultaneously develop the new process and implement all the recommendations to its current process.

This winter and spring, HUD has revealed its efforts to identify and test a new approach to physical inspections and enforcement.  In February, HUD announced that it would reduce the advance notification inspectors will provide before conducting physical inspections of assisted housing from 120 days to 14 days. The intent is to reduce the lead time property owners and agents have to make cosmetic repairs in order to secure a passing physical inspection score.   

HUD Secretary Carson also chartered an Inspection Task Force Mission to conduct a wholesale reexamination of REAC inspections, placing the greatest emphasis on eliminating health and safety hazards and ensuring that owners adopt sound maintenance practices all year round.  HUD held a series of listening sessions throughout the country to get feedback on its plans for a new inspection model.  The new model will contain three types of inspections: 1) property owner and manager annual self-inspections; 2) REAC contracted periodic inspections every 1-3 years; and 3) HUD Quality Assurance inspections, which would be triggered by poor conditions.  The new model contains three categories of deficiencies related to: 1) safety and health; 2) function and operability; and 3) condition and appearance.  Each category will be associated with a level of urgency for response, with safety and health requiring the most exigent response.

HUD is launching a two-year multi-phase demonstration in Region III to test the new model.  Currently, the Department is finalizing the strategy for the demonstration, developing items to be evaluated, and formulating test criteria and metrics.  Phase I will begin in the third quarter of Fiscal Year (FY) 2019 and will initiate the property owner and agent self-inspections, which will be evaluated but not scored.  Phase II will commence in the fourth quarter of FY 2019 and will be comprised of contractors and government employees utilizing and assessing new inspector standards and protocols, as well as the development of a new scoring model.  HUD plans to continue soliciting feedback on the demonstration from stakeholders through listening sessions and other methods of outreach. 

NHT supports HUD’s efforts to explore how to improve its physical inspections process, especially its solicitation of stakeholder comments.  We believe it is critically important for the Department to consider the perspective of residents during the demonstration and more broadly as part of its inspection and enforcement protocol, which has not consistently occurred.  We also urge the Department to maintain transparency about its inspection and enforcement efforts, to help stakeholders and advocates better understand the circumstances surrounding those properties. 

REAC also has indicated its plans to replace its Reserve Auction Program for hiring inspectors.

For more information on HUD’s physical inspections, please contact NHT Federal Policy Director Ellen Lurie Hoffman.