HUD Releases Final NSPIRE Scoring, Administrative Procedures Notices

We highlight the noteworthy changes and clarifications in both notices.

HUD’s National Standards for the Physical Inspection of Real Estate (NSPIRE) are replacing the Uniform Physical Condition Standards (UPCS) Inspection Protocol and will apply to LIHTC sites. The change is scheduled to be effective for multifamily inspections as of Oct. 1, 2023. And unless the IRS explicitly states otherwise, as of Oct. 1, the inspection standards for monitoring LIHTC sites will become NSPIRE. To close out its existing 20-year-old housing inspection protocols, HUD recently published the remaining notices to be able to fully implement NSPIRE.

HUD’s finalized scoring notice for NSPIRE protocols was released on July 6. And on July 3, HUD published its NSPIRE administrative notice, “Implementation of NSPIRE Administrative Procedures” [PIH 2023-16 / H 2023-07]. The finalized scoring notice outlines how NSPIRE inspections will be scored and responds to comments submitted in response to the proposed scoring notice. And the administrative procedures notice spells out the new procedures for inspection, inspectable areas, verification of property data and contact info, and handling life-threatening deficiencies. We’ll highlight the noteworthy changes and clarifications from both notices.

Final NSPIRE Scoring Notice

HUD’s notice outlines how NSPIRE inspections will be scored and responds to comments submitted in response to the proposed scoring notice. The final notice doesn’t revise the new scoring methodology, which prioritizes resident health and safety by prioritizing units most heavily.

Final scores will be calculated by weighting each deficiency the inspection finds. Weights are determined by the location and severity of the deficiency. Those found in units are weighted more heavily than common areas inside buildings, and deficiencies outside of buildings are assigned the lowest weights.

At the same time, “life-threatening” deficiencies, as defined by HOTMA, are given the greatest weight and the lowest severity deficiencies are given the lowest. Therefore, a life-threatening deficiency found in a unit will result in the largest possible score deduction of any single deficiency. The final scoring notice includes some changes from the proposed notice.

Added non-scoring deficiencies. HUD has added to items to the “non-scoring” deficiency category. Traditionally, non-scoring items were limited to issues with smoke detectors. Under NSPIRE, this will continue to be the case but the following are new items added to this category. Non-scoring will now also include:

• Missing handrails;
• Call-for-aid systems that are blocked or where pull cord is higher than 6 inches off the floor;
• Carbon monoxide detectors; and
• Smoke alarms.

According to the final scoring notice, these items are not to be scored in units, but to be noted and must be corrected in either 24 hours or 30 days.

New affirmative safety standards. HUD has a new classification referred to as affirmative safety standards. These can be seen as design standards or deficiencies that are to be cited for something that is missing by design.

Originally, HUD intended a 12-month phase-in for new affirmative safety standards. HUD now says that it won’t score new affirmative requirements in at least first 12 months of NSPIRE inspections for the program from the later effective date, ending Oct. 1, 2024, for public and Multifamily Housing programs.

These new standards include the following:

• Guardrails
• GFCIs
• Fire Doors
• Minimum Heating Requirements
• Interior Lighting Standards
• Minimum Electrical Outlet Standards

Letter grade requirement. The proposed scoring notice stated that HUD will assign a letter grade to each property inspection score. This was intended to assist HUD, ownership and/or management, residents, and the public to better understand the condition of the property and to guide administrative activities such as oversight, risk management, and enforcement. However, the final notice eliminates the new letter grade requirement. NSPIRE scores will no longer provide a letter grade categorizing a property’s physical condition based on the inspection score it receives. 

REAC inspection building exclusions. The finalized scoring notice clarifies that the inspections under NSPIRE will exclude buildings without any sampled units and reduce the scope of inspection for common areas.

According to the notice, “The NSPIRE Scoring methodology no longer requires every building of the property to be inspected; instead, only those buildings that contain a unit in the inspection sample are to be inspected. The inspection will also include at least two non-dwelling area spaces, with a priority on spaces that residents can access or will spend time in, in addition to those common areas within a building that includes sampled units. For example, residents are more likely to spend time in a community room as compared to a basement storage area or the management office.”

Scoring point loss cap. Sites that have one deficiency in multiple parts of a building will have points deducted only once per “inspectable area”—units, inside common areas, and outside areas—but not multiple times per each inspectable area. HUD originally had proposed to deduct points for each repeated infraction of the same standard.

Examples of deficiencies that will be cited for each instance but scored only once in the same inspectable area include blocked egress, damaged doors, damaged walls, sharp edges, and infestation.

“This revision takes into consideration concerns expressed in public comments while upholding HUD’s focus on resident health and safety as standards for acceptable living conditions,” HUD’s final notice says.

New property survey requirement. As part of the final scoring notice, HUD has included a new requirement that at the end of each REAC inspection, the property must do a full inspection of its own and then report the findings and repair records to HUD.

According to the notice, “At the completion of a REAC inspection, the owner or PHA must review the inspection report and perform a survey of units not inspected and provide that information to HUD. 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. 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.”

NSPIRE Administrative Procedures Notice

On July 3, HUD published an administrative procedures notice covering the administrative requirements associated with the implementation of the NSPIRE inspection protocol. Among other things, the notice covers procedures for inspection, inspectable areas, verification of property data and contact info, and handling life-threatening deficiencies. Here are some highlights from the administrative notice:

Tenant-owned items in inspectable areas. The NSPIRE final rule defines the inspectable areas for the inspection as inside, outside, and units of HUD housing. REAC inspectors will inspect areas and associated items or components that are listed in the regulations as affirmative requirements and those included within the NSPIRE Standards posted in the Federal Register.

The notice clarifies that inspectors shouldn’t cite tenant-owned items or articles that aren’t considered components of the unit or inside or outside of HUD housing. For example, a tenant-owned picture with broken glass would not be cited for sharp edges, as that is a resident’s personal property and not part of the unit or its components. But REAC inspectors may make an exception and cite certain tenant-owned items in the following examples:

• Tenant-owned items that affect the performance of a fire safety system or otherwise puts the building at risk;
• Tenant-owned appliances and associated electrical and venting components, where that appliance is considered the primary item to meet the affirmative requirements in 24 CFR 5.703(d). For example, a tenant-owned refrigerator that’s the primary device for safe food storage; and
• Tenant-owned items, like an unvented fuel-burning appliance that’s in violation of the affirmative requirements.

Additionally, the notice states that inspectors won’t inspect areas of the property that aren’t considered housing or part of the housing project. For example, commercial or market-rate space used for non-residential purposes, and sidewalks, fencing, roads, and parking lots not owned or maintained by the property won’t be inspected.

Generally, NSPIRE inspections will focus on areas where residents live, areas residents can enter, and components or systems that could impact resident safety and health. For example, REAC inspectors should not cite deteriorated paint as a potential lead-based paint hazard in an area that a child under the age of 6 years would not frequent, such as a locked utility closet. Potential lead-based paint hazards are relevant in units, outside, and common areas, including the main entryway, stairways and hallways, and other common areas frequented by a young child.

Inspection time frames. For most sites, the frequency of inspections will be determined by the date of the prior inspection and the score received. Sites that score 90 points or higher will be inspected at least every three years. Sites that score over 80 (but less than 90) will be inspected every two years. Sites that receive less than 80 will be inspected annually. In the first year of NSPIRE final rule’s implementation, REAC inspections may occur six months before or after the anniversary date. After that, inspections will generally occur up to three months before or after the anniversary date.

HUD may approve requests by an owner for extensions of the inspection deadline for good cause. HUD may also extend inspection deadlines without an owner’s request, as deemed necessary by the HUD Secretary. HUD also has the right to inspect properties outside of the established inspection frequency, especially where there are concerns about persistent conditions that impact the health and safety of residents.

Routine inspection scheduling. Inspection scheduling under NSPIRE will remain largely unchanged. Currently, REAC provides a 28-calendar day notice of the inspection. If this time frame is shortened, it will be announced in a subsequent notice. However, the notice introduces new procedures for verifying information about the property before the inspection. With the advanced notice, the assigned REAC inspector will review and verify information such as rent rolls, market-rate units, and other building information before the inspection date.

HUD also includes a new suggestion for a seven-day notice to residents for REAC inspections using the NSPIRE Standards. In advance of the scheduled inspection, owners must provide notice to all residents as described in the regulations and the lease. In the administrative procedures notice, HUD suggests at least seven days’ notice for residents through multiple communication methods. Notification may be provided through paper or electronic means, including email, text messaging, or through notices posted on the community bulletin board, halls, or doors.

During the inspection. The notice provides new guidance for what owners and agents should and should not do during REAC Inspections using the NSPIRE Standards. During the inspection, the owner or agents should not:

• Interfere with or delay the inspection;
• Block inspectable areas;
• Dispute deficiencies or validity of observed defects;
• Ask for the inspector’s advice on how to correct deficiencies;
• Ask for the inspector’s advice on how to improve their score or avoid future deficiency citations; or
• Engage in behavior that may be considered harassment, including making comments on an inspector’s race, color, gender, sexual orientation, religion, national origin, familial status, or disability.

Interim repairs of life-threatening and severe conditions. In the notice, HUD recognizes that to permanently repair some deficiencies, the property may need additional time to acquire a licensed professional or supplies that may not be available in a 24-hour time frame. This notice gives some clarity on what HUD determines to be sufficiently corrected to remove the health and safety risk. A deficiency is “corrected” when it no longer poses a severe health or safety risk to residents of the property, or that the hazard is blocked until permanent repairs can be completed. If a permanent repair will take longer than the allowable time in the relevant standard for the deficiency, the owner must provide HUD a time frame for completing permanent repairs for HUD approval.

If the correction is a temporary correction to block the hazard, or if professional services or materials to complete the work were not available in 24 hours, the owner must provide a target date for when the permanent correction will be completed. HUD considers permanent repairs to be those that have an expected design life of at least 20 years, or those that meet the manufacturer’s recommendations for service life.

Self-inspection requirements for failed REAC inspections. For properties that score below 60, the owner or agent must conduct a survey of the entire project, including all units, inside and outside, for any deficiency and must electronically submit a copy of the results of the survey to HUD. The survey reports will be provided to NSPIRERegulations@hud.gov with a courtesy copy to the assigned field office representative until the NSPIRE system can receive the submission. HUD will announce when the NSPIRE system is fully operational to receive self-inspections. Survey results are typically due 60 days after the NSPIRE inspection is completed.

Administrative review for failing scores. Sites that score 30 or less under the NSPIRE Standards are subject to administrative review by HUD. Properties that score under 60 in two successive inspections may be subject to administrative review. For scores of 31-59, the Office of Public Housing will retain some discretionary review of the PHA before or in place of a referral to the HUD’s Departmental Enforcement Center.

Resident input in inspection process. Under NSPIRE, HUD is prioritizing resident health and safety, including by incorporating resident feedback about the site’s condition into the inspection process. The final NSPIRE rule at §5.705(f) allows residents to recommend units to be inspected in addition to units randomly selected by official inspectors. Section 11 of the administrative notice establishes the procedures for carrying out 24 CFR §5.705(f).

Approximately 180 days before a site inspection, residents’ groups can identify the dwelling units they would like to add to the inspection process. HUD will provide an electronic mechanism for residents’ groups to submit these requests. HUD will inform residents when they can submit recommendations through the automated system, and residents may electronically submit unit recommendations through the automated system or email. All submissions must be made at least 30 days prior to the inspection.

Once the information is received, the NSPIRE system will randomly select up to five recommended units to add to the scheduled NSPIRE inspection. The inspector will inspect these units and identify Life-Threatening, Severe, Moderate, and Low deficiencies as described in the NSPIRE Standards notice. The rule states that the resident-selected units won’t be considered when determining a property’s NSPIRE score. However, a PHA or owner must still correct any deficiencies detected at resident-recommended units and must submit evidence of the correction along with evidence for other sampled and scored units.