HUD Issues Final NSPIRE Standards

The Department of Housing & Urban Development (HUD) has announced the pending federal register publication of the Final Inspection Standards Notice for the National Standards for the Physical Inspection of Real Estate (NSPIRE). The notice details inspectable items at HUD-assisted and Multi-family insured properties. This includes a classification of the conditions that are considered life-threatening, severe, moderate, or low-risk by item and inspectable area. Additionally, the notice commits HUD to review standards at least every three years.

NSPIRE improves HUD’s oversight by aligning and consolidating inspection regulations used to evaluate HUD housing across multiple programs. NSPIRE strengthens HUD’s physical condition standards, formerly known as the Uniform Physical Condition Standards (UPCS) and the Housing Quality Standards (HQS). Effective October 1, 2023, UPCS and HQS will no longer exist.

The NSPIRE standards were tested during the NSPIRE Demonstration and were opened for public comment on June 17, 2022. The final standards were published with changes considering feedback HUD received and additional field testing during the NSPIRE Demonstration. Major changes include:

• Addressing life-threatening and severe deficiencies within 24 hours. All other deficiencies must be addressed within 60 days or a reasonable period.
• Making the Smoke Alarm Standard consistent with the National Fire Protection Association (NFPA) Standard 72.
• Creating a Fire Door Standard detailing the specific function, operability, and structural integrity requirements for fire doors.
• Requiring carbon monoxide alarms to be installed in compliance with the 2018 International Fire Code.
• Setting minimum temperature requirements during the colder months and requiring a permanent heating source.
• Including criteria for when guardrails and handrails are required.
• Establishing infestation deficiencies based on discrete levels of observations with clarification on citable pests.
• Developing deficiencies based on observed mold conditions or elevated moisture levels measured using a moisture meter.
• Including a deficiency for an enhanced visual assessment for deteriorated paint in units where children under six years of age reside to document potential lead-based paint hazards.
• Specifying Ground Fault Circuit Interrupter (GFCI) protection as a requirement.
• Including affirmative habitability requirements for bathrooms, kitchens, and other rooms used by residents.

HUD published the final NSPIRE rule on May 11, 2023, that made changes to inspections for Public Housing and Multifamily Housing programs. In addition to the final rule, the Final Standards Notice is one of three core subordinate publications as part of NSPIRE; HUD will publish the two remaining notices – the final Scoring and Administrative Notices – this summer.

How NSPIRE Differs

The new NSPIRE scoring approach is very different from the ones used by REAC since 1999. As noted earlier, NSPIRE will formally align expectations of housing quality and consolidate inspection standards.

Currently, UPCS inspections are “risk-based” inspections. A risk-based inspection takes a sampling of results and determines what risk may be present on the entire property and the owner’s general operation. HQS inspections are results-based, and these standards are used to create a list of items that need to be corrected in order to participate in a HUD program (e.g., housing choice vouchers).

The updated NSPIRE inspection protocols seek to combine the aims of both approaches. It uses a “risk-based” approach of using results to encourage better day-to-day compliance and a “results-based” approach that aims to ensure the issues are corrected in a prompt manner. Also, NSPIRE inspection standards and scoring methodology reflect NSPIRE’s goals of focusing on the health and safety of residents over curb appeal and on life-threatening and severe deficiencies inside units resulting in more scoring impact than those outside the units.

Three Components of NSPIRE

NSPIRE is designed around three components that are intended to help accomplish HUD goals with the updated inspection program. The NSPIRE model provides for three inspection types, which include a self-inspection element to support owners and managers adopting year-round maintenance practices:

• Self-Inspection: Under NSPIRE, every year each owner/manager will inspect all units and retain a record of those inspections for three years. In a change from the proposed rule, electronic transmission of inspection results to HUD will not be required.
• NSPIRE Inspections: These inspections will be conducted by contract inspectors and public housing agencies every one to five years, depending on a property’s previous inspection score.
• NSPIRE Plus: HUD federal inspectors may conduct additional inspections triggered by poor property conditions.

Inspectable Areas

Under UPCS, there are five inspectable areas. With NSPIRE, HUD establishes and consolidates the inspectable areas of a REAC inspection into three easily identifiable locations: Unit, Inside, and Outside.

• Unit: A “unit” of housing refers to the interior components of an individual apartment – where the resident lives.
• Inside: Inside means the common areas and building systems that can be generally found within the building interior but are not inside a unit.
• Outside: “Outside” refers to the building site, building exterior components, and any building systems located outside the building or unit.

Deficiency Categories

NSPIRE has abandoned the UPCS levels of deficiency (1-3, from least to most severe) in favor of a model that just identifies whether there is a specific deficiency or not. The severity is indicated by the overall category of deficiency. The majority of deficiencies are now considered health & safety deficiencies.

Health & Safety deficiencies have strict deadlines to correct and report as corrected to HUD. For severe health & safety deficiencies, an owner will have 24 hours to correct and 72 hours to report to HUD. For standard health and safety deficiencies, an owner will have 30 days to correct and 35 days to report the correction to HUD.

• Health & Safety: This category makes up most of the NSPIRE deficiencies because they are believed to be focused on the most critical elements that impact resident safety and habitability. There are two main categories of health and safety deficiencies: standard and severe. And the severe category is broken down into life-threatening and non-life-threatening.
• Function & Operability: These deficiencies are those where the resident is unable to use certain fixtures, features, or appliances. An example would be a sink that is constantly running. Deficiencies of this type require repair based on the property’s routine maintenance plan.
• Condition & Appearance: These deficiencies are those where components of the property don’t meet reasonable expectations of condition and appearance or are damaged. In these cases, the repair would be based on the property’s routine maintenance plan.

Proposed NSPIRE Scoring Format

The NSPIRE scoring methodology converts observed defects into a numerical score and is easier to understand than under UPCS.

HUD intends to continue using the zero to 100-point scale for purposes including (but not limited to):

• Frequency of Inspections – properties that score higher will receive fewer inspections;
• Enforcement – low-scoring properties will be subject to HUD enforcement actions;
• Public Housing Assessment System (PHAS) Designations – average weighted inspection scores comprise 40 points of a PHAS designation;
• Participant Evaluation – inspection scores will be considered when determining future involvement of owners and agents in HUD projects; and
• Risk Assessment – HUD will use the scores to assess risk for individual properties.

Scoring Calculations

With the proposed scoring format, standards that are categorized as more severe will have a greater impact on a property’s score when the deficiencies are in a unit, and a property with observed health and safety defects in the units is more likely to fail an inspection than a comparable property with less severe defects.

As noted above, NSPIRE has three inspectable areas – Units/Inside/Outside. Within these three inspectable areas, there are four Defect Severity Categories: (1) Life-Threatening {most severe}; (2) Severe; (3) Moderate; and (4) Low {least severe}.

To determine a site’s score, for each of the categories, the number of deficiencies on an inspection will be multiplied by a HUD-provided multiplier and that value will be divided by the unit sample. The following example illustrates how the scoring will work:

• Assume ten units are sampled.
• The inspection finds four life-threatening issues in the units, and three moderate defects Inside.
• A life-threatening finding in a unit is worth 60 points so the unit section would be 60 X 4 or 240. Divided by the unit sample of ten, the total is 24.
• A moderate defect found “Inside” is worth 5 points so the Inside section would be 3 X 5 or 15. Divided by the unit sample of ten, the total is 1.5.
• These numbers are deducted from 100 resulting in a score of 74.5 or 75 after being rounded to the nearest whole number.

It is important to note that while calculated scores are rounded to the nearest whole number in most cases, sites that score between 59 and 60 will always be rounded down to 59.

Fail Scores

There are two situations in which a site will be considered to have failed inspection. Failure to achieve a score at or above 60 is considered a failing score, and sites with a unit point deduction of 30 or more will fail – even if there are no other deductions for the Inside or Outside parts of the review.

Letter Grades

In order to improve the ease of understanding the meaning of the scores, HUD will assign a letter grade to each property inspection score.

Bottom Line

HUD’s expected actions for scores of 30 or less, or two successive scores under 60 will be specifically outlined in future HUD guidance. Severe consequences should be anticipated for any property falling into either of these categories. These standards represent a transformative step in improving the quality, safety, and livability of affordable housing in the United States. By expanding inspection criteria to include health and safety, promoting livability and accessibility, and implementing a standardized scoring system, NSPIRE is raising the bar for affordable housing providers. Owners and agents need to get ahead of the curve by ensuring that their properties are maintained on a regular basis – with particular emphasis on the condition of the units.