HUD Issues Additional Guidance on Delaying REAC Inspections

The Deputy Assistant Secretary for HUD’s multifamily housing programs recently issued a memorandum entitled “Approving the Delay of a Physical Inspection Beyond the New Real Estate Assessment Center (REAC) Inspection Notification Timelines.” It provides guidance on when a field office may approve an owner’s request to delay an inspection outside the new inspection notification timelines provided in Notice PIH-2019(HA) H-2019-04.

REAC is responsible for inspecting sites owned and operated by approximately 3,700 local public housing authorities (PHAs) nationwide. In addition, REAC-contracted inspectors evaluate approximately 23,000 privately owned apartment buildings. Combined, approximately 96 percent of these properties pass their inspections. Still, it had been HUD’s observation that many PHAs and private owners of HUD-subsidized housing have grown accustomed to REAC’s 20-year-old inspection regime, and, in some cases, invest more resources in passing minimal inspection requirements rather than satisfying their obligation to provide quality housing.

As a result, HUD reduced the advance notice it provides to PHAs and private owners of HUD-subsidized sites before their housing is inspected to ensure it’s decent, safe, and healthy. HUD’s new standard gives PHAs and private owners of HUD-assisted housing 14 calendar days’ notice before an inspection, a dramatic reduction from the prior notice, which was frequently extended up to four months. HUD’s concern was that this amount of lead time allowed certain PHAs and site owners to undertake cosmetic, “just-in-time” repairs to their sites rather than adopting year-round maintenance practices.

With Notice PIH-2019(HA) H-2019-04, HUD employees and contract inspectors acting on behalf of HUD will give site owners and their agents 14 calendar days of notice before their inspection. If an owner declines, cancels, or refuses entry for an inspection, a presumptive score of “0” (zero) will be recorded. If the second attempt results in a successful inspection within seven calendar days, the resulting score will be recorded. If the second attempt doesn’t result in a completed inspection within seven days of the initial date due to the fault of the owner, the zero pending score will be registered and the owner is subject to HUD’s remedies for a failing score.

Grounds for Delaying REAC Inspections

The memo gives the asset management director in the field office grounds for delaying inspections as follows. The delay of an inspection may be approved for:

Major rehabilitation. The HUD field office may approve the delay of an inspection for major rehabilitation only if the owner informed the office of the rehabilitation before receiving the notification of an inspection date and the notification included information verifying the start and end dates of the work and a description of the work covered and the total cost.

The notification must indicate when the project will be ready for inspection. To qualify as a major rehabilitation, HUD says the project is “undergoing a major recapitalization transaction such as a refinance or an allocation of LIHTC where the total cost of the rehabilitation is $15,000 per unit or more.”

Owners are reminded that rehabs that don’t meet these criteria can still file a database adjustment appeal prior to an inspection or within 45 days of release of the inspection report. The instructions for filing a database adjustment appeal before or after the release of an inspection are found at www.hud.gov/program_offices/public_indian_housing/reac/products/pass/pass_guideandrule.

Presidential Disaster Declaration. A project located in an area or county covered by a Presidential Disaster Declaration during the period when an inspector is trying to schedule an inspection will qualify for an inspection delay.

Other emergency. An inspection delay will be granted if an emergency such as fire or water damage that was beyond the owner’s control has affected more than 30 percent of the units during the period an inspector is trying to schedule an inspection. If damage is restricted to certain units or buildings, the field office may approve that the damaged units be taken offline while the inspection proceeds.

HUD-approved repair plan. An inspection delay will be granted for a site that has a HUD-approved repair plan in place as a result of a below 60 score that covers the period during which an inspection is trying to be scheduled.

Notification to the Owner and REAC

According to the memo, the field office must inform the owner of the approval or denial of an inspection delay request based on the above criteria. The approval or denial should be sent to the owner by email with a copy to the headquarters email address at REACPostponement@hud.gov.

The email must state the reason for the delay and provide a date when the site will be ready for inspection. HUD headquarters will use these emails to update information in a system maintained by REAC. The owner should provide a copy of the approval email to an inspector or to a HUD representative if one calls to schedule an inspection during the period covered by the delay.