AGENCY:

Office of the Assistant Secretary for Housing—Federal Housing Commissioner, Office of the Assistant Secretary for Community Planning and Development, Office of the Assistant Secretary for Public and Indian Housing, HUD.

ACTION:

Proposed rule.

SUMMARY:

This rule proposes a new approach to defining and assessing housing quality: The National Standards for the Physical Inspection of Real Estate (NSPIRE). This proposed rule is part of a broader effort across HUD to revise the way HUD-assisted housing is inspected and evaluated. The purpose of NSPIRE is to reduce regulatory burden and improve HUD oversight through the alignment and consolidation of the inspection regulations used to evaluate HUD housing across multiple programs, which are currently evaluating housing quality through differing standards, protocols, and frequencies. The goal of this alignment and consolidation is to create a unified assessment of housing quality. In advancement of HUD's mission to create quality affordable housing and strong, sustainable, and inclusive communities, this rule would establish the method HUD will use for the implementation of specific NSPIRE standards, scoring, and processes through Federal Register notices. Additionally, the proposed rule seeks to apply a “safe, habitable dwellings” standard; reduce the categories of current inspectable areas for physical condition standards for covered housing programs from five to three; implement a new annual self-inspection and reporting requirement for certain HUD housing; establish an administrative process for the treatment of health and safety deficiencies; and incorporate provisions of the Economic Growth and Recovery, Regulatory Relief and Consumer Protection Act that will reduce administrative burden on small rural PHAs.

DATES:

Comment Due Date: March 15, 2021.

ADDRESSES:

Interested persons are invited to submit comments to the Office of the General Counsel, Rules Docket Clerk, Department of Housing and Urban Development, 451 Seventh Street SW, Room 10276, Washington, DC 20410-0001. Communications should refer to the above docket number and title and should contain the information specified in the “Request for Comments” section. There are two methods for submitting public comments.

1. Submission of Comments by Mail. Comments may be submitted by mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW, Room 10276, Washington, DC 20410-0500. Due to security measures at all federal agencies, however, submission of comments by mail often results in delayed delivery. To ensure timely receipt of comments, HUD recommends that comments submitted by mail be submitted at least two weeks in advance of the public comment deadline.

2. Electronic Submission of Comments. Interested persons may submit comments electronically through the Federal eRulemaking Portal at http://www.regulations.gov. HUD strongly encourages commenters to submit comments electronically. Electronic submission of comments allows the commenter maximum time to prepare and submit a comment, ensures timely receipt by HUD, and enables HUD to make comments immediately available to the public. Comments submitted electronically through the http://www.regulations.gov website can be viewed by other commenters and interested members of the public. Commenters should follow instructions provided on that site to submit comments electronically.

Note: To receive consideration as public comments, comments must be submitted through one of the two methods specified above. Again, all submissions must refer to the docket number and title of the notice.

No Facsimile Comments. Facsimile (fax) comments are not acceptable.

Public Inspection of Comments. All comments and communications submitted to HUD will be available for public inspection and copying between 8 a.m. and 5 p.m. weekdays at the above address. Due to security measures at the HUD Headquarters building, an advance appointment to review the public comments must be scheduled by calling the Regulations Division at (202) 708-3055 (this is not a toll-free number). Copies of all comments submitted are available for inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT:

Timothy Weese and Samuel Franco, Real Estate Assessment Center, Office of Public and Indian Housing, Department of Housing and Urban Development, 550 12th St SW, Suite 100, Washington, DC 20410-4000, telephone number 202-708-1112 (this is not a toll-free number). Individuals with hearing or speech impediments may access this number via TTY by calling the Federal Relay during working hours at 800-877-8339 (this is a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

There are currently two inspection models used across the majority of HUD housing programs: The Housing Quality Standards (HQS) developed in the 1970s, which are currently found at 24 CFR 982.401, and the Uniform Physical Condition Standards (UPCS) developed in the 1990s, which are currently found at 24 CFR 5.703. Both remain largely unchanged since their inception. The housing portfolio that was once dominated by government-owned properties has changed in the past two decades to become largely increasingly owned by private entities. This shift has caused Congress and HUD's evolving list of stakeholders to demand revisions to the physical inspection products and services that will both provide reliable evaluations of housing conditions and protect residents.

HUD analyzed the way inspections are conducted under both models to better understand how housing quality regulations needed to evolve. HUD found that both inspection models can sometimes provide inaccurate and inconsistent results and can prevent HUD from effectively evaluating housing across programs. HUD determined that while the models are well-intentioned in design, neither model currently aligns with HUD's priorities, the state of the housing industry and improvements in technology. This is partly because neither model includes mechanisms for continual update. This analysis also identified a disproportionate emphasis around the appearance of items that are otherwise safe and functional and paid inadequate attention to the health and safety conditions within the built environment. HUD has concluded that existing housing standards need to focus on habitability and the residential use of the structures, and most importantly, the health and safety of residents.

To this end, HUD announced the implementation of NSPIRE through the publication of an August 21, 2019, notice,^[1] which described the development of a new inspection model for HUD programs. HUD began building the updated standards, procedures, and scoring methodologies, which will to be refined through a multistage NSPIRE demonstration. The demonstration will test and HUD will further refine the future state of HUD's physical inspection model to best serve residents. NSPIRE programmatic provisions will be published in the Federal Register and will provide an opportunity for public comment.^[2] The improvements being refined through the NSPIRE demonstration are intended to occur in parallel to support and reinforce the changes being proposed by this rule.

Regulatory Consolidation and Alignment

As noted above, the proposed rule would consolidate and align housing quality requirements and associated inspection standards across programs wherever possible. To achieve this, housing quality regulations across HUD programs would be consolidated into one location at 24 CFR part 5. HUD understands, however, that regulations must be flexible enough to accommodate each program's unique circumstances. Where differing statutory requirements or public policy considerations prevent alignment to 24 CFR part 5, those program-specific requirements would be maintained in their respective program regulations and would supersede or supplement 24 CFR part 5.

Current program regulations governing housing quality and inspections have a large regulatory footprint. Rather than being in a single location, they are located under 24 CFR part 5 and part 200 for programs governed by Uniform Physical Condition Standards (UPCS); 24 CFR 982.401 for programs governed by HQS; and within each program's individual regulations in 24 CFR parts 92, 93, 200, 574, 576, 578, 880, 882, 884, 886, 902, 982, 983, and 985. This means that finding and understanding the requirements across programs—even those governed by the same standard—is often cumbersome. Instead, this rule would consolidate 14 dispersed sections which are spread across 24 CFR, into 7 consecutive sections.

Further, there are often minor, unnecessary discrepancies in language across regulations. The use of “decent, safe, and sanitary” is a good example. The physical condition standards applicable to Public Housing and HUD's Multifamily Housing program outlines that housing must be “decent, safe, sanitary, and in good repair.” ^[3] The Housing Choice Voucher (HCV) and Project-Based Voucher (PBV) program regulations state housing must be “decent, safe, and sanitary rental housing of a modest (non-luxury) nature with suitable amenities.” ^[4] Meanwhile, regulations for the Home Investment Partnerships (HOME) program state housing be “decent, safe, sanitary and affordable.” HUD believes that all standards governing HUD housing are equivalent in that they mandate safe, habitable housing for residents. An alignment of these standards would create a single expectation of housing quality across these programs and remove these unnecessary discrepancies.

Finally, programmatic alignment and consolidation is increasingly important as HUD's inspection portfolio has shifted to include greater numbers of mixed finance properties which are subject to multiple inspection standards by the nature of their financing. A similar challenge is faced by PHAs and owners whose portfolio includes multiple HUD program types or that convert from one funding stream to another, such as through the Rental Assistance Demonstration (RAD) program. HUD acknowledges that the challenges a PHA faces are not always the same challenges that owners face, but in both cases, the lack of aligned requirements unduly increases the complexity and uncertainty associated with participating in HUD's programs and may deter some owners from future involvement.

Programmatic and Statutory Limits on Alignment

Part of this alignment will consolidate and align the regulations governing the physical condition of HUD housing to create a shared expectation of housing quality across a wide array of distinct programs. The remainder of the alignment centers around program administration: Inspection protocols, processes, and procedures.

Regarding these inspection protocols, processes, and procedures, the majority of the alignment that HUD is proposing involves the program regulations for the public housing and multifamily programs. However, given the unique nature of some HUD programs and the limits posed by existing statutory requirements, it is not possible for HUD to align all program administration regulations across all programs under this proposed rule.

Within this proposed rule, the Housing Choice Voucher (HCV) program, comprised of the Project Based Voucher (PBV) and Tenant Based Voucher (TBV) programs, has been aligned with other HUD programs to the maximum extent possible, while also acknowledging that varying types of rental housing and unique geographic features conditions nationwide necessitate separate requirements in certain areas. HUD's approach for aligning these programs accounts for the:

• Unique statutory requirements related to the standards of individual units rather than the project as a whole; ^[5]

• Nature of the entity responsible for conducting inspections ^[6] (the PHA rather than HUD);

• Relationship of housing quality standards to State and local codes; ^[7]

• Pass/fail nature of inspections; and
• Frequency of inspections.^[8]

All of these differ greatly from other HUD programs, particularly project-based assistance programs.^[9]

Similarly, while the proposed rule aligns the Office of Community Planning and Development (CPD) programs whenever possible, CPD programs pose unique challenges to alignment, both across HUD and within CPD. CPD programs provide housing assistance, one-time or time-limited assistance (such as mediation with a property owner or a one-time payment of rental arrears to help a family avoid eviction from their existing housing, or payment of rental application fees to help a person in shelter get back into housing), and special housing needs programs. CPD programs also fund various services, such as legal assistance and mediation to prevent eviction and housing search and placement, for special needs populations. The variety of housing assistance and services offered through CPD programs required HUD to adopt, as proposed here, unique inspection frequencies and protocols that account for the needs of these different programs and assistance types. Furthermore, this alignment accounts for the fact that CPD programs are administered differently. For example, CPD's formula grant-based programs are provided to States, eligible units of local government, the District of Columbia, U.S. Territories and Tribal governments, which often follow local code requirements.

Through the rulemaking process, HUD invites recommendations on opportunities to further consolidate similar regulatory provisions.

With regard to consolidation, HUD is requesting public comments on the following questions:

Question for Comment #1: The Economic Growth and Recovery Act mandates that for small public housing agencies, the same standards apply to small public housing agencies for the acceptable condition of public housing projects also apply to projects assisted under Section 8. Is there a preferable approach to implementing the statutory provision that requires the same standards for small rural Section 8 projects and PHA public housing projects? If so, how should the standards for and small rural PHA Section 8 projects and public housing projects differ from the standards employed for all other public housing and HCV units while ensuring that all HUD housing must be free of health and safety hazards?

Why HUD Is Implementing NSPIRE Through Rulemaking

As previously noted, the current regulatory footprint of all housing standards is sprawling. HUD believes that consolidating these standards—a total of 16 regulations containing many administrative and procedural differences—is required to reduce administrative burden and increase resident safety.

While some of the programmatic modifications made by this proposed rule could have been implemented without formal rulemaking, proceeding with this proposed rule provides a framework for continued stakeholder engagement and ensures transparency throughout the process.

During the NSPIRE implementation and in parallel to formal rulemaking, HUD plans to draft Federal Register notices that would outline the specific standards, scoring, and protocols under NSPIRE. All updated standards and scoring methodologies would be published—as required by this proposed rule—through a Federal Register Notice at least once every 3 years with the opportunity for public comment prior to implementation. This would provide opportunity for both industry stakeholders and the general public to examine the proposed changes, provide pertinent comments, and suggest the inclusion of any relevant industry best practices. This would also allow HUD to be more responsive to the changing portfolio and evolving needs in the field and would allow HUD to further ensure resident safety remains at the forefront.

II. The Proposed Rule

There are three sections under this heading representing the four types of changes this rule is making: Section A covers amendments and additions to 24 CFR part 5, which make up the bulk of the changes proposed;” Section B covers HUD's implementation of its statutory mandate regarding Small rural PHAs;” and Section C discusses other changes which the proposed rule would make to regulations for programs which are being integrated under NSPIRE.

A: Amendments and Additions to 24 CFR Part 5

Amending 24 CFR part 5 would allow HUD to consolidate multiple physical condition requirements into a single regulation. This would align overarching policies related to the frequency of inspections, the method of appealing results, and the actors responsible for conducting inspections. It would also make several technical modifications to other regulations. These changes would ensure transparency, consolidate regulatory sprawl, and reduce overall burden for PHAs and owner/agents.

HUD's consolidation and alignment of the inspections regulations under this part broadly fall into two categories. First, amended and aligned § 5.703 would generally apply across all HUD programs covered under the proposed rule. These regulations are meant to convey clear expectations of housing quality and maintenance requirements across HUD programs, ensuring residents have a shared expectation of safe, habitable housing regardless of program type. Second, changes and alignment in § 5.705 through § 5.713 are generally only applicable to the public housing and multifamily programs as they deal with administrative procedures and scoring for HUD-conducted inspections. To clarify, by nature of their differing statutory requirements and programmatic considerations, § 5.705 through § 5.713 in part 5 generally do not apply to Section 8(o) programs (HCV and PBV), Moderate Rehabilitation, or certain CPD programs (i.e., HOME and Housing Trust Fund (HTF)).

HUD proposes the following amendments and additions to 24 CFR part 5:

a. Section 5.701 Applicability

The current regulations at § 5.701 state that the physical condition standards in 24 CFR part 5 apply to Public Housing and certain programs administered under HUD's Office of Multifamily Housing, including all project-based Section 8 programs and any housing with mortgages insured or held by HUD or receiving insurance from HUD.

Amended § 5.701 would extend this subpart to the HCV (part 982) and PBV programs (part 983). CPD programs would adopt these standards by reference in the applicable CPD regulations to include: The HOME Program (part 92); HTF) (part 93); Housing Opportunities for Persons with Aids (HOPWA) (part 574); Emergency Solutions Grants (ESG) Program (part 576); and Continuum of Care (CoC) (part 578).

b. Section 5.703 National Standards for the Condition of HUD Housing

HUD's housing condition standards are located in two areas in the regulations today: Existing § 5.703 applies to public housing, multifamily, and some CPD programs while existing § 982.401 applies to HCV and PBV, and to some other CPD programs via cross-reference. CPD programs do not apply any scoring, weighting, ranking or enforcement from Part 5. This is outlined in the CPD program rules (e.g., HOME rule at 24 CFR 92.251(f)(1)(i).)). CPD programs are fundamentally different than many of the programs subject to REAC inspections as they are programs administered by local governments subject to local decision making. CPD programs have their own means of enforcement specified in each program regulation. These functions are instead performed by HUD CPD staff, and can include requiring the participating jurisdiction or grantee repaying the full amount of subsidy provided to the project. Amended § 5.703(a) through (e) consolidates and replaces both § 5.703 and § 982.401. These provisions parallel the specific directives at 42 U.S.C. 1437(f)(2) and 42 U.S.C. 1437(o)(8)(B) that require the Secretary to establish quality standards that ensure housing is safe and habitable. In these provisions, HUD proposes to define “safe, habitable dwellings” as those for which “the items and components located inside the building, outside the building, and within the units of HUD housing . . . [are] functionally adequate, operable, and free of health and safety hazards.” HUD believes the requirement of “functionally adequate, operable, and free of health and safety hazards” is generally equivalent to “decent, safe, and sanitary.” The intentional shift in language would serve as a uniting phrase across programs. Additionally, the shift would help the public differentiate between the old and the new regulatory frameworks. It would further allow HUD to establish clear, objective, and aligned property inspection standards (described later in this rule at § 5.705(a) and § 5.709) by creating identifiable limits that are comparable across housing programs. For example, the terms “functionally adequate” and “operable” may be defined based on universal habitability requirements and design specifications for an item or component. In contrast, “decent,” is a highly subjective term. Perceptions of decency vary from person to person and location to location. The terms “health” and “safety” can also be measured universally and quantitatively by using standard public health and safety metrics related to morbidity and mortality. “Health” as used here would be inclusive of “sanitary;” HUD believes that term “health” would be more useful for assessment of a broader range of impacts. HUD intends this new description to make clear that the built environment's effect on the health and safety of residents is more important than any building damage that is strictly cosmetic in nature. The new definition would also simplify the way in which this rule names the inspectable areas of a property by reducing the number of areas from five to three. This change is intended to increase readability, streamline the inspection process, and emphasize to stakeholders the importance of resident units.

Section 5.703(a) would limit the ways in which the quality requirements apply to units occupied by HCV and PBV participants, as well as common areas and exterior areas which either service or are associated with such units. This limitation is generally derived from the unique statutory requirements for these programs related to the application of housing quality standards to units (as opposed to projects). Other factors that make this limitation appropriate is the entity responsible for conducting the inspections (the PHA), the relationship of the housing quality standards to local codes, and the frequency of those inspections.

HUD also proposes to consolidate into § 5.703(d) several provisions currently found in one section of the regulations but implied in others. For example, the proposed rule would make it clear that certain unit features, like having a kitchen area, are minimum habitability requirements across programs. Most renters would expect to have the ability to store and prepare food in their home. While not new requirements, they reinforce the importance that this rule places on residents' units and the primarily residential nature of HUD housing. Similarly, amended § 5.703(d) would add the word “safe” to the current requirement that units have an adequate source of potable water. “Safe” in this context would be defined by HUD through future rulemaking after receiving public comments.

This portion of the rule would also incorporate requirements currently described more clearly by the HCV regulations for smoke detectors, including those for hearing impaired persons and the requirement for hot and cold running water, and would replace current paragraph (f) concerning health and safety concerns. So that all the habitability provisions are in one place, paragraph (e)(2) would maintain language found in the current regulation at § 5.703(f) regarding lead-based paint but would add information on applicability.

The remaining provisions in (f) through (h) discuss the relationship of local codes to HUD housing and identify when alternatives to § 5.703 would apply.

New paragraph (g) would clarify that § 5.703 may be replaced or supplemented by a state or local standard under the HCV and PBV program in line with the statutory exception for those programs found at 42 U.S.C. 1437f(o)(8)(B). Additionally, for special housing types, such as Single Room Occupancies or congregate housing, that may have incompatible design requirements, like shared bathroom or kitchen facilities, paragraph (h) would clarify that the provisions in § 5.703 may be modified by program specific requirements which would continue to be found in the same program-specific sections of the regulations as they are today.

With regard to standards, HUD is requesting public comments on the following questions:

Question for Comment #2: HUD has the following questions regarding water safety:

(a) How can HUD best define what is meant by safe or potable water?

(b) Should “safe” mean water provided by a public water system that is in compliance with the Safe Drinking Water Act (42 U.S.C. 300f et seq.) as implemented by the EPA?

(c) How should HUD monitor whether water is safe?

(d) What elements should be reviewed during the physical inspection to determine water safety?

(e) Should inspectors verify that a municipal water supply authority is in compliance with EPA's Safe Drinking Water Act? How would they best do this?

Question for Comment #3: HUD is specifically seeking comment on whether the site and neighborhood standards as found in 24 CFR 982.401(l), should be included in the regulation or only in the inspection standards? HUD also seeks comments on whether all of the explicit standards should be included or if there are certain site and neighborhood standards that HUD should consider changing?

Question for Comment #4: The proposed rule would establish a subset of minimum NSPIRE standards to apply to rehabilitation of rental and owner-occupied or homebuyer housing and homebuyer acquisition of standard housing (i.e., down payment assistance) assisted with HOME or HTF at §§ 92.251(b) and (c)(3) and §§ 93.301(b) and (c)(3), and to HOME- and HTF-assisted rental projects throughout the affordability period at § 92.251(f) and § 93.301(e), and for units occupied by tenants receiving HOME Tenant-based rental assistance (TBRA) in accordance with § 92.251(f)What minimum housing condition standards should HUD apply to HOME- and HTF-assisted rehabilitation activities for rental or owner-occupied housing and what minimum condition standard should apply to HOME-assisted homebuyer acquisition activities at completion to ensure that the housing is decent, safe, sanitary and in good repair? In addition, what minimum housing condition standards should HUD apply throughout the affordability period to HOME- and HTF-assisted rental projects and units occupied by tenants receiving HOME TBRA to ensure that the housing remains decent, safe, sanitary and in good repair?

Question for Comment #5: How do the NSPIRE standards in this proposed rule compare to minimum deficiencies that must be corrected in HOME- and HTF-assisted rehabilitation projects at § 92.251(b) and § 93.301(b) or which must be corrected prior to HOME- and HTF-assisted homebuyer acquisition of standard housing (i.e., down payment assistance) to ensure that upon completion the housing is decent, safe, sanitary and in good repair?

Question for Comment #6: Should HUD establish different minimum deficiencies that must be corrected in HOME- or HTF-assisted rental housing and homebuyer or owner-occupied housing rehabilitation projects at § 92.251(b) and § 93.301(b)? If so, what should HUD consider when establishing minimum standards for the rehabilitation of rental housing, homebuyer housing, or owner-occupied housing?

Question for Comment #7: Should HUD establish different minimum deficiencies that must be corrected in large and small HOME- or HTF-assisted rehabilitation projects at § 92.251(b) and § 93.301(b)? If so, what should HUD consider when establishing minimum standards and what should HUD define as a large housing project?

Question for Comment #8: Should HUD establish different minimum deficiencies that must be corrected for HOME or HTF-assisted rehabilitation and homebuyer or owner-occupied acquisition of standard housing (i.e., down payment assistance) projects at § 92.251(c)(3) and § 93.301(c)(3)? If so, what should HUD consider when establishing minimum standards for rehabilitation projects and homebuyer acquisition projects?

Question for Comment #9: Should HUD establish minimum written property standards requirements for housing occupied by tenants receiving HOME TBRA at § 92.251(f) that exceed or are different than minimum requirements for the ongoing condition of HOME-assisted rental housing? Should HUD establish a list of minimum deficiencies that must be corrected if found during an onsite physical inspection of HTF-assisted rental housing? If so, what elements should be required in the written property standards?

Question for Comment #10: Alternatively, should HUD apply the NSPIRE standards established in accordance with this proposed rule (not to include the inspection procedures, administrative processes for scoring and ranking, or the enforcement requirements of NPSIRE) to housing occupied by tenants assisted receiving HOME TBRA at § 92.251(f)? HUD could require inspection of the assisted unit; the items and components within the primary and secondary means of egress from the unit's entry door(s) to the public way; the common features related to the residential use of the building (e.g., the laundry room, community room, mail room); and, the systems equipment that directly services the unit similar to the exceptions that are included in the proposed rule for HCV and PBV. Is there another national housing quality or condition standard that HUD should apply to housing occupied by tenants assisted with HOME TBRA?

Question for Comment #11: Should HUD establish a list of minimum deficiencies that must be corrected if found during an onsite physical inspection of HOME- or HTF-assisted rental housing or housing occupied by a tenant receiving HOME TBRA at § 92.251(f)? If so, should HUD establish separate lists for HOME and HTF-assisted rental housing and housing occupied by a tenant receiving HOME TBRA? What should HUD consider in the development of such lists of deficiencies?

Question for Comment #12: Section 5.703(h) of the proposed rule identifies unique standards to special types of housing—single room occupancy (SRO) housing; congregate housing; group home; shared housing; manufactured home; cooperative housing; and homeownership—but applies this section only to the HCV, PBV, and Moderate Rehabilitation Programs. Should any of these unique standards—specifically SRO, congregate housing, shared housing, and manufactured homes—apply to the CoC, ESG, and HOPWA programs?

Question for Comment #13: HUD is considering adding certain affirmative requirements at the final rule stage. Currently under consideration are related to ground-fault circuit interrupter (GFCI), an arc-fault circuit interrupter (AFCI); Heating, ventilation, and air conditioning (HVAC); Guardrail; and Lighting-Interior. In alignment with HUD's prioritization of resident safety, HUD welcomes public comment on all issues, but is specifically seeking feedback regarding implementing the following:

a. Electrical Outlet and Switch—HUD is considering adding a deficiency under the Electrical Outlet and Switch Standard regarding an inadequate number of outlets (i.e., either 2 working outlets or 1 working outlet and a permanent light) within all habitable rooms due to potential safety hazards, usability barriers, and inadequate illumination.

b. GFCI & AFCI—HUD is considering adding a deficiency under the GFCI & AFCI Standard regarding the lack of GFCI protection where required (e.g., within 6 feet of sinks, tubs, showers; or exterior, garage, or unfinished basement areas) due to potential safety hazards, such as shock or electrocution.

c. HVAC—HUD is considering adding a deficiency under the HVAC Standard regarding the lack of a permanently installed heating source due to potential health safety hazards, such as fire or carbon monoxide exposure.

d. Guardrail—HUD is considering adding a deficiency under the Guardrail Standard to require a guardrail when there is an elevated walking surface with a drop off of 30 inches or greater measured vertically.

e. Lighting—Interior—HUD is considering adding a deficiency under the Lighting—Interior Standard regarding the absence of a permanently mounted light fixture in the kitchen or bathroom due to potential safety hazards and inadequate illumination.

c. Section 5.705 Inspection Requirements

The current § 5.705 states that entities must inspect covered HUD housing programs annually in accordance with HUD-prescribed physical condition standards unless program regulations or HUD provide otherwise. Amended and expanded § 5.705 would align inspection standards (including provisions pertaining to frequency), would identify entities responsible for conducting inspections, would outline timing of inspections and reinspection fees, and would mandate access to properties. Centralizing these standards would provide greater clarity and ease of access for stakeholders and oversight authorities.

Section 5.705(a)(1) continues to require that any entity responsible for conducting an inspection of HUD housing determine compliance with this subpart. However, (a)(1) would require that entities must inspect such HUD housing in accordance with the standards and procedures set out by the Secretary and published in the Federal Register as described in § 5.711, and would allow HUD to establish aligned inspection standards across HUD programs.

New paragraph (b)(1) would incorporate existing provisions from § 200.855 describing the entity responsible for inspecting HUD housing. New paragraph (b)(2) would provide an exception for the HCV, PBV and Mod rehab programs in cases where the PHA is required to conduct the inspection.

New subparagraph § 5.705(c)(1) would pull elements from existing regulations which outline that a property must be inspected before the property is approved for participation in any of the HUD housing programs under this part unless the property is already a participant in another HUD program under this part. It would also continue to require that an entity responsible for conducting an inspection of HUD housing must determine compliance with this subpart and must inspect such housing annually, unless otherwise specified below.

Current inspection requirements for public housing and multifamily programs are risk-based with frequencies ranging from annually to once every three years. The proposed rule would maintain risk-based annual inspection requirements. The proposed rule would expand this time period to between 2 and 5 years. The criteria under which a PHA or owner/agent may qualify for a longer inspection cycle would be described in a future Federal Register Notice and will be based on a risk assessment. This change in inspection frequency would further incentivize performance without any anticipated degradation in housing quality as it would not obviate the expectation of continuous compliance with housing quality requirements. Further, since proposed § 5.707 would require properties to conduct an annual self-inspection and submit results to HUD, the Agency believes that submission of self-inspection results and status of repair would mitigate risk associated with longer inspection frequencies. In all cases, HUD housing would be required to remain in compliance with all applicable laws and regulations, including the quality standards in § 5.703, regardless of the date of the next inspection.

Due to different statutory and programmatic requirements, requirements surrounding inspections frequencies for some programs would continue to be governed by current applicable regulations, including HCV, PBV, and Moderate Rehabilitation. Further, small rural PHAs would be exempted from the annual inspection requirement and would instead follow provisions of the Economic Growth and Recovery Act outlined later in this notice. Finally, HUD may exempt assisted-living facilities, board and care facilities, and intermediate care facilities, and any other Section 232 facilities if they meet certain criteria as outlined in the regulation.

New paragraph (d) would incorporate and align existing language regarding reinspection costs from the public housing and multifamily regulations. The proposed rule would allow, but not require, the responsible entity (as identified in proposed § 5.705(a)(1)) to charge a property owner (including PHAs) a reasonable reinspection fee when an owner notifies the responsible entity that a repair has been made, or the allotted time for repairs has elapsed, and a reinspection reveals the deficiency was not corrected.

New paragraph (a)(3) would outline variants in inspection standards for the HCV and PBV programs by incorporating existing regulations at § 982.401(a)(ii). As required by statute, the proposed rule would continue to give PHAs the ability to consider variations in local laws and practices and provide appropriate flexibility to facilitate the efficient provision of assistance.^[10]

With regard to inspection, HUD is requesting public comments on the following questions:

Question for Comment #14: HUD is soliciting comment on the risk-based annual inspection requirement expansion from 2 to 5 years. Is a different range merited? If so, what should HUD consider in setting and adjusting the ranges?

Question for Comment #15: HUD is soliciting comment on how to involve tenants in helping REAC identify poor performing properties. For example, could tenants provide a “1-5 rating” of their units with “1” being “poor” and “5” being “excellent?” Could tenants recommend their units for inspection separate from the statistical sample for scoring purposes to inform HUD's risk analysis of the property?

d. Section 5.707 Uniform Self-Inspection Requirement and Report

While 42 U.S.C. 1437(d)(f)(3) requires that each PHA inspect all public housing projects annually, current regulations governing other covered HUD housing programs, such as those for Multifamily Housing, do not explicitly require an annual self-inspection of all units. The proposed rule would add a new regulation at § 5.707 which would explicitly require annual self-inspections of all units in a project and would add a new electronic reporting requirement. The results of the electronic reporting requirement would be an integral part of HUD's real estate inspection process. With advances in technology, HUD believes it is now possible and practical to collect this type of property data electronically. The procedures for this reporting would be outlined in a future Federal Register Notice with an opportunity for public comment.

By making regular, comprehensive self-inspections and reporting a part of each covered property's physical assessment regimen, HUD would once again signal a focus on identifying and mitigating risks to resident health and safety. Self-inspections are a key component of ensuring properties are maintained year-round and encourage regular, preventative maintenance rather than “just in time” repairs ahead of HUD-conducted inspections.

It should be noted that due to the unique statutory requirements of the HCV, PBV, and CPD programs, they would be exempted from this electronic reporting requirement. Additionally, Moderate Rehabilitation would continue to follow program requirements described in the current regulations.

With regard to self-inspection, HUD is requesting public comments on the following questions:

Question for Comment #16: HUD is soliciting comment on how the clarification to self-inspect all HUD housing units in certain programs to ensure that units are being maintained in accordance with HUD housing quality standards will impact the operations of PHAs, owners and agents? What advantages and disadvantages would arise from extending this self-inspection requirement to the programs that do not explicitly require an annual self-inspection of all units (such as HCV, PBV, Moderate Rehabilitation, and CPD programs)?

Question for Comment #17: Is there an alternative to the self-inspection protocol (§ 5.707 Uniform self-inspection requirement and report) that would allow HUD to achieve the objective that families live in safe and habitable units, and what are the risks and benefits of that alternative?

e. Section 5.709 Administrative Process for Defining and Revising Inspection Criteria

The proposed rule would add § 5.709 which would require HUD to establish an administrative process for regularly receiving public comments on scoring and ranking criteria through Federal Register notices.

New paragraph (a)(1) would establish a timeframe for revisions of standards of every 3 years, or every 3 years after the most recent revision, whichever is later. The inclusion of this regulation would allow HUD to respond to the changing needs of an evolving housing portfolio and technological changes that may impact the inspections process. This proposed rule would mandate that the Agency update the scoring and ranking criteria regularly and would further demonstrate HUD's commitment to ensure scoring is reasonable, responsive, and current.

New paragraph (a)(2) would allow HUD to publish a notice without 30 days of public comment in the case of an emergency. For § 5.709, an emergency would be defined as a significant health hazard, a new safety concern due to changing construction technology, or another event as determined by the Secretary. This section would further highlight the Secretary's commitment to being responsive to the needs and safety of residents.

Question for Comment #18: In alignment with HUD's desire to increase clarity and decrease ambiguity, HUD is considering definitions for kitchens and sanitary facilities. HUD seeks public input on the following:

a. Should HUD define what constitutes a kitchen and its related components required for functional adequacy (e.g., cooking appliance, means of refrigeration, food preparation and storage)?

b. Should HUD define what constitutes a sanitary facility and its related components required for functional adequacy (e.g., bathtub or shower, toilet, ventilation, sink)?

f. Section 5.711 Scoring, Ranking Criteria, and Appeals

The proposed rule would add a new regulation at § 5.711 which would incorporate and streamline existing regulations governing the scoring and ranking of covered properties, chiefly multifamily and public housing properties. Further, it would include the responsibilities of PHAs and owner/agents after an inspection and outline the process for appealing inspection results. Proposed § 5.711 would also incorporate and replace the current scoring and ranking process under § 200.857 as well as the prior appeals process for physical inspections under the Public Housing Assessment System (PHAS) at §§ 902.22, 902.24, 902.26, and 902.68. By aligning similar language across programs, HUD believes the proposed rule will increase clarity and ease of compliance while creating a standardized set of expectations.

New paragraph (a) would exempt the HCV and PBV programs which would continue to be assessed under the Section Eight Management Assessment Program (SEMAP) as well as small rural PHAs which would be assessed under new subpart D of 985. As part of the streamlining in the proposed rule, new paragraph (b) moves the existing regulation at § 200.857(a)(1) to part 5.

New paragraph (b)(2) would clarify that Public Housing projects would continue to be scored and ranked under the Public Housing Assessment System (PHAS) outlined in part 902. New paragraph (c)(1) would introduce the category of severe health or safety (SHS) deficiencies which are the most serious types of conditions that can be cited as violations of § 5.703 and replaces the current exigent health and safety (EH&S) category of deficiencies found in § 902.22. Similar to the use of new language in § 5.703, the change in terminology would serve as a visual marker to help a reader differentiate between the existing and proposed regulations. It would also help to minimize confusion across the aligned programs. The term “exigent health and safety” has been associated with more than one definition in the past and has been confused with the term “life-threatening.” For example, HUD's notice at 76 FR 10055 employed EH&S and life threatening synonymously despite the different meanings.^[11]

While generally equivalent in purpose to the way EH&S is being used today, the new phrase, “severe health or safety” would provide a clear expression of the seriousness of these types of issues which would also be reflected in the proposed default timeframe of repair of 24 hours. HUD acknowledges that current regulations are inconsistent in describing how soon an EH&S deficiency must be corrected, establishing a singular provision at § 5.711(c)(1) for the correction of SHS deficiencies for most programs would address these inconsistencies.

Additionally, the Housing Opportunity Through Modernization Act of 2016 (HOTMA) limited HUD's flexibility in defining the timeframes for repair of deficiencies in the HCV or PBV programs. That act requires that life threatening conditions be addressed in 24 hours and all other deficiencies within 30 days. In order to accommodate that statutory constraint, HUD would identify in the notice described in § 5.709 which of the SHS deficiencies are life threatening and which ones are non-life threatening. Section 5.711 would also require the correction of non-SHS health or safety deficiencies within 30 days, for all programs.

Further, proposed § 5.711 would incorporate and condense the administrative review and enforcement action provisions found at § 200.857(h) and § 200.857(i) to align with HUD's current procedures and eliminate inconsistencies with Section 219, Title II, Division H of the Consolidated Appropriations Act, 2020, Public Law 116-94, December 20, 2019. As previously noted, CPD programs do not apply any scoring, weighting, ranking or enforcement from Part 5. This is outlined in the HOME rule at 24 CFR 92.251(f)(1)(i). CPD programs are fundamentally different than many of the programs subject to REAC inspections as they are programs administered by local governments subject to local decision making. CPD programs have their own means of enforcement specified in each program regulation. These functions are instead performed by HUD CPD staff, and can include requiring the participating jurisdiction or grantee repaying the full amount of subsidy provided to the project. New paragraph (d)(2) would consolidate current regulations governing the process for technical reviews into one section with an aligned set of procedures applicable to properties inspected by HUD.

With regard to tenant-induced damage, HUD is requesting public comments on the following questions:

Question for Comment #19: HUD is soliciting comment on how to fairly approach tenant-induced damage to units and properties in such a way that it will have a positive impact on HUD-assisted properties. What could be used as incentives or disincentives to discourage tenant-induced damage?

Question for Comment #20: HUD seeks input on the scoring threshold that should be used to refer a property to the Departmental Enforcement Center (DEC): What factors should be considered by HUD in setting the threshold, and whether should this be a stationary threshold or one that is updated periodically?

g. Section 5.713 Second- and Third-Party Rights

The proposed rule would add new § 5.713, which would incorporate and modify existing language at § 982.407 on enforcement of inspection requirements. The new regulation would mirror existing regulations in place for the HCV and PBV programs—which in no way create any right to assert any claim against HUD or the PHA for damages, injunction, or other relief for alleged failure to enforce inspection standards, and would expand it to other programs under NSPIRE.

B: Addition of Part 902, Subpart H and Part 985, Subpart D Regarding Small Rural PHAs

Small rural PHAs generally operate in a very different financial environment and rental housing market than larger PHAs in major metropolitan areas. These PHAs often have less access to private capital and their small size typically means that they operate with fewer staff and outside consulting services. Accordingly, regulatory burden often falls more heavily on small rural PHAs, reducing their ability to serve low-income families.

On May 24, 2018, President Trump signed the Economic Growth and Recovery, Regulatory Relief and Consumer Protection Act (“Economic Growth Act”) into law. Section 209 of the Act added section 38 to the United States Housing Act of 1937 (42 U.S.C. 1437 et seq.) and made several amendments pertaining to small rural PHAs. Certain statutory amendments made by section 209 became effective 60 days after enactment, and HUD published a notice in the Federal Register on February 14, 2019,^[12] which, read together with the statutory language, was intended to aid HUD program participants and the public in understanding the reasons for deferred action with respect to specific statutory provisions. HUD published a notice in the Federal Register on February 27, 2020,^[13] explaining how HUD designates small rural PHAs and described which 209 provisions were being implemented. The notice also stated that HUD would undertake future rulemaking for full implementation of other provisions, including defining small rural PHAs in the regulations. This proposed rule would implement this definition of small rural PHA as well as a new assessment system for their public housing and HCV programs. HUD believes that the Economic Growth Act's focus on inspections and the directive to follow the same standards for small, rural public housing as that for projects assisted under Section 8 make the inclusion of the act's provisions in this rule a logical fit.

The proposed rule would create new Subpart H under the current 902 regulations for the Public Housing Assessment System (PHAS). Section 209(a)(2) of the Economic Growth Act defined “small public housing agency” and directed HUD to use the existing definition of “rural area” contained in the regulations governing the Consumer Financial Protection Bureau (CFPB) at 12 CFR 1026.35(b)(2)(iv)(A). In the February 27, 2020 notice, HUD further refined this definition by defining PHAs that “predominantly operate in a rural area” and clarifying that these PHAs would be referred to as “small rural PHAs” to avoid confusion with other small PHA designations employed by HUD. The proposed rule would fully implement these definitions through § 902.101. A small rural PHA would be defined as a PHA that administers 550 or fewer combined public housing and Section 8 voucher units and either has a primary administrative building with a physical address in a rural area or more than 50 percent of its combined public housing units and voucher units in rural areas. The methodology for identifying a small rural PHA was identified in the February 27, 2020 notice and § 902.101(b) would require that HUD make this determination once every three years. PHAs would have the ability to appeal this determination in accordance with § 902.101(c).

The proposed rule would amend the current regulations for the Public Housing Assessment System (PHAS) to exempt small rural PHAs and would instead implement an alternate performance indicator and rating system. Under proposed § 902.103, small rural PHAs would be assessed based on the physical condition of their public housing properties. Proposed § 902.103(b) would establish an assessment frequency of no more than once every three years, as required under Section 209(c)(1)(A) of the Economic Growth Act, except that a troubled small rural PHA would be subject to an annual assessment.

A small rural PHA's public housing program would be designated as troubled under § 902.105 if:

• The weighted average score of all property inspections is below 70 percent of the total available points; or
• If a the PHA has a weighted average score of between 70 and 80 percent of the total available points and has at least one property that receives fewer than 70 percent of the total available points.

Troubled small rural PHAs would be referred to their local field office or other designated HUD office(s) for remedial action, oversight, and monitoring. HUD would negotiate and develop a Corrective Action Agreement (CAA) as described in § 902.105(c) within 30 days of the PHA's notification of their designation as troubled. Section 902.105(c) through (i) would outline the requirements and process for the CAA. Proposed § 902.107 would describe the situation under which HUD may withhold, deny, or rescind a troubled designation. Conditions for appealing troubled designations are outlined in proposed § 902.109. Sanctions for small rural PHAs that remain troubled as well as incentives for small rural PHAs that are high performers would remain the same as those currently described in the PHAS regulations.

The Economic Growth Act provides that HUD may designate a small rural PHA as a troubled PHA with respect to its HCV program if HUD determines the agency has failed to comply with HCV inspection requirements, HUD is proposing to add a new subpart D to 24 CFR part 985, Section 8 Management Assessment Program (SEMAP).

Under proposed § 985.201, PHAs that meet the definition of small rural under § 902.101 would no longer be subject to SEMAP requirements but would instead be assessed on the basis of the performance indicators and rating system under subpart D. In assessing whether a small rural PHA's HCV program is a high performer, standard performer, or troubled, HUD would take four indicators into consideration, all of which are related to the small rural PHA's compliance with the inspection requirements. Each indicator would be scored on a pass/fail basis. The inspection indicators described in the proposed § 985.203 include:

• Inspection standards which would confirm the PHA is applying the applicable NSPIRE standards to HCV or PBV-assisted units or a HUD-approved variation under § 5.703. The PHA would pass the indicator if all HCV and PBV units were inspected using the correct standards;
• Initial unit inspections which would validate the PHA is conducting initial inspections within the appropriate timeframes. The PHA would pass the indicator if at least 98 percent of newly leased units passed inspection prior to the beginning of assistance;
• Frequency of HQS inspections which would verify the PHA inspects tenant-based units under HAP contract and the required sample of PBV units at least once during the three-year period from the last PHA inspection. The PHA would pass the indicator if at least 98 percent of the units were inspected; and
• Unit condition enforcement would confirm the PHA is taking corrective action as required in cases where the owner fails to correct an identified unit deficiency in accordance with HUD requirements. The PHA would pass the indicator if 98 percent of inspections with identified life-threatening or other deficiencies were corrected within the required timeframe.

In order for the small rural PHA to be designated as a high performer, additional requirements related to funding would also apply. Proposed § 985.205(a) would state that for a PHA to be designated as a high performer, the PHA must:

• Either utilize at least 98 percent of its HCV budget authority for the most recent calendar year or the percent of HCV units leased by renters or occupied by homeowners for the most recent calendar year must be at least 98 percent;
• Not end the calendar year with excess HAP reserves; and
• Not end the calendar year in a funding shortfall or receive shortfall prevention funding from HUD.

If the small rural PHA passes all four inspection indicators and meets the funding criteria listed above, the PHA is designated as a high performer. If a PHA passes all four inspection indicators but does not meet the funding criteria listed above, the PHA will be designated as a standard performer. If the small rural PHA fails any one of the four inspection indicators, regardless of whether or not it meets the funding requirements, the PHA is designated as troubled.

In accordance with statutory requirements contained in the Economic Growth Act, proposed § 985.207 would establish an assessment frequency of no more than once every three years, except that a troubled small rural PHA would be subject to an annual assessment in accordance with § 985.204.

Proposed § 985.209 would cover requirements that apply to small rural PHAs designated as troubled, including the statutorily mandated appeals process and the required corrective action agreement.

Proposed § 985.211 would state that HUD would maintain small rural PHAs' assessment files, including designations, appeals, and agreements, for at least 3 years.

With regard to small rural PHAs, HUD is requesting public comments on the following questions:

Question for comment #21: HUD is considering establishing the threshold for troubled PHAs under the small rural assessment as a PHA that either has a weighted average of less than 70 percent of all available points on physical inspections, or a PHA that has a weighted average of between 70 and 80 percent of all available points and that also has at least one property that received a score of less than 70 percent of available points. HUD is seeking comment on how this threshold will impact PHAs and residents, and what alternative thresholds HUD should use to define a troubled PHA?

Question for comment #22: HUD is specifically seeking comment on the four indicators proposed to determine if the PHA is failing to fulfill its responsibilities for unit inspections under the HCV program and the method by which HUD is proposing to determine if the PHA has passed or failed the indicator. Are the indicators proposed to make such determination appropriate? If not, are there better alternatives?

Question for comment #23: HUD is specifically seeking comment on the criteria it is proposing to determine if the PHA is a high performer or a standard performer. Are the conditions related to funding utilization appropriate? If not, are there better alternatives? Should HUD be considering other criteria besides utilization to designate a PHA a high performer as opposed to a standard performer? If so, what other performance measures should be taken into account? How would HUD verify the PHA's performance on any suggested additional or alternative performance criteria, keeping in mind HUD's preference to move away from reliance on self-certifications wherever possible and to not require PHAs to report or submit data for PHA assessments that is not already collected as part of normal HCV PHA operations and HUD oversight?

Question for comment #24: What specifically should be required in the corrective action agreement?

C: Other Regulatory Changes

As discussed above, § 5.701 would expand the scope of part 5, subpart G. Therefore, this proposed rule would amend regulations for the HCV (part 982), PBV (part 983), HOME (part 92), HTF (part 93), HOPWA (part 574), ESG (part 576), and CoC (part 578).

The proposed rule would align HOME property standards requirements for housing with the requirements for ongoing property condition standards of rental housing at § 92.251(f). Participating jurisdictions would be required to establish written property standards for housing occupied by tenants that meet minimum requirements at § 92.251(f) including compliance with State and local codes and ordinances, health and safety, and lead-based paint requirements.

While most participating jurisdictions are subject to State and local building or rehabilitation codes, many are not subject to comprehensive property condition or habitability codes. The program regulations at § 92.251(f) do not provide a uniform standard for housing that is decent, safe, and sanitary and in good repair where State and local codes are absent. HUD is proposing a uniform standard for what must be inspected during, and corrected as the result of, an ongoing physical inspection of HOME-assisted rental housing during the period of affordability or an annual inspection of housing occupied by a resident.

Also under the proposed rule, the Housing Trust Fund (HTF) program regulations would be revised to make conforming changes to the HTF property standards requirements at § 93.301(b)(1)(viii), (c)(3), and (e)(i). The specific deficiencies will be a subset of the deficiencies defined for NSPIRE and published in the Federal Register in accordance with § 5.705.

The proposed rule would also make conforming changes to apply § 5.703 to the Housing Opportunities for Persons with AIDS (HOPWA), Continuum of Care (CoC), and Emergency Solutions Grants (ESG) programs. The rule proposes to amend the HOPWA regulations at § 574.310; the CoC regulations at § 578.75; and the ESG regulations at § 576.403 to cite to § 5.703. The CoC regulations at § 578.75(b) regarding lead-based paint requirements would be amended only to apply § 5.703 where § 982.401 currently applies; this proposed rule makes no substantive changes to the lead-based paint requirements. The ESG regulations would be amended to include § 5.703 in the minimum standards for permanent housing but not emergency shelters.

These amendments are intended to replace program-specific standards with references to part 5. Further, § 5.711 would incorporate and condense the administrative review and enforcement action provisions at §§ 200.857(h) and 200.857(i) to align with HUD's current procedures and to eliminate inconsistencies with Section 219, Title II, Division H of the Consolidated Appropriations Act, 2020, Public Law 116-94, December 20, 2019.

HUD is also proposing technical changes for HAP contracts at §§ 880.612, 884.217, 886.123 and 886.323 to require annual compliance with the expanded part 5, subpart G.

Under this proposed rule, the Moderate Rehabilitation program regulations at § 882.516(b) would be revised to clarify that PHAs must inspect (or cause to be inspected) units at least annually and at other times as necessary in accordance with the NSPIRE standards established under § 5.703. HUD would continue to conduct the inspections in accordance with the NSPIRE standards for mod rehab projects that are managed by the PHA as provided under § 882.516(d). In addition, the proposed rule would change the title of § 882.516(c) from “Units not decent, safe, and sanitary” to “Units with health and safety hazards” and add a title to § 882.516(e) for clarity.

D. Other Rulemakings

HUD notes that there is some overlap in the proposed changes with HUD's Housing Opportunity Through Modernization Act of 2016: Implementation of Sections 102, 103, and 104 proposed rule (84 FR 48820). HUD further notes that HUD intends to publish a proposed rule concerning the implementation of requirements to install carbon monoxide detectors in HUD-assisted and -Insured Housing, which would also overlap with this proposed rule. At the final rule stage, HUD will make any changes necessary to address any conflicts between these rules.

III. NSPIRE Improvements Beyond This Rule

In addition to the regulatory changes being proposed by this rule, HUD is making other improvements to its physical inspection program. HUD is committed to extending the same principles reflected in this rule to other aspects of the NSPIRE effort. HUD has continued to move forward with the “top-to-bottom review” of its inspection process directed by the Secretary to ensure taxpayer-supported housing is healthy, safe, and habitable for the millions of families HUD serves. The regulation will signal to the public HUD's clear intent to change its business approach. HUD is proactively aligning Public Housing, HCV, and other programs, through establishing an approach to revise and publish inspection standards, testing and validating a new inspection scoring model, and continuously engaging with the public in HUD's improvement efforts.

To ensure stakeholders can provide input on all aspects of NSPIRE, HUD launched listening sessions about making improving HUD's inspections better. That approach of early and often feedback has continued. For example, in the development of the physical inspection standards, HUD published drafts on the NSPIRE website for public input.^[14] For reference, these are the standards which will apply to all inspections (see § 5.705(a)) and will be published formally for public comment prior to implementation (see § 5.709). HUD has received hundreds of suggestions on the draft NSPIRE standards and has closely reviewed all the comments. The majority were successfully incorporated into revisions. HUD's analysis, supported by stakeholder feedback, has identified that the current Uniform Physical Condition Standards (UPCS) and Housing Quality Standards (HQS) specifications do not always clearly identify or explain the particular harm or hazard that HUD is trying to avoid. To address this concern, HUD applied best practices from risk analysis frameworks that feature predominantly in the public health discipline to help all stakeholders understand the “why” or the “rationale” for each deficiency. A “rationale” is a plainly written risk-based assessment that describes the harm or negative result that could occur if that issue were to be present at a property. It justifies why that issue is critical to housing quality. By taking this approach, HUD can ground each standard in a clear and defensible explanation based in sound science.

Given the approach described above—and because it is important to ensure the standards remain up to date—HUD is working to establish an “infrastructure of partnerships” to provide continuous technical input and scientific guidance for standards development. HUD started this effort by collaborating with partners across the public and private sectors—including other Federal agencies—and academic and non-profit organizations. HUD anticipates that the continued expansion of these relationships will help to provide the input into the three-year updates to which HUD commits in this rule.

Along with the efforts already described, HUD has launched two demonstrations: (1) The Demonstration to Assess the National Standards for the Physical Inspection of Real Estate (84 FR 43536) and (2) the Demonstration to Test Proposed New Method of Assessing the Physical Conditions of Voucher-Assisted Housing (81 FR 26759). These demonstrations are among the first steps in implementing an aligned inspection protocol for public housing, multifamily housing, and voucher programs. More information about those demonstrations can be found on the NSPIRE ^[15] and ISDV ^[16] websites.

Strategically, the demonstration programs give HUD and properties an opportunity to “stress test” processes in a real-world setting to ensure they are stable and ready to scale out to the full population of Property Owner Agent (POA). In addition to being reasonable, HUD wants to ensure that its inspection standards are performable across a wide variety of inspectors. The demonstrations allow HUD the ability to make sure its administrative processes that support physical inspections are efficient and responsive. HUD is also leveraging technology to eliminate manual processes and to realize the benefits of having aligned programs.

The information coming out of both demonstrations also informs the development and refinement of property scoring approaches. HUD has worked diligently to identify the most appropriate scoring models to improve the accuracy, objectivity, and consistency of assessment across different property configurations. Along with modifications to the current model, HUD is currently exploring alternative scoring models based instead on data-driven methodologies, including those based on probabilistic approaches.

Finally, aligning HUD's oversight to property risk will benefit both HUD and the POAs. For example, HUD has proposed in this rule that a risk model inform the extension of the frequency of inspections up to 5 years in some programs. Taking a risk-based oversight approach allows high-performing properties to continue to do those things that make them successful while ensuring struggling properties are able to get the attention needed. While HUD will maintain a “pass/fail” result for HCV and PBV inspections as required by statute, moving to NSPIRE with consistent inspection standards allows large volumes of inspection and housing quality data to be compared across programs for the first time. HUD believes that better data will lead to the development of more refined risk models and also allow rigorous assessment of the impacts of deficiencies, individually and in combination, on residents.

IV. Findings and Certifications

Regulatory Review—Executive Orders 12866 and 13563

Pursuant to Executive Order 12866 (Regulatory Planning and Review), a determination must be made whether a regulatory action is significant and therefore subject to review by the Office of Management and Budget (OMB) in accordance with the requirements of the order. Executive Order 13563 (Improving Regulations and Regulatory Review) directs executive agencies to analyze regulations that are “outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned.” Executive Order 13563 also directs that, where relevant, feasible, and consistent with regulatory objectives, and to the extent permitted by law, agencies are to identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public.

HUD believes that this proposed rule, by consolidating physical condition inspection standards into a streamlined format and utilizing improved technology and methods will aid all parties—PHAs, property owners, agents, and inspectors—in complying with HUD's physical condition standards creating a smaller burden while maintaining or increasing the effectiveness of HUD's physical condition requirements. The proposed rule has been determined to be a “significant regulatory action,” as defined in section 3(f) of the Order, but not economically significant under section 3(f)(1) of the Order. The docket file is available for public inspection online at www.regulations.gov.

Executive Order 13771, Regulatory Costs

Executive Order 13771, entitled “Reducing Regulation and Controlling Regulatory Costs,” was issued on January 30, 2017. This proposed rule is expected to be an Executive Order 13771 deregulatory action. The requirements this proposed rule would place on the public are comparable to pre-existing requirements. This rule would also provide relief to small rural PHAs and certain qualifying properties and would provide relief by removing inconsistencies across HUD's programs, reducing compliance costs.

Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. There are 2,297 small PHAs all of which will be affected; however, the economic impact will not be significant.

The economic impact will not be significant because the proposed rule would not change the substantive requirement that HUD program participants are required to maintain the physical condition of HUD housing. The proposed rule would also, in most cases, maintain the same level of review for compliance in the form of physical inspections. Regulatory flexibility would be increased by allowing HUD to require less frequent inspections for high-performing PHAs under PHAS. Regulatory relief would also be provided to small rural PHAs, which would only be subject to triennial inspections under PHAS. Accordingly, the undersigned certifies that the proposed rule will not have a significant economic impact on a substantial number of small entities. Notwithstanding HUD's determination that this rule will not have a significant effect on a substantial number of small entities, HUD specifically invites comments regarding any less burdensome alternatives to this rule that will meet HUD's objectives as described in the preamble to this rule.

Environmental Impact

A Finding of No Significant Impact with respect to the environment has been made in accordance with HUD regulations at 24 CFR part 50, which implement section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The Finding of No Significant Impact is available for public inspection between the hours of 8 a.m. and 5 p.m. weekdays in the Regulations Division, Office of General Counsel, Room 10276, Department of Housing and Urban Development, 451 Seventh Street SW, Washington, DC 20410-0500. The FONSI is also available through the Federal eRulemaking Portal at http://www.regulations.gov.

Executive Order 13132, Federalism

Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either: (i) Imposes substantial direct compliance costs on State and local governments and is not required by statute, or (ii) preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This proposed rule would merely revise existing Federal standards in a way which would not increase or decrease compliance costs on State or local governments and therefore does not have federalism implications and would not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the Executive Order.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) (UMRA) establishes requirements for federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments, and on the private sector. This proposed rule would not impose any Federal mandates on any State, local, or tribal governments, or on the private sector, within the meaning of the UMRA.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information, unless the collection displays a currently valid Office of Management and Budget (OMB) control number. Except for the self-inspection report requirements, the information collection requirements contained in this proposed rule have been approved by OMB under the Paperwork Reduction Act and assigned OMB control numbers 2502-0369 (Uniform Physical Standards and Physical Inspection Requirements), 2577-0241 (Exigent Health and Safety Deficiency Correction Certification), 2577-0257 (Public Housing Assessment System (PHAS) Appeals, Technical Reviews and Database Adjustments), 2577-0289 (National Standards for the Physical Inspection of Real Estate (NSPIRE)), and 2577-0169 (HCV Program and Tribal HUD-VASH). The collection requirements will be amended to reflect the altered burden contained in this proposed rule. The current PRA “HCV Program and Tribal HUD-VASH” (OMB 2577-0169) authorizes collection of unit inspection data from PHAs as part of their participation in the HCV and PBV programs. This proposed rule will not require a modification to this approved collection.

The current PRA package “National Standards for the Physical Inspection of Real Estate (NSPIRE)” (OMB 2577-02890) authorizes collection of self-inspection data from properties participating in HUD's NSPIRE Demonstration. As NSPIRE moves from demonstration to implementation, the number of responses will increase to accommodate the full portfolio of properties required to submit self-inspection results to HUD.

The current PRA package “Administrative Process for Scoring, Ranking, and Appeals” (OMB 2577-0257) authorizes the collection of data associated with data base adjustments, technical reviews, and appeals (Public Housing only) for Multifamily and Public Housing properties. HUD anticipates this number to remain constant upon implementation of NSPIRE.

The current PRA package “Uniform Physical Standards and Physical Inspection Requirements” (OMB 2502-0369) authorizes the collection of data associated with inspections of HUD-insured mortgages. HUD expects this number to increase slightly due to higher unit sampling as part of the NSPIRE protocol.

The current PRA package “Other Reporting Requirements” (OMB 2577-0241) only authorizes the collection of electronic certifications by PHAs for corrected/mitigated Exigent Health and Safety (EH&S) deficiencies. The new number of responses and burden reflect the inclusion of all programs, beyond Public Housing, that will now be required to submit electronic closeout of all health and safety deficiencies, not just EH&S deficiencies.

The burden of the information collections in this proposed rule is estimated as follows:

In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments from members of the public and affected agencies concerning the information collection requirements in the proposed rule regarding:

(1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;

(2) The accuracy of the agency's estimate of the burden of the proposed collection of information;

(3) Whether the proposed collection of information enhances the quality, utility, and clarity of the information to be collected; and

(4) Whether the proposed information collection minimizes the burden of the collection of information on those who are to respond, including through the use of appropriate automated collection techniques or other forms of information technology (e.g., permitting electronic submission of responses).

Interested persons are invited to submit comments regarding the information collection requirements in this rule. Under the provisions of 5 CFR part 1320, OMB is required to make a decision concerning this collection of information between 30 and 60 days after the publication date. Therefore, a comment on the information collection requirements is best assured of having its full effect if OMB receives the comment within 30 days of the publication. This time frame does not affect the deadline for comments to the agency on the proposed rule, however. Comments must refer to the proposed rule by name and docket number (FR-6123) and must be sent to:

HUD Desk Officer, Office of Management and Budget, New Executive Office Building, Washington, DC 20503, Fax number: 202-395-6947

and

Colette Pollard, HUD Reports Liaison Officer, Department of Housing and Urban Development, 451 7th Street SW, Room 2204, Washington, DC 20410

Interested persons may submit comments regarding the information collection requirements electronically through the Federal eRulemaking Portal at http://www.regulations.gov. HUD strongly encourages commenters to submit comments electronically. Electronic submission of comments allows the commenter maximum time to prepare and submit a comment, ensures timely receipt by HUD, and enables HUD to make them immediately available to the public. Comments submitted electronically through the http://www.regulations.gov website can be viewed by other commenters and interested members of the public. Commenters should follow the instructions provided on that site to submit comments electronically.

List of Subjects

24 CFR Part 5

• Administrative practice and procedure
• Aged
• Claims
• Crime
• Government contracts
• Grant programs—housing and community development
• Individuals with disabilities
• Intergovernmental relations
• Loan programs—housing and community development
• Low and moderate income housing
• Mortgage insurance
• Penalties
• Pets
• Public housing
• Rent subsidies
• Reporting and recordkeeping requirements
• Social security
• Unemployment compensation, and Wages

24 CFR Part 92

• Administrative practice and procedure
• Low and moderate income housing
• Manufactured homes
• Rent subsidies, and Reporting and recordkeeping requirements

24 CFR Part 93

• Administrative practice and procedure
• Grant programs—housing and community development
• Low and moderate income housing
• Manufactured homes
• Rent subsidies, and Reporting and recordkeeping requirements

24 CFR Part 200

• Administrative practice and procedure
• Claims
• Equal employment opportunity
• Fair housing
• Housing

24 CFR Part 574

• Community facilities
• Grant programs—housing and community development
• Grant programs—social programs
• HIV/AIDS
• Low and moderate income housing, and Reporting and recordkeeping requirements

24 CFR Part 576

• Community facilities
• Grant programs—housing and community development
• Grant programs—social programs
• Homeless, and Reporting and recordkeeping requirements

24 CFR Part 578

• Community development
• Community facilities
• Grant programs—housing and community development
• Grant programs—social programs
• Homeless, and Reporting and recordkeeping requirements

24 CFR Part 880

• Grant programs—housing and community development
• Rent subsidies, and Reporting and recordkeeping requirements

24 CFR Part 882

• Grant programs—housing and community development
• Homeless
• Lead poisoning
• Manufactured homes
• Rent subsidies, and Reporting and recordkeeping requirements

24 CFR Part 884

• Grant programs—housing and community development
• Rent subsidies
• Reporting and recordkeeping requirements, and Rural areas

24 CFR Part 886

• Grant programs—housing and community development
• Lead poisoning
• Rent subsidies, and Reporting and recordkeeping requirements

24 CFR Part 902

• Administrative practice and procedure
• Public housing, and Reporting and recordkeeping requirements

24 CFR Part 982

• Grant programs—housing and community development
• Grant programs—Indians
• Indians
• Public housing
• Rent subsidies, and Reporting and recordkeeping requirements

24 CFR Part 983

• Grant programs—housing and community development
• Low and moderate income housing
• Rent subsidies, and Reporting and recordkeeping requirements

24 CFR Part 985

• Grant programs—housing and community development
• Public housing
• Rent subsidies, and Reporting and recordkeeping requirements

For the reasons discussed in the preamble, HUD proposes to amend 24 CFR parts 5, 92, 93, 200, 574, 576, 578, 880, 882, 883, 884, 886, 902, 982, 983 and 985 as follows:

PART 5—GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS

1. The authority for 24 CFR part 5 continues to read as follows:

Authority: 12 U.S.C. 1701x; 42 U.S.C. 1437a, 1437c, 1437d, 1437f, 1437n, 3535(d); Sec. 327, Pub. L. 109-115, 119 Stat. 2936; Sec. 607, Pub. L. 109-162, 119 Stat. 3051 (42 U.S.C. 14043e et seq.); E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258; and E.O. 13559, 75 FR 71319, 3 CFR, 2010 Comp., p. 273.

2. Revise subpart G to read as follows:

Subpart G—Physical Inspection of Real Estate

PART 92—HOME INVESTMENT PARTNERSHIPS PROGRAM

3. The authority for 24 CFR part 92 continues to read as follows:

Authority: 42 U.S.C. 3535(d), 12 U.S.C. 1701x and 4568.

4. Amend § 92.2 by removing the definition of “Uniform Physical Condition Standards”.

5. In § 92.209, revise paragraph (i) to read as follows:

6. Revise § 92.251 by:

a. Revising paragraphs (b)(1)(viii) and (c)(3);

b. Removing and reserving paragraph (d); and

c. Revising paragraph (f)(1) introductory text, and paragraph (f)(1)(i).

The revisions read as follows:

7. In § 92.504, revise paragraph (d)(1)(iii) to read as follows:

PART 93—HOUSING TRUST FUND

8. The authority for 24 CFR part 93 continues to read as follows:

Authority: 42 U.S.C. 3535(d), 12 U.S.C. 4568.

9. In § 93.301, revise paragraphs (b)(1)(viii), (c)(3), and (e)(1)(i) to read as follows:

PART 200—INTRODUCTION TO FHA PROGRAMS

10. The authority for 24 CFR part 200 continues to read as follows:

Authority: 12 U.S.C. 1702-1715z-21; 42 U.S.C. 3535(d).

11. Revise § 200.850 to read as follows:

12. Remove and reserve §§ 200.853, 200.855, and 200.857.

PART 574—HOUSING OPPORTUNITIES FOR PERSONS WITH AIDS, SUBPART D—USES OF GRANT FUNDS

13. The authority for 24 CFR part 574 continues to read as follows:

Authority: 12 U.S.C. 1701x, 1701x-1; 42 U.S.C. 3535(d) and 5301-5320.

14. In § 574.310, revise paragraph (b) introductory text and paragraph (b)(2), and add paragraph (b)(3) to read as follows:

PART 576—EMERGENCY SOLUTIONS GRANTS PROGRAM

15. The authority for 24 CFR part 576 continues to read as follows:

Authority: 12 U.S.C. 1701x, 1701x-1; 42 U.S.C. 11371 et seq., 42 U.S.C. 3535(d).

Subpart E—Program Requirements

16. In § 576.403, revise paragraph (c) and add paragraphs (d) through (f) to read as follows:

PART 578—PROGRAM REQUIREMENTS

17. The authority for 24 CFR part 578 continues to read as follows:

Authority: 12 U.S.C. 1701x, 1701x-1; 42 U.S.C. 11381 et seq., 42 U.S.C. 3535(d).

18. In § 578.75, revise paragraph (b) to read as follows:

PART 880—SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR NEW CONSTRUCTION

19. The authority for 24 CFR part 880 continues to read as follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 12701, and 13611-13619.

20. In § 880.612, revise paragraph (a) to read as follows:

PART 882—SECTION 8 MODERATE REHABILITATION PROGRAMS

21. The authority for 24 CFR part 882 continues to read as follows:

Authority: 42 U.S.C. 1437f and 3535(d).

22. In § 882.404, remove paragraph (d).

23. In § 882.516, revise paragraphs (b), (c) and (e) to read as follows:

PART 884—SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM, NEW CONSTRUCTION SET-ASIDE FOR SECTION 515 RURAL RENTAL HOUSING PROJECTS

24. The authority for 24 CFR part 884 continues to read as follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-13619.

25. Revise § 884.217 to read as follows:

PART 886—SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM—SPECIAL ALLOCATIONS

26. The authority for 24 CFR part 886 continues to read as follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-13619.

27. In § 886.113, remove and reserve paragraphs (b) and (i).

28. Revise § 886.123 to read as follows:

29. In § 886.307, remove and reserve paragraphs (b), (i), and (m).

30. Revise § 886.323 to read as follows:

PART 902—PUBLIC HOUSING ASSESSMENT SYSTEM

31. The authority for 24 CFR part 902 is revised to read as follows:

Authority: 42 U.S.C. 1437d(j), 42 U.S.C. 3535(d), 1437z-10.

32. Amend § 902.3 by:

a. Removing the definition of “Criticality”;

b. Revising the definitions of “Dictionary of Deficiency Definitions” and “Inspectable areas (or area)”; and

c. Removing the definitions of “Item Weights and Criticality Levels document”, “Normalized weights”, “Score”, “Severity”, “Statistically valid sample”, and “Unit-weighted average”.

The revisions read as follows:

33. Remove and reserve § 902.20.

34. Revise § 902.21 to read as follows:

35. Revise § 902.22 to read as follows:

36. Remove and reserve §§ 902.24, 902.26, and 902.68.

37. Add subpart H to read as follows:

Subpart H—Assessment of small rural Public Housing Agencies

Authority: 42 U.S.C. 1437d(j), 42 U.S.C. 3535(d), 1437z-10.

PART 982—SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM

38. The authority for 24 CFR part 982 continues to read as follows:

Authority: 42 U.S.C. 1437f and 3535(d).

39. In § 982.4, amend paragraph (b) by revising the definition of “Housing quality standards (HQS)” to read as follows:

40. In § 982.352, revise paragraph (b)(1)(iv)(A)( 3) to read as follows:

41. Revise § 982.401 to read as follows:

42. In § 982.405, revise paragraph (a) to read as follows:

PART 983—PROJECT-BASED VOUCHER (PBV) PROGRAM

43. The authority for 24 CFR part 983 continues to read as follows:

Authority: 42 U.S.C. 1437f and 3535(d).

44. In § 983.3, amend paragraph (b) by revising the definition of “Housing Quality Standards (HQS)” to read as follows:

45. In § 983.10, revise paragraph (b)(2)(ii) to read as follows:

46. Revise § 983.101 to read as follows:

47. In § 983.103, revise the heading of paragraph (d) and add paragraph (d)(4) to read as follows:

PART 985—SECTION 8 MANAGEMENT ASSESSMENT PROGRAM (SEMAP) AND SMALL RURAL PHA ASSESSMENTS

48. The authority citation for 24 CFR part 985 is revised to read as follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437f, 1437z-10, and 3535(d).

49. Revise the heading of Part 985 to read as set forth above.

50. In § 985.1, revise paragraph (b) and add paragraph (c) to read as follows:

51. Add subpart D to read as follows:

Subpart D—Small rural PHA Assessment

Authority: 42 U.S.C. 1437a, 1437c, 1437f, 1437z-10, and 3535(d).

Footnotes