HUD Provides Guidance on Implementing HOTMA Inspection Provisions

HUD’s Office of Public and Indian Housing (PIH) recently issued Notice PIH 2017-20, which provides guidance regarding the implementation of Housing Quality Standards for Housing Choice Voucher (HCV) and Project-Based Voucher (PBV) programs. The notice relates to the initial inspection of dwelling units. The decision to implement these provisions rests with the individual public housing authority (PHA).

The two Housing Opportunity through Modernization Act (HOTMA) provisions discussed in this guidance don’t remove the requirement that the PHA conduct an inspection prior to making a housing assistance payment (HAP), but provides PHAs two options for bringing units under HAP contract or, in the case of PBV, approving occupancy and the execution of a lease more quickly. These options may be especially useful for PHAs operating in tight rental markets, where the ability to approve a unit and execute a HAP contract with the landlord more quickly could improve families’ ability to use their vouchers to lease housing.

A PHA may choose to adopt neither, one, or both of the following provisions. The first option allows a PHA to approve the assisted tenancy and make HAPs on a unit that fails to meet HQS, provided the unit only has non-life-threatening (NLT) deficiencies. The second provision allows the PHA to approve assisted tenancy of a unit prior to the HQS inspection if the property has passed an alternative inspection within the past 24 months; however, the PHA must still inspect the unit within 15 days of receiving a prospective resident’s Request for Tenancy Approval (RFTA). The notice emphasizes that PHAs must conduct an inspection before making a HAP.

Implementing the Non-Life Threatening (NLT) Option

The January notice that implemented many HOTMA provisions defined 10 categories of life-threatening conditions. These included various gas leaks and electrical hazards, inoperable or missing smoke detectors or carbon monoxide detectors, lack of alternative means of exit in case of a fire, and deteriorated paint in a unit built before 1978 that is to be occupied by a household with a child under 6 years of age.

Notice PIH 2017-20 has a table elaborating on each of the 10 categories. For example, the table lists 11 instances of life-threatening electrical hazards. A PHA may have added NLT conditions in its HCV Administrative Plan before April 18, 2017, the date the January notice provisions became effective. A PHA that chose to adopt the NLT option must apply their list of life-threatening conditions to all HQS inspections, ongoing annual or interim HQS inspections, not just initial inspections.

The existing voucher regulations regarding life-threatening conditions remain in effect and life-threatening conditions must still be corrected within 24 hours. One exception, however, pertains to lead hazards identified in a unit already occupied by an assisted household under a HAP contract as of the effective date of the PHA’s NLT provision—for example, during a regular or interim HQS inspection. In this situation, lead hazard reduction does not need to be completed within 24 hours as is the case for all other life-threatening. Instead, PHAs and owners must follow the requirements in 24 CFR part 35, the lead hazard regulation.

If an initial inspection identifies non-life-threatening deficiencies, a PHA must provide a list of the deficiencies to the household and offer the household an opportunity to decline a lease without jeopardizing its voucher. The PHA must also notify the household that if the owner fails to correct the NLT deficiencies within the time period specified by the PHA, the PHA will terminate the HAP contract and the family will have to move to another unit.

If the household declines the unit, the PHA must inform the household how much search time they have remaining to find another unit. In addition, the PHA must suspend the initial or any extended term of the voucher from the date the household submitted the request for PHA approval of the tenancy until the date the PHA notifies the household in writing whether the request has been approved or denied.

HOTMA requires a PHA to withhold assistance payments if NLT deficiencies aren’t corrected within 30 days of the PHA notifying the owner of a unit’s failure to comply with the HQS. A PHA may establish a maximum amount of time that it will withhold payments before terminating a HAP contract; a HAP contract may not continue more than 180 days, however. Once a unit is in compliance, a PHA may reimburse the owner for the period during which payments were withheld.

Implementing the Alternative Inspections Provision

HOTMA allows a unit to be occupied prior to completion of an inspection if the unit passed an alternative inspection method within the previous 24 months. A PHA must still inspect the unit within 15 days of receiving a request for tenancy approval from a household with a voucher seeking to rent that unit.

A key requirement of the Alternative Inspection Provision is that a PHA must execute a HAP contract with an owner before the assisted lease and tenancy begins. Since the household will have moved in before the PHA conducts the initial inspection, the executed HAP contract ensures that the owner is contractually responsible for making any repairs that are necessary to meet the HQS, and protects the household from being charged the full amount of the rent if the owner fails to make the necessary repairs. Under the regular voucher rule, a PHA can execute a HAP contract up to 60 days after a lease begins.

Also, a PHA may not make a HAP payment to an owner until the PHA completes the initial HQS inspection. Once the unit passes the HQS, a PHA may make retroactive assistance payments. A PHA may rely on inspections of housing assisted under the HOME Investment Partnerships (HOME) program or Low Income Housing Tax Credits (LIHTC) program, as well as some other HUD-approved method a PHA proposes. Under the regular voucher program rules, PHAs with more than 1,250 units don’t have to conduct an initial inspection within 15 days of receiving an RFTA, but if such a PHA chooses to implement the Alternative Inspections Provision, that PHA must conduct an initial HQS inspection within 15 days.

If a unit fails the HQS, the PHA must require that life-threatening deficiencies be corrected within 24 hours and non-life-threatening deficiencies be corrected within 30 days. HUD strongly encourages PHAs to notify households before accepting a tenancy that they may be obligated to stay if the unit doesn’t pass the initial inspection unless the PHA terminates the contract.