New Developments: NSPIRE-ing Change

5 min read

There was a flurry of activity last month from the U.S. Department of Housing and Urban Development (HUD) around its new National Standards for the Physical Inspection of Real Estate (NSPIRE) demonstration. The announcement of demonstration properties later this month presents a timely opportunity to review what we know about the demonstration and how stakeholders can engage in the process, even outside of being an official demonstration property.

HUD says it is undergoing, “a wholesale reexamination of REAC’s [Real Estate Assessment Center] inspection process” and “modernizing its physical housing inspection model.” Forty-five hundred public housing agencies and property owners throughout the country will be announced in September as participants in the demonstration.

The demonstration properties will be inspected under the NSPIRE inspection protocol and receive an advisory NSPIRE score, while the most recent Uniform Physical Condition Standards (UPCS) score will officially remain on the books. The demonstration participants must inspect all units once a year on their own. REAC contracted inspectors will inspect each property every one- to three-years and enter a random sample of units. HUD federal employee inspectors will inspect properties to collect evidence for enforcement actions on properties that perform poorly on the REAC contracted inspections.

The Good
The new inspection model is more resident-focused and reduces the number of inspectable areas from five to three dwelling units, inside and outside. Under the previous model, dwelling units accounted for 35 percent of a UPCS score; in the new model, dwelling units account for 50 percent and the entire property will fail if the dwelling units fail. NH&RA and others are working with HUD to determine how resident-caused deductions of points will be scored. For example, how will HUD score a blocked exit when the owner has moved a piece of furniture to unblock an exit only to have the resident move it back? How will HUD score in-unit property damages that have not yet been fixed because the resident has yet to report to management for fear of incurring a fee? HUD is aware of these issues and seems to be approaching them delicately. HUD is considering allowing inspectors to note if they believe the issue is resident-caused. Owners should document these types of encounters with residents through the work order system and/or lease violation notices that don’t lead to eviction.

HUD is trying to move away from subjective scoring towards measurable, objective scoring. In doing so, it ended the reverse auction program for REAC contracted inspectors, in which the lowest bidder was awarded the contract. HUD intends to train all REAC contracted inspectors and to perform quality assurance testing to ensure REAC contracted inspections are producing accurate results

The Bad
Back in February, HUD issued a notice that reduces the time of notice prior to inspection to 14 calendar days. Refusal or cancellation of an inspection will result in a ‘pencil’ score of zero. If an inspection can be scheduled and completed within seven calendar days of the original date, that inspection score will be entered. If the second attempt to inspect fails, the zero score will stand. It’s important to note that the 14-day inspection notice applies to all HUD-inspected properties, not just those participating in the demonstration. HUD’s goal is to reduce the amount of properties that prepare for inspections, rather than perform year-round maintenance. HUD anticipates that properties will likely see lower, more accurate scores that reflect the typical conditions of a property. NH&RA remains concerned about how this will impact owners and their planned improvements. Properties planning for major renovations ($15,000 or more) should alert their HUD field office and HUD headquarters with the anticipated renovation scope and dates to reduce the chance of having an inspection scheduled during that time period.

The Ugly and Moldy
The new model prioritizes safety and health over condition and appearance. Things like rust on system appliances will no longer incur negative points, so long as the rust doesn’t impair function and operability.

Inspectors will use infrared cameras and moisture meters to test wall moisture. HUD is concerned that property managers paint over mold stains in order to pass inspections without addressing the root cause of the mold. HUD will need to carefully consider how to score this, especially for rehab properties and properties with stacked bathrooms. HUD will also need to consider what resources, if any, they are willing to bring to the table to rehab properties with systemic mold issues, especially public housing properties, which have been routinely underfunded through congressional appropriations to the Public Housing Capital and Operating Funds.

The Changing Standards
Last month, HUD issued a new set of standards for chimneys, exit signs, sinks, smoke detectors and trash chutes for specific input about the clarity of the deficiencies, the accuracy of the rationales and the overall usability of these standards. This is the first set of many standards and I encourage owners to submit their feedback. These inspection protocols will inform the demonstration and, ultimately, the final rule.

HUD plans to issue a final rule with updated inspection protocols that will apply to the entire universe of HUD-inspected properties by the end of Fiscal Year 2020 or September 31, 2020. HUD’s high level of stakeholder engagement and willingness to adapt makes me optimistic that the final inspection protocols will be a vast improvement for everyone involved. Check out or contact me at [email protected] for more information.

Kaitlyn Snyder is managing director of National Housing & Rehabilitation Association.