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Owners Prepare For Post-COVID HUD Inspections to Resume

Low-income housing property managers are plowing through a backlog of maintenance work and resuming unit inspections to prepare for the return of in-person inspections by The Real Estate Assessment Center, or REAC, at the Department of Housing and Urban Development in June.

The COVID-19 pandemic not only suspended HUD inspections, but property managers paused non-essential maintenance work. As COVID restrictions are lifted and in anticipation of forthcoming inspections, properties are trying to clear the backlog of work orders, sometimes running into shortages of materials and labor.

“We’ve talked with organizations that represent owners, and we found pretty widespread recognition of the careful balance that needs to be struck,” says Ethan Handelman, HUD’s deputy assistant secretary for multifamily housing. “There certainly are health risks associated with visiting properties, but there are also very real health risks to residents of not inspecting.”

“We have a saying that you should be REAC ready every day,” notes Lisa Landis, senior vice president of property management at Pennrose. “That’s been more difficult during COVID.”

Pennrose stopped normal inspections and non-emergency work orders for most of 2020, but continued preventive maintenance, Landis says. Normal inspections and normal work orders resumed in March. They are now working on catching up on the backlog of work orders.

Pennrose has properties in 13 states, with the majority of them in New Jersey and Pennsylvania. Pennrose already has received a number of letters for REAC inspections, as well as municipality inspections, slated for next month, Kevin Hankins, vice president of maintenance for Pennrose, says.

Hankins and his team of regional managers and maintenance managers have walked the exterior of buildings throughout the pandemic to ensure compliance. They’ve also begun interior inspections.

“We do pre-walk inspections on not only properties that we know have REAC inspections, but on other communities that will have REAC inspections at some point within the next two years,” Hankins explains. “We walk about 25 percent of the interiors each quarter to ensure that we are ready with the 28-day notice that we’re receiving now, which is great.”

HUD increased its notice time for REAC inspections from 14 days to 28 days but has not yet announced when it will return to a 14-day notice.

While Hankins feels confident that Pennrose’s properties will be prepared for inspections, he’s concerned that certain parts have become hard to obtain because of COVID shortages of raw material and labor.

“We may have to make changes in the parts that we would typically order,” Hankins says. “We may have to find a like product to that or something similar to make the repairs in order to meet the code. We certainly want to make sure that we’re doing it right, but that is a concern for sure.”

At Community Preservation Partners (CPP), which owns 42 HUD properties, roughly 65 percent of its total portfolio, property managers are having trouble finding appliances, Michael Snowdon, vice president of asset management at Community Preservation Partners, says.

The company is not too concerned with the restart of HUD inspections, Snowdon adds. They started going back into the units in December and the backlog of maintenance orders is beginning to clear out.

CPP’s properties are located in 12 states, mostly on the East and West Coast. Snowdon’s been on a few unit inspections in New Jersey recently. At each property, there is at least one person who didn’t want anyone coming into the unit, but he’s “been pleasantly surprised” that most residents are willing to let inspectors, wearing proper protective gear, come into their units.

Michaels Management has restarted quarterly inspections on exigent health and safety, says Senior Vice President Charles Durnin.

“That is really a fairly quick and easy in and out of a unit as opposed to doing a full REAC inspection,” Durnin says.

Senior residents tend to be the most hesitant to allow inspectors into their units. Property managers see resident hesitancy as a challenge they’ll have to overcome, but they are getting back into all of their units across the portfolio by the end of June. Not only is HUD restarting its inspections but so are local housing authorities and municipalities.

Each state agency is handling it differently, Durnin explains. Some inspectors are getting into occupied units, others are just visiting vacant units. Michaels has properties in 36 states with over 40,000 units.

“Nonetheless, we think that given where we are in the pandemic and the cycle of vaccination, it’s wholly appropriate to get into our units,” Durnin says.

To clear the backlog of work orders, unreported health and safety issues would be addressed first and then normal work orders would be second.

HUD is prioritizing property inspections based on the risk and urgency, Handelman says. Properties with many years of clean REAC inspections, high scores and no tenant complaints will be a lower priority than properties from which HUD has received a bunch of tenant complaints or their REAC score from the pre-COVID inspection was a very low score. They are using community spread of the COVID-19 as another guide.

“We are mindful and aware of the differences in local public health conditions and have the ability to kind of track those and use those accordingly,” says Ashley Sheriff, acting deputy director for HUD’s Real Estate Assessment Center. “At the same time, if we believe a property is high-risk, we’re going to try and come in and inspect that property.”

Once they receive a 28-day notice, Sheriff encourages property owners and agents to reach out to the REAC technical assistance center if they are concerned about specific health concerns or local ordinances that might affect inspections.

While Durnin believes that HUD has a reasonable approach to reimplementing REAC inspections, he foresees certain short-term challenges, such as inspectors being overly critical of unit conditions without consideration of the fact that maintenance work has been limited to life-safety issues over the past year.

“So, on the one hand you have the department being very circumspect about what you do, and then you may have an inspector on the other hand forgetting about that edict and saying ‘okay, well the textbook says this should have been fixed anyhow,’” says Durnin.

On the other hand, Durnin envisions that such challenges would dissipate over the next 18 to 24 months.

When the stay-at home orders were put in place last year, BRIDGE Housing Corp., like many companies, suspended all unit inspections. Then it created a self-certification process, says Christian Wiedel, director of operations at BRIDGE. The company would send surveys out to residents to fill out to make sure everything was okay. Residents could self-certify and let management know if there was a safety issue that needed to be fixed.

“We were only doing unit work orders that were life-safety in nature, such as fire or a flood or leaking water or a sprinkler or smoke detector, but not, Mrs. Jones’ kitchen light bulb that was out during the pandemic,” Wiedel notes.

Like other properties, this created a backlog of routine maintenance work orders that staff is catching up on, Wiedel says. During the pandemic, it continued inspections of common areas, but now they’ve begun in-person inspections to prepare for REAC inspections.

“We’re starting to do unit inspections, meaning obviously more work orders.” Wiedel says. “So that’s a challenge.”

Like the other companies, BRIDGE has also prioritized work orders to clear its backlog efficiently. Not all their properties are subject to REAC inspections, so in order to have properties ready within the period of notice and inspection, they are pushing harder to clear the backlog of maintenance work orders on properties subject to REAC inspections.

Like other companies, finding subcontractors and certain supplies has become another challenge.

“We’re kind of all in the same boat,” Wiedel says. ”It’s just the new norm for a while, I think. Usually, properties would call one or two vendors for a job they’re now calling five or six.”

BRIDGE properties are located throughout California, as well as in Portland, OR and Seattle.

“When you don’t open the closet for 13 months, you never know what you’ll find inside, but for the most part I would expect properties are getting prepared, doing the maintenance and their self-inspections,” Handelman says.

When inspections do restart, it won’t be at full capacity, Sheriff says.

“We’re not sure exactly how long it’ll take us to get the full capacity in terms of the number of inspectors that we have available to us,” Sheriff says. “Even though we’ve conducted some inspections over the last 13 or 14 months, we’ve conducted very few inspections. So, ramping back up to full capacity is going to take a little bit of time, but we do anticipate we’ll be back to full capacity sometime between June 1 and the end of the year.”

Nushin Huq is a Houston-based freelance journalist. She has worked as a reporter covering energy markets and regulation, business and government – both federal and state.