Request for Comments: National Standards for the Physical Inspection of Real Estate and Associated Protocols, Proposed Scoring Notice
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Abstract
This request for public comment serves as a complementary document to the Economic Growth Regulatory Relief and Consumer Protection Act: Implementation of National Standards for the Physical Inspection of Real Estate (NSPIRE) proposed rule. The proposed rule provided that HUD would publish in the Federal Register the NSPIRE inspection standards and scoring methodology to assess the overall condition, health, and safety of properties and units assisted or insured by HUD. The NSPIRE Standards were published for public comment on June 17, 2022. HUD now seeks public review and comment on the proposed NSPIRE physical inspection scoring and ranking methodology to implement HUD's final NSPIRE rule for Public Housing and Multifamily Housing programs, including Section 8 Project-Based Rental Assistance (PBRA) and other Multifamily assisted housing, Section 202/811 programs, and HUD-insured Multifamily as described in the NSPIRE proposed rule. The scoring methodology converts observed defects into a numerical score and sets a threshold for HUD to perform additional administrative oversight by establishing a level for when a property fails an inspection (less than 60 points) and when an enforcement referral is automatic or required (less than or equal to 30 points). HUD will consider comments received in response to this request before publishing a final NSPIRE Scoring notice in the Federal Register.
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<title>Federal Register, Volume 88 Issue 59 (Tuesday, March 28, 2023)</title>
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[Federal Register Volume 88, Number 59 (Tuesday, March 28, 2023)]
[Proposed Rules]
[Pages 18268-18278]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-06339]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 5, 92, 93, 200, 574, 576, 578, 880, 882, 884, 886,
888, 902, 982, 983, and 985
[Docket No. FR-6086-N-04]
RIN 2577-AD05
Request for Comments: National Standards for the Physical
Inspection of Real Estate and Associated Protocols, Proposed Scoring
Notice
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, Office of the Assistant Secretary for Public and Indian
Housing, U.S. Department of Housing and Urban Development, (HUD).
ACTION: Request for public comment.
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SUMMARY: This request for public comment serves as a complementary
document to the Economic Growth Regulatory Relief and Consumer
Protection Act: Implementation of National Standards for the Physical
Inspection of Real Estate (NSPIRE) proposed rule. The proposed rule
provided that HUD would publish in
[[Page 18269]]
the Federal Register the NSPIRE inspection standards and scoring
methodology to assess the overall condition, health, and safety of
properties and units assisted or insured by HUD. The NSPIRE Standards
were published for public comment on June 17, 2022. HUD now seeks
public review and comment on the proposed NSPIRE physical inspection
scoring and ranking methodology to implement HUD's final NSPIRE rule
for Public Housing and Multifamily Housing programs, including Section
8 Project-Based Rental Assistance (PBRA) and other Multifamily assisted
housing, Section 202/811 programs, and HUD-insured Multifamily as
described in the NSPIRE proposed rule. The scoring methodology converts
observed defects into a numerical score and sets a threshold for HUD to
perform additional administrative oversight by establishing a level for
when a property fails an inspection (less than 60 points) and when an
enforcement referral is automatic or required (less than or equal to 30
points). HUD will consider comments received in response to this
request before publishing a final NSPIRE Scoring notice in the Federal
Register.
DATES: Comment Due Date: April 27, 2023.
ADDRESSES: There are two methods for submitting public comments. All
submissions must refer to the above docket number and title.
1. Electronic Submission of Comments. Comments may be submitted
electronically through the Federal eRulemaking Portal at <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>. 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 website
can be viewed by other commenters and interested members of the public.
Commenters should follow instructions provided on that website to
submit comments electronically.
2. Submission of Comments by Mail. Comments may also 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, HUD recommends that
comments be mailed at least 2 weeks in advance of the public comment
deadline.
Note: To receive consideration as public comments, comments must be
submitted using one of the two methods specified above.
Public Inspection of Comments. HUD will make all properly submitted
comments and communications available for public inspection and copying
during regular business hours at the above address. Due to security
measures at the HUD Headquarters building, you must schedule an
appointment in advance to review the public comments by calling the
Regulations Division at 202-708-3055 (this is not a toll-free number).
HUD welcomes and is prepared to receive calls from individuals who are
deaf or hard of hearing, as well as individuals with speech or
communication disabilities. To learn more about how to make an
accessible telephone call, please visit <a href="https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs">https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs</a>. Copies of all comments
submitted are available for inspection and downloading at
<a href="http://www.regulations.gov">www.regulations.gov</a>.
FOR FURTHER INFORMATION CONTACT: Tara J. Radosevich, Real Estate
Assessment Center, Office of Public and Indian Housing, Department of
Housing and Urban Development, 550 12th Street SW, Suite 100,
Washington, DC 20410-4000, telephone number 612-370-3009 (this is not a
toll-free number), email <a href="/cdn-cgi/l/email-protection#377964677e6572655250425b56435e585944775f425319505841"><span class="__cf_email__" data-cfemail="f5bba6a5bca7b0a79092809994819c9a9b86b59d8091db929a83">[email protected]</span></a>. HUD welcomes and is
prepared to receive calls from individuals who are deaf or hard of
hearing, as well as individuals with speech or communication
disabilities. To learn more about how to make an accessible telephone
call, please visit: <a href="https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs">https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs</a>.
SUPPLEMENTARY INFORMATION:
I. Background
A. Current Standards and Scoring
There are currently two assessment methodologies used by HUD to
ascertain the quality and health and safety of HUD-assisted and insured
properties and units: (1) Pass/Fail, used for the Housing Quality
Standards (HQS) for the Housing Choice Voucher (HCV) and Project-based
Voucher (PBV) programs; and (2) a zero to 100-point (0-100) scale used
for properties inspected under the Uniform Physical Condition Standards
(UPCS) for public housing and properties managed by HUD's Office of
Multifamily Housing Programs.\1\
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\1\ ``Uniform Physical Condition Standards and Physical
Inspection Requirements for Certain HUD Housing,'' Final Rule, 63 FR
46565 (Sept. 1, 1998).
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B. NSPIRE Proposed Rule and Timeline
On January 13, 2021, HUD published the NSPIRE proposed rule \2\ to
implement one of NSPIRE's core objectives--the formal alignment of
expectations of housing quality and consolidation of inspection
standards across HUD programs.
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\2\ 86 FR 2582 (Jan. 13, 2021).
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In the proposed rule, HUD stated its intent to publish updates to
the NSPIRE standards and scoring methodology through future Federal
Register notices at least once every three years with an opportunity
for public comment. The draft NSPIRE Standards were published in the
Federal Register on June 17, 2022.\3\ This notice provides an
opportunity to comment on the draft NSPIRE scoring and ranking
methodology. HUD expects to publish the NSPIRE final rule early this
year. The final NSPIRE Scoring notice will be published after the
NSPIRE final rule but before HUD's Real Estate Assessment Center (REAC)
will commence inspections for scores of record for Multifamily
programs, or scores to be included in a Public Housing Assessment
System (PHAS) score for public housing. HUD will also publish an NSPIRE
Administrative notice after the final rule that provides implementation
guidance, including instructions for submitting requests for technical
reviews, how to notify residents of inspection results and scores, and
how to submit evidence that health and safety deficiencies identified
in the NSPIRE inspection have been corrected, among other requirements.
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\3\ 87 FR 36426 (June 17, 2022).
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C. HCV and PBV Scoring
Consistent with existing practice and with the NSPIRE proposed
rule, NSPIRE will retain a pass/fail indicator for the HCV and PBV
programs and use a zero to 100-point scale for HUD programs previously
inspected under UPCS. This Scoring notice does not apply to the HCV and
PBV programs and does not revise the inspection frequencies established
under the applicable program regulations. The individual NSPIRE
Standards, which will be finalized in advance of the effective date of
the rule for HCV and PBV programs, will include an indication of
whether defects in the standard would result in an HCV fail for the
unit or property.
[[Page 18270]]
D. Development of This NSPIRE Scoring Notice
To develop a new scoring methodology, HUD reviewed its current
scoring model under UPCS and solicited feedback from the public,
including residents, housing industry groups, and housing professionals
within and outside of HUD through the NSPIRE proposed rule.\4\ HUD also
considered feedback on the UPCS inspection and scoring process received
over time from industry, residents, advocacy groups, and Congress, and
acknowledges concerns about consistency and subjectivity, including the
disproportionate impact of certain defects based on item weighting and
disproportionate impact of certain non-unit observed defects in smaller
properties.
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\4\ Public comments can be reviewed in the rulemaking docket at:
<a href="https://www.regulations.gov/docket/HUD-2021-0005">https://www.regulations.gov/docket/HUD-2021-0005</a>.
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One major issue that many observers have cited over the years is
that, in rare cases, a property can pass an inspection while scoring
zero points on the Unit Inspectable Area under the UPCS scoring
methodology. Properties with substandard unit conditions may appear
safe and still have good ``curb appeal'' but have unsafe conditions in
the units that persist because the score was not failing, or under 60
points in a 100-point scale. REAC worked with a contractor to review
potential scores of properties enrolled in the NSPIRE Demonstration, to
compare scoring differences between UPCS and NSPIRE inspections, and to
avoid statistical bias in designing a survey to establish a new scoring
methodology. HUD also considered additional feedback collected during
NSPIRE ``Get Ready Sessions'' held in 14 cities and through other
mechanisms, collected through in-person Q&As and QR-code based survey
questions. REAC has also continued to host an NSPIRE Demonstration
website and email address for questions and comments.\5\
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\5\ See HUD's NSPIRE Demonstration website at: <a href="https://www.hud.gov/program_offices/public_indian_housing/reac/nspire/demonstration">https://www.hud.gov/program_offices/public_indian_housing/reac/nspire/demonstration</a>.
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As part of the contractor-designed survey, HUD also conducted a
survey of over 60 experts in physical inspections, building codes, and
public health and safety. The feedback was requested through a survey
designed based on contingent valuation principles.\6\ Participants
compared the relative risk of defects across severity levels and
property locations. The survey findings helped guide the principles of
the scoring methodology and establish which defects should most impact
the score. Finally, HUD consulted experts in statistics and economics
to consider how scores may change between the UPCS standards and the
NSPIRE standard. The survey predetermined that certain areas (e.g.,
units) and severities (e.g., life-threatening) were considered worse
than others, and participants responded by quantifying how much.
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\6\ Contingent valuation is a survey-based economic technique
for the valuation of non-market resources, often as a values-based
or revealed preference response.
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The survey results helped form many principles used in the NSPIRE
scoring and sampling methodology:
<bullet> Defect Severity Level: Survey respondents largely agreed
with the hierarchy of defect severity, that the differentiation at
higher severity should be greater than at a lower severity, and that
severe health and safety items should have the most impact on score.
For example, the differentiation between the two lowest defect
hierarchies (Low and Moderate) should be smaller than the
differentiation between the two highest defect hierarchies (Severe and
Life-Threatening (LT)).
<bullet> Defect Location: Survey respondents largely agreed that
defect location should impact the relative value (importance) of
defects in terms of scoring impact and that defects located in the unit
should count more than defects located on the property grounds (e.g.,
site, or ``outside'' as defined in the NSPIRE rule). The survey-helped
determine rates of change for both location and severity for defect
valuations (in other words, how much the defect penalty increases as
the severity increases), which were used as guideposts or benchmarks
for reasonability to create the defect impact points.
II. The Proposed NSPIRE Scoring Model
A. Applicability of the NSPIRE Scoring Notice
The NSPIRE Scoring notice will apply to all HUD housing currently
inspected by REAC, including public housing and Multifamily Housing
programs such as Project-based Rental Assistance, FHA Insured, and
sections 202 and 811 as described in the NSPIRE proposed rule at Sec.
5.701.\7\
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\7\ 86 FR 2582 (Jan. 13, 2021).
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B. NSPIRE Scoring Format
For properties previously subject to UPCS, HUD intends to continue
setting the maximum score to 100 for a property with no deficiencies,
and deducting points based on the scoring methodology, with any score
under 60 considered a failing score. HUD will also supplement this
score with letter grades to make clear to residents, public housing
agencies (PHAs), property owners/agents (POAs), and other stakeholders
how the numerical score relates to the condition of the property.
C. Scoring Methodology Generally
The NSPIRE scoring methodology converts observed defects into a
numerical score. It implements the proposed rule's intent to provide
reliable evaluations of housing conditions and to protect residents. In
evaluating the prior inspection standards and scoring, HUD identified a
disproportionate emphasis around the appearance of items that are
otherwise safe and functional and that the standards paid inadequate
attention to the health and safety conditions within the built
environment. HUD concluded that revised housing standards would need to
focus on habitability and the residential use of the structures, and
most importantly, the health and safety of residents. To best protect
residents, the inspection must prioritize conditions that are most
likely to impact residents in the places where they spend the most
time, the units. Thus, standards which are categorized as more severe
should have a greater impact on a property's score when deficiencies
exist in the unit, and a property with observed health and safety
defects in its units is more likely to fail an inspection than a
comparable property with less severe defects.
HUD therefore intends to score deficiencies based on two factors:
severity and location. The categories of severity, as provided in the
proposed NSPIRE Standards notice, are Life-Threatening (LT), Severe,
Moderate, and Low. As described in the proposed NSPIRE Standards
Notice, defect severity levels include the following characteristics:
<bullet> Life-Threatening (LT). The Life-Threatening category
includes deficiencies that, if evident in the home or on the property,
present a high risk of death, severe illness, or injury to a resident.
<bullet> Severe. The Severe category includes deficiencies that, if
evident in the home or on the property, present a high risk of
permanent disability, or serious injury or illness, to a resident. It
also includes deficiencies that would seriously compromise the physical
security or safety of a resident or their property.
<bullet> Moderate. The Moderate category includes deficiencies
that, if evident in
[[Page 18271]]
the home or on the property, present a moderate risk of an adverse
medical event requiring a healthcare visit; could cause temporary harm;
or if left untreated, could cause or worsen a chronic condition that
may have long-lasting adverse health effects. It also includes
deficiencies that would compromise the physical security or safety of a
resident or their property.
<bullet> Low. The Low category includes deficiencies critical to
habitability but not presenting a substantive health or safety risk to
a resident.
The location categories provided in Sec. 5.703 of the NSPIRE
proposed rule are the unit, inside, and outside. Under this proposed
NSPIRE scoring methodology, in-unit deficiencies are weighted more
heavily, meaning that properties with such deficiencies would be more
likely to fail. HUD will weigh these factors using a Defect Impact
Weight. Under the Defect Impact Weight methodology, the weight of the
deduction for a given deficiency changes depending on both the location
and the severity, such that a LT deficiency inside a unit will lead to
the largest deduction and a Low deficiency observed outside the
property will lead to the smallest deduction. To determine the point
deduction of a given deficiency, HUD would determine the location and
severity of the deficiency as described in Table 1. Defect Impact
Weights by Inspectable Area.
Table 1--Defect Impact Weights
----------------------------------------------------------------------------------------------------------------
Inspectable area *
Defect severity category -----------------------------------------------
Outside Inside Unit
----------------------------------------------------------------------------------------------------------------
Life-Threatening (most severe).................................. 49.6 54.5 60.0
Severe.......................................................... 12.2 13.4 14.8
Moderate........................................................ 4.5 5.0 5.5
Low (least severe).............................................. 2.0 2.2 2.4
----------------------------------------------------------------------------------------------------------------
* Defect impact weights are rounded to the tenths place.
In Table 1, the sum of individual defects would be divided by the
number of units inspected. If for example only one LT defect in a unit
was observed during an inspection sample size of 10 units, and no other
defects were observed, the total deduction from the score would be 6
points (60.0 points divided by 10 units). HUD determined each of the
values in Table 1 by determining relative severity values for each
category. HUD initially considered that the value of an LT defect may
be as twice a Severe, a Severe twice Moderate, etc., But based on the
survey results, this is not an accurate statement--on average, most
respondents agreed that we value the difference between a LT and Severe
more than the difference between a Severe and Moderate.
HUD proposes the rates of change by which Defect Impact Weights
change depicted in Table 2 below:
Table 2--Defect Severity Values and Rates of Change by Defect Severity
Category
------------------------------------------------------------------------
Severity rate of
Defect severity category Severity value change *
------------------------------------------------------------------------
Life-Threatening (most severe).... 49.6 4.1 x Severe Non-
Life Threatening.
Severe............................ 12.2 2.7 x Moderate.
Moderate.......................... 4.5 2.3 x Low.
Low (least severe)................ 2.0 N/A.
------------------------------------------------------------------------
* Severity rate of change is rounded to the tenths decimal place.
LT deficiencies will deduct much more than Low deficiencies,
consistent with HUD's goal of prioritizing the health and safety of
residents.
Defect Impact Weights would also change at constant rates across
the three inspectable areas (Outside, Inside, and Unit), but by a
smaller amount. From the proposed rule, these areas are:
Outside of HUD housing (or ``outside areas'') refers to the
building site, building exterior components, and any building systems
located outside of the building or unit. Examples of ``outside''
components may include fencing, retaining walls, grounds, lighting,
mailboxes, project signs, parking lots, detached garage or carport,
driveways, play areas and equipment, refuse disposal, roads, storm
drainage, non-dwelling buildings, and walkways.
Inside means the common areas and building systems that can be
generally found within the building interior and are not inside a unit.
Examples of ``inside'' common areas may include, basements, interior or
attached garages, enclosed carports, restrooms, closets, utility rooms,
mechanical rooms, community rooms, day care rooms, halls, corridors,
stairs, shared kitchens, laundry rooms, offices, enclosed porches,
enclosed patios, enclosed balconies, and trash collection areas.
Unit (or ``dwelling unit'') of HUD housing refers to the interior
components of an individual unit. Examples of components included in
the interior of a unit may include the balcony, bathroom, call-for-aid
(if applicable), carbon monoxide devices, ceiling, doors, electrical
systems, enclosed patio, floors, HVAC (where individual units are
provided), kitchen, lighting, outlets, smoke detectors, stairs,
switches, walls, water heater, and windows.
Inspectable areas would increase point deductions by a factor of
1.1 or 110 percent. For example, if you multiply a Low Defect Impact
Weight located in the Outside Inspectable Area (2.0) by 1.1, the result
is the Defect Impact Weight for a Low Defect located in the Inside
Inspectable Area or 2.2. Similarly, if you multiply a Low Defect Impact
Weight located in the Inside Inspectable Area (2.2) by 1.1, the result
is the Defect Impact Weight for a Low Defect located in the Unit
Inspectable Area or 2.4. This constant rate by which Defect Impact
Weights change by inspectable area is depicted in Table 3 below for the
Low Defect Severity Category (Note: The same rate of change by
inspectable area applies to all Defect Severity Categories):
[[Page 18272]]
Table 3--Defect Severity Values and Rates of Change by Inspectable Area
----------------------------------------------------------------------------------------------------------------
Inspectable area
Defect severity category ----------------------------------------------------------------------------
Outside Inside Unit
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Low................................ 2.0 2.2........................ 2.4.
Rate of Change..................... N/A 1.1 x Outside.............. 1.1 x Inside.
----------------------------------------------------------------------------------------------------------------
* Area rate of change is rounded to the tenths place.
D. Final Scoring Conversion
Because the number of defects observed will be greater in
properties where HUD inspects a larger number of units, the NSPIRE
scoring methodology normalizes the total defect deduction value by
dividing it by the total number of units inspected. To convert the
Defect Deduction Value Per Unit to a 100-point score, the sum of the
Defect Impact Weights is divided by the number of units inspected. The
formula is represented below:
Total Defect Deduction Value All Areas/Unit Sample Size = Defect
Deduction Value Per Unit
To determine the final property score, the Defect Deduction Value
Per Unit is then subtracted from 100:
100-(Defect Deduction Value Per Unit) = Final Score
Note: Scores cannot go below zero, so if the calculation yields a
result lower than 0, the score is set to 0.
E. Fail Thresholds
As provided in the rule and Standards notice, all deficiencies
identified through the NSPIRE inspection must be corrected within
timeframes established in the rule and the NSPIRE Standard. In
addition, under this proposed NSPIRE Scoring methodology, there are two
situations in which a property will be considered to have failed
inspection:
<bullet> Scores below 60. Consistent with existing policy and
practice, the Property Threshold of Performance is defined as
properties that achieve a score of 60 or above. Failure to achieve a
score at or above 60 is considered a failing score, and properties that
score under 60 are required to perform additional follow up and may be
referred for administrative review under current regulations. These
policies will be retained in the NSPIRE program.
<bullet> Unit Point Deduction 30 or above. Consistent with HUD's
goal of maximizing the health and safety of a unit, HUD has determined
that scores where deductions are disproportionately from Unit
deficiencies should be considered failures even if, for example, the
rest of the property is in pristine condition. Therefore, regardless of
the overall property score, if 30 points or more were deducted due to
Unit deficiencies, HUD would consider the property to have failed the
inspection and would deem the result of the inspection to be a score of
59.
III. Examples
Example 1: A Property Where HUD Inspects 10 Units as Part of Its
Inspection Sample
The following example demonstrates a 10-unit inspection in which
the property passes the inspection with a score of 80. In this example,
the following defects and the corresponding Defect Impact Weight
categories were recorded by the inspector:
Table 4: Example #1--Defects Observed During an Inspection of 10
Sampled Units
An Inspector conducted an inspection of Property L and observed the
following deficiencies in 10 units inspected under the NSPIRE Standard:
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Defect severity category Outside Inside Units
----------------------------------------------------------------------------------------------------------------
Life-Threatening................................................ 0 0 2
Severe.......................................................... 0 2 1
Moderate........................................................ 0 3 0
Low............................................................. 1 10 0
-----------------------------------------------
Total by Inspectable Area................................... 1 15 3
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Under the NSPIRE scoring methodology, each of these defects would
be multiplied by the corresponding Defect Impact Weights to establish
the total property defect deduction value. The total property defect
deduction value is calculated as follows in Table 5:
Table 5--Example #1--Total Property Defect Deduction Value Calculation
--------------------------------------------------------------------------------------------------------------------------------------------------------
Defect severity category Outside Inside Unit G Unit B All other units
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-Threatening......................................... 0 x 49.6 = 0 0 x 54.5 = 0 1 x 60 = 60 1 x 60 = 60 0 x 60 = 0
Severe................................................... 0 x 12.2 = 0 2 x 13.4 = 26.8 0 x 14.8 = 0 1 x 14.8 = 14.8 0 x 14.8 = 0
Moderate................................................. 0 x 4.5 = 0 3 x 5 = 15.0 0 x 5.5 = 0 0 x 5.5 = 0 0 x 5.5 = 0
Low...................................................... 1 x 2.0 = 2.0 10 x 2.2 = 22.0 0 x 2.4 = 0 0 x 2.4 = 0 0 x 2.4 = 0
Sum of Defect Deduction Value............................ 2.0 63.8 60.0 74.8 0.0
--------------------------------------------------------
Inspectable Area Defect Deduction Value.................. 2.0 63.8 134.8
----------------------------------------------------------------------------------------------
Total Property Defect Deduction Value................ 2.0 + 63.8 + 134.8 = 200.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 18273]]
The defect deduction value per unit would be the sum of the Total
Property Defect Deduction Value All Areas of 200.6 divided by the unit
sample size of 10 for a value of 20 (values and calculations in
parentheses):
Total Defect Deduction Value All Areas (200.6)/Unit Sample Size (10) =
Defect Deduction Value Per Unit (20.06)
The property's preliminary score on the 100-point scale would
therefore be calculated as follows:
100-Defect Deduction Value Per Unit (20.06) = Preliminary Score (79.94)
This score would then be rounded up to 80.
Example #2--The Unit Threshold of Acceptability Factor
The following is another example which demonstrates a 10-unit
inspection of property T that would receive a score above 60 but would
fail the NSPIRE inspection based on Unit Point Deduction. In this
example, the following defects and the corresponding Defect Impact
Weight categories were recorded by the inspector:
Table 6--Example #2--Total Inspectable Area Defect Deduction Values
----------------------------------------------------------------------------------------------------------------
Defect severity category Outside Inside Units
----------------------------------------------------------------------------------------------------------------
Life-Threatening....................................... 0 x 49.6 = 0 0 x 54.5 = 0 4 x 60 = 240
Severe................................................. 0 x 12.2 = 0 2 x 13.4 = 26.8 4 x 14.8 = 59.2
Moderate............................................... 0 x 4.5 = 0 3 x 5 = 15 2 x 5.5 = 11
Low.................................................... 1 x 2 = 2 10 x 2.2 = 22 0 x 2.4 = 0
Sum of Defect Deduction Values (or Inspectable Area 2.0 63.8 310.2
Defect Deduction Values)..............................
--------------------------------------------------------
Total Property Defect Deduction Value.............. 2.0 + 63.8 + 310.2 = 376.0
----------------------------------------------------------------------------------------------------------------
Using the Unit Inspectable Area Defect Deduction Value of 310.2,
the Unit Threshold of Performance would be calculated as follows
(values and calculations in parentheses):
Total Unit Inspectable Area Defect Deduction (310.2)/Sample Size (10) =
Final Unit Defect Deduction (31.02)
Because the Final Unit Defect Deduction is over 30, the property
would fail the inspection, even if the overall final score would be
greater than 60.
In this example, defects were observed in the Outside and Inside
inspectable areas also, resulting in a Total Defect Deduction Value for
All Areas = 376.0 which would be adjusted by the sample size of 10
units as follows (values and calculations in parentheses):
Total Defect Deduction Value All Areas (376.0)/Unit Sample Size (10) =
Defect Deduction Value Per Unit (37.6)
The property's score factoring in the observed defects in all
inspectable areas would be calculated as follows:
100-Total Defect Deduction Value All Areas Per Unit (37.6) = Final
Score (62.4)
In this example, the property's overall inspection results would be
considered passing under UPCS scoring as the final score would be
rounded down to 62, but under NSPIRE, the Unit Defect Deduction is 31.0
(30 points or more were deducted due to Unit deficiencies) and thus
results in an automatic adjustment to a failing score of 59.
The table below provides a summary of the Property and Unit
Thresholds of Performance and details the circumstances in which a
property passes an inspection based on these thresholds.
Table 7--Summary of Property and Unit Thresholds of Performance and
Inspection Outcomes
------------------------------------------------------------------------
Inspection results Property L Property T
------------------------------------------------------------------------
Property Score >= 60............. Yes............... Yes.
Final Unit Defect Deduction <= 30 Yes............... No.
Overall Inspection Result........ PASS.............. FAIL.
------------------------------------------------------------------------
IV. Administrative Details
A. Rounding
Calculated scores will be rounded to the nearest whole number with
one exception. For properties that score between 59 and 60, the score
will be rounded down to 59. This reflects HUD's concern that properties
must surpass these scoring thresholds to be considered at or above
those scores which may dictate HUD's administrative, oversight,
monitoring and enforcement approach for poorly scoring properties.
B. Inspection Report
In the inspection report provided to property ownership and/or
management, HUD will provide the overall score and indicate the
numerical results for each of the two types of inspection evaluations
that determine whether the property passes or fails the inspection:
<bullet> Property Threshold of Performance: Property Score on the zero
to 100-point scale
<bullet> Unit Threshold of Performance Factor: Unit Inspectable Area
Defect Deduction Value Per Unit
C. HUD's Use of NSPIRE Inspection Scores
HUD uses property scores to support monitoring and enforcement of
HUD's physical condition requirements. Property scores give HUD, the
owner or PHA, and any other relevant parties an impression of the
overall physical condition of the property. A high or low score does
not change that a participant is required to repair all deficiencies
identified in the inspection.
HUD intends to continue using the zero to 100-point scale for
purposes including (but not limited to):
<bullet> Frequency of Inspections: Properties that score higher are
inspected less frequently;
<bullet> Enforcement: Properties that fail or score below certain
thresholds may be subject to HUD enforcement actions, including
referral to HUD's Departmental Enforcement Center (DEC);
<bullet> Public Housing Assessment System (PHAS) Designations:
Average weighted inspection scores comprise forty (40) points of a
public housing agency's PHAS designation;
<bullet> Participant Evaluation: Inspection scores are considered
when determining whether a potential or existing HUD Multifamily
business stakeholder may expand its involvement in HUD housing; and
<bullet> Risk Assessment: HUD's Offices of Multifamily Housing and
Public
[[Page 18274]]
Housing use inspection scores and pass/fail designations to assess the
risk of owners/agents and public housing agencies.
D. Non-Scored Defects and New Affirmative Requirements
In recognition of its long-standing practice for not scoring smoke
detector defects under the UPCS scoring methodology, HUD will not score
smoke detector defects, but will continue to use an asterisk (*) to
denote identified smoke detector defects. The asterisk will be appended
to the numerical property score, and it is critical to note that these
defects are classified as LT defects and must be corrected within 24-
hours even though these defects are not scored. HUD will also follow
this policy for carbon monoxide devices. While not scored, these items
are considered LT and must be remedied within the timelines established
by HUD.
Similarly, HUD recognizes that the NSPIRE Standards include new
affirmative requirements defined generally as property attributes or
requirements that must be met. The lack of these property attributes,
which may include the quantity and location of these items (e.g., GFCI
outlets) would constitute a defect and result in a deduction from the
property's inspection score. HUD understands that it may take
properties' ownership and management some time to comply with these new
standards and as a result will not score new affirmative requirements,
defined as those standards that were expressly not in the UPCS or in
any way covered by those standards, in the first 12 months of NSPIRE
inspections for the program.\8\ The list of new affirmative
requirements will be included in the final NSPIRE rule. HUD currently
expects that this list will include GFCI protected outlets within 6
feet of a water source, guardrails for elevated walkways, a permanently
installed heating source for certain climate zones, and a permanently
mounted light fixture in the kitchen and each bathroom.
---------------------------------------------------------------------------
\8\ The NSPIRE final rule will have different effective and
compliance dates for different programs. The first 12 months for a
given program will be based on the date inspections commence for
that program.
---------------------------------------------------------------------------
During this initial 12-month period, HUD will provide a score of
record that will be used for administrative purposes including
oversight and enforcement and a projected score if those new
affirmative requirements were scored. Both scores will be provided on
the inspection report received by property ownership and/or management.
E. Scoring Designations
HUD will supplement the property's zero to 100-point score with the
following designations that provide property ownership and/or
management, residents, and other stakeholders with information
important to understanding the overall inspection results. These
designations include:
<bullet> Smoke Detectors: An asterisk next to the property's zero
to 100-point score will indicate whether an inspector observed a smoke
detector defect during an inspection.
<bullet> Carbon Monoxide Detectors: An alternate symbol
designation, similar to an asterisk, will also be included next to the
property's zero to 100-point score to indicate whether an inspector
observed a carbon monoxide detector defect during an inspection.
<bullet> Presence of Certain Defect Severity Levels: HUD previously
provided a letter designation (e.g., a, b, c) to indicate the presence
of exigent health and safety defects; this will no longer be used under
NSPIRE. HUD will instead provide a summary table of the defect
observations by Defect Severity Category, e.g., Life-threatening,
Severe, Moderate, Low. At the conclusion of the inspection, the PHA or
Owner will receive a list of all health and safety items that must be
corrected within 24 hours of the inspection.
<bullet> New Affirmative Requirements: In at least the first 12
months after the effective date of the final NSPIRE Rule, a designation
to be determined will also be included as part of the property's
inspection results to indicate new affirmative requirements that were
not scored. Standards that may need more calibration through field
testing, such as a minimum temperature standard, may not be scored for
more than a year. In at least the initial year of NSPIRE, HUD will also
provide two scores; one that shows the potential score if all new
affirmative requirements were scored, and the official score for that
inspection.
<bullet> Letter Grades: HUD will assign a letter grade to each
property inspection score. This will assist HUD, property ownership
and/or management, residents, and the public to better understand the
condition of the property and to guide administrative activities such
as oversight, risk management, and enforcement. The letter grades will
be attributed to the zero to 100-point property score based on the
following scale in Table 8 below:
Table 8--Letter Grades by Distribution of the Zero to 100-Point Inspection Score
----------------------------------------------------------------------------------------------------------------
Property score Letter grade Meaning
----------------------------------------------------------------------------------------------------------------
>= 90 points............................ A The property is in good physical
condition with the fewest number of
concerning defects, which are also
easily addressed.
>= 80 points, <90 points................ B The property is in good physical
condition with comparatively more
concerning defects, but these defects
are also easily addressed.
>= 70 points, <80 points................ C The property is in an acceptable physical
condition with a greater number of
concerning defects. The property should
be closely monitored to see if these
issues are correctable or present larger
concerns about resident health and
safety and overall asset condition.
>= 60 points, <70 points................ D The property is in a very challenged and
near failing physical condition, with a
high prevalence of concerning health and
safety defects that may not be easily
addressed and/or reflect possible
concerns about maintenance or overall
asset condition. The property should be
closely monitored to avoid it becoming a
failed property.
>30 points, <60 points.................. E The property is in a failing physical
condition, with a high prevalence of
concerning health and safety defects
that clearly reflect larger concerns
with the maintenance and short-term
condition of the asset. The property
should be monitored regularly and may be
reinspected more than annually to
protect resident health and safety. If
the property receives two successive
scores in this range, HUD will consider
administrative actions to protect
residents as described in the final
NSPIRE rule.
[[Page 18275]]
<= 30 points............................ F The property is in a failing physical
condition, with an extremely high
prevalence of concerning health and
safety defects that clearly reflect
larger concerns with the maintenance and
short-term condition of the asset. The
property should be monitored and
inspected regularly to protect resident
health and safety and, if necessary,
actions should be taken to protect
residents including, but not limited to
relocation and/or changes in property
ownership and/or management. These
properties will be automatically
referred to the DEC.
----------------------------------------------------------------------------------------------------------------
Each of the above designations will be clearly summarized on the
draft inspection report provided to property ownership and/or
management shortly after the conclusion of an inspection. Regulations
covering HUD's expected actions for scores of 30 or less, or two
successive scores under 60, will be in the final NSPIRE rule.
F. Defect Remediation and Pass/Fail Status
HUD will evaluate the extent to which property ownership and/or
management complies with its requirements to submit documentation
indicating certain more severe defects have been remediated or are at
least in the process of being remediated (e.g., the property
implemented an integrated pest management plan to address infestation).
HUD will use its administrative authority in its regulations to compel
compliance. More information will be provided in the NSPIRE
Administrative notice.
G. Draft and Final Inspection Reports, Preliminary and Final Scores
REAC will issue a draft inspection report with a preliminary score
and a recordation of all defects including those that must be addressed
within certain timeframes. HUD will issue a final inspection report
with a final score and a recordation of all defects following the
appeals process specified in the NSPIRE Administrative Procedures
Notice. In the interest of protecting residents, HUD may take
administrative actions based on the draft inspection report and
preliminary inspection score. Both the draft and final reports will
also provide summaries of the inspection results.
H. Unit Sampling
HUD's inspection program and scoring methodology under NSPIRE
relies on inspecting a statistically significant sample of units to
achieve a 90 percent confidence level with a 6 percent margin of error
for its inspections. HUD employed the same confidence level, and a
similar margin of error, but capped the number of units inspected at 27
units under UPCS. Under the NSPIRE scoring and sampling methodology,
HUD intends to increase the maximum number of units to 32 units. This
will help achieve consistency in inspection results across all sizes of
properties.
---------------------------------------------------------------------------
\9\ Cochran, William G., Sampling Techniques, New York: John
Wiley & Sons, Inc., 1977.
---------------------------------------------------------------------------
Under the UPCS scoring and sampling methodology, many inspections
required that every residence building be inspected regardless of
whether or not any unit within that building was subject to inspection.
HUD is eliminating that requirement. Under the NSPIRE scoring and
sampling methodology, building-level sampling will be driven by units.
For any building that contains a unit in the inspection sample, the
building will also be inspected. Under the NSPIRE scoring and sampling
methodology, there are also no point values calculated and assigned to
specific buildings or units, which further eliminates the need to
inspect all residence buildings.
Achieving a uniform confidence level is critical to the overall
accuracy of HUD inspections and benefits residents and property
ownership and/or management by reducing the number of re-inspections
due to inspections that do not meet HUD's standards for accuracy. Under
HUD's regulations (and as will be affirmed in the final NSPIRE rule)
and HUD's contracts with owners and operators of HUD-assisted and
insured housing, units should meet HUD's physical condition standards
365 days a year.
The results of the NSPIRE sampling methodology are provided in
Table 9. It was developed to consider the desired confidence interval
(90 percent), margin of error (6 percent), and expected defect
population proportion. HUD calculated the sample size for every
possible population of units by solving for the lowest possible minimum
sample size in the following equation: \9\
[GRAPHIC] [TIFF OMITTED] TP28MR23.001
[[Page 18276]]
Where:
<bullet> [egr] = margin of error
<bullet> In this case, 6 percent
<bullet> z = z-score corresponding to confidence interval
<bullet> In this case, ~1.65 corresponds to 90 percent two-sided
confidence interval
<bullet> p = expected defect population proportion
<bullet> In this case, HUD used a proportion of 3.97 percent
\10\
<bullet> N = unit population
<bullet> s = minimum sample size
[Note: For comparison purposes, the UPCS sampling methodology is
also provided in Table 9, although the unit grouping does not fully
align.]
V. Inspection Sample Sizes
Table 9--Number of Units Sampled Under NSPIRE Scoring and Sampling
Methodology Based on Property Size
------------------------------------------------------------------------
UPCS NSPIRE
Units in property sample sample
------------------------------------------------------------------------
1................................................. 1 1
2................................................. 2 2
3................................................. 3 3
4................................................. 4 4
5................................................. 5 5
6................................................. 5 6
7................................................. 6 6
8................................................. 7 7
9................................................. 7 8
10................................................ 8 8
11-12............................................. 8 9
13-14............................................. 9 10
15-16............................................. 10 11
17-18............................................. 11 12
19-21............................................. 12 13
22-24............................................. 13 14
25-27............................................. 14 15
28-30............................................. 14 16
31-35............................................. 15 17
36-39............................................. 16 18
40-45............................................. 17 19
46-51............................................. 18 20
52-59............................................. 18 21
60-67............................................. 19 22
68-78............................................. 20 23
79-92............................................. 21 24
93-110............................................ 21-22 25
111-120........................................... 22-23 26
121-166........................................... 23-24 27
167-214........................................... 24-25 28
215-295........................................... 25 29
296-455........................................... 25-26 30
456-920........................................... 26 31
921+.............................................. 27 32
------------------------------------------------------------------------
VI. Changes From UPCS
---------------------------------------------------------------------------
\10\ Based on an analysis of historical UPCS data, this is the
estimate of the percentage of units with more than 3 unique NSPIRE
defects.
---------------------------------------------------------------------------
HUD welcomes and appreciates all feedback on the scoring
methodology detailed in this request for comments. HUD also seeks
specific input on the following items that it considers will emphasize
health and safety more clearly compared to the UPCS scoring
methodology.
A. Removing Severity and Criticality Levels
HUD's UPCS scoring methodology included two factors for how a
specific defect would impact a property's score. The first factor of
defect severity evaluated the relative magnitude of the defect. For
example, a small scratch or indentation in a wall would mostly likely
be a Level 1 defect (on a 1-3 scale). In contrast, a sizeable hole in a
wall that likely presented structural issues would be a Level 3 defect.
The second factor evaluating criticality (on a 1-5 scale)
multiplied the value associated with the severity of the defect
depending on how important the actual defect was to the residents'
safety and quality of life. For example, an exigent health and safety
defect such as a blocked egress would apply the maximum multiplier to
the defect severity value. In this example, a blocked egress is both a
Level 3 defect and a Criticality 5 defect, which would result in the
maximum deduction of points.
NSPIRE would replace both factors with a scoring methodology which
deducts a certain point value by type and severity of defect depending
on where that defect is observed during the inspection. For example:
identifying a Severe defect would result in deducting more points from
the overall inspection score if the defect were identified inside the
unit than on the property's grounds, or outside.
B. Reducing the Number of Inspectable Areas From Five to Three
HUD is reducing the number of inspectable areas from five to three.
Under UPCS there were five inspectable areas: Units, Common Areas,
Building Systems, Building Exterior, and Site. HUD undertook this
change to better clarify where certain defects can be observed and to
eliminate some unique situations under UPCS where an inspector could
have more leeway in designating the inspectable area of a certain
defect, which could greatly impact and potentially skew scoring. For
example, a certain defect could be considered to be within the Building
Exterior inspectable area or the Unit Inspectable Area, which could
result in different scoring depending on the inspectable area where the
inspector decided to record a defect.
In the NSPIRE proposed rule at Sec. 5.703, HUD proposed three
inspectable areas: Units, Inside, and Outside. The NSPIRE Standards
notice and attached standards provide additional clarity about in which
inspectable area certain defects should be observed and prescribe that
those defects can only be recorded in that area.
Table 10 below roughly illustrates how the inspectable areas under
UPCS translate to NSPIRE; however, it is critical to understand that
some inspectable items that may have been in a certain inspectable area
under UPCS may not necessarily fall into the category represented in
the table below due to how NSPIRE categorizes the location of these
defects.
Table 10--Comparison and Rough Translation of Inspectable Areas Under
UPCS as Compared to NSPIRE (Most Common Distribution of Points by
Inspectable Area Under UPCS Included in Parentheses, Where NSPIRE Does
Not Distribute the 100 Points Across Inspectable Areas)
------------------------------------------------------------------------
------------------------------------------------------------------------
UPCS inspectable area NSPIRE inspectable area
------------------------------------------------------------------------
Unit (35 points)............... Unit. 100 points.
------------------------------------------------------------------------
Common Areas (15 points)....... Inside.............
Building Systems (20 points)
------------------------------------------------------------------------
[[Page 18277]]
Building Exterior (15 points).. Outside............
Site (15 points)
------------------------------------------------------------------------
C. Removing Item and Area-Based Limits and Scoring Weight Distribution
Along With Point Caps
Under the UPCS scoring methodology, the sampling methodology
created a maximum number of points at multiple levels, including (but
not limited to):
<bullet> Inspectable Area. As depicted in Table 10 above, under
UPCS each inspectable area had a total point value. [Note: The total
point value could shift slightly depending on the presence of certain
inspectable items. For example, the Unit Inspectable Area could account
for as many as 40 points.] Under NSPIRE, the 100-point score
distribution is not divided among inspectable areas meaning an
inspection could theoretically result in a zero (0) point score solely
based on observations in units.
<bullet> Inspectable Item. Within each inspectable area, the UPCS
scoring methodology would identify inspectable items (e.g., if a
kitchen has 10 inspectable items such as a door, each of the ten items
would have an item weight or account for 10 percent of the score in
that location) that would result in a point cap for those items. Under
NSPIRE, there are no inspectable items. Defects observed are assigned a
Defect Impact Weight as described in Section IV of this Notice and the
score is reduced accordingly by the defects observed.
<bullet> Buildings. Under UPCS, the number of buildings sampled
would impact the total points available and the maximum number of
points that could be lost under Building Systems and Building Exterior,
meaning if 3 buildings were sampled, each building essentially
contributed one-third of the points for the two building inspectable
areas. Under NSPIRE there is no such point value assigned to sampled
buildings.
<bullet> Units. Under UPCS, and like buildings, the number of units
sampled would result in a maximum number of points that could be lost
per unit. This meant that if 10 units were sampled, each unit
contributed approximately 3.5 points towards the total score and that
would also be the total amount of points that could be lost in a
specific unit. Under NSPIRE, there is no such point value assigned to
sampled units.
<bullet> Point Caps. Under UPCS, HUD established a point loss cap
for single deficiencies by sub-area (e.g. building exterior, site,
units) at set deductions, for example, no more than 7.5 points could be
deducted for the site for that type of deficiency. Under NSPIRE,
defect-specific point caps based on sub-areas are eliminated.
Additionally, under UPCS, within a single ``sub-area'' (for instance,
within one unit), even if there were multiple instances of the same
deficiency type, there would only be one deduction for that deficiency
type. For example, if multiple deficiencies for broken windows were
recorded in one unit, only the most severe deficiency observed would be
deducted for that unit. Under NSPIRE, HUD is proposing to allow for
deductions multiple times for the same deficiency if that deficiency is
identified in multiple distinct inspectable items. Deficiencies and
resulting score deductions will depend on the specific NSPIRE standard
and inspection protocol, which includes unique deficiency criteria that
limit the number of observations to prevent excessive observations of
deficiencies. For example, in the Pest Infestation standard, the number
of rooms in a unit where evidence of infestation is observed does not
matter; the deficiency will be cited and scored as a pest infestation
in the unit. HUD seeks comment specifically on this change.
<bullet> Normalization. Under UPCS, almost all aspects of the
scoring were normalized based on the number of buildings, units, or
inspectable items. This created point caps for each of these areas as
described above, but also adversely impacted smaller properties which
could lose a much larger proportional share of points on Building
Systems and Building Exterior even if a single defect was observed
(e.g., if it was a single building property, the point value of the
defects in the Building Systems and Building Exterior Areas would be
divided by one).
Consistent with the principles of the Economic Growth Act (Pub. L.
115-74) and creating less burden on smaller and especially rural
properties, NSPIRE limits normalization to the number of units only,
with consideration of the sample size. This reflects the recognition
that defects are likely to be observed more often in larger properties
with more units; but certain defects regardless of where observed
(e.g., on the property grounds) should not disproportionately impact a
smaller property's score. Where there are fewer buildings and units
assessed, deductions for site-based conditions under UPCS (e.g.,
overgrown vegetation, cracked sidewalks that are not a tripping hazard,
erosion) were disproportionally weighted. This unit-only normalization
also reflects that the NSPIRE scoring and sampling methodology focus on
the condition of units more so than the condition of other inspectable
areas such as Inside or Outside of the property.
D. Additional Considerations Before Finalizing NSPIRE Scoring
As described in the Background section, HUD used the results of the
NSPIRE Demonstration to evaluate its Standards and Scoring methodology.
HUD will continue to test this scoring methodology in NSPIRE
Demonstration inspections and compare score results to the properties'
last UPCS inspection. The results of this exercise will be considered
in addition to public comment on this notice. The results will be
discussed in the final NSPIRE Scoring notice.
VII. NSPIRE and the Public Housing Assessment System (PHAS)
For Public Housing properties subject to the Public Housing
Assessment System, HUD will use the new NSPIRE scoring methodology and
associated property inspection scores to calculate the PHAS Physical
Condition Indicator component of PHAS once a PHA's entire portfolio has
been inspected under NSPIRE. This indicator, also known as the Physical
Assessment Sub-system (PASS) indicator, comprises 40 points of the 100-
point PHAS score. HUD will employ the same unit-weighted average score
methodology under 24 CFR 902.22 to calculate the PASS indicator score
for PHAs subject to PHAS in calendar year 2023 using
[[Page 18278]]
NSPIRE property inspection scores. Until all inspections are completed
under NSPIRE, a PHA's physical condition indicator will continue to be
based on the most recent UPCS scoring and unit-weighted average. HUD
will provide additional guidance to PHAs that are currently under a
Recovery Agreement that include goals to improve the physical condition
in a separate notice.
Dominique Blom,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 2023-06339 Filed 3-27-23; 8:45 am]
BILLING CODE 4210-67-P
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</html>This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.