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May 16, 2023 Kathi Markan

May HUD REAC/NSPIRE Newsletter: HUD Publishes NSPIRE Final Rule

ANNOUNCEMENTS

‘NSPIRE: What We Know So Far!’ is a 2-hour live webinar training.
which will be held from 10 am – 12 pm PST (1 pm – 3 pm EST) on:
May 23rd (hosted by AHMA-NCH)
Register here: NSPIRE Training – Hosted by AHMA-NCH

June 14th (hosted by Compliance Prime)
Register here:NSPIRE Training – hosted by Compliance Prime
And
June 21st (hosted by Constructive Forensics)
Register here: NSPIRE Training – hosted by C4N6

In this May 2023 issue of our HUD-REAC/UPCS/NSPIRE Monthly Newsletter, I am going to be discussing the highlights of the 222-page document that HUD published on May 11, 2023, called the “Economic Growth Regulatory Relief and Consumer Protection Act: Implementation of National Standards for the Physical Inspection of Real Estate (NSPIRE).”

The full PDF version (easiest to read/highlight) is here: https://public-inspection.federalregister.gov/2023-09693.pdf
The posting in the Federal Register is here: https://www.federalregister.gov/documents/2023/05/11/2023-09693/economic-growth-regulatory-relief-and-consumer-protection-act-implementation-of-national-standards

What is this document?
This is the first of 4 final publications that HUD will be posting in the next couple of months.  This first publication primarily addresses HUD’s responses to public commentary from June 17, 2022, (found here: Request for Comments: NSPIRE and Associated Protocols) and from January 13, 2021 (found here: Request for Comments: Implementation of NSPIRE) as well as technical changes, verbiage modifications and amendments to 24 CFR. The other 3 core “Subordinate Notices” that are forthcoming are:

  1. NSPIRE Standards Notice
  2. NSPIRE Scoring Notice
  3. NSPIRE Administrative Notice

*Most of our questions will be answered in these 3 upcoming Notices! *

As this published document is considered “Final,” it is not open to public comment/feedback

This “Final Rule” appears rushed as there are numerous grammatical, spelling and reference errors throughout the entire document. Additionally, HUD’s response to public commentary unfortunately included primarily non-answers and continually references that the future release of the 3 notices listed above will address the topics in further detail.  Bottom line – the “Subordinate Notices” will be, by far, the most important and impactful notices HUD will release.

Key Takeaways or Changes from UPCS (not listed in any particular order)

*Remember there are now 3 inspectable areas: Outside, Inside and Unit*

  1. The timeline to implement NSPIRE remains unchanged thus far.  I still have a little hope that HUD will read the comments from the recent NSPIRE Scoring Notice  (that 95% of the stakeholders firmly believe more time is needed before NSPIRE replaces UPCS, HQS, etc) and delays implementation…but for now:
    • Public Housing transitions to NSPIRE on July 1, 2023
    • *PHAs with a fiscal year end of June 30, 2023, will be prioritized to receive their next inspection under NSPIRE*
    • Multifamily, Housing Choice Voucher (HCV), Project Based Voucher (PBV) and the Community Planning and Development (CPD) programs transition on October 1, 2023.
    • This notice says virtually nothing about the rumored option to continue Housing Quality Standard (HQS) inspections for an extra year before NSPIRE-V (for vouchers) begins.
  2. Updated Standards and Scoring methodologies will be published through the Federal Register notice at least once every 3 years with opportunity for public comment prior to implementation.
    • This statement makes me nervous…it sounds like HUD is going to go forward with the current proposed scoring to ‘see how it goes’ for 3 years.
  3. Units of HUD Housing (including mortgages insured or held by HUD) must be “Functionally adequate, operable, and free of health and safety hazards.”
    • I have been opposed to the phrase “functionally adequate” from the beginning because it is a subjective condition. However, it is less subjective than the current “Decent, safe and sanitary” under UPCS.
    • HUD states “Each standard in the NSPIRE Standards notice will define what “functionally adequate” means for that particular standard.”
  4. Annual Self-Inspections
    • Public Housing and Multi-Family properties are required to complete an annual self-inspection.
    • PHAs and MF will be required to keep a copy of their annual self-inspection for 3 years.
    • For properties that scored at or above 60, the survey may be limited to inspecting for deficiencies based on the inspecting entity’s inspection findings.
    • This means if you can knock out your annual self-inspection simply by documenting that you fixed everything that was recorded during the NSPIRE inspection!
      • For properties that scored below 60, the owner or PHA must conduct a survey of the entire project, including all units, inside areas, and outside areas, for any deficiency, and must electronically submit a copy of the results of the survey to HUD.
    • To minimize the burden of inspections, HUD has allowed flexibility to PHAs and owners to combine the self-inspection requirement in the years HUD performs an inspection – so the bottom line is you can count the NSPIRE inspection and the subsequent deficiency correction follow-up as your annual self inspection if you scored OVER 60 and you can count the NSPIRE inspection and subsequent deficiency correction follow up as PART of your annual self-inspection if you scored under 60
      • The full process for conducting self-inspections according to NSPIRE Standards will be detailed in the NSPIRE Administrative Notice
      • Are NOT REQUIRED for all programs such as HCV, PBV, Moderate Rehabilitation Programs and Community Planning and Development Programs (ex. Home, HTF)
      • The transmitted reports will be used as part of the “follow-up” for failing properties – not for any scoring purposes.  **HUD could request additional documentation, like work orders, during the follow-up**
      • Only the properties that score under 60 will be required to electronically transmit the self-inspection to HUD – and must adhere to NSPIRE Standards
  5. The Inside area must include at least one battery-operated or hard-wired smoke detector on each level of the property.
    • “Inside” refers to common areas and systems that are found on the building interior but not inside a unit.
    • This is different from UPCS because although previously required in common areas per CFR § 965.805, it was only enforced as ‘missing’ by UPCS if there was evidence one previously was present.
    • Side note – HUD meant to follow code and say “smoke alarm OR detector” here – detectors set off the fire alarm system, alarms are independent devices – does not depend on a fire alarm system to warn people.  This site explains the difference perfectly: https://homesecurityempire.com/smoke-detectors-vs-smoke-alarms
    • When confused or in doubt, ALWAYS fall back on your local Fire Code.  Fire trumps HUD 100% of the time!
  6. Unit smoke alarm/detector requirements
    • Must have at least 1 battery-operated or hard-wired smoke detector/alarm
      1. On each level of the unit
      2. Inside each bedroom
      3. Within 21 feet of any door to a bedroom
      4. Where a smoke alarm/detector installed outside a bedroom is separated from an adjacent living area by a door, it must also be installed on the living area side.
      5. For the hearing impaired, there must be an alarm system designed for hearing-impaired persons.
    • Additional smoke alarm/detector requirements expected to go into effect December 24, 2024, can be found here: C4N6 February Newsletter
  7. Carbon Monoxide (CO) Detectors/Alarms
    • The rule that went into effect on December 22, 2022, can be found here: https://www.hud.gov/sites/dfiles/PIH/documents/PIH2022-01.pdf
    • EXEMPTED FROM CO RULE (although urged by HUD to take action)
      1. HUD-insured housing not subject to an assistance contract
      2. ESG, CoC, HOME, and HTF programs
      3. Section 202 direct loan program before 10/1/1991 (inc. 202/8 and 202/162 projects)
      4. Housing with mortgages insured OR held by HUD receiving assistance from HUD under the following authorities:
        1. Section 207 (Rental Housing Insurance)
        2. Section 213 (Cooperative Housing Insurance)
        3. Section 220 (Rehab and Neighborhood Conservation Housing Insurance)
        4. Sections 221(d) (3-5) (MIR, BMIR or Hsg for Moderate Income and Displaced Families
        5. Section 231 (Housing for Elderly Persons)
        6. Section 232 (Nursing Homes, ICF, ALF, Board and Care Homes)
        7. Section 234(d) (Condominiums)
        8. Section 236 (Rental/Cooperative Housing for Lower Income Families)
        9. Section 241 (Supplemental Loans for MF Projects)
        10. Section 542(c) (HFA’s – Housing Finance Agency Risk Sharing Program)
    • Inside – Daycare’s, Community Rooms and Preschools must have a carbon monoxide alarm/detector installed if there are fuel-burning appliances/fireplaces OR adjacent area where byproducts of combustion gases can flow (attached garage, mechanical room, laundry).
    • Units – Everyone has a unique situation, but the bottom line is that if carbon monoxide could be vented into a bedroom from a gas appliance/fireplace, a CO detector or alarm is required:
      1. Inside the bedroom
      2. Outside the bedroom, within the immediate vicinity.
      3. First floor units above or below a garage
    • If you have ANY questions about carbon monoxide requirements at your property, please reach out to your local Fire Marshall and get your local requirements IN WRITING on their letterhead with signature and contractor licensing and contact information.
  8. GFCI protection for any outlet within 6 feet of a water source
    • Required for all 3 inspectable areas: Outside, Inside and Unit
    • Although not specified in this document, the NSPIRE Standard for Inside and Units states under Deficiency 3 the following exceptions:
      1. An outlet designated for a major appliance (e.g., water heater, HVAC, refrigerator, washing machine, dishwasher, garbage disposal, microwave, etc) should NOT be evaluated under this standard, regardless of its distance from the water source.
      2. An outlet located below a countertop and within an enclosed cabinet should NOT be evaluated under this standard, regardless of its distance from the water source.
    • Outside GFCI-protected outlets were originally required by code to be installed in buildings starting with construction year of 1975 and of course with any major rehab/remodel or receptacle replacement with a few exceptions. The current version 2.2 NSPIRE Standard does not distinguish construction years of the buildings but rather states ALL outlets throughout the Outside must be GFCI-protected either at the outlet, breaker or within a series.
  9. Guardrails
    • Required for all 3 inspectable areas: Outside, Inside and Unit
    • HUD requires a guardrail when there is an elevated walking surface with a drop off of 30 inches or greater measured vertically.
    • Sadly, code is vague on guardrail locations therefore so is HUD on this subject.  Ultimately, the decision for guardrail requirements usually lies with the local Building Official.
      1. IRC Code states, under R312.1.1, “Guards shall be provided for those portions of open-sided walking surfaces, including floors, stairs, ramps and landings that are located more than 30 inches measured vertically to the floor or grade below any point within 36 inches horizontally to the edge of the open side.
      2. IBC Code states, under  1015.2, “Guards shall be located along open-sided walking surfaces, including mezzanines, equipment platforms, aisles, stairs, ramps and landings that are located more than 30 inches measured vertically to the floor or grade below at any point within 36 inches horizontally to the edge of the open side.
      3. NEITHER code indicates what exactly a “walking surface” is – thus, it could mean that retaining walls over 30 inches in height could be required to have a guardrail installed.  This is where your local building official becomes extremely important.
      4. This is a great source for guardrails on retaining walls Inspectapedia’s Retaining Walls Guardrails – most likely it will become a case-by-case scenario rather than a clear HUD guideline.
  10. Permanently mounted light fixtures in any kitchen and EACH bathroom are required for Inside and Units.
    • For historic properties – if the historic designation does not permit a permanent light fixture in the kitchen and/or bathroom, the PHA/owner may apply to HUD for a waiver of this affirmative requirement.
  11. No unvented space heaters that burn gas, oil, or kerosene are permitted for Inside or Units.  Also, the unit must have a permanently installed heating source for the climate zones designated by the Secretary through notice.
  12. More Unit Affirmative Requirements:
    • The unit must have hot and cold running water in both the bathroom and kitchen, including an adequate source of safe drinking water in the bathroom and kitchen.
    • The unit must include its own bathroom or sanitary facility that is in proper operating condition and usable in privacy. It must contain a sink, a bathtub or shower, and an interior flushable toilet.
      1. Although not expressly stated, I assume SRO’s, Assisted Living Facilities, etc. are exempt from this affirmative requirement.
    • The unit must have a living room and a kitchen area with a sink, cooking appliance refrigerator, food preparation area, and food storage area.
      1. Again, some Independent Living Facilities, SROs etc should be exempt from this rule.
    • For units assisted under the HCV or PBV program, the unit must have at least one bedroom or living/sleeping room for each 2 persons.
    • The unit must have 2 working outlets or one working outlet and a permanent light within all habitable rooms.
  13. Window Screens
    • HUD gives us 1 preview of the upcoming Final NSPIRE Standards Notice stating on Page 36, “In the final NSPIRE Standards notice, a screen will be considered a component of the window, and will be cited if damaged, missing or not functionally adequate.”
    • HUD then emphasizes they take very seriously the risks posed to residents located at housing in “areas with industrial contamination.”
    • Under the Standards Deficiency 4, a missing/damaged screen will be considered a Moderate Health & Safety (required repair in 30 days)
    • Many properties have a clause in their lease indicating window/door screens are not provided by the owner/agency – it will be interesting to see if HUD accepts this as a pre-database adjustment for those properties.
  14. Deficiency Correction Timeframes and Reporting Requirements
    • Much more guidance will be given in the upcoming Administrative Notice
    • You ONLY need to report corrected LT and Severe deficiencies (not Moderate or Low deficiencies)!
    • Repair timing dependent on deficiency type:
      1. Life-Threatening (LT) = 24 hours
      2. Severe (NLT) = 24 hours *only for PHA and MF properties – HCV get 30 days
      3. Moderate = 30 days
      4. Low = 60 days, unless otherwise specified.
    • For certain 24-hour repair requirements, “Corrected” means:
      1. The PHA/owner has completed all the repairs.
      2. Controlled or blocked access to the hazard in a manner that it no longer poses a severe health or safety risk to the residents of the property. (But you can’t just leave it blocked forever…. you have to repair it at some point)!
    • Do NOT claim deficiencies have been corrected if they have not been corrected – the Departmental Enforcement Center (DEC) will investigate you under the False Claims Act.
  15. Timing of inspections
    • An inspection shall be conducted no earlier than 3 months before and no later than 3 months after the date marking the anniversary of the previous inspection.
    • Exception: Inspections due on or before July 1, 2024, shall be conducted no earlier than 6 months before and no later than 6 months after the date marking the anniversary of the previous inspection.  After this date, the 3 months before/after will resume.
    • The score will determine how much time properties have between inspections.  The possibility of up to 5 years between inspections is officially off the table.  The timing based off score remains UNCHANGED from the current UPCS protocol.
      1. Standard 1 performing property – 90+ = 3 years
      2. Standard 2 performing property – 80-89 = 2 years
      3. Standard 3 performing property – 79 and lower = 1 year
    • HUD removed the requirement that inspections have to be conducted in the calendar year in which they are due!<
  16. Small Rural Public Housing Agencies (PHAs) will be inspected under NSPIRE Standards
    • Defined as:
      1. 550 or fewer combined public housing units and vouchers under section 8
      2. and either
        1. Has a primary administrative building with a physical address in a rural area, or
        2. More than 50% of its combined PH and Voucher units are in rural areas.
    • HUD will make the initial determination of PHAs that qualify as small rural no later than October 30, 2023, and every 3 years thereafter.  You can also appeal HUD’s decision.
    • Shall be assessed and scored based only on the physical condition of their public housing properties.
    • Will be inspected no more than once every 3 years, unless designated as “troubled” which is defined as:
      1. The weighted average score of all inspections is below 70% of the total available points, OR
      2. Weighted average score between 70-80% of the total available points and has at least one property that receives fewer than 70% of the total available points.
    • Small Rural PHAs will undergo a SEMAP (Section 8 Management Assessment Program) assessment only every 3 years and indicators will be evaluated only on a pass/fail basis.  Individual properties will not be scored under NSPIRE.
    • To determine an assessment rating, small rural PHAs will be judged based on the last 2 years of HVC budget authority data instead of 1 year.
  17. HCV or PBV Major Change
    • HUD is removing the requirement at § 5.703(d)(5) that children of opposite sex may not be required to occupy the same bedroom or living/sleeping room.
  18. PHAS (Public Housing Assessment System) Assessments
    • HUD will not provide a PHAS physical condition indicator score that uses both UPCS scores and NSPIRE scores in its calculation.
    • Starting July 1, 2023, PHAs will keep their most recent physical condition indicator score until every public housing property associated with the PHAS has been inspected under NSPIRE.
    • After every property under a PHA has received an NSPIRE inspection, the PHA will receive a new physical condition indicator score which will exclusively use NSPIRE inspections in its calculation.
      1. After this transition period, scores will be calculated using the normal method laid out in § 902.13(b)(2).
      2. This does NOT apply to small PHAs (<250 units) or small rural PHAs, however HUD intends to ensure that all properties under small and small rural PHAs receive an NSPIRE inspection before calculating a PHA’s new physical condition indicator score.
    • HUD will use the most recent physical inspection score for all properties of the PHA regardless of inspection frequency, in calculating the PHAS physical condition indicator score.
    • An inspection does not have to occur during the PHA’s assessed fiscal year to be included in that fiscal year’s PHAS score!
      1. Public Housing properties will no longer be scored based on the fiscal year end for the portfolio and previous PHAS score, and properties will be assessed based on the anniversary and score of the previous inspection.
  19. LIHTC (Low-Income Housing Tax Credit)
    • HUD does not have authority to create rules that apply to LIHTC and therefore cannot apply the NSPIRE rule to LIHTC generally, but can apply this rule whenever the LIHTC property also receives some form of HUD-assistance.
  20. State and local Housing Codes
    • HUD states that “For all covered programs, the NSPIRE Standards for the condition of HUD-assisted housing do not supersede State and local Housing codes.”
    • If this statement proves false, presumedly you can appeal or receive a waiver.
  21. Tenant Involvement in the NSPIRE process
    • Regarding tenant-caused damage, HUD states on page 129-134:
      1.  “HUD disagrees with the comments suggesting that tenant-induced damage not be scored as part of an inspection.”
      2. “Scoring should reflect the overall condition of the property regardless of the source of the damage, and inspectors will not be able to fully assess and determine responsibility for damages while onsite.” *this statement could change for HCV and PBV programs and will be published in the Scoring Notice. *
      3. “PHAs and landlords can use policies and lease enforcement to prevent and collect fees for tenant damages.”
      4. “…excessive tenant-induced damage may also indicate problems with property management and enforcement of lease provisions and house rules. Lease agreements and security deposits are essential vehicles for managing these issues.”
      5. In the attached Regulatory Impact Analysis as part of the NSPIRE final rule the following (and I quote) “Under NSPIRE, HUD expects that even one unit with many life-threatening conditions could fail a property overall, but this will occur in only about 1 percent of the inventory.”
    • Any additional units selected by resident council for the inspector to inspect during the NSPIRE inspection will not comprise part of the property score unless randomly selected as part of the Sample.
    • Additionally, HUD does not intend for tenant feedback to HUD to supersede existing work order and tenant complaint processes.
    • HUD sees tenant involvement in the inspection process as “an additional means to improve the overall quality of HUD-assisted housing by bringing the resident’s voice to the table.”
    • The owner/PHA is required to post, within 3 days, in the management office and on common bulletin boards the availability of physical inspection reports and all related documents available to residents during regular business hours upon reasonable request for review and copying. Related documents include:
      1. Owner’s survey plan
      2. Plan of correction
      3. Certifications
      4. Where applicable, the name, address and telephone number of the HUD field office contact.
      5. Additionally, the notice must be translated into other languages, if necessary.
      6. The documents listed above must be kept available for review for a period of 60 days from the date HUD provides the inspection score.
      7. HUD will not expand language to provide more notice to residents of the inspections because “notification requirements are already included in leases and vary by owner and program.”
  22. Appeals – Technical Reviews (TR)
    • Stated on page 116 of the Final Rule, “HUD has retained 45 days for technical review.”
      1. In addition to extending the TR from 30 days to 45 days, it appears that HUD is combining the Database Adjustments into the Technical Review section. (Page 19)
    • HUD also changed verbiage to clearly indicate your clock starts ticking “the day inspection report is provided to the owner or PHA.”
    • On page 129, HUD states, “If there are tenant-owned items cited in the inspection, the PHA or owner can request a technical review.”
    • On page 137, HUD states owners/PHAS can “request a technical review of the inspection to determine if the inspection considered [renovations] at the property.”
    • We will find out more about this in the Administrative Notice

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