[Federal Register Volume 88, Number 91 (Thursday, May 11, 2023)]
[Rules and Regulations]
[Pages 30442-30506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-09693]



[[Page 30441]]

Vol. 88

Thursday,

No. 91

May 11, 2023

Part III





Department of Housing and Urban Development





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24 CFR Parts 5, 92, 93, et al.





Economic Growth Regulatory Relief and Consumer Protection Act: 
Implementation of National Standards for the Physical Inspection of 
Real Estate (NSPIRE); Final Rule

  Federal Register / Vol. 88 , No. 91 / Thursday, May 11, 2023 / Rules 
and Regulations  

[[Page 30442]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 5, 92, 93, 200, 570, 574, 576, 578, 882, 884, 886, 
902, 965, 982, 983, and 985.

[Docket No. FR-6086-F-03]
RIN 2577-AD05


Economic Growth Regulatory Relief and Consumer Protection Act: 
Implementation of National Standards for the Physical Inspection of 
Real Estate (NSPIRE)

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, U.S. Department of Housing and Urban Development (HUD).

ACTION: Final rule.

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SUMMARY: This final rule establishes a new approach to defining and 
assessing housing quality: The National Standards for the Physical 
Inspection of Real Estate (NSPIRE). This rule is part of a broad 
revision of the way HUD-assisted housing is inspected and evaluated. 
The purpose of NSPIRE is to strengthen HUD's physical condition 
standards and improve HUD oversight through the alignment and 
consolidation of the inspection regulations used to evaluate HUD 
housing across multiple programs. This final rule also incorporates 
provisions of the Economic Growth and Recovery, Regulatory Relief and 
Consumer Protection Act that will reduce administrative burden on small 
rural public housing authorities (PHAs).

DATES: This final rule is effective July 1, 2023, except amendments to 
the following parts, which are effective October 1, 2023: 24 CFR part 
92 (instructions 4 through 7); 24 CFR part 93 (instructions 9 and 10); 
24 CFR part 200 (instructions 12 and 13); 24 CFR part 570 (instruction 
15); 24 CFR part 574 (instruction 17); 24 CFR part 576 (instruction 
19); 24 CFR part 578 (instruction 21); 24 CFR part 882 (instructions 23 
and 24); 24 CFR part 884 (instruction 26); 24 CFR part 886 
(instructions 29 through 31); 24 CFR part 982 (instructions 45 through 
55); 24 CFR part 983 (instructions 57 through 61); and 24 CFR part 985 
(instructions 62 through 65). For more information, see SUPPLEMENTARY 
INFORMATION.

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 202-708-1112 (this is not a 
toll-free number), [email protected]. 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: https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

SUPPLEMENTARY INFORMATION: 

Effective Dates

    This rule has two effective dates:
    1. Amendments to 24 CFR parts 5, 902, and 965 are effective on July 
1, 2023. These amendments implement the NSPIRE regulations at 24 CFR 
part 5, subpart G and affect the Public Housing regulations.
    2. Amendments to 24 CFR parts 92, 93, 200, 570, 574, 576, 578, 882, 
884, 886, 982, 983 and 985 are effective on October 1, 2023. These 
amendments affect the Multifamily Housing regulations, the Housing 
Choice Voucher regulations, the Project-Based Voucher regulations, 
Section 8 Moderate Rehabilitation regulations and the Community 
Planning and Development (CPD) programs such as HOME Investment 
Partnerships Program (HOME), the Housing Trust Fund (HTF), Housing 
Opportunities for Persons with AIDS (HOPWA), Emergency Solution Grants 
(ESG) and Continuum of Care (COC) regulations. Participants and owners 
subject to these regulations are subject to the Code of Federal 
Regulations as it exists on the publication date of this rule, and are 
not subject to the regulatory changes being made by this rule on July 
1, 2023, until October 1, 2023.

I. Background

    On January 13, 2021, HUD published the ``Economic Growth Regulatory 
Relief and Consumer Protection Act: Implementation of National 
Standards for the Physical Inspection of Real Estate (NSPIRE)'' 
proposed rule (``proposed rule'') in the Federal Register.\1\ In the 
NSPIRE proposed rule, HUD proposed to align and consolidate its 
inspection standards and procedures and incorporate provisions of the 
Economic Growth and Recovery, Regulatory Relief and Consumer Protection 
Act (Pub. L. 115-174) for all of HUD's programs. Specifically, HUD 
proposed to revise 24 CFR part 5 to become the focal point of 
consolidated standards, and proposed changes to other regulations to 
cross-reference to the new streamlined part 5 standards.
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    \1\ 86 FR 2582.
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    The proposed rule also sought to consolidate, update, and improve 
the Housing Quality Standards (HQS) and the Uniform Physical Condition 
Standards (UPCS) to prevent standards and procedures from becoming out 
of date. In addition, the rule proposed to implement the Economic 
Growth and Recovery, Regulatory Relief and Consumer Protection Act 
(``Economic Growth Act'') to implement an alternate performance 
indicator and rating system for the Public Housing Assessment System 
(PHAS) and Section 8 Management Assessment Program (SEMAP).
    HUD's proposed rule and this final rule were informed by HUD's 
NSPIRE Demonstration. On August 21, 2019, HUD established through 
notice \2\ the implementation of the NSPIRE demonstration to develop a 
new inspection model for HUD programs. Through the demonstration, HUD 
built updated standards, procedures, and scoring methodologies. The 
NSPIRE Standards and procedures for the demonstration were first 
published on HUD's website in August 2019 and were subject to and 
improved through stakeholder feedback and test inspections. The 
Demonstration will continue for enrolled properties until 
implementation of this rule for the relevant program, or as otherwise 
announced by notice.
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    \2\ ``Notice of Demonstration To Assess the National Standards 
for the Physical Inspection of Real Estate and Associated 
Protocols,'' 84 FR 43536.
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    For additional background, please see the proposed rule.

II. NSPIRE Final Rule and NSPIRE Notices

    Consistent with the proposed rule, this final rule will create a 
unified inspection protocol for three different overarching programs: 
programs for housing assisted under the U.S. Housing Act of 1937 other 
than section 8 of the Act (``public housing''), programs previously 
under the Housing Quality Standards regulations at 24 CFR 982.401 (HQS 
regulations), and programs previously covered under 24 CFR part 5, 
subpart G (``Multifamily housing''). CPD programs and regulations are 
included because these programs pointed to the HQS program regulations. 
This final rule maintains a regulatory framework that streamlines, 
consolidates, and aligns inspection standards over 14 sections of 
regulations for HUD's programs. This new framework for inspection 
focuses on inside the building, outside the building and

[[Page 30443]]

within the units of HUD housing and ensures that they are 
``functionally adequate, operable, and free of health and safety 
hazards.'' Because of the scope of changes to the inspection process, 
HUD is setting a different implementation date for HUD's programs to 
create as smooth a transition as possible.

A. Implementation Timeline

    This rule will be implemented in two phases. On July 1, 2023, 
Public Housing will transition to NSPIRE. On October 1, 2023, the 
Multifamily Housing programs, Housing Choice Voucher (``HCV'') and 
Project Based Voucher (``PBV'') programs, and the CPD programs included 
in this rulemaking will transition to NSPIRE.
    Public Housing regulations will be amended on July 1, 2023, and 
Public Housing program participants will be required to comply with 
this final rule and use the NSPIRE standards starting July 1, 2023. HUD 
will prioritize PHAs with a fiscal year end of June 30, 2023, to 
receive their next inspection under the updated regulations. Because 
the universe of Public Housing properties is smaller than those 
participating in Multifamily Housing programs, HUD is better able to 
prioritize and complete inspections of these properties first under 
NSPIRE, and then launch inspections in Multifamily Housing programs in 
October.
    The Housing Choice Voucher (HCV), Project Based Voucher (PBV), 
Section 8 Moderate Rehabilitation Program, HOME, HTF, HOPWA, ESG and 
CoC regulations will be amended on October 1, 2023, and program 
participants will be required to comply with this final rule and begin 
using the NSPIRE standards on October 1, 2023. These programs are 
unique because inspections are done by PHAs, program participants, and 
participating jurisdictions (PJs) and not by HUD. These entities will 
need additional time to update forms and implement technological 
solutions. Therefore, programs that follow HQS will continue to follow 
HQS and will not need to comply with these regulations until October 1, 
2023.
    The Multifamily Housing programs will also begin to use the NSPIRE 
standards starting on October 1, 2023. After Uniform Physical Condition 
Standards (UPCS) inspections were delayed due to the COVID-19 pandemic, 
HUD has committed to providing Multifamily Housing program participants 
one more UPCS inspection before the transition to NSPIRE. HUD intends 
to meet this goal by the end of the 2023 Federal fiscal year. 
Therefore, HUD will transition Multifamily Housing programs to NSPIRE 
on October 1, 2023. Part 5, subpart G, as it existed before this rule, 
provided at Sec.  5.703 for the physical condition standards for 
Multifamily Housing and authorized HUD at Sec.  5.705 to establish UPCS 
through notice. On July 1, 2023, when Public Housing transitions to 
NSPIRE, these regulations will be overwritten by the new part 5, 
subpart G. To enable Multifamily to continue using UPCS, HUD will delay 
the effective date for Multifamily Housing such that Multifamily 
Housing program participants are not subject to the new part 5, subpart 
G until October 1, 2023. Part 5, subpart G as it exists on the 
publication date of this rule, prior to the changes which will be made 
on July 1, 2023, will apply to Multifamily Housing until September 30, 
2023.
    Further transition information will be provided in three core 
``Subordinate Notices'' which will follow this final rule. These core 
Subordinate Notices are the NSPIRE Standards notice, the NSPIRE Scoring 
notice, and the NSPIRE Administrative notice. HUD will also issue 
additional notices on the NSPIRE Standards for the HOME, HTF, ESG, 
HOPWA, and CoC programs. PIH will issue additional Departmental notices 
to implement the Small Rural Assessment requirements under part 902, 
subpart H and part 985. The function of each of these notices is 
provided in more detail below. All updated Standards and Scoring 
methodologies will be published--as required by this rule--through a 
Federal Register notice at least once every 3 years with the 
opportunity for public comment prior to implementation.

B. NSPIRE Standards Subordinate Notice

    This rulemaking establishes at 24 CFR 5.705(a) that HUD will 
establish Standards through a subordinate Federal Register notice. HUD 
proposed standards through notice in the Federal Register with request 
for comments on June 17, 2022 (``Proposed NSPIRE Standards 
notice'').\3\ These proposed standards were developed in consideration 
of the NSPIRE Demonstration and feedback received in response to that 
demonstration. The notice sought comments on the proposed NSPIRE 
Standards and included thirteen specific questions for public input, 
including questions related to mold, safe drinking water, requirements 
for a permanent heating source, minimum temperature, electrical 
outlets, deficiency correction time frames, and pest infestation. The 
individual NSPIRE Standards, posted on HUD's website,\4\ provided 
detailed descriptions of housing components and hazards for inspection 
with descriptions of potential deficiencies and correction timeframes. 
The notice also proposed an update to the list of life-threatening 
conditions covered by the Housing Opportunity Through Modernization Act 
of 2016 (``HOTMA''). The comment period for the Proposed NSPIRE 
Standards notice closed on August 1, 2022. HUD will publish the final 
NSPIRE Standards notice before the effective date of this rule, which 
will consider feedback received in the NSPIRE proposed rule, the NSPIRE 
Demonstration, and the proposed NSPIRE Standards.
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    \3\ ``Request for Comments: National Standards for the Physical 
Inspection of Real Estate and Associated Protocols,'' 87 FR 36426.
    \4\ Available at: www.hud.gov/sites/dfiles/PIH/documents/6092-N-02nspire_propose_standards.pdf.
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C. NSPIRE Scoring and Administrative Subordinate Notices

    This rulemaking establishes at 24 CFR 5.705(b) that HUD will 
establish scoring methods through a Federal Register notice. The 
proposed NSPIRE Scoring notice was published in the Federal Register on 
March 28, 2023.\5\ It will be final and effective before HUD begins 
inspections under NSPIRE. The NSPIRE Scoring notice will outline the 
methodology for weighting the deficiencies found during inspections 
using the NSPIRE Standards notice and scoring those deficiencies for 
each program . It will discuss the gradations and severity levels of 
the new scoring system, including thresholds for potential enforcement 
action.
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    \5\ 88 FR 18268.
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    The NSPIRE Administrative notice will be published as a final 
notice shortly following this final rule. This notice will replace all 
UPCS guidance that HUD's Real Estate Assessment Center (REAC) 
previously issued including the Compilation Bulletin for RAPID 4.0, 
Version 3, Inspector Notices, and other web-based guidance on 
requesting appeals, exigent health and safety reporting, and other 
inspection process topics. This subordinate notice will outline the 
updated NSPIRE process for inspections, submitting evidence of 
deficiency correction, technical reviews, administrative referrals and 
other administrative requirements changing with the final NSPIRE rule. 
It will also include the process HUD will use to gather resident 
feedback on property conditions. In an additional notice, HUD will 
provide

[[Page 30444]]

guidance for PHAs on the new small rural assessment processes.

D. NSPIRE Implementation and PHAS Score Transition for Public Housing 
Authorities

    With the implementation of the NSPIRE rule, REAC will begin 
performing physical inspections using the NSPIRE Standards after the 
effective date of the rule for each program. Recognizing that there may 
be operational or system transition issues in the initial year of 
NSPIRE implementation, HUD is specifying in the regulation at Sec.  
5.705(c)(1) that an inspection ``shall be conducted no earlier than 6 
months before and no later than 6 months after the date marking the 
anniversary of the previous inspection'' for a period of one year after 
the effective date of this rule. After this transition period, the time 
frame will return to ``no earlier than 3 months before and no later 
than 3 months after the date marking the anniversary of the previous 
inspection'' or at a time period approved by HUD upon a PHA's or 
owner's good cause request.
    For PHAS scores issued after this rule is effective, REAC will use 
scores calculated as described in the subordinate NSPIRE Scoring notice 
and aggregate these scores on a unit-weighted basis as described in 
Sec.  902.25 to create the Physical Assessment Sub-system (PASS) 
indicator score. Additional information about NSPIRE and PHAS Score 
transition, including PHAs rated as Troubled, will be provided in the 
subordinate NSPIRE Administrative notice.

E. Other NSPIRE Notices

    HUD's Office of Community Planning and Development will issue 
separate notices before October 1, 2023, (``CPD NSPIRE notices'') to 
implement the rule for the individual programs, which generally do not 
adopt the methods in the three ``core'' Subordinate Notices discussed 
above, and provide guidance for how the NSPIRE Standards cover 
differing CPD program situations, such as homebuyer acquisition or 
where assistance is tied to a bedroom in shared housing. These notices 
will be published before the effective date of the rule. Also with this 
rule, HUD will issue a Departmental notice to provide guidance for the 
Small Rural PHAS and SEMAP scoring processes. At a later date, HUD will 
publish a third additional notice to implement a process for collecting 
and utilizing resident feedback as part of the inspection process.

III. Changes Made at the Final Rule Stage

    In response to public comments, and in further consideration of 
issues addressed at the proposed rule stage, HUD is publishing this 
final rule with the following changes from the proposed rule.

Section 5.703 National Standards for the Condition of HUD Housing

Affirmative Requirements at Sec.  5.703

    In the proposed rule, HUD requested comment on the addition of 
affirmative requirements for ground-fault circuit interrupter (GFCI) 
outlets, an arc-fault circuit interrupter (AFCI); heating, ventilation, 
and air conditioning (HVAC) related to a permanent heating source; 
guardrails; and interior lighting. The final rule includes requirements 
for GFCI outlets near a water source, a permanent heating source for 
certain climate zones, guardrails, and permanent lighting in some 
living areas. In some cases, these requirements only apply to habitable 
rooms of the unit. HUD defines a habitable room as it is typically 
defined in model codes: a room in a building for living, sleeping, 
eating, or cooking, but excluding bathrooms, toilet rooms, closets, 
hallways, storage or utility spaces, and similar areas. Additional 
detail on the affirmative requirements will be provided in the NSPIRE 
Standards and Administrative notices. HUD makes the following changes 
from the proposed rule to the NSPIRE affirmative requirements:
Application of Affirmative Requirements to Inside and Outside at Sec.  
5.703(b) and (c)
    In this final rule, HUD is clarifying that some of the affirmative 
requirements not only apply to ``Units'' but also apply to Inside and 
Outside requirements. This final rule applies the requirements for 
smoke detectors, carbon monoxide detectors, GFCI outlets, guardrails, 
and lighting to Inside, and applies the requirements for GFCI outlets 
and guardrails to Outside. HUD also added pipes to the non-exhaustive 
list of components that provide domestic water in Sec.  5.703(b).
Smoke Detector Requirement at Sec.  5.703(b)(1) and (d)(3)
    In the proposed rule, HUD proposed to require that properties 
follow the National Fire Protection Association Standard (NFPA) 72 or 
successor standards, consistent with existing statutory obligations. 
This final rule removes the reference to NFPA 72 and instead lists 
requirements consistent with NFPA 72. HUD also provides that following 
these requirements satisfies the specifications of NFPA 72. HUD also 
adds that properties must follow these standards and additional 
standards established by HUD through Federal Register notification. 
This clarifies that HUD may adjust its Standards to include additional 
requirements in the future, such as future added statutory 
requirements.
Safe Water Requirement at Sec.  5.703(d)(1)
    HUD is removing the requirement that water be ``potable'' from the 
proposed rule and instead requiring that water must be ``safe.'' After 
consideration of comments and further deliberation, HUD believes that 
these two words are, for the purposes of this rule, duplicative and it 
is not necessary to use both. HUD is also clarifying that this ``safe'' 
requirement applies to drinking water in the kitchen and bathroom and 
clarifies that the requirement that the unit have ``hot and cold'' 
running water applies in both the bathroom and the kitchen.
Sanitary Facility and Kitchen Area Requirements at Sec.  5.703(d)(2) & 
(d)(4)
    In the proposed rule, HUD requested comment on whether to define a 
``sanitary facility'' and ``kitchen area.'' After considering comments, 
HUD has included additional language in the regulations for both terms 
at the final rule stage; this new language serves the same function as 
the definition suggested in the proposed rule for comment. HUD is 
requiring that sanitary facilities (or bathrooms) include a sink, a 
bathtub or shower, and an interior flushable toilet. HUD is removing 
the requirement that the sanitary facility be ``adequate for personal 
hygiene and the disposal of human waste'' because listing these 
elements adequately covers this same requirement. HUD is also requiring 
that kitchens must include a sink, cooking appliance, refrigerator, 
food preparation area, and food storage area.
Removal of the Occupancy Requirement Related to Children of the 
Opposite Sex From Sec.  5.703(d)(5)
    In this final rule, HUD is removing the requirement at Sec.  
5.703(d)(5) for units assisted under HCV or PBV that children of 
opposite sex may not be required to occupy the same bedroom or living/
sleeping room. HUD views the restriction based on gender to be 
unnecessary and unrelated to physical conditions, and wanted to provide 
more flexibility to families and PHAs to determine the number of 
bedrooms needed as part of determining the payment standard. Removal of 
the term

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``opposite sex'' is also consistent with the January 20, 2021, 
Executive Order on ``Preventing and Combating Discrimination on the 
Basis of Gender Identity or Sexual Orientation.'' This language also 
avoids the implication that PHAs must inquire about gender identity to 
determine occupancy.
Addition of Carbon Monoxide Detection Requirement at Sec.  5.703(d)(6)
    Section 101, ``Carbon Monoxide Alarms or Detectors in Federally 
Assisted Housing'' of Title I of Division Q, Financial Services 
Provisions and Intellectual Property, of the Consolidated 
Appropriations Act, 2021, Public Law 116-260, 134 Stat. 2162 (2020) 
(``2021 Consolidated Appropriations Act'') included amendments to 
sections 3(a) and 8 of the United States Housing of 1937 (42 U.S.C. 
1437a(a) and 42 U.S.C. 1437f) (1937 Act), section 202(j) of the Housing 
Act of 1959 (12 U.S.C. 1701q(j)), and Section 811(j) and 856 of the 
Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 8013(j) 
and 42 U.S.C. 12905). These amendments, which took effect on December 
27, 2022, concern the installation of Carbon Monoxide alarms or 
detectors in public housing owned or operated by a PHA, dwelling units 
occupied by individuals with Housing Choice Vouchers, dwelling units 
assisted with project-based vouchers or project based rental 
assistance, dwelling units assisted under the 202 and 811 programs, and 
dwelling units assisted under the HOPWA program. In the proposed rule, 
HUD stated its intent to publish a separate proposed rule concerning 
the implementation of requirements to install carbon monoxide detectors 
in HUD-assisted and -insured Housing. HUD is still considering a 
proposed rule which would implement carbon monoxide detectors beyond 
what is now required by statute. In this rule, however, HUD has 
determined to make conforming changes so that the regulations of the 
programs covered by NSPIRE include the new statutory carbon monoxide 
detector requirement for each program. Because these conforming rule 
changes merely codify the new statutory requirements, HUD has 
determined that additional notice and public comment procedure is 
unnecessary.
    Additionally, HUD notes that the 2021 Consolidated Appropriations 
Act only adds carbon monoxide-related requirements to the HUD programs 
listed above and the USDA programs authorized by sections 514 and 515 
of the Housing Act of 1949. HUD programs such as HUD-insured housing 
not subject to an assistance contract and the ESG, CoC, HOME, and HTF 
programs are not subject to statutory requirements concerning carbon 
monoxide detection. HUD has made corresponding changes at the final 
rule stage in Sec. Sec.  92.251(b)(1)(viii), 93.301(b)(1)(viii), 
576.403(c), 578.75(b) to clarify that these units will not be subject 
to the new carbon monoxide requirements. HUD urges grantees, owners, 
developers, and project sponsors in these programs to take action for 
the safety of residents and reminds them that there may be additional 
property standard requirements under applicable State and local laws 
regarding carbon monoxide detection.
    Finally, HUD notes that this final rule only implements the 
statutory carbon monoxide detector requirement for programs covered 
under NSPIRE. However, programs not covered by NSPIRE are still subject 
to the statutory requirement where applicable. Specifically, the 
statutory requirement covers all of HOPWA, but NSPIRE only applies 
where HOPWA funds are used under Sec.  574.300(b)(3), (4), (5), and 
(8). HUD intends to modify the HOPWA regulations to reflect the 
existing statutory requirement in a future rulemaking related to HOPWA.

Other Changes to Sec.  5.703

Addition of Example Unit Components at Sec.  5.703(d)
    HUD is including balconies, carbon monoxide devices, and enclosed 
patio to the non-exhaustive list of components which may be included in 
a unit.
Addition of ``Structural Soundness'' and ``Extreme Temperature'' Health 
and Safety Concern Examples at Sec.  5.703(e)(1)
    HUD has added structural soundness to the non-exhaustive list of 
health and safety concerns at Sec.  5.703(e)(1) previously required 
under Sec.  576.403(c)(1).
    HUD has also added ``extreme temperature'' to the non-exhaustive 
list of health and safety concerns at Sec.  5.703(e)(1). HUD considers 
the failure to provide an adequate heat source to prevent extreme cold 
a deficiency as described in the NSPIRE Standards notice. By adding 
this language to the regulation and NSPIRE Standards, HUD further 
implements HOTMA Section 111, which required HUD to publish model 
guidelines for minimum heating requirements for public housing. As part 
of the consolidation under NSPIRE, HUD is removing Sec.  982.401(e) 
regarding the thermal environment and making this addition here. HUD 
has added language from Sec.  982.401(e) prohibiting the indoor use of 
unvented fuel-burning space heaters in Sec.  5.703(b) and (d).
Addition of ``Carbon Monoxide'' as a State and Local Requirement at 
Sec.  5.703(f)(1)
    At this final rule stage, HUD is adding ``carbon monoxide'' as an 
example in its non-exhaustive list of examples of State or local 
requirements that are not superseded by these regulations. This change 
has no substantive effect.

Section 5.705 Inspection Requirements

Inspection Standards Notice Clarification at Sec.  5.705(a)(1)

    In the final rule, HUD clarifies that in addition to the standards 
and procedures for identifying safe, habitable housing being set out by 
the Secretary and published in the Federal Register, HUD will also 
provide the scoring and ranking for HUD housing by publication in the 
Federal Register. HUD has also added language identifying the different 
levels of deficiency which will be used in the NSPIRE Standards notice.

Correction of Typographical Error at Sec.  5.705(b)(2)

    In the final rule, HUD corrects a citation in the proposed Sec.  
5.705(b)(2) which cited to ``Sec.  982.352(b)(iv)'' but should have 
cited to ``Sec.  982.352(b)(1)(iv).'' HUD instead cites to parts 982 
and 983 generally.

Timing of Inspections at Sec.  5.705(c)(1) and (c)(2)

    HUD has added language to Sec.  5.705(c)(1) clarifying that HUD may 
approve extension requests for good cause as determined by HUD. In 
HUD's experience, inspections occasionally need to be rescheduled due 
to events outside the owner's or PHA's control or for other reasons 
which would cause the extension request to be justified. HUD has also 
added language making clear that HUD may extend inspection deadlines 
without the PHA or owner's request, to account for situations in which 
HUD decides to grant a general extension, such as in an emergency 
situation.
    HUD is also removing from paragraph (c)(1) the restriction that 
inspections must be done in the calendar year in which they are due. 
HUD does not find that this restriction is necessary or important to 
ensuring timely inspections, nor does it serve another administrative 
purpose.
    In paragraph (c)(2), HUD proposed a default annual inspection for 
Multifamily and project-based housing,

[[Page 30446]]

with the potential for alternative timelines for inspection, such that 
a property or project may be inspected on a timeline between two and 
five years. After considering comments and reviewing inspections, HUD 
believes that such an extended timeline as four or five years would, in 
most cases, be too long to adequately review HUD-assisted housing. HUD 
believes that the current ``3-2-1'' approach utilized in Multifamily 
and Public Housing properly allocates HUD inspection resources to 
ensure the regular inspection of all properties while prioritizing 
those properties which require additional oversight. Properties of PHAs 
that meet the definition of Small Rural under Sec.  902.101 will be 
inspected every three years, as described in Sec.  902.103(b).

Addition of Citation Regarding Small PHAs at Sec.  5.705(c)

    In Sec.  5.705(c)(4), HUD is adding a citation to Sec.  902.13(a) 
to clarify that small PHAs shall continue to be inspected in accordance 
with the relevant regulation, and in paragraph (c)(8), HUD is adding a 
citation to Sec.  882.516 to clarify that Section 8 Moderate 
Rehabilitation housing shall continue to be inspected under its own 
regulation.

Tenant Involvement in Inspections at Sec.  5.705(f)

    This final rule adds Sec.  5.705(f) stating that HUD will allow, 
through notice, for tenant involvement in the inspection process of 
Public Housing and Multifamily housing programs by making 
recommendations regarding particular units to be inspected. Any units 
inspected in addition to the standard unit sample will not be part of 
the property's score, but the owner or PHA will be required to repair 
any identified deficiencies. HUD has made this addition after 
consideration of public comments regarding tenant involvement and the 
aim to balance the need for tenant input with the procedural integrity 
of the inspection process.

Section 5.707 Uniform Self-Inspection Requirement and Report

    HUD is revising Sec.  5.707 to remove the electronic reporting 
requirement of self-inspections, and is instead requiring that the 
owner or PHA maintain records related to the self-inspection for three 
years. HUD agrees with commenters who suggested a universal reporting 
requirement for self-inspection results would pose an additional 
administrative burden. Additionally, HUD has removed language from 
Sec.  5.707 that offered an additional announcement and opportunity for 
public comment in the Federal Register. This language was removed 
because HUD will not use the results of self-inspections as proposed to 
determine risk or the frequency of REAC inspections. The results of 
self-inspections will also not affect a property's score. Because the 
final version of the self-inspection requirement largely reflects 
current requirements for Public Housing and Multifamily programs and 
properties that score under 60, there is no need for additional 
comment. The process to perform self-inspections will be in the NSPIRE 
Administrative notice, which will be published without comment. For 
properties scoring below 60, HUD believes that this information would 
be uniquely useful as a tool to ensure all deficiencies are identified 
and corrected. HUD is also adding language to allow properties the 
option to perform the self-inspection in conjunction with the follow up 
inspection at Sec.  5.711(c)(2). HUD has added additional language to 
Sec.  5.711(c)(2) to clarify the post-inspection survey process and the 
self-inspection requirement related to the inspection score.

Section 5.709 Administrative Process for Defining and Revising 
Inspection Criteria

    HUD is amending Sec.  5.709 at the final rule stage to make two 
clarifying changes. First, HUD is distinguishing between the Standards 
notice and the Scoring notice. In the proposed rule, both were 
discussed as though they would be one notice. However, Standards and 
Scoring represent two distinct elements of the assessment of HUD 
housing, and HUD is publishing separate notices. Both notices are 
subject to the same procedures.
    Second, HUD is clarifying, consistent with the proposed rule's 
discussion of the matter, that HUD will publish its Standards and 
Scoring notices ``at least'' once every three years, to make clear that 
HUD may publish its notices before it has been three years, at HUD's 
discretion.

Section 5.711 Scoring, Addressing, and Appealing Findings

Change to the Name of Sec.  5.711

    HUD is renaming Sec.  5.711 to more accurately reflect the purpose 
of this section.

Changes to Deficiency Terminology at Sec.  5.711(c)

    HUD is revising the different levels of deficiency to Life-
Threatening (LT), Severe, Moderate, and Low. This change is reflected 
in the proposed NSPIRE Standards notice and HUD is also amending Sec.  
5.709(a)(2)(i) for consistency with this change. As discussed further 
in the NSPIRE Standards and Scoring notices, Low deficiencies are 
deficiencies which are critical to habitability but do not present a 
substantive health or safety risk to a resident. HUD is requiring that 
Low deficiencies be repaired within sixty days unless specified 
otherwise in the NSPIRE Standards.

Meaning of Correction at Sec.  5.711(c)(1)

    HUD also amends Sec.  5.711(c)(1) to require that LT and Severe 
items must be ``corrected'' instead of mitigated. In the context of 
Sec.  5.711, ``corrected'' means the owner or PHA has resolved or 
sufficiently addressed the deficiency in a manner that it no longer 
poses a severe health or safety risk to residents. A correction could 
include controlling or blocking access to the hazard by performing a 
temporary relocation of the resident while repairs are made.\6\ HUD 
recognizes that to permanently repair some deficiencies, the PHA or 
owner may need additional time for a licensed professional, or supplies 
that may not be available in a 24-hour timeframe. In some cases, for 
lead hazard control work, exterior paint stabilization can be delayed 
due to season conditions, or the resident family may need to be 
relocated temporarily while the work is completed, and HUD can approve 
extensions based on good cause.\7\ Additional information will be 
provided in the subordinate NSPIRE Standards and Administrative 
notices. For LT and Severe defects, HUD expects that permanent repairs 
will be completed expeditiously, and that evidence of the repair will 
be provided to HUD as described in Sec.  5.711(c)(2). HUD has also 
removed the word ``contiguous'' from paragraph (c)(1) as unnecessary. 
In practice, PHAs, owners and HUD all understand that the 24-hour 
timeframe commences immediately upon notification and does not pause 
for non-working hours, including the weekend.
---------------------------------------------------------------------------

    \6\ HUD notes that correction of a LT deficiency has a specific 
meaning under HOTMA. Sec.  5.711 does not apply to HCV or PBV, and 
therefore this definition of ``corrected'' does not apply to HCV or 
PBV.
    \7\ Relocation for lead hazard control work may be required 
under 24 CFR 35.1345 and is subject to the requirements of the 
Uniform Relocation Assistance and Real Property Acquisition Policies 
Act of 1970, as amended.
---------------------------------------------------------------------------

Timeline for Correction at Sec.  5.711(c)(1)

    HUD also amends Sec.  5.711(c)(1) to clarify the timeline for the 
correction of health or safety deficiencies. The

[[Page 30447]]

timeline for correcting LT and Severe health or safety deficiencies 
remains 24 hours after the inspection. The timeline for repairing 
Moderate and Low deficiencies has been revised from ``expeditiously'' 
to ``within 30 days,'' consistent with HUD's intent as stated in the 
preamble of the Proposed Rule. HUD can authorize permanent repair 
timelines that exceed 30 days if the deficiency cannot be permanently 
repaired in 30 days.
    The NSPIRE Standards provide HUD's expectations regarding the 
timeline for repair of each type of deficiency. HUD will not change the 
requirement that LT health and safety deficiencies must be corrected 
within 24 hours. Under the NSPIRE Standards, for the Public Housing and 
Multifamily housing programs, Severe will also require correction in 24 
hours.

Post-Report Inspection at Sec.  5.711(c)(2)

    HUD is removing the requirement that owners or PHAs provide 
electronic evidence of correction of Moderate deficiencies as HUD 
believes, after considering comments, the burden both of reporting and 
processing this evidence would outweigh the benefit. Paragraph (c)(1) 
continues to require evidence that Severe deficiencies have been 
corrected be provided to HUD within established timeframes. HUD is also 
adding a requirement that properties which score below a 60 must 
complete a full self-inspection, and not the limited self-inspection 
described in this regulation for identified deficiencies in units and 
areas of the property not inspected by REAC. This addition is necessary 
to ensure that owners and PHAs survey 100 percent of their properties 
when they have poor physical performance (i.e., scores below 60) in 
order to identify additional health and safety defects in the units 
that were not part of the inspection sample. PHAs and owners that 
conduct a full inspection after the HUD inspection can consider this 
inspection to satisfy the requirements of Sec.  5.707 for that year.

Start of the 45-Day Deadline To File a Request for Technical Review at 
Sec.  5.711(d)(1)

    In response to a public comment, HUD is revising Sec.  5.711(d)(1) 
to clarify that the 45-day deadline to file a request for a technical 
review begins on the day the inspection report is provided to the owner 
or PHA.

Basis for Technical Review at Sec.  5.711(d)(4)

    Based on comments received, HUD revised Sec.  5.711(d)(4) for 
clarity and renumbered the three types of material errors 
appropriately.
    HUD is also adding in paragraph (d)(4) the three qualifiers for 
requesting a database adjustment previously at 24 CFR 902.24. 
Commenters noted this was inadvertently removed, especially the 
exclusion of adjustments for modernization work in progress. At this 
final rule, HUD is combining these three qualifiers for adjustment with 
the three bases for technical review. These three qualifiers will have 
the same appeal and review process as the technical review process for 
errors. Given these revisions, HUD is removing paragraph (c)(3) and 
removing part of paragraph (e) which HUD believes is repetitive with 
revised paragraphs (d) and (d)(4).
    HUD also removed the term ``year built'' as an item not scored 
under Sec.  5.711(d)(4)(i), since a visual lead-based paint evaluation 
is now part of the NSPIRE inspection, and the results of this 
evaluation will be scored.

Posting on the Availability of Materials at Sec.  5.711(h)(3)

    HUD has revised this section to clarify that the owner or PHA must 
post a notice to residents on the date of submission to the owner of 
the inspection score for the property in which the residents reside. 
The notice must advise the residents of the availability of the 
inspection materials described in 24 CFR 5.711. HUD is also specifying 
that the notice must be translated into other languages if necessary to 
provide meaningful access for limited English proficient (LEP) 
individuals, consistent with HUD's LEP guidance and Title VI.\8\
---------------------------------------------------------------------------

    \8\ For more information on HUD LEP and Title VI guidance, see 
``Final Guidance to Federal Financial Assistance Recipients 
Regarding Title VI Prohibition Against National Origin 
Discrimination Affecting Limited English Proficient Persons'', 72 FR 
2731 (Jan. 22, 2007).
---------------------------------------------------------------------------

Departmental Enforcement Center (DEC) Evaluation at Sec.  5.711(i)

    HUD is revising the introductory text of Sec.  5.711(i) to add that 
HUD will also take administrative review action against properties with 
two successive scores under 60. HUD also clarifies that while a score 
of 30 points or less automatically leads to DEC referral, referral is 
not automatic for the two successive scores under 60. Regarding the two 
successive scores under 60, HUD recognizes that there may be mitigating 
circumstances and HUD will take other review actions before HUD decides 
whether DEC referral is necessary. As proposed, this regulation covered 
both public and Multifamily housing programs, and HUD has retained this 
in the final rule and clarified applicability. For public housing 
properties, HUD recognizes that there are situations where the 
responsible PHA's PHAS score may have already triggered other forms of 
administrative review, rendering DEC review repetitive. HUD has also 
made other minor, technical changes to this paragraph.

No Limitation on Existing Enforcement Authority at Sec.  5.711(j)

    HUD has added the term ``grant agreement'' as an example of a 
potential authorizing authority.

Sections Sec.  92.251 and 93.301 Property Standards

    HUD has removed the clause, ``pursuant to 24 CFR 5.705,'' from 
Sec. Sec.  92.251(b)(1)(viii), 92.251(c)(3), 92.251(f)(1)(i), 
93.301(b)(1)(viii), 93.301(c)(3), and 93.301(e)(1)(i) because the 
requirements in 24 CFR 5.705 through 5.713 do not apply to HOME 
participating jurisdictions (PJs) under 24 CFR part 92 or HTF grantees 
under 24 CFR part 93. HUD included the clause in the proposed rule in 
these sections of 24 CFR part 92 and 24 CFR part 93 only to refer to 
the part in Sec.  5.705 describing inspection standards and procedures 
that would be published in the Federal Register. However, to avoid 
further confusion, HUD is removing the clause. HUD will publish the 
specific deficiencies that must be addressed by HOME PJs and HTF 
grantees and explain how the requirements in 24 CFR 5.703 apply to PJs 
and HTF grantees in a standards document published in the Federal 
Register. This standards document for HOME and HTF will be separate 
from, although similar to, the NSPIRE Standards notice and apply only 
to HOME and HTF.
    HUD is also making changes to these sections to clarify that 
``decent, safe, sanitary, and in good repair'' means compliance with 
Sec.  5.703 and deleting ``as referenced in Sec.  5.703'' because Sec.  
5.703 does not use this term.
    HUD is also making clarifying changes that the affirmative 
requirements at Sec.  5.703 apply to single-room occupancy (``SRO'') 
housing where the housing contains the room or facility referenced in 
the affirmative requirements. This is necessary, for instance, where 
the SRO does not contain its own restroom and therefore does not need 
to meet affirmative requirements related to restrooms.
    HUD is also revising Sec. Sec.  92.251(f)(1) and 93.301(e)(1) to 
clarify that any property standards established by a participating 
jurisdiction must ``require'' instead of ``ensure'' that the

[[Page 30448]]

owners maintain the housing as decent, safe, sanitary, and in good 
repair. HUD believes that these two words, in this context, have the 
same meaning, but has made the change to make the requirement clear.

Sections 92.504 and 93.404 Regarding Inspectable Areas

    HUD has revised the language in Sec.  92.504(d)(1)(ii)(D) and Sec.  
93.404(d)(2)(v) to describe ``inspectable areas for each building 
housing HOME-assisted units.'' The regulation previously required that 
for HOME projects with one-to-four HOME-assisted units, the 
participating jurisdiction must inspect ``100 percent of the HOME-
assisted units'' and 100 percent of the ``inspectable items (site, 
building exterior, building systems, and common areas) for each 
building housing HOME-assisted units.'' However, the parenthetical 
described the inspectable areas (e.g., site, building exterior, 
building systems, and common areas) within a HOME project and not 
``inspectable items.'' In this final rule, HUD is correcting the 
language to require that when projects of one-to-four units are being 
inspected by the participating jurisdiction or HTF grantee, all of the 
units and 100 percent of the inspectable areas for each building must 
be inspected by the PJ or HTF grantee.

Section 570.208 Criteria for National Objectives

    This final rule also updates an outdated citation in Sec.  
570.208(b)(1)(iv) to create a standard for determining whether 
Community Development Block Grant (CDBG) funds were used to 
rehabilitate a substandard residential building. Section 
570.208(b)(1)(iv) describes whether an assisted activity is considered 
to have met the public benefit standard for an activity to address slum 
or blight on an area basis. One of the criteria for determining whether 
a CDBG-assisted activity qualifies as an area benefit standard is that 
the assisted activity must eliminate substandard housing, which is 
housing that would also fail to meet the housing quality standards for 
the Section 8 Housing Assistance Payments Program--Existing Housing (24 
CFR 882.109).
    On April 30, 1998, the final rule entitled ``Section 8 Certificate 
and Voucher Programs Conforming Rule'' removed and reserved 24 CFR 
882.109 as part of comprehensive rulemaking where HUD revised 24 CFR 
part 882 to move requirements applying to the Section 8 voucher and 
certificate programs into 24 CFR part 982 and 983.\9\ Therefore, this 
citation is out of date. This final rule updates the citation in Sec.  
570.208(b)(1)(iv) from 24 CFR 882.109 to 24 CFR 5.703. This change is 
technical in nature, and HUD believes that this is an appropriate 
technical correction to incorporate into this final rule.
---------------------------------------------------------------------------

    \9\ 63 FR 23826 at 23854.
---------------------------------------------------------------------------

Section 574.310 General Standards for Eligible Housing Activities

    At the final rule stage, HUD is removing certain housing covered 
under HOPWA from applicability from NSPIRE. Specifically, HUD is 
removing from Sec.  574.310(b) NSPIRE's applicability to housing for 
which HOPWA funds are used under permanent housing placement to pay an 
eligible person's security deposit, utility hookup and processing 
costs, or move in costs, except rental application and credit check 
fees (Sec.  574.300(b)(7)). HUD has decided to no longer include stand-
alone permanent housing placement (Sec.  574.300(b)(7)) due to the 
administrative burden it would place on HOPWA housing assistance 
providers for these one-time costs. Many HOPWA grantees utilize 
permanent housing placement in combination with the other permanent 
housing activities that will be subject to the HUD housing standards 
under the NSPIRE rule.

Section 576.403 Shelter and Housing Standards

    For clarity and consistency, HUD is revising the organizational 
structure of the proposed Sec.  576.403 consistent with the format of 
Sec.  574.310(b)(2). HUD is also clarifying in Sec.  576.403(c)(2) that 
the exemption from requiring self-inspection prior to move in for the 
first thirty days does not exempt the requirement under part 35 to 
inspect for lead-based paint.

Part 880--Section 8 Housing Assistance Payments Program for New 
Construction

    In the proposed rule, HUD proposed to amend Sec.  880.612 to 
require that contract administrators inspect projects to determine 
compliance with part 5, subpart G. Since the proposed rule was 
published, Sec.  880.612 was modified by HUD's ``Streamlining 
Management and Occupancy Reviews for Section 8 Housing Assistance 
Programs'' rule.\10\ Because of this change, HUD is now choosing not to 
amend Sec.  880.612. Part 880 is already made subject to part 5, 
subpart G through Sec.  880.104(d), which states that ``the provisions 
of 24 CFR part 5 apply to all projects [under this part.]'' Therefore, 
no substantive change is made by the decision not to amend Sec.  
880.612.
---------------------------------------------------------------------------

    \10\ 87 FR 37990 (June 27, 2022).
---------------------------------------------------------------------------

Section 884.217, 886.123, 886.323 Maintenance, Operation, and 
Inspections

    HUD is making a technical edit to Sec. Sec.  884.217(b), 
886.123(b), and 886.323(c). The previous regulation required the owner 
and family to certify before move-in that the unit had been inspected 
by both parties and the unit was decent, safe, and sanitary. The 
proposed rule, consistent with other changes, proposed changing 
``decent, safe, and sanitary'' to read ``compliant with part 5, subpart 
G.'' HUD does not intend to require that a family is familiar with 
HUD's housing requirements to certify compliance. Therefore, for 
clarity, HUD has revised the regulation to require that only the owner 
must certify compliance with part 5, subpart G. Both parties must still 
certify that they have each inspected the unit. Families are still 
entitled and encouraged to identify any deficiencies they believe may 
exist and, where an owner fails to make repairs, report those 
deficiencies to HUD.

Section 902.3 Definitions

    At the final rule stage, HUD is removing the definition of 
``Subarea'' from Sec.  902.3. As discussed further in HUD's proposed 
Scoring notice, HUD is not using ``Subareas'' in NSPIRE. HUD is also 
making a technical revision to the definition of ``Inspectable item'' 
to remove the reference to the ``Item Weights and Criticality Levels 
document'', which no longer exists (as discussed in the proposed rule) 
under NSPIRE.

Section 902.13 Frequency of PHAS Assessments

    The proposed rule removed from Sec.  902.13(b)(2) language relating 
to inspection frequency under PHAS and replaced it with a citation to 
Sec.  5.705(c). Incidentally, this change removed language clarifying 
that, for properties with a physical inspection score at or above 80--
i.e., properties scored less than annually--the most recent physical 
inspection would be used in calculating the overall PHAS physical 
condition indicator score for a given fiscal year.
    At this final rule stage, HUD has revised Sec.  902.13(b)(2) to 
clarify that HUD will use the most recent physical inspection score for 
all properties, regardless of inspection frequency, in calculating the 
PHAS physical condition indicator score. Section 5.705(c), which 
provides the requirements for the timing of

[[Page 30449]]

inspections, does not tie inspections to a particular fiscal year. 
Therefore, this revision makes clear that an inspection does not have 
to occur during the PHA's assessed fiscal year to be included in that 
fiscal year's PHAS score Troubled PHAs will continue to be assessed 
annually as previously required by Sec.  902.13(b)(3).
    Additionally, this final rule adds language to Sec.  902.13(b)(2) 
regarding the transition from UPCS-based physical condition indicator 
scores to NSPIRE-based scores. For simplicity, and to prevent technical 
issues related to calculating scores using both the old UPCS system and 
the new NSPIRE system, HUD will not provide a PHAS physical condition 
indicator score that uses both UPCS scores and NSPIRE scores in its 
calculation. Instead, starting July 1, 2023, PHAs will keep their most 
recent physical condition indicator score until every public housing 
property associated with the PHA has been inspected under NSPIRE. After 
every property under a PHA has received an NSPIRE inspection, the PHA 
will receive a new physical condition indicator score which will 
exclusively use NSPIRE inspections in its calculation. After this 
transition period, scores will be calculated using the normal method 
laid out in Sec.  902.13(b)(2). This exception does not apply to small 
PHAs under Sec.  902.13(a) or to small rural PHAs under part 902, 
subpart H. These PHAs have a relatively small number of buildings 
compared to PHAs covered by Sec.  902.13(b)(2) and inspections of these 
buildings are usually more coordinated in a specific period of time. 
Therefore, while this exception does not apply to these PHAs, HUD 
intends to ensure that all properties under small and small rural PHAs 
receive an NSPIRE inspection before calculating a PHA's new physical 
condition indicator score.

Section 902.103 Public Housing Assessment of Small Rural PHAs

    HUD is revising Sec.  902.103(a) to add one additional point for 
physical condition and neighborhood environment to better align the 
small rural PHAS regulation with the ordinary PHAS assessment. This 
additional consideration ensures consistency with 42 U.S.C. 
1437d(j)(1), which acknowledges the differences in the difficulty of 
managing individual projects that result from their physical condition 
and their neighborhood environment. HUD is also revising the 
parenthetical examples in paragraphs (c)(1) and (2) to only provide one 
example to avoid implying that the list of examples is exhaustive.

Section 902.107 Withholding, Denying, and Rescinding Troubled 
Designation

    The final rule includes Conciliation Agreements as a type of 
special agreement with HUD in Sec.  902.107(a)(1) because a Voluntary 
Compliance Agreement refers to agreements under Section 504, Title VI, 
and the ADA, whereas Conciliation Agreement refers to agreements under 
the Fair Housing Act.

Section 983.101 Housing Quality Standards

    In the proposed rule, HUD proposed to replace all of Sec.  983.101 
with a citation to Sec.  5.703. After further consideration, HUD has 
decided, for clarity, to keep the entirety of Sec.  983.101 in place, 
and to revise paragraph (a) to cite to Sec.  5.703. HUD also makes 
minor conforming edits to paragraphs (b) and (c).

Section 985.205 Determination of Assessment Rating

    HUD has revised the proposed Sec.  985.205(a)(1)(i) at the final 
rule stage to add that a small rural PHA will be judged based on the 
last two years of HCV budget authority data. HUD has made this change 
because, for some PHAs, the sample size would be too small to rely on 
one year only as an accurate picture of the PHA's performance. The 
increased review period will improve a PHA's ability to achieve 98 
percent in related indicators.

Conforming Changes

    HUD makes the following conforming changes which do not impose or 
change substantive requirements.

Terminology in Part 5

    In the proposed rule, in certain places HUD inadvertently used the 
term ``owner'' when the correct term should have been ``owner or PHA.'' 
There are also instances in the proposed rule where HUD used the term 
``public housing'' when the correct term should have been ``HUD 
housing'', which includes all the programs listed in Sec.  5.701(a). 
HUD has corrected the terminology, where appropriate, in this final 
rule.

Sections 884.217 and 886.123

    HUD is also making minor changes to the proposed Sec. Sec.  
884.217(c) and 886.123(c). HUD is removing language regarding the 
sample of units to be inspected and removing language regarding the 
frequency of inspections to ensure that these paragraphs are consistent 
with each other, and consistent in applying part 5, subpart G.

Part 965, Subpart I--Fire Safety

    This final rule removes part 965, subpart I regarding fire safety. 
This subpart applied fire safety regulations to public housing. The 
NSPIRE rule applies these same requirements to public housing, 
rendering this subpart redundant.

Sections 982.402 and 982.618

    This final rule updates part 982 to remove citations to paragraphs 
in Sec.  982.401 to reflect the update to Sec.  982.401.

Part 982, Subpart M--Special Housing Types

    This final rule amends 24 CFR part 982, subpart M, which lays out 
alternative and additional requirements to the Housing Quality 
Standards. This final rule makes no substantive changes to subpart M, 
but only updates and removes citations and references to the Housing 
Quality Standards consistent with the changes proposed and now made. 
This is consistent with Sec.  5.703(h) of both the proposed and final 
rule, which states that special housing types under part 982, subpart M 
are subject to different and additional requirements.

Part 983--Project-Based Voucher (PBV) Program

    This final rule amends Sec.  983.2(c)(4) to remove the citation to 
``Sec.  982.401(j),'' which was removed in both the proposed and final 
rule. This does not change the lead-based paint obligations which apply 
to the part 983, as discussed at Sec.  983.4.

IV. Public Comments

General Support Comments

    Several commenters expressed general support for the changes in the 
proposed rule. A commenter stated that the rule would advance 
affordable housing. Another commenter anticipated a responsive real-
life process to effect improvement in housing standards. Another 
commenter stated that the proposed rule would be an avenue for managing 
the workload and incentivizing properties that perform well, and also 
as a way for HUD to manage its own backlog of inspections. A commenter 
stated that there are many communities that do not enforce code 
regulations but having all agencies on the same platform would help 
local officials understand what is needed. One commenter supported the 
decreased subjectivity and increased accuracy of the proposed rule to 
achieve positive outcomes. Commenters also supported HUD's NSPIRE 
demonstration.

[[Page 30450]]

    HUD Response: HUD appreciates this input and support for the 
changes in the rule. HUD agrees that having focused, objective, 
accurate and up to date regulations, processes, and standards can help 
achieve positive outcomes for millions of families while at the same 
time improving the way HUD operates. In this final rule, HUD has 
largely maintained the same framework as in the proposed rule.

Additional General Support Comments

    Commenters expressed support for HUD's dedication to seeking 
stakeholder feedback. One commenter supported HUD engaging with the 
public to address the industry's difficulties with existing 
inflexibility on technical, mechanical, and engineering issues that 
have limited impact on the safety and habitability of existing 
structures but absorb a disproportionate amount of time and difficulty 
on sites. Another commenter stated that HUD has made clear that equity 
and transparency are key goals for this rule. One commenter noted that, 
while it is important that HUD lays out an expansive framework at the 
Federal level, it will be important that HUD works frequently with 
public authorities as they facilitate this transition to promote 
efficiency while limiting administrative burden when possible. A 
commenter urged HUD to expand outreach to include residents, State and 
local code enforcement agencies, legal service attorneys, housing 
advocates, public health advocates, and environmental justice 
advocates, to make enforcement effective and efficient.
    HUD Response: HUD thanks commenters for their input on this topic. 
HUD continues to improve outreach efforts and obtain feedback from 
stakeholders and the general public. HUD agrees that equity and 
transparency are key considerations in this rule. HUD has retained the 
requirement at Sec.  5.709(a)(1) to regularly revisit the requirements 
through public comment, allowing all stakeholders an opportunity to be 
heard. HUD also believes outreach efforts should include residents, 
State and local code enforcement agencies, and other housing 
stakeholders and advocates and continues to seek their feedback through 
this rulemaking process. The proposed NSPIRE Standards notice was 
posted for comment on June 17, 2022, for 45 days for public comment. 
HUD considers these comments important in finalizing the Standards 
notice. To promote feedback and encourage transparency, HUD also 
published information on the NSPIRE demonstration effort on its website 
and sought feedback from participants through the demonstration.
    Residents of HUD-assisted housing were encouraged to comment as 
members of public, but also through other available opportunities for 
participation. In public housing, residents can participate in resident 
advisory councils and attend regular meetings held by their Board of 
Commissioners. Board members are typically appointed by elected 
officials and include at least one resident member. All members of the 
public, including legal service attorneys and housing and public health 
advocates, can report housing standard violations or other concerns to 
HUD offices. A list of contacts for HUD's local offices can be found at 
https://www.hud.gov/local.

Economic Growth and Recovery Act

Question for Comment #1: Standards for Small Rural Section 8 Projects 
and PHA Public Housing Projects

    Commenters recommended that HUD follow Congress's intent to provide 
less burdensome regulations for small PHA properties. One commenter 
supported HUD's proposal to align standards for small rural PHAs. 
Another commenter supported taking an expansive view and defining 
``standards . . . for the acceptable condition of public housing 
projects'' to mean the entire NSPIRE model. A commenter also 
recommended HUD provide more technical assistance options for small 
rural PHAs. One commenter suggested the same standards should apply to 
all projects to ensure fair and equitable living conditions across 
PHAs.
    A commenter stated that Housing Quality Standards (HQS) inspections 
for Section 8 properties were more consistent and objective than the 
Uniform Performance Condition Standards (UPCS) inspection protocol used 
for their public housing properties, and therefore small rural agencies 
should be allowed to use the HQS protocol to comply with inspection 
requirements. This commenter recommended that if HUD determines that 
maintaining HQS inspection protocols for small rural agencies is 
infeasible, then HUD should allow public housing units at small rural 
agencies to be inspected similar to Section 8 properties.
    HUD Response: Through this rule, HUD is adopting the statutory 
requirement for specific relief for small rural PHAs but requires that 
properties of these PHAs will be assessed using the NSPIRE standards 
for physical conditions in both the Public Housing and HCV programs. 
The changes will apply to PHAs as described in 24 CFR part 902, subpart 
H and 24 CFR part 985, subpart D. HUD declines to implement the 
recommendation to utilize Housing Quality Standards (HQS) for small 
rural PHAs. One of HUD's objectives is to align standards across 
numerous housing portfolios, and with this rule the HQS regulations 
incorporate the NSPIRE standards and refer to Sec.  5.703. HUD believes 
that the NSPIRE standards provide more consistent and objective 
criteria with which to evaluate the safety and habitability of HUD-
assisted housing. Residents that live in units managed by small rural 
PHAs should be provided the same level of safety and habitability as 
residents of other 572 public or HUD-assisted housing.
    As proposed and now made final, HUD will make the initial 
determination of PHAs that qualify as small rural as defined in Sec.  
902.101 of this title no later than 120 days after the effective date 
of the final rule for Public Housing, or July 30, 2023. Additional 
deregulation efforts for other small PHAs are outside the purview of 
this rule but could occur through future rulemaking including updates 
to the Public Housing Assessment System (PHAS). Relief under this rule 
is provided in 24 CFR part 985, subpart D and a new subpart H under the 
current 24 CFR part 902. Section 902.103(b) includes a three-year cycle 
for overall scoring based on physical conditions for non-Troubled small 
rural PHAs.
    HUD agrees with the need to align standards for small rural PHAs 
for Public Housing and Section 8 properties with other PHAs, and this 
rule provides the framework for this alignment to the NSPIRE standards. 
The NSPIRE standards were proposed for comment on June 17, 2022, and 
final standards will be published before this rule's effective date. 
Additional implementing information for the new standard, including the 
process for PHAS rule and SEMAP assessments, will be provided through a 
Departmental notice. HUD plans to provide more technical assistance for 
small rural PHAs with the administrative notice.

Section 5.701 Applicability

    Commenters stated that the proposed rule should be broad in scope. 
Two commenters suggested expanding applicability to include tax credit 
communities and Section 232 properties. Another commenter welcomed 
HUD's efforts to codify uniform standards across HUD-assisted housing, 
noting that establishing uniformity will help empower residents to 
navigate different HUD assisted

[[Page 30451]]

housing systems over time and also improve the interface with local 
code inspection agencies, who otherwise may have to navigate 
conflicting standards and expectations across HUD programs.
    A commenter expressed concern that the proposed rule does not take 
into account the differences between insured housing and affordable 
housing, pointing out that some types of HUD-insured housing, e.g., 
assisted living and nursing homes, are subject to various State-imposed 
requirements and regulations. One commenter suggested that HUD should 
clearly state which specific program regulations are superseded or 
supplemented elsewhere, noting that part 5 may become the first stop a 
PHA, owner, or owner/agent (``POA''), member of the public, or other 
interested party makes to find housing quality regulations, and it may 
be their last stop if they are not directed to other applicable 
regulations. The commenter stated that absent this direction, 
individuals will have to cross-check program regulations manually which 
could lead to unnecessary confusion.
    HUD Response: HUD agrees with the comments about the scope of the 
rule and believes that the rule improves the consistency and uniformity 
of housing standards for HUD-assisted programs given its broad 
applicability to all HUD-assisted residential properties and units. In 
order to ensure regulated parties know which standards apply to them, 
this rule revises specific program regulations to reference the new 
NSPIRE standards. The framework for evaluating physical condition 
addresses safety and habitability regardless of the type of HUD-
assisted housing.
    This rule applies to all types of HUD housing including health care 
facilities insured under Section 232 of the National Housing Act and 
Low-Income Housing Credit (LIHTC) properties receiving some form of HUD 
assistance and other properties under a HUD-assisted housing contract 
(e.g., annual contributions contract). HUD does not have authority to 
create rules that apply to the Department of Treasury's Internal 
Revenue Service LIHTC and therefore cannot apply this rule to the LIHTC 
generally, but can apply this rule whenever the LIHTC property also 
receives some form of HUD-assistance. HUD will engage other Federal 
agencies with potentially overlapping subsidies to further evaluate the 
applicability of the NSPIRE rule to these other Federal housing subsidy 
types.
    With respect to conflicting standards and expectations, HUD 
physical condition requirements have always overlapped with State and 
local physical condition standards and sometimes exceed these 
standards. In other cases, State and local standards exceed HUD 
standards. This rule does not change the proposed Sec.  5.703(f) which 
states that for all covered programs, the NSPIRE Standards for the 
condition of HUD-assisted housing do not supersede State and local 
Housing codes. This rule establishes nationwide Federal minimum 
requirements for HUD-assisted housing and does not attempt to unify or 
preempt State and local housing standards. Because all HUD-assisted 
housing must meet the NSPIRE rule requirements, residents and other 
HUD-assisted housing stakeholders should have a nationwide expectation 
for the safety and habitability of housing; however, it will continue 
to be necessary to review all other applicable requirements including 
Federal accessibility requirements and State and Local requirements.

Section 5.703 Inspection Standards

Comments Regarding Alignment and Streamlining of Standards

    Commenters expressed support for the alignment of standards and 
inspection processes, stating that this would have a positive impact on 
properties with mixed financing or subsidy layering, eliminate the need 
to subject residents to multiple, separate oversight mechanisms, and 
reduce administrative and cost burden to owners and agents. Commenters 
supported the proposed rule's streamlining of the number of inspection 
categories and focus on the condition of individual units and stated 
that this approach is more aligned with municipal laws governing health 
and safety in rental housing. A commenter supported moving away from 
``curb appeal'' deficiencies toward ``substantial safety 
deficiencies,'' while another commenter supported the linguistic change 
from ``exigent health and safety'' to ``severe health and safety'' 
deficiency, as reducing bias and variability in the inspections 
process.
    One commenter noted that federally assisted rental properties are 
in varying states of disrepair with multiple deficiencies, and 
suggested that irrespective of the housing program HUD might require 
the same standards to be applied across the board, and according to the 
housing program requirements, require different levels of risk 
management measures or approaches to address the health and safety 
risks posed by the identified hazards.
    One commenter stated that the proposed rule lacks coherence between 
HUD standards and other groups' standards. The commenter further stated 
that given how housing has been contracted out and privatized, it can 
be more difficult to assess program-assisted housing.
    HUD Response: HUD agrees with commenters that the regulatory 
consolidation, use of consistent standards across housing program, and 
program alignment within this rule will allow HUD and regulated 
entities to realize administrative benefits.
    HUD agrees with commenters that the rule will reduce the 
administrative and cost burden to owners while improving the 
habitability and safety of HUD-assisted properties and units, which are 
not mutually exclusive objectives. HUD evaluated many other third-party 
organization standards and believes its standards are consistent with 
industry best practices for residential real estate. This rule provides 
a consistent means of assessing all types of HUD-assisted housing.
    This rule will align all listed HUD-assisted programs under the 
NSPIRE Standards that were proposed on June 17, 2022 and will be final 
before the effective date of this rule. Resolution of identified 
deficiencies will be mostly consistent with resolution of deficiencies 
under the UPCS and HQS standards but scoring and pass/fail decisions 
will be driven by the NSPIRE program requirements and applicable 
statutes. With this consolidation, HUD will better focus on 
habitability and the health and safety of residents.

Minimum Habitability Requirements

    A commenter agreed with the idea of reinforcing the importance of 
minimum habitability requirements and adding the word ``safe'' to the 
existing rule and suggested that ``safe'' take on issues regarding lead 
exposure and mean ``protected from the amount of exposure that will 
cause harm or damage after exposure.''
    HUD Response: The term ``safe'' has been, and will continue to be, 
an important term for HUD inspection standards. This rule will 
reinforce the priority of maintaining a safe and habitable dwelling. 
HUD declines to adopt additional language around lead exposure in this 
regulation, as it is covered by 24 CFR part 35.

Environmental Factors

    A commenter noted that ``standard public health and safety metrics 
related to morbidity and mortality'' are largely foreign to housing 
providers, and whether they align well with the unique environment of 
housing maintenance and management is unknown. This commenter agreed 
that the built

[[Page 30452]]

environment's effect on the health and safety of residents is more 
important than any building damage that is strictly cosmetic in nature 
but cautioned that HUD must ensure that protocols reflect that PHAs are 
constrained by funding and other funding priorities.
    A commenter suggested HUD require inspection of roofs, foundations, 
storm water runoffs, trash receptacles, ERV systems, heat pumps, and 
air ducts. This commenter further suggested HUD require screens to 
prevent bugs, and humidity and environmental control to avoid 
unnecessary power bills. Another commenter stated that HUD must 
specifically consider hazards created by the outside environment and 
their effects on subsidized properties and on the low-income tenants 
who reside in these developments or are eligible to live there, and 
that the comment period should either be extended, or a new comment 
period opened, to specifically consider these important factors. This 
commenter suggested specifically that HUD should include 24 CFR 
982.401(l) in the regulations, as well as 24 CFR 982.401(h), and other 
environmental hazards considerations (e.g., the proximity of the 
property to large polluters and transportation infrastructure, toxins 
in the soil and water, and the area's air quality).
    A commenter proposed several additions to address general health 
and safety concerns. The commenter suggested that HUD address toxic 
mold and indoor air, largely caused by water leaks and poor ventilation 
in aging housing stock, by equipping REAC inspectors with moisture 
meters to detect moisture behind walls that may signal plumbing or roof 
leaks that cause mold. The commenter also suggested adding and/or 
revising requirements around a number of health and safety issues, 
including clogged ventilation; presence of asbestos/radon; presence of 
lead-based paint; presence of mice, rats, bedbugs and roaches. Finally, 
the commenter recommended that HUD re-adjust or remove the Point Loss 
Caps to allow for accurate deductions for deficiencies. The commenter 
opined that the practice artificially inflates REAC scores, negates the 
point of a ``random sample,'' and is inherently biased against the 
health and safety of residents.
    Commenters also focused on the issue of water-borne lead poisoning 
and provided several lead-related suggestions, including that HUD 
update its lead inspection requirements, by, for example, no longer 
allowing visual inspections to suffice as a valid way to assess lead 
risks, and by using a portable x-ray fluorescence tool, or XRF gun to 
assess lead hazards. A commenter expressed concern that HUD's proposal 
to make no substantive changes to the lead-based paint requirements of 
its current regulations misses a critical opportunity to make long-
overdue updates to outdated lead standards.
    HUD Response: HUD appreciates acknowledgement of the built 
environment's effect on health and safety of residents; as such this 
rule focuses on the built environment supported by HUD subsidies and/or 
assistance, as described in Sec.  5.703 for outside, inside and units 
and in the NSPIRE Standards notice. HUD acknowledges that capital 
funding across both its Public Housing and Multifamily programs has 
been limited in recent years, and this may have resulted in deferred 
maintenance and modernization. However, this cannot result in units 
that are unsafe for residents, and so the NSPIRE program has made life-
threatening conditions a priority for standards development and 
scoring.
    Comments concerning the scope of inspectable items will be 
addressed through the subordinate Federal Register notice on the NSPIRE 
physical condition standards, which was proposed for public comment on 
June 17, 2022.
    In the final NSPIRE Standards notice, a screen will be considered a 
component of the window, and will be cited if damaged, missing or not 
functionally adequate. HUD acknowledges that some HUD-assisted housing 
may be located in areas with industrial contamination, and takes very 
seriously the comment concerning the risks posed to residents by the 
external environment. Contamination can be addressed as a health and 
safety concern under Sec.  5.703(e) of this rule. HUD will provide 
additional information about the applicability of this section in the 
NSPIRE Administrative notice. Lead-based paint evaluation and hazard 
control is covered under 24 CFR part 35 and is outside the scope of 
this rulemaking.
    With respect to the dangers posed by water-borne lead, HUD 
continues to work with the Office of Lead Hazard Control and Healthy 
Homes and the Environmental Protection Agency (EPA) where there are 
active, environmental hazards to residents, including lead in water. 
More information on the review of site contamination is available at: 
https://www.hudexchange.info/programs/environmental-review/site-contamination/.
    With respect to other health and safety issues such as mold, 
moisture and pest intrusion, this rule and the associated standards 
cover these housing-related hazards. The NSPIRE Standards were proposed 
on June 17, 2022, for public comment and will be finalized before this 
rule takes effect. NSPIRE will continue to include visual assessments 
only, but HUD will continue to consider other, specialized inspections 
for environmental health issues. The use of a moisture meter to assess 
moisture intrusion is one of several tools HUD has considered and, 
because this pertains to inspection standards, HUD will discuss this 
further in the final NSPIRE Standards notice.
    HUD will elaborate more on its scoring methodology in its Scoring 
notice. HUD will take these comments and all additional comments into 
consideration before scoring under NSPIRE commences, including whether 
the point-loss cap will be retained.

Affirmative Requirements

    A commenter cautioned that several of HUD's proposed affirmative 
safety requirements would exceed local building codes and create 
significant costs for housing stakeholders and create unnecessary 
confusion and urged HUD to base standards on existing International 
Building Code or fire Life Safety Codes wherever possible. The 
commenter suggested that if HUD proceeds with these affirmative safety 
requirements, the agency should be mindful of these impacts and help 
owners defray costs, while allowing transition times or the possibility 
to ``earn'' extra points, rather than lose points, for new affirmative 
safety requirements. The commenter further suggested that HUD make 
efforts to mitigate inconsistencies between inspectors to the extent 
possible.
    HUD Response: HUD considered the costs and benefits of this rule 
and considered model codes in its development, where appropriate. The 
affirmative requirements in the final rule at Sec.  5.703 align with 
the International Property Maintenance Code (IPMC) which is currently 
adopted for use in 40 States & 1000 plus local jurisdictions as their 
housing maintenance codes. Affirmative requirements are the basic 
requirements for an assisted unit and property that must be met for 
participation. These standards are what HUD considers the minimum 
requirements for habitability, and generally will not be scored for 
their presence or absence but will be designated as pass/fail. If they 
are not met, they will be cited, and must be corrected if the unit is 
approved for participation or continued occupancy. HUD has evaluated 
the costs of the new

[[Page 30453]]

rule in its Regulatory Impact Assessment. The NSPIRE Standards notice 
was published for comment on June 17, 2022; additional information 
regarding affirmative requirements will also be included in the 
forthcoming Scoring notice.
    HUD agrees that inconsistencies between inspections and inspectors 
is an important issue that should be mitigated and has revised the 
requirements for eligibility and ongoing training as described in the 
subordinate NSPIRE Administrative notice which will be issued soon 
after this rule. This notice, and the contract used to procure REAC 
inspectors will include requirements for quality assurance and control 
to ensure consistency between inspectors and inspections.
    The NSPIRE scoring methodology will be published in the Scoring 
notice. This Scoring notice will be published for effect but will seek 
public comments, including regarding scoring changes that reward 
certain properties for adoption of affirmative requirements, but HUD 
does not plan to award bonus points for standards that must be met and 
are not optional.

Alternative Standards

    A commenter noted that Federal agencies are required to use 
voluntary consensus standards wherever possible in their procurement 
and regulatory activities in lieu of expending public resources 
developing government unique standards and encouraged HUD to leverage 
private sector codes by, at minimum, accepting the IPMC across HUD's 
programs as an optional, alternative compliance mechanism. The 
commenter opined that allowing adherence to the IPMC to satisfy HUD's 
maintenance requirements would harmonize these requirements and 
standardize practices, and that inspectors would be more efficient and 
effective at implementing a single maintenance standard than they would 
at three or more variations. The commenter noted the IPMC exceeds HUD's 
standards because HUD's standards have not been substantively updated 
for decades., while the IPMC is updated every three years.
    HUD Response: HUD considered the IPMC as a model but believes the 
NSPIRE Standards are more appropriate for HUD programs. To apply the 
IPMC, the current inspector workforce would need to learn a new set of 
standards in addition to the statutory requirements that HUD must 
oversee that exceed IPMC. The IPMC also does not publish standards in 
areas that are safety concerns for HUD and is often a prescriptive 
standard that does not consider current conditions.

Accessibility Compliance

    Several commenters recommended that HUD require that common areas, 
indoor mailboxes, parking lots, waste disposal areas, walkways, and 
other areas should be ADA compliant for persons with disabilities.
    HUD Response: Compliance with the requirements of the Americans 
with Disabilities Act (ADA) is already required for services, programs, 
and activities of State or local governments, as described in 28 CFR 
part 35. HUD-assisted properties must also comply with Section 504, as 
described in 24 CFR part 8. The Office of Fair Housing and Equal 
Opportunity (FHEO) is responsible for inspection and administrative 
enforcement related to compliance with accessibility standards under 
both the ADA and Section 504, as well as the Fair Housing Act. Those 
regulations are not proposed for modification through this rulemaking. 
The NSPIRE Standards will include elements of accessibility within the 
standards, but these elements are not the same as the Federal 
accessibility standards as they relate to housing. Compliance with 
these NSPIRE Standards does not mean the participant has complied with 
the Federal accessibility standards. HUD also notes that the NSPIRE 
standards include common areas under Sec.  5.703(b), Inside, and the 
areas outside the property such as waste disposal areas, walkways in 
Sec.  5.703(c), Outside.

Area Names and Definitions

    A commenter suggested clarifying in paragraph (a) that ``outside 
the building'' includes the building site. This commenter also 
suggested that paragraph (b) be renamed as ``Inside common areas,'' 
that both mechanical rooms and utilities rooms be stricken, and that 
the definition be qualified as applying only to areas that are 
accessible to residents. With respect to paragraph (c), the commenter 
suggested renaming it to ``Outside areas'' and that the definition be 
qualified as applying only to areas that are accessible to residents.
    One commenter stated that HUD must define ``functionally adequate'' 
and also questioned the basis of the universal habitability 
requirements and design specifications.
    HUD Response: HUD streamlined the number of inspection categories 
(or areas as previously defined) from five to three to simplify the 
inspection program and improve transparency for all stakeholders. HUD 
believes that properties should be free from health and safety hazards, 
including all of the areas as described in (b) Outside, (c) Inside, and 
(d) Units. Section 5.703(c) includes the building site, building 
exterior components, and any building systems located outside of the 
building or unit. Examples of ``outside'' components on the site 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. Regarding ``inside common areas,'' mechanical 
rooms and utilities are included as areas to inspect, regardless of 
access because they could present a safety hazard that could impact 
units. For example, combustible materials near a water heater or 
furnace in a utility room could cause a fire that impacts the entire 
building. Regarding the definition of the term ``functionally 
adequate,'' each standard in the NSPIRE Standards notice will define 
what ``functionally adequate'' means for that particular standard.

Living Rooms as Bedrooms

    Commenters suggested that Sec.  5.703(d)(5) should not count living 
rooms as a bedroom and should be modified to include Public Housing and 
Multifamily housing. A commenter stated that families with a member who 
experiences a disability should not be forced to use the living areas 
as a bedroom in lieu of granting the family's reasonable accommodation 
request for a larger voucher.
    HUD Response: Proposed Sec.  5.703(d)(5) included requirements that 
for units assisted under the HCV or PBV program, the unit must have at 
least one bedroom or living/sleeping room for each two persons. While 
HUD appreciates comments on bedroom sizes, the regulation has been 
retained with a modification to exclude gender qualifiers but retained 
language around age regarding what PHAs could require for families. The 
commentor's concerns, however, touch also on subsidy standards in Sec.  
982.402, which are not proposed for revision. The requirements for 
family size and composition are not applied to the Public Housing and 
Multifamily housing programs because those programs did not previously 
have strict occupancy requirements linked to the unit size. Families 
that include a person with a disability may request a waiver of the 
occupancy requirements to accommodate their needs as a reasonable 
accommodation. The Fair Housing Act and Section 504 of the 
Rehabilitation Act of 1973 each prohibit

[[Page 30454]]

discrimination against persons with disabilities, and PHAs and owners 
are obligated to grant requests for reasonable accommodation when it 
may be necessary to afford a person with a disability with equal 
opportunity to use and enjoy housing. For more information or to file a 
complaint, see www.hud.gov/fairhousing.

Superseding State and Local Code

    A commenter suggested that Sec.  5.703(f)(1) should be amended to 
state that HUD standards supersede local or State codes when HUD 
standards exceed local or State codes.
    HUD Response: HUD declines to state that HUD's standards supersede 
local or State code. The NSPIRE rule establishes a standard for housing 
quality across covered HUD programs, while allowing applicability of 
State/local building codes that are more protective or necessary for 
local conditions. Superseding State or local code only where HUD 
standards exceed that code, and only for HUD housing, would be 
administratively difficult and unnecessary. HUD Housing is required to 
follow both Federal standards and State and local law.

Application to HCV and PBV Units

    Commenters suggested that Sec.  5.703(f)(2) should be amended to 
require HCV and PBV units (not just Public Housing and Multifamily 
housing) to meet State and local standards that are greater than those 
established by HUD in order to comply with the subpart. A commenter 
asserted that the inapplicability of State and local housing code to 
HCV and PBV units is in opposition of the statute and HUD's historical 
practices and stated that HCV and PBV units should not pass inspection 
if they do not comply with Federal, State, and local codes, asserting 
that voucher families should be able to benefit from using State and 
local laws to improve their housing conditions without the risk of 
their losing their subsidies, and that to the extent HUD is concerned 
that State and local codes are being used to target and exclude voucher 
holders, HUD could clarify that local and State code violations cannot 
result in the termination of the subsidy or used in a manner to 
penalize the tenant household. A commenter stated that HUD must ensure 
that inspection standards applicable to the HCV program do not impose 
requirements that exceed typical rental market standards and 
unintentionally limit housing choice or discourage landlords from 
participating. The commenter stated specifically that the standard for 
units to have ``a living room and a kitchen area'' should reflect the 
existing definitions used in the HCV program and that the phrase 
``other than very young children'' must be defined, or it must be clear 
that the housing provider has the discretion to define the age.
    HUD Response: HUD believes that the language under Sec.  
5.705(a)(3) is sufficient to address these concerns. State and local 
codes still apply to HUD assisted housing, but the requirements would 
not be incorporated in the NSPIRE inspection. For the HCV and PBV 
programs, PHAs have the ability to consider variations in local laws 
and practices and provide appropriate flexibility to facilitate the 
efficient provision of assistance. Multifamily owners, managers and 
PHAs are encouraged to include State and local requirements in their 
annual self-inspections. HUD agrees that the HCV and PBV program should 
have certain flexibilities to ensure that the program does not 
unintentionally limit housing choice or discourage landlords from 
participating, while still requiring that units be healthy and safe for 
residents.
    With respect to definitions of ``living rooms'' and ``kitchens,'' 
HUD has not created new definitions for these spaces in regulatory 
text, and State/local standards will continue to apply. In the 
Administrative notice, HUD will include definitions that align with the 
American Housing Survey. HUD appreciates the comment on defining ``very 
young children.'' As discussed elsewhere, HUD removed the regulation 
requiring separate bedrooms for children of the opposite sex, and 
therefore the term ``very young children'' is no longer used.

Comments Regarding Smoke/Carbon Monoxide Detectors and Fire 
Extinguishers

    Commenters had concerns about the burden associated with providing 
the various items. One commenter suggested that requirements for CO/
Smoke detectors in every sleeping room be grandfathered to requirements 
at the time of construction. The commenter noted that current 
regulations and code require them on each living level but, unless a 
minimum threshold is crossed in rehab/modification in any unit, they 
are not required in each bedroom. The commenter also opined that the 
likelihood for tampering and/or removal will increase by a level times 
the number required to be provided.
    Another commenter opined that the proposed change of requiring fire 
extinguishers in every unit is a costly and bad idea to implement, and 
that it will be highly difficult to regulate extinguishers owned by 
residents, and costly in dollars and points to the project. Another 
commenter urged HUD to reconsider the draft standard that would require 
a fire extinguisher in every unit, and to replace it with a requirement 
to install extinguishers regularly at a certain measure throughout the 
hallways of properties. The commenter stated that having a fire 
extinguisher in the unit will increase the likelihood that a resident 
will remain in the unit in the case of the fire and try to extinguish 
it, instead of exiting the unit as quickly as possible.
    A commenter stated that requiring a fire extinguisher inside each 
rental unit would exceed local requirements and create administrative 
burden. Some commenters supported requiring carbon monoxide detectors. 
One commenter stated that HUD must move quickly to require the 
installation of carbon monoxide detectors in HUD-assisted and HUD-
insured housing, and that, given that most local codes require the 
presence of carbon monoxide detectors, there is no need for delay. A 
commenter noted that HUD did not require carbon monoxide detectors to 
be installed consistent with the 2018 edition of the International Fire 
Code but noted that the IPMC has required carbon monoxide detectors in 
each of the last two editions. A commenter asked if fire stops could be 
used in place of fire extinguisher and noted success in installing fire 
stops, which deploy automatically, above stoves to prevent kitchen 
fires, which they found to be safer than using a fire extinguisher.
    HUD Response: Regarding carbon monoxide detectors, the requirements 
in the 2021 Consolidated Appropriations Act took effect on December 27, 
2022. The Act requires that PHAs adopt the provisions of the 2018 
edition of the International Fire Code (IFC) Standards, sections 915 
and 1103 (or subsequent versions if amended) for the covered programs. 
The NSPIRE Standards proposed to incorporate this requirement, but the 
statute is prescriptive for public housing owned or operated by a PHA, 
dwelling units occupied by individuals with Housing Choice Vouchers, 
dwelling units assisted with project-based vouchers or project-based 
rental assistance, dwelling units assisted under the 202 and 811 
programs, and dwelling units assisted under the HOPWA program and 
required that units in these covered programs have carbon monoxide 
detection devices installed, effective December 27, 2022. No action 
from HUD was necessary to cause this requirement to take effect, and 
HUD is making these conforming changes at the final rule stage without 
notice and

[[Page 30455]]

comment because they only incorporate these statutory requirements.
    Regarding fire extinguishers and other fire safety requirements, 
the proposed NSPIRE Standards notice published on June 17, 2022, 
included a fire extinguisher requirement and HUD will discuss this 
requirement, including comments received on this requirement, more in 
the final Standards notice. With respect to the comment about ``fire 
stops,'' HUD interprets the comment as actually relating to a 
``StoveTop Firestop system.'' HUD does not intend to include such a 
system as an alternative manner of compliance because these systems do 
not have national standards and must be acceptable to the local 
authority having jurisdiction.

Other Suggestions

    A commenter supported requiring pictures of failed items and 
recommended requiring pictures of items that are not fails but should 
nonetheless be documented. Another commenter supported current HUD 
asbestos abatement standards. Another commenter urged HUD to provide a 
single document with clear and objective scorable defects and weight of 
defects and required condition.
    Two commenters suggested that HUD, in the final rule, refine the 
characteristics of some of the identified unit components, such as 
adequate heat (and cooling where appropriate) directly or indirectly in 
each room, well-functioning windows and doors with functioning locks, 
and an adequate number of electrical outlets and built-in lighting 
fixtures.
    HUD Response: HUD appreciates the comments about the need for a 
clear and objective scoring methodology. NSPIRE will require 
documentation of deficiencies which inspectors will upload into a new 
streamlined system. Further guidance regarding documentation of 
deficiencies will be published in the final Standards notice, Scoring 
notice, and Administrative notice which will be published before the 
effective date of this rule.
    The proposed rule did not propose new standards for asbestos in 
federally assisted housing and HUD is choosing not to do so now. 
Property owners, managers and PHAs are advised to continue to monitor 
any known or suspected asbestos containing materials (ACM) and ensure 
that they are not damaged or friable. If ACM will be disturbed during 
renovation activities, follow all applicable OSHA and EPA laws.

Comments Regarding Water Safety (Questions for Comment #1 and #2)

    HUD asked several questions about water safety. HUD received 
comments on all of these questions, which are combined and discussed 
below. The first group of questions was directed at definitional 
issues, i.e., how should ``safe and potable water'' be defined and 
whether ``safe'' should mean that a public water system is in 
compliance with the Safe Drinking Water Act?
    A number of commenters pointed out that PHAs are not in a position 
to monitor water safety, which is the responsibility of local water 
suppliers and local government agencies. Commenters also noted that 
there is an important distinction, unaddressed in the proposed rule, 
between properties served by public water systems and those served by 
well water systems. Some commenters stated that HUD had no business 
attempting to define ``safe and potable water,'' with a few 
recommending specifically that ``safe'' be removed. These commenters 
stated that this determination is the province of other State and 
Federal entities, most notably the EPA, and that HUD lacks the 
requisite expertise with respect to determinations of water safety.
    Many commenters did suggest definitions for ``safe and potable 
water.'' Some commenters suggested keeping the definitions very basic: 
``Running water with temperatures of hot and cold running thru the 
pipes''; ``water that is safe to drink and for food preparation''; 
potable water is water that is ``safe to drink.'' One commenter 
suggested that HUD should define safe water as having ``reasonable 
certainty that no harm will result,'' and that ``there is a reasonable 
certainty in the minds of competent scientists that the substance is 
not harmful under the conditions of its intended use.'' This commenter, 
with respect to ``potable water,'' suggested that potable means more 
than just safe, and that water can be used for drinking, cooking, 
bathing, and other household needs, and therefore must meet the 
required (chemical, biological and physical) quality standards at the 
point of supply to the users, and be of an acceptable color, odor and 
taste for each personal and domestic use. One commenter stated that 
``if water is coming from a public source, it is safe to assume the 
water is fit to drink.'' A commenter believed that HUD should establish 
a national definition, not driven by local standards or politics. Many 
commenters stated that it is appropriate for HUD to rely on EPA 
determinations under the Safe Drinking Water Act (``SDWA''). At least 
two commenters, however, while supporting a general reliance on EPA's 
SDWA determinations, pointed out that those determinations are not 
acceptable in the presence of lead service lines.
    HUD also asked several questions related to detection and 
enforcement of safe water standards, including how should HUD monitor 
whether water is safe; what elements should be reviewed during a 
physical inspection to determine water safety; and whether inspectors 
should verify that a municipal water supply authority is in compliance 
with EPA's Safe Drinking Water Act?
    A number of commenters expressed an opinion that HUD should not be 
involved in ``monitoring'' water safety; rather, HUD should defer to 
the agencies that currently monitor the water supply under State and 
Federal law. One commenter noted that should HUD choose to enter this 
area, participation should be limited to confirmation that the property 
is served by a municipal water system through a water bill or that any 
private well system is monitored and tested regularly. Another 
commenter stated that adding a new safe water monitoring layer to 
something that is already regulated and monitored on a State and 
Federal level seems a bit redundant and unnecessary. Another commenter 
offered that if HUD is concerned about water quality, then HUD, either 
internally or through the EPA, should be able to perform regular, 
routine inquiries about public water systems around the country to 
ensure that those systems are in compliance with the Safe Drinking 
Water Act.
    Similar to monitoring, a number of commenters expressed an opinion 
that HUD should not be involved in conducting inspections related to 
water safety; or, in the alternative, that HUD conduct only the most 
cursory inspection with respect to water safety. One commenter opined 
that no elements should be reviewed during the physical inspection to 
determine water safety; that a PHA has met its responsibility if there 
is hot and cold running water. Another commenter suggested that HUD's 
inspection be limited to a visual observation of water for 
contamination or discoloration. Other commenters suggested that no 
elements should be included by HUD in requirements for physical 
inspections other than a visual inspection for poorly maintained pipes 
and valves and confirmation that water flow is present and can maintain 
at least 120 degrees.
    One commenter suggested that as one element of inspection, HUD 
should seek to determine that owners are not delinquent in their water 
and sewer

[[Page 30456]]

accounts for individual properties, in order to ensure that properties 
are not at risk for service disconnection. Several commenters suggested 
that HUD could review local Water Quality Reports that are compliant 
with the U.S. EPA's National Primary Drinking Water Regulation for 
Consumer Confidence Reports, and/or other reports provided by 
municipalities/water supply authorities.
    Two commenters opined that inspectors trained in water sampling 
techniques could take the water samples directly and send them to a 
certify laboratory for analysis. One commenter stated that HUD should 
monitor drinking water safety by testing housing facility 
infrastructure for contamination, not just public water systems. 
Another commenter stated that HUD, either internally or through the 
EPA, should be able to perform regular, routine inquiries about public 
water systems around the country to ensure that those systems are in 
compliance with the Safe Drinking Water Act. If not, the Federal 
Government should work with the local jurisdiction managing the public 
water system to ensure those systems are upgraded and safe. The 
commenter noted that HUD can also inform PHAs in those areas that there 
may be water contamination so that they may inform their residents and 
provide those residents options for safe drinking water if the local or 
State government has yet to do so.
    One commenter recommended that HUD must conduct its own monitoring 
of water safety in order to ensure that housing it supports provides 
safe and potable water to its residents. The commenter suggested 
periodic monitoring of every unit for lead; PFAS and other unregulated 
yet harmful contaminants; Legionella; and, objectionable smell, taste, 
color, or clarity, and that monitoring and sampling should be done in 
accordance with the best science to achieve accurate results. The 
commenter also stated that HUD must immediately notify residents of 
unsafe or unpotable water, what is being done to rectify the condition, 
and when the condition has been resolved.
    With respect to whether HUD inspectors should verify that a 
municipal water supply authority is in compliance with EPA's Safe 
Drinking Water Act, the majority of commenters replied in the negative 
with several noting that building owners have zero recourse if the 
water provider is not in compliance with the Safe Drinking Water Act. 
One commenter expressed that if HUD seeks to verify the availability of 
safe and potable water for residents, the Department should communicate 
with local water system administrators rather than with property owners 
and agents. One commenter stated that SDWA is designed to measure a 
water system's compliance with Federal standards, which the commenter 
finds lacking in several respects. This commenter stated that Federal 
lead standards, EPA enforceable limits, and maximum SDWA contaminant 
levels are out of date and do not reflect latest scientific evidence, 
with the result that some dangerous contaminants can be present in 
water within homes even though the water provided by the water system 
is free of the bacteria.
    Some commenters supported the notion that HUD should verify SDWA 
compliance; one commenter strongly supported this idea. This commenter 
stated that HUD should create a uniform standard of water safety 
monitoring at HUD facilities nationwide. Another commenter opined that 
water safety should be determined using the guidelines of the EPA's 
Safe Drinking Water Act and that an inspector needs to ensure that the 
local municipal water supply authority is in compliance.
    Those commenters who did suggest physical inspection criteria 
offered a number of recommendations. Multiple commenters suggested 
primary reliance on official reports from other governmental entities; 
one of these suggested that where there is no public water supply HUD's 
inspection should rely on appearance, odor and/or taste. Another 
commenter suggested that a basic turbidity test from randomly selected 
units at the property might give some immediate feedback for an 
inspection report about whether a plumbing issue might be impacting the 
potable drinking water, and that an inspector could also take a quick 
pH test at the same source. This same commenter suggested that 
privately sourced water could be sent to a laboratory for testing.
    A commenter suggested that any Point of Use or Point of Entry 
treatment device should be identified and inspected to ensure it is 
properly installed and maintained, and that hot water tanks be 
inspected and drained, as appropriate. This commenter recommended 
inspection criteria for well water systems, including well inspection; 
proximity to and quality of any onsite or neighboring septic system; 
total coliform/microbial testing; lead and copper testing, and chemical 
testing for all known potential chemical contaminants in the aquifer.
    HUD Response: HUD appreciates comments on how water is monitored, 
and the shared responsibility for ensuring drinking water safety. HUD 
notes that drinking water requirements are not new to HUD standards. 
Requirements already exist within the HQS and UPCS regulations, with 
additional details in the HQS inspection guidance; the NSPIRE 
regulations consolidate and clarify the requirement. At this final rule 
stage, HUD is including a requirement that the unit provide safe 
drinking water, regardless of the source (well vs. municipal water 
supply). Additional information about this requirement is provided in 
the NSPIRE Standards notice proposed for comment on June 17, 2022.
    When there is public health risk related to drinking water from a 
public source, the public water system is required under US 
Environmental Protection Agency (EPA) regulations \11\ to notify its 
customers. Notice typically includes local media alerts, postings on 
public water system websites and alerts in water bills. Given this, HUD 
expects that PHAs, residents and landlords participating in the Section 
8 programs will have a minimal burden to monitor public water safety. 
If a local public water system notifies a landlord or PHA that the 
public water is contaminated and recommends action, landlords 
participating in the Section 8 program are already expected to ensure 
that the action is taken. This same expectation applies to PHAs 
operating public housing. This rule standardizes both regulations to a 
single requirement and adopts the existing approved acceptability 
criteria for drinking water for all applicable programs.
---------------------------------------------------------------------------

    \11\ 40 CFR part 141, subpart I.
---------------------------------------------------------------------------

    HUD adopted the term ``safe'' to align its regulations with the 
term used under the Safe Drinking Water Act, as well as to support the 
broad HUD-wide goal to provide safe, habitable housing for residents. 
Water for drinking, bathing and other activities must be available to 
residents. After consideration of public comments, HUD has decided to 
continue to defer to EPA's determinations for allowable levels of 
drinking water contaminants, and what is considered safe. HUD expects 
that landlords, PHAs, and residents will be advised by a public water 
system, State or local health departments, or the EPA when the public 
water is unsafe and can rely on this determination without further 
testing. These alerts will be distributed through local media alerts, 
the public water system website or within water bills. PHAs and owners 
should be aware of local water safety alerts and take action to either 
implement recommendations or provided an alternate source of safe

[[Page 30457]]

water, such as bottled water. Often, the impacted jurisdiction will 
provide bottled water for free. For more information about requirements 
for public notification, see https://www.epa.gov/dwreginfo/lead-and-copper-rule. Regarding the suggestion of a visual inspection for 
contamination or discoloration, this observation would not indicate if 
the water had high levels of lead. Additional details about the water 
inspection process will be provided in the NSPIRE Standards notice.
    The NSPIRE rule, and the REAC physical inspection, does not require 
detailed reviews of documentation, and there is no current HUD 
regulatory requirement that PHAs and property owners maintain 
documentation of water and sewer payments or local water quality 
reports. This would be a substantial new administrative burden not 
contemplated in the proposed rule. Additionally, since this information 
is not federally standardized, it would add a significant time burden 
to the inspection. HUD has consulted with the EPA on whether it could 
monitor reporting in the Safe Drinking Water Information System 
(SDWIS), but the information reported is delayed, and may not indicate 
whether there is a current exposure risk. For example, when lead is 
identified through routine system monitoring, the public water supply 
can take actions to alter water chemistry to reduce leaching. In HUD's 
administrative notice, HUD intends only to include a requirement that 
PHAs and landlords be aware of local drinking water alerts that are 
already required under EPA regulations and to take action to implement 
an acceptability criteria variation (e.g., point of use water 
filtration) when necessary. These alerts are issued when actions taken 
by the public water system are not sufficient and there may be a risk 
of exposure. HUD also continues to evaluate means of using publicly 
available data to keep residents safe.
    HUD declines to include a requirement under NSPIRE for inspection 
of water treatment devices, point of use filters, well systems, or 
water testing. Section 5.703(d)(1) requires that the unit include an 
adequate source of safe water and does not specify or establish 
different contaminant standards for whether the source is municipal or 
well. As discussed above in the preamble, HUD has removed the term 
``potable'' and has clarified that safe drinking water must be provided 
in the kitchen.

Question for Comment #3: Site and Neighborhood Standards

    HUD asked 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 asked whether all of the explicit 
standards should be included or if there are certain site and 
neighborhood standards that HUD should consider changing. HUD received 
the following comments in response.

Site & Neighborhood Standards Generally

    Several commenters stated that PHAs should be held responsible for 
environmental conditions within their control and that the standards 
remain relevant because it may sometimes be necessary to invoke site 
and neighborhood standards when conditions are genuinely unsafe, 
especially for children. A commenter stated that site and neighborhood 
standards have historically been important to ensure a balanced 
distribution of public housing projects within a locality.
    A commenter suggested that a regulation for a site & neighborhood 
inspection is unnecessary because most of the facilities already follow 
the HUD and Tax Credit guidelines to not build in areas of industry, 
railroad tracks or traffic congestion; another noted that it would not 
make sense to include these standards in the regulation when the vast 
majority of inspection standards will not be in the regulation. Another 
commenter pointed to the difficulty inspectors would have enforcing 
local site and neighborhood standards.
    Commenters cautioned that these standards could be prejudicial 
against older housing and transit-oriented properties and suggested 
that historical buildings should be exempted from the testing standard 
to preserve the rarity and quality of materials and finishes in these 
buildings.
    Commenters expressed concerns that site and neighborhood standards 
can be subjective and very hard to judge, unless an area clearly 
represents a serious health hazard or safety concern. Thus, commenters 
urged HUD to provide explicit standards and to clarify how it 
determines whether there is a danger because it is important for HUD to 
provide specific and measurable guidance so that PHAs are able to 
incorporate any changes into existing processes. A commenter urged HUD 
to write the regulations to specify that properties must be 
``reasonably free'' of ``serious adverse environmental conditions''; 
another suggested HUD add ``landslide'' and ``hill slide'' to the term 
``mudslide'' and cited to examples of HUD-assisted properties being 
vacated due to hill slide events in both public housing and project-
based housing.
    With respect to the Section 8 program, where there is no scoring 
system similar to the PHAS system, a commenter suggested HUD clarify 
whether these items require failure of an HQS inspection.
    One commenter opined that the site and neighborhood standards 
should be included in the inspection standards and the regulation, 
because there are no qualifications for inspectors and leaving 
enforcement to individuals who can only rely on instructions provided 
by their locality would defeat the implementation of establishing a 
uniform standard. This commenter also opposed giving these inspectors 
discretion, which the commenter said would effectively render them 
legislators.
    HUD Response: HUD appreciates the comments related to the 
importance of site and neighborhood standards to the NSPIRE rule. HUD 
believes that expanding the existing HQS site and neighborhood 
standards from Sec.  982.401(l) to apply to additional programs would 
negatively impact existing properties for circumstances beyond their 
control and threaten already scarce affordable housing resources. With 
this final rule, the original text of Sec.  982.401 is removed and the 
regulation refers to Sec.  5.703. Site is included as the example 
``building site'' at Sec.  5.703(c). Neighborhood conditions are not 
directly included in Sec.  5.703(c). The listed elements of the outside 
must be functionally adequate, operable, and free of health and safety 
hazards. The final subordinate NSPIRE Standards notice, to be published 
before this rule is effective, will provide more details on areas and 
components inspected. HUD will continue to update and publish guidance 
on other environmental hazards that are not fully addressed by NSPIRE, 
such as radon, lead-based paint, carbon monoxide, and other 
environmental health hazards. The NSPIRE inspection is not intended to 
serve as the only way HUD assesses compliance with all environmental 
health laws and related requirements. Compliance is verified through 
other oversight processes performed by different HUD staff. For 
example, radon is considered as part of certain environmental reviews 
conducted under 24 CFR parts 50 and 58. Because the revised Sec.  
982.401 will refer to the new Sec.  5.703, the term ``mudslide'' is no

[[Page 30458]]

longer in regulation, and there is no need to add ``landslide'' or 
``hill slide'' as examples in regulatory text. Finally, NSPIRE 
inspections will include the elements identified as ``outside,'' 
including the site as provided in the NSPIRE Standards notice. But the 
NSPIRE inspection will not include environmental sampling. The focus of 
NSPIRE is more toward residents' units, where residents spend the most 
time.
    Inspectors using the NSPIRE standards will be trained in the 
standards and have experience in performing housing inspections. The 
final NSPIRE Standards notice will provide guidance on what to 
evaluate, and the NSPIRE Scoring notice will provide factors for 
scoring. A software tool will be available to inspectors and PHAs to 
help ensure assessments are consistent and accurate. Property owners 
and managers will continue to have a process to appeal physical 
inspection scores to HUD, and REAC will continue to have a quality 
assurance team to monitor inspection scoring and trends. The process 
for appeals is provided in this final rule at Sec.  5.711(c), (d) and 
(e) and the Administrative Procedures notice.

Environmental Conditions

    Many commenters stated that the property or PHA should not be held 
accountable for adverse environmental conditions outside of its 
control, such as flooding, poor drainage, sewage hazards, mudslides, 
air pollution, smoke or dust, excessive noise of vehicular traffic, and 
issues with adjacent lots or buildings. A commenter noted that property 
owners' ability to address these issues may be restricted by local 
laws. Another noted that fire hazards, garbage and infestations can be 
the result of tenant behaviors within their units, common areas or the 
site grounds.
    Commenters pointed out that if properties are penalized for these 
issues, the voucher program may have fewer units available for families 
as landlords are increasingly frustrated with the inspection process. 
One commenter stated the neighborhood standards may also preclude 
provision of assistance to existing homeowners in substandard housing 
conditions that reside in rural communities where drainage, streets, 
sidewalks and other neighborhood improvements are not found or also 
require improvement.
    Commenters suggested that the site and neighborhood standards 
should be considered for properties only at the time of development, 
prior to final endorsement, or prior to entering into a rental subsidy 
contract.
    HUD Response: HUD appreciates the comments regarding site and 
neighborhood standards and environmental conditions that may be outside 
the control of the property owner or PHA. In addition to HUD's 
responses above, NPSIRE inspections and scoring are more focused on the 
units, versus other inside and outside areas. This is because the unit 
is where residents spend most of their time, and the safety and 
habitability of the unit is critical. Additional details on inspectable 
areas and deficiencies were proposed for comment in the subordinate 
NSPIRE Standards notice and will be finalized before the rule is 
effective.

Questions for Comment #4-11 on HOME and HTF

    HUD asked a number of related questions pertaining to minimum 
housing condition standards, minimum deficiencies, and other 
appropriate standards across HOME and HTF, including HOME Tenant-based 
rental assistance (TBRA) properties, in a variety of contexts (e.g., 
rehabilitation, rental, home ownership and affordability period) to 
solicit feedback on appropriate standards to ensure that HOME-assisted 
and HTF-assisted housing remains decent, safe, sanitary and in good 
repair.

Comments Regarding HOME and HTF Standards Generally

    Across the different scenarios presented, several commenters 
expressed a need for a uniform, consistent set of standards, not only 
for HOME and HTF, but across all federally assisted housing programs. 
One commenter stated that minimum standards should not be asymmetrical 
depending on program or resident type, but broad sweeping to fit all 
sorts of housing units. The same commenter recommended that inspectors 
for HOME and HTF programs be provided clear definitions to limit 
firsthand interpretations of the guidance as well as appropriate 
supplemental training on future guidance.
    HUD Response: HUD appreciates and agrees with the comment with 
respect to consistency and has aligned standards with only minor 
exceptions. The NSPIRE rule aligns HOME and HTF standards with other 
HUD-assisted housing programs subject to NSPIRE. There will be some 
differences by project type in certain cases (e.g., rental project, 
homebuyer acquisition, or units occupied by tenants receiving HOME 
TBRA). While the NSPIRE rule aligns standards for HUD-assisted housing 
programs where these programs share common attributes (e.g., within the 
dwelling unit), HUD agrees with comments pointing out that the minimum 
deficiencies that must be corrected in a HOME- or HTF-assisted project 
should vary in certain cases. This is because NSPIRE includes standards 
for areas or components of a Multifamily building that do not exist in 
a single unit assisted with HOME TBRA or HOME or HTF-assisted single-
family housing of one to four units. In addition, HOME and HTF may be 
used to assist a homebuyer to acquire housing, which is a fundamentally 
different type of housing project compared to the HUD rental programs 
for which NSPIRE is designed. HUD is concerned that unduly onerous 
property standards may severely limit the choice of unit for an 
individual or family receiving assistance for homebuyer acquisition. It 
is HUD's intent to impose property standards that ensure both HOME- or 
HTF-assisted homebuyer acquisition projects are decent, safe, sanitary 
and in good repair but also sustainable so that the homebuyers are not 
subject to the financial burden of a system replacement or major 
repairs soon after acquisition.
    Consequently, HUD has determined that it is necessary to impose 
HOME and HTF minimum property standards consistent with NSPIRE's focus 
on safety and habitability, but which vary based on project type to 
balance the need for both quality and availability of housing. As 
requested by commenters, HUD will provide additional guidance and 
training to ensure that all PJs and HTF grantees understand the 
property standards requirements. HUD's Office of Community Planning and 
Development (``CPD Office'') will issue an NSPIRE notice describing the 
applicability of the NSPIRE Standards for HOME and HTF.

Comments Regarding Minimum Housing Condition Standards for HOME and HTF 
Housing

    Some commenters discussed the suitability of the current HQS as an 
appropriate standard to ensure that the housing remains decent, safe, 
sanitary and in good repair. One commenter believed that HQS in and of 
itself could apply across the programs covered by the proposed rule. 
Another commenter stated that HQS, in combination with the current 
HomeFirst inspection form, would establish a robust minimum housing 
condition standard.
    One commenter recommended adoption of International Residential 
Code (IRC) for single family new construction projects and 
rehabilitation projects. With respect to rehabilitation, the commenter 
further recommended

[[Page 30459]]

inclusion of minimum health and safety standards in addition to IRC, as 
not all health and safety concerns are addressed by IRC rehabilitation 
requirements.
    With respect to HOME TBRA specifically, the commenter urged HUD to 
consider that many participants elect to reside in single-family 
housing that may not meet the requirements set forth for HOME rental 
properties and expressed an opinion that existing Housing Quality 
Standards are well suited to both homebuyer, acquisition only, and HOME 
TBRA projects.
    A commenter recommended that HUD include Sec.  982.401(l) and (h) 
and other environmental hazard considerations.
    HUD Response: HUD understands that some commenters prefer HQS as a 
standard for ensuring that HOME- and HTF-assisted housing is decent, 
safe, sanitary and in good repair upon completion and throughout the 
period of affordability for rental housing. HUD believes that the 
transition to NSPIRE will retain what commenters appreciate about HQS 
while accomplishing NSPIRE's goal of aligning standards across HUD 
programs.
    For the HOME and HTF programs, CPD will issue a notice to implement 
the NSPIRE Standards and identify deficiencies related to the NSPIRE 
Standards for these specific programs. In CPD's experience with HQS as 
a minimum property and inspection standard for HOME TBRA units and 
certain HOME and HTF rental projects, HOME- and HTF-assisted housing 
have different statutory requirements than other NSPIRE programs and 
therefore, other factors that must be considered in implementing 
revised property standards. This rule revises the HQS regulations at 
Sec.  982.401 to point to Sec.  5.703. Due to this, HUD will implement 
requirements for HOME- and HTF-assisted projects that limit the 
applicability of the NSPIRE Standards to accommodate program-specific 
requirements.
    HOME and HTF programs are formula block grants that allow for local 
decision-making by the State and local governments that administer 
these programs. Therefore, HOME and HTF cannot impose property standard 
requirements that ignore State and local codes. This requirement for 
compliance with State and local codes is also statutory under the HOME 
program. Consequently, it is not possible for the NSPIRE Standards to 
replace State and local codes in HOME and HTF-assisted projects. In the 
absence of applicable State or local codes, HOME and HTF program 
regulations apply the IRC or International Building Code (IBC) of the 
International Code Council to new construction projects, as applicable 
to the type of housing, and the International Existing Building Code 
(IEBC) of the International Code Council to rehabilitation projects, as 
applicable.
    References in HOME to Sec.  982.401(l) and (h) and other 
environmental hazard considerations are now covered by Sec.  5.703(c) 
and have been updated. HUD agrees that elements of Sec.  982.401(l) and 
(h) and other environmental hazards are important and will be addressed 
in the supplemental CPD NSPIRE notice that will apply to HOME and HTF.

Comments Comparing NSPIRE Standards to HOME and HTF Housing and Minimum 
Deficiencies

    One commenter, in comparing the NSPIRE Standards to minimum 
deficiencies that must be corrected in HOME- and HTF-assisted 
rehabilitation projects at Sec. Sec.  92.251(b) and 93.301(b) or which 
must be corrected prior to HOME- and HTF-assisted homebuyer acquisition 
of standard housing, opined that the HomeFirst inspection form meets or 
exceeds the NSPIRE standards for minimum deficiencies that must be 
corrected since it incorporates State and local standards of housing 
safety and maintenance. Another commenter stated that there should not 
be a minimum or maximum of deficiencies that must be corrected during 
an onsite inspection; rather, there should be a system in place by 
which as many hazards are identified in a home, evaluated, and 
prioritized based on their severity for potential health and safety 
outcomes affecting the occupants. Once there is a prioritized list, the 
owner would address those hazards in the order of outcome severity. The 
same commenter specifically noted that addressing lead hazards should 
be part of that high standard for housing assisted with HOME or HTF, 
and that lead hazards assessed should include lead-based paint, lead in 
the drinking water with point of use testing, and soil contamination.
    With respect to whether HUD should establish different minimum 
deficiencies that must be corrected in HOME- or HTF-assisted rental 
housing and homebuyer or owner-occupied housing rehabilitation projects 
at Sec. Sec.  92.251(b) and 93.301(b), a commenter stated that instead 
of having minimum deficiencies that must be corrected, the property 
owner/manager should address the hazards based on the severity (i.e., 
extreme, severe, serious, or moderate) of potential health and safety 
outcomes affecting the occupants.
    HUD Response: Under the HOME and HTF regulations, an owner of a 
rental property must immediately correct health and safety 
deficiencies. In addition, the lead-based paint requirements at 24 CFR 
part 35 continue to apply to HOME and HTF-assisted rehabilitation 
projects and during the period of affordability for rental projects; 
these regulations are not proposed for revision and this final rule 
includes cross-references to the applicable sections of part 35, 
including subparts B, J, K, M, and R. HUD disagrees that the programs 
should not set minimum deficiencies that must be corrected following an 
onsite inspection of rental housing during the period of affordability. 
If HOME or HTF funds are invested in a rental development project, HUD 
must ensure that the project remains decent, safe, sanitary and in good 
repair throughout the period of affordability. This is a statutory 
requirement for HOME. Furthermore, the HOME and HTF programs require 
that PJs and HTF grantees underwrite a rehabilitation or new 
construction rental project to ensure that funding is available to make 
necessary repairs throughout the period of affordability. Therefore, it 
is reasonable to expect HOME and HTF projects to support necessary 
repairs to maintain the housing at a standard that meets HOME and HTF 
minimum requirements and the PJ or HTF grantee's ongoing property 
standards.
    HUD does not agree that the HQS, in combination with the current 
HomeFirst inspection form, would meet the new standards established 
with the NSPIRE final rule.

Comments Regarding Minimum Deficiencies for Small HOME and HTF 
Rehabilitation Projects

    With respect to whether HUD should establish different minimum 
deficiencies that must be corrected in large and small HOME- or HTF-
assisted rehabilitation projects at Sec.  92.251(b) and Sec.  
93.301(b), commenters replied in the negative, and generally repeated 
the feeling that standards should be uniform across programs and 
occupancy categories. With respect to how HUD should define a large 
housing project, one commenter suggested that the appropriate threshold 
is 40 or more units.
    HUD Response: HUD agrees with commenters and will not establish 
different minimum deficiencies for large and small HOME- and HTF-
assisted rehabilitation projects in this final rule.

[[Page 30460]]

Comments Regarding Minimum Deficiencies That Must Be Corrected for HOME 
or HTF Housing

    With respect to whether HUD should establish different minimum 
deficiencies that must be corrected for HOME or HTF-assisted 
rehabilitation and homebuyer or owner-occupied acquisition of standard 
housing projects at Sec.  92.251(c)(3) and Sec.  93.301(c)(3), one 
commenter opined that no updates to the minimum deficiency standards 
are recommended at this time.
    Another commenter responded in the affirmative, noting that the 
current requirement for single-family housing to meet the requirements 
of UPCS includes inspecting for non-applicable items, and exceeds the 
standard for other federally assisted or insured mortgage programs. The 
commenter recommended that units for acquisition be subject only to 
homebuyer inspections as required by FHA financing, and not subject to 
a separate standard.
    HUD Response: Updates to the required minimum deficiencies that 
must be corrected in a HOME- or HTF-assisted rehabilitation or 
homebuyer acquisition project are necessary because the current 
regulation references UPCS, which will no longer exist when this rule 
becomes effective. HUD agrees with the commenter that minimum 
deficiencies to be corrected should vary based on project type in 
certain cases because not all the standards of NSPIRE, which was 
developed for ongoing inspections of Multifamily rental developments, 
will apply to single-family housing.

Comments Regarding Minimum HOME TBRA Written Property Standards

    With respect to whether HUD should establish minimum written 
property standards requirements for housing occupied by tenants 
receiving HOME TBRA at Sec.  92.251(f) that exceed or are different 
than minimum requirements for the ongoing condition of HOME-assisted 
rental housing, one commenter noted that tenants of HOME TBRA often 
reside in single-family housing rather than in multifamily rental 
developments and that the use of a standard that is heavily focused on 
large rental developments, such as UPCS, would include items that are 
not present in single-family housing, and may neglect to fully inspect 
for hazards that are generally only present in single-family housing.
    With respect to whether HUD, in the alternative, should apply the 
NSPIRE standards (not to include the inspection procedures, 
administrative processes for scoring and ranking, or the enforcement 
requirements of NSPIRE) to housing occupied by tenants assisted with 
HOME TBRA at Sec.  92.251(f), one commenter stated that this was a 
reasonable approach. The commenter stated that HUD can apply NSPIRE 
standards but allow local jurisdictions to establish stronger local 
standards which would apply in that jurisdiction. The NSPIRE standard 
should be a minimum, but if there are higher quality standards that 
local jurisdictions establish, those should be allowable as well. 
Another commenter replied in the negative, stating that HUD should 
treat this situation consistent with the proposed rule for HCV and PBV, 
and not another standard.
    In response to whether another national housing quality or 
condition standard exists that HUD should apply to housing occupied by 
tenants assisted with HOME TBRA, one commenter recommended the use of 
the same standard for HOME TBRA as for the Section 8 HCV program, even 
if this standard is different than the standard for HOME rental 
projects. The commenter reasoned that HOME TBRA closely mirrors the 
Section 8 HCV program, and both programs are often administered by the 
same agencies, allowing them to utilize one common standard that is 
most applicable to the project type.
    HUD Response: HUD agrees with commenters who requested consistency. 
The NSPIRE rule establishes standards that will cover all listed 
programs, with exceptions only where there are differing statutory or 
programmatic requirements. For example, the regulation at Sec.  
92.251(b)(1)(viii) continues to exclude HOME-assisted projects and 
units from using the scoring, item weights, criticality, and other 
requirements contained in Sec. Sec.  5.705-5.713. Additionally, HOME 
PJs must create their own ongoing property standards for HOME rental 
housing or housing occupied by tenants receiving HOME TBRA, which must 
comply with State and local code requirements and ordinances. Where 
there are no applicable State or local code requirements and 
ordinances, the HOME PJ will be required to inspect the property so 
that the property does not contain the specific deficiencies prescribed 
by HUD based on the applicable standards in 5.703 and published in the 
Federal Register. By doing this, HUD is establishing c HOME PJs require 
owners maintain the housing as decent, safe, and sanitary housing in 
good repair.

Question for Comment #12: Special Housing

    HUD asked whether the application of unique standards to certain 
specific special types of housing (i.e., single room occupancy housing; 
congregate housing; shared housing; and manufactured homes) in the HCV, 
PBV, and Moderate Rehabilitation Programs should be expanded to apply 
to CoC, ESG, and HOPWA programs as well.
    Two commenters expressed general agreement with the expansion of 
the unique standards; however, one of these commenters limited 
endorsement of the application of the unique standards to CoC PBRA. One 
commenter stated that the unique standards should be expanded to apply 
to CoC, ESG, and HOPWA programs. The commenter opined that if a 
recipient of CoC, ESG, or HOPWA funding determines that using a special 
type of housing is the best course of action for a specific household, 
then they should be able to use that type of housing and not be 
penalized through poor inspection scores based off of standards that do 
not make sense for the unit. The commenter also noted that applying the 
unique standards to CoC, ESG, and HOPWA will help standardize 
inspection protocols across HUD programs.
    One commenter stated that the unique standards should apply to CoC, 
ESG, and HOPWA programs in order to fulfill HUD's intent to align 
inspection requirements for all housing assistance programs to decrease 
the complexity and uncertainty associated with participating in HUD's 
programs that may deter some owners from future involvement, as well as 
to decrease regulatory burden. The commenter further suggested that HUD 
consider other housing types recently implemented by municipalities to 
address their housing crises such as the approval of Accessory Dwelling 
Units.
    One commenter stated that the NSPIRE protocol should consider 
universally accepted norms associated with healthcare, assisted living 
and memory care occupancies, and that these should include specific 
allowances for egress issues associated with normal elopement risk 
reduction inherent to these facilities. The commenter further stated 
that the health care facility concept of ``RACE'' (Rescue, Alarm, 
Contain and Extinguish) should be accepted by NSPIRE as a standard 
method of fire and life safety within healthcare and senior facilities, 
greatly reducing the necessity of window egress exits.
    One commenter stated that the unique housing standards in part 982 
should

[[Page 30461]]

not be applied to ESG since the minimum standards for permanent housing 
in Sec.  576.403 provide more flexibility for the program participant 
and consistency for the administrator. The commenter also recommended 
that the proposed addition of Sec.  576.403(d) should be revised to 
state, ``for the first 30 days in which a program participant receives 
homelessness prevention assistance, the recipient or subrecipient may 
provide services under Sec.  576.105(b) and Sec.  576.106 to help the 
program participant remain in their unit without inspecting the unit or 
determining whether it meets the requirement in this section.'' The 
commenter reasoned that the payment of rental arrears or rental 
assistance under Sec.  576.106 are often necessary to prevent eviction, 
and that requiring the habitability inspection within 30 days of 
assistance while also providing rental arrears or assistance would 
decrease the disruptive process of eviction. The commenter recommend 
further that HUD provide guidance about what resolution is required of 
a grantee if the unit that was assisted in the 30-day period does not 
meet the standard but should not require repayment of assistance 
provided during that term.
    HUD Response: HUD appreciates the comments related to special 
housing types and the needs of participants in tenant-based rental 
assistance, as well as the feedback about consistent standards across 
housing programs, including expanding unique standards to certain types 
of housing within CoC, ESG and HOPWA programs. The NSPIRE Standards 
will apply to these programs, with some limitations that will be 
described in the CPD NSPIRE notices. For the HCV and PBV programs, 
Section 982.605 continues to allow for alternate requirements for 
sanitary facilities, food preparation, and space and security if there 
is no applicable local code standard for SRO housing. Housing that 
meets the affirmative habitability standards in Sec.  5.703(d) can be 
eligible for HUD assistance, including Accessory Dwelling Units. With 
alignment of housing standards, the Department will better focus on 
habitability and the health and safety of residents.
    With respect to universally accepted norms associated with health 
care, HUD evaluated many of these norms including RACE. Facilities that 
need to keep doors or windows locked for resident safety (e.g., memory 
care facilities) or to comply with other legal requirements, such as 
Federal civil rights laws, will be allowed to request a technical 
correction and score adjustment after the inspection. More information 
will be in the Administrative Procedures notice. In addition, Sec.  
5.703(d) of this rule requires smoke detectors consistent with the 
requirements in NFPA 72, and more information will be provided in the 
NSPIRE Standards notice.
    HUD will issue additional guidance on Sec.  576.403(f) as pertains 
to payment of rental arrears or rental assistance and preventing 
evictions.

Question for Comment #13: Affirmative Requirements

    HUD asked for input with respect to the inclusion of certain 
affirmative requirements at the final rule stage by adding deficiencies 
for the lack of a presence of certain specific features in HUD-assisted 
units. Specifically, HUD asked for input related to electrical outlets 
and switches; GFCIs and AFCIs; HVAC (permanently installed heating 
source); guardrails; and lighting.

General Comments

    Two commenters noted their general agreement with all of HUD's 
suggestions, without providing any specific comments. Many commenters 
sounded a common theme that HUD should weigh very carefully any attempt 
to introduce affirmative requirements across the entire portfolio of 
HUD-assisted housing, in light of all of the relevant considerations to 
the differences in such housing. One common theme was centered on the 
difference between older and newer housing. For example, one commenter 
noted that most new construction units have more than enough electrical 
outlets in each bedroom and living room. However, older cities, such as 
New York City, have aging housing stock which might not support 
multiple new outlets without upgrading to a new wiring system. Another 
commenter opined that properties built in the 1940s should not be held 
to the same standards as those more recently built, and that even those 
that may have undergone some modernization since initially built were 
modernized to the codes and standards of the time during which they 
were modernized. The commenter pointed out that to hold older 
properties to the same standards of recent buildings would be a 
financial burden and that the PHA has neither the funds nor the staff 
to stay in compliance and would discourage private property owners from 
participating in HUD programs.
    Another common theme related to suggestions for HUD restraint 
centered around the existence of various housing codes, which 
commenters argued obviated the need for HUD to impose additional 
requirements. For example, one commenter pointed out that HUD's 
proposed requirements would not be in alignment with local code and 
would set higher expectations than local code, which could have far-
reaching implications on the development and maintenance of properties 
and lead to much higher costs. Another commenter opined that in some 
cases the proposed changes represent very significant upgrades or 
overhauls and urged HUD to either defer to local building codes, or to 
slowly phase in the affirmative safety requirements, as well as to 
consider approving additional project or capital funds to cover the 
costs of these upgrades. Two commenters noted that to the extent that 
existing properties are subject to new standards, HUD must refrain from 
penalizing (unintentionally or otherwise) PHAs, owners, and operators 
that may not have funds for upgrades, particularly when those 
properties are in compliance with local/State codes which reflect local 
needs and conditions. Commenters suggested that the electrical 
requirements should match the code at the time the building was built, 
and that requiring electrical upgrades to existing building would be a 
financial hardship on building owners unless the building is being 
renovated. A commenter expressed that HUD should align the proposed 
requirements to the UCC and PHA's local codes.
    With respect to the proposed addition of new standards, generally, 
one commenter noted that some owners with older properties may decide 
not to participate if HUD requires significant upgrades to their units 
that they are not required to perform if they rent to someone in the 
private market. Another commenter noted that funding to maintain and 
improve properties is in limited supply, and that properties that are 
compliant under current standards should be considered compliant under 
the new standards, and that any new standards should apply only to new 
construction and properties that undergo renovation. One commenter 
agreed that all potential deficiencies that HUD is considering appear 
to be reasonable for safety considerations, but noted that to the 
extent that existing properties are subject to new standards, PHAs, 
owners and operators should have an ample notice period to bring their 
units into compliance. Another commenter opined that the proposed 
requirements could create new costs for PHAs and limit the supply of 
housing available to voucher holders. As such, HUD should assess the 
total cost to PHAs to comply. One commenter, while agreeing that the 
proposed features may be necessary, cautioned that the cost to produce 
the features must be heavily

[[Page 30462]]

weighed in view of additional affordable units lost versus created or 
preserved, and that dollars invested in these features will ultimately 
reduce the available subsidies for those applicants waiting to be 
housed, further straining American's scarce affordable housing stock.
    HUD Response: HUD appreciates the comments about differences in 
housing stock related to age and location and reaffirms that the NSPIRE 
Standards will balance the need for housing with the mission to ensure 
that the housing is decent, safe, sanitary and in good repair, as well 
as the challenge of having consistent housing standards across programs 
with very different levels of Federal investment and assistance. HUD 
recognizes, and agrees with the commenters, that if inspection 
standards and process for tenant-based programs are onerous and delay 
lease up, private landlords may decline to accept a voucher and lease 
to other renters.
    HUD also recognizes the challenge of meeting State or local housing 
codes for properties that will be covered by the NSPIRE Standards. Most 
importantly, the forthcoming NSPIRE Standards will apply nationally and 
provide standards for areas where there are no codes or safety 
requirements. In other areas, the State or local requirements may be 
more or less stringent. Often, State or local requirements account for 
special conditions in that jurisdiction such as local climate 
variation. Where a State or local requirement is more stringent that 
NSPIRE, the property must meet that requirement as well as the NSPIRE 
Standards.
    With respect to comments regarding timelines to correct identified 
deficiencies, and the ability of property owners or PHAs to fund 
required renovations, the available time frame for response will vary 
depending on the deficiency, the program, and the process. In this 
final rule, HUD has revised ``severe health and safety'' to LT. HUD 
also developed a secondary category for other severe, but not LT 
deficiencies. Where a LT deficiency as described in Sec.  5.711(c) is 
identified, the owner or PHA must correct it in 24 hours. For the HCV 
program, response times for LT deficiencies must be corrected in 
accordance with the HOTMA statute. HUD will discuss this matter further 
in the final NSPIRE standards. Other deficiencies can be resolved as 
described in existing program regulations. Those regulations are not 
included in this rulemaking for revision. HUD recognizes that standards 
should include reasonable expectations for repair, and the need for 
work to be completed quickly and affordably. These expectations will be 
described in the Administrative Procedures notice which will be 
published before this final rule takes effect.

Comments Regarding the Electrical Outlet and Switch Requirement

    Two commenters referred expressly to the presence of extension 
cords. One of them, in agreeing with the proposed requirement, 
explained that inadequate number of outlets within all habitable rooms 
leads the occupant to rely on the usage of power-strips and extension 
cords, and that these power strips and extension cords are often 
overloaded with plugs from multiple appliances, a condition that could 
lead to overheating and potential electrical fires. The commenter 
further noted that the presence of such cords is also the cause of 
trips and falls hazards which significantly affect elderly occupants. 
The other stated that the proposed requirement should not be addressed 
as an issue unless there are extension cords that could cause a trip 
hazard.
    Several commenters raised the issues of the age of the property in 
question. One commenter stated that meeting this requirement may be 
challenging in older units that do not have either two electrical units 
or an electrical unit and a permanent light in all habitable rooms, as 
older buildings may have to undergo substantial electrical work on the 
unit, adding significant cost and burden to meeting the standard. 
Another commenter stated that many older units include bedrooms where 
there is only one outlet and no overhead lighting. One commenter 
specifically noted that the age of the building should be considered 
when determining the distance of the outlet to the sink. One commenter 
felt that establishing minimum standards to be maintained by properties 
that have already been constructed and under contract as affordable 
housing for decades exceeds the reach of an inspection which is 
supposed to ensure the property is being adequately maintained as safe, 
decent, and sanitary, and crosses into the realm of specifying how that 
property should have been constructed instead of confirming the 
adequacy of its maintenance.
    Two commenters specifically expressed concerns with respect to 
historic properties. One noted that, because insured buildings are so 
diverse in age and design, to add this requirement would be a hardship 
on owners especially in older historic occupancies; the other opined 
that historic buildings should be exempted from this proposed 
requirement in order to preserve the high quality of fixtures and 
materials.
    One commenter expressed that the rationale in the rule (safety, 
usability, and illumination) demonstrates why a one-size-fits-all 
approach is inappropriate and opined that HUD should attempt to create 
standards around safety, usability, and illumination or demonstrate, 
with data, why the proposed requirements are necessary before adding 
the proposed deficiency. One commenter, while expressing general 
support for the proposed requirement, noted that wiring a second outlet 
can represent a significant undertaking, and therefore urged HUD to 
incorporate a mechanism for providing relief for housing under existing 
rental assistance contracts which may not have been built/renovated to 
this standard, providing a grace period until improvements can be made.
    HUD Response: HUD appreciates feedback about the question of adding 
a deficiency for an inadequate number of outlets. HUD took these 
comments into consideration in drafting the proposed Standards notice 
and will address this matter more fully in the final NSPIRE Standards 
notice.

Comments Regarding the GFCI & AFCI Requirement

    As with ``electrical outlet and switch,'' many of the comments on 
GFCI and AFCI centered on issues of existing codes and/or 
implementation with respect to older properties. One commenter noted 
that while new and rehabilitated properties are in compliance with this 
standard, older properties that have not been upgraded may not be able 
to comply. Specifically, a commenter noted that bathrooms in older 
properties tend to be smaller and built before the era of ground fault 
indicators, but it is likely that GFCIs were installed at a later date 
during an electrical modernization, and that to now require that an 
outlet be located more than 6 feet from a shower or sink or be upgraded 
with a GFCI is not only unreasonable but unfeasible as well.
    Another commenter repeated its position that imposition of this 
proposed requirement crosses into the realm of specifying how that 
property should have been constructed instead of confirming the 
adequacy of its maintenance. Commenters stated that GFCI outlet 
requirement should be grandfathered, i.e., required where minimum 
rehabilitation thresholds for modification have been surpassed and 
that, if required in older Section 8 HCV units, owner participation may 
be discouraged due to prohibitive costs to

[[Page 30463]]

modify. One commenter stated that it does not believe that owners of 
older construction (pre-1975) housing units with proper operating 
outlets need to be forced to upgrade to GFCI and AFCI outlets in order 
for the unit to pass inspection and that, if HUD decides to move 
forward with this requirement, additional capital resources should be 
made available to convert to this protection. The commenter further 
urged that all NSPIRE inspectors should be equipped with the proper 
equipment to test the GFCI and AFCI outlets and not be reliant on a 
visual inspection.
    With respect to AFCI in particular, two commenters noted that AFCI 
protection is a newer concept and would be burdensome and costly to 
install in older buildings. Another commenter, while supporting the 
GFCI proposal, distinguished AFCI as a higher standard that represents 
a significant undertaking because it requires the removal and 
replacement of circuit breakers. The commenter encouraged HUD to defer 
to local building code requirements rather than imposing a blanket AFCI 
requirement, and that, if the AFCI requirement is imposed, HUD should 
incorporate a mechanism for providing relief for housing under existing 
rental assistance contracts which may not have been built/renovated to 
this standard, providing a grace period until improvements can be made.
    Several commenters provided comments with respect to the GFCI 
location standard (i.e., within 6 feet of sinks, tubs, showers; or 
exterior, garage, or unfinished basement areas). Two commenters stated 
that while it is reasonable to expect GFCI protection when an outlet is 
within 6 feet of water or on the exterior of the building, it does not 
believe it is necessary to require GFCI protection in garages and 
unfinished basement areas.
    With respect to refrigerators, a commenter questioned the need for 
GFCI protection as they are often located within 6 feet of a sink but 
are on their own dedicated circuit which does not have a GFCI 
installed. The commenter felt that such a requirement would be 
confusing.
    HUD Response: HUD agrees that ARC Fault Circuit Interrupter (AFCI) 
should not be required in existing buildings. The ARC Fault Circuit 
Interrupter (AFCI) standard under consideration does not require the 
installation of AFCI breakers where they are not present. The standard 
requires the test button, when present, to function properly when 
pressed.
    With respect to the physical placement of Ground Fault Circuit 
Interrupter (GFCI) protected outlets or breakers, HUD continues to 
believe that Ground Fault Circuit Interrupter (GFCI) protected outlets 
or breakers should be a requirement near water sources as specified in 
the current Electrical--Outlet and Switch standard \12\ HUD agrees that 
major appliances do not need to be plugged into a GFCI outlet. HUD will 
address this matter further in the final NSPIRE Standards notice. The 
requirement for GFCI outlets was added to the affirmative requirements 
in Sec.  5.703(b), (c) and (d).
---------------------------------------------------------------------------

    \12\ Electrical Safety Foundation International (ESFI), ``Ground 
Fault Circuit Interrupters: Preventing Electrocution Since 1973'' 
https://www.esfi.org/ground-fault-circuit-interrupters-preventing-electrocution-since-1971/ (Last accessed May 2, 2022).
---------------------------------------------------------------------------

Comments Regarding HVAC (Permanently Installed Heating Source)

    Several commenters expressed general approval of including a 
requirement for a permanently installed heating source and suggested 
there should be a deficiency for lack of proper heating. One commenter 
opined that because not having heat could be a life-threatening 
situation, not having a working and reliable heating system should be a 
deficiency; another pointed out that use of a portable heater (with HUD 
approval) is generally approved only in rural areas with warm climates, 
and that HUD should include a requirement for a permanently installed 
heat source. Another agreed that all units should have a heating source 
but suggested that HUD define this to include a properly installed and 
vented wood stove as a permanent heating source. One commenter urged 
consideration for existing properties which do not meet this standard 
and are not going through a substantial rehabilitation and suggested 
that it might be appropriate to exclude existing developments from the 
proposed requirement.
    Other commenters differed. Two commenters stated that the 
requirement would greatly burden older and historic homes that do not 
have permanent heat sources installed, and that it would be more 
reasonable to require heating to be UL rated for use as a heating 
device so long as it is in safe, operable condition. One commenter 
pointed out that many areas do not require the use of HVAC systems to 
maintain a living space at a safe temperature, and that forcing 
tropical properties to install heating equipment and polar communities 
to install air conditioning is wasteful and unnecessarily complicates 
property maintenance. The commenter suggested that establishing that a 
target temperature range be attainable would be a more cost-effective 
manner of protecting stakeholder interests.
    One commenter stated that the heating source requirement is 
addressed under flammable materials and that the proposed requirement 
would be redundant and should be eliminated.
    HUD Response: HUD agrees with the comments regarding the importance 
of properly functioning heating systems. Adequate heat is essential for 
the health and comfort of residents. The NSPIRE HVAC standard will 
include a deficiency for a minimum temperature requirement during the 
winter to prevent the potential negative health and safety effects of 
cold temperatures, including hypothermia, which can be fatal. HUD has 
replaced language originally in Sec.  982.401(e) regarding the 
``thermal environment'' with a requirement in Sec.  5.703(e)(1) that 
the unit not be subject to ``extreme temperatures'' and will finalize 
provisions to meet the requirement in the NSPIRE standards.
    HUD appreciates feedback particularly regarding tropical climates 
and will take it into consideration for future standards iterations. 
Additional consideration may be given to areas with extreme cold 
weather that falls within the 3rd standard deviation of winter 
temperatures. This will be revisited in subordinate Standards notices. 
HUD agrees that presence of air conditioning units should not currently 
be a requirement. The proposed NSPIRE HVAC standard does not include a 
requirement for air conditioning, just that installed AC units provide 
cool air, which is specified as lower than room temperature. NSPIRE 
does not have a deficiency for a maximum temperature requirement during 
the summer that is analogous to the minimum temperature winter 
requirement for heat. Where State or local jurisdictions have such 
requirements, covered programs must follow the more stringent 
requirement.
    HUD does not agree with commenters that suggested that portable 
space heaters or fireplaces should be allowable as sources of heat. 
Portable space heaters, electric and fuel burning, have been associated 
with property fires and carbon monoxide poisoning. Fires and carbon 
monoxide poisoning resulting from space heater usage have caused 
serious injuries and deaths. Space heaters have also caused substantial 
property damage to properties throughout the United States sometimes 
leading to the complete loss of housing. Residents without adequate 
heating have occasionally used gas and electric ovens to provide heat, 
which have resulted in property fires and

[[Page 30464]]

carbon monoxide poisonings as well. Requiring a properly functioning 
permanent heating source as an affirmative requirement in Sec.  
5.703(c) removes the health and safety risks associated with portable 
space heaters.
    HUD also does not agree that a fireplace should be considered as a 
permanent heating source. Permanent heating sources are typically 
specified as being self-fueled. They are permanently affixed within the 
unit or building, safely connected to the unit or building electrical 
system, thermostatically controlled by the unit or building and 
appropriate for the size of the unit. The energy source for a permanent 
heating system can be electric, gas or oil. A fireplace does not meet 
the self-fueled criteria. Fireplaces also do not evenly distribute 
heated air throughout a property as effectively as permanently 
installed heating sources and are one of the leading causes of heating 
system caused fires in properties.
    HUD notes that there have been instances of properties experiencing 
a heating emergency if a boiler or furnaces fail. In these situations, 
a temporary, back up heating source may be necessary.

Comments Regarding the Guardrail Requirement

    While some commenters supported the proposed requirement, several 
noted the need for additional details. Two commenters stated that the 
requirement needs to have a minimum horizontal distance associated with 
it within which the 30-inch vertical drop exists; one recommended that 
HUD better explain the proposed requirement depending on site 
conditions such as hills, slopes, etc.; otherwise, the requirement 
could adversely affect the scoring while posing no threats to the 
residents or general public. One commenter noted that because a 30'' 
drop over a 2'' run is dramatically different from a 30'' drop over a 
20'' run, a better definition of conditions requiring a railing would 
be helpful. The same commenter felt that the standard for handrails on 
an exterior ramp are excessively vague and in need of clarification 
about what constitutes a ramp versus an inclined sidewalk. One 
commenter requested additional details for the design of the railing, 
such as height, material, presence of balusters/spindles, etc.
    One commenter stated that guardrails should be installed in elderly 
or disabled facilities only, and not in family facilities. One 
commenter suggested that HUD collect data to evaluate the costs 
associated with the proposed guardrail requirement, as it could impose 
significant financial burdens on certain properties, and HUD should 
perform a comprehensive assessment of the potential impacts of this 
proposal before implementation. The commenter indicated support for a 
guardrail adjacent to a ``walking surface,'' but not to an area of 
raised grass (e.g., single family home with a front yard where there is 
a low retaining wall by the sidewalk).
    HUD Response: HUD appreciates the commenters' feedback. Guardrails 
were added as an affirmative requirement in Sec.  5.703, so they apply 
to all housing covered by that section. In addition, all HUD-assisted 
housing must comply with accessibility requirements, where applicable, 
including Section 504, the Americans with Disabilities Act, and the 
Fair Housing Act. The Section 504 accessibility standards, which are 
the Uniform Federal Accessibility Standards or the 2010 ADA Standards 
for Accessible Design as specified in the Deeming Notice (79 FR 29,671, 
May 23, 2014), have certain technical requirements for guardrails 
(referred to as handrails under the Federal accessibility standards) 
for ramps. In general, trip and fall related injuries occur with high 
frequency across multiple age groups throughout the country. These 
injuries result in emergency room visits, life altering impacts and 
sometimes death. Installing guardrails in higher risk walking locations 
will decrease the risk for residents throughout the HUD portfolio. The 
deficiency criteria for guardrails are closely aligned with housing 
codes throughout the country. The deficiency criteria reflect 
observable conditions documented during extensive field testing and 
demonstration inspections. HUD is not including specifications for 
balusters or spacing for vertical railing within the guardrail due to 
variations in building code requirements over time across the HUD 
property portfolio.

Comments Regarding the Interior Lighting Requirement

    Several commenters were in general agreement with the proposed 
requirement. Two commenters expressed general agreement with the 
proposed requirement but opined that special considerations should be 
allowed for historic buildings or other special circumstances related 
to older buildings. One commenter agreed with the proposed requirement 
and added that similar consideration should be given to adequate 
illumination on interior stairs and to some extent on exterior 
entrances/stairs. The commenter further opined that a standard should 
be provided with respect to what constitutes proper lighting (e.g., 
lumens). One commenter stated that the rule should explicitly require a 
light fixture in the bathroom.
    One commenter stated that there are already HUD guidelines for 
lights installed in bathrooms and kitchens, and that they are also 
included in building codes. One commenter urged that if HUD moves 
forward with this requirement, consideration be given to existing 
properties which do not meet this standard and are not going through a 
substantial rehabilitation.
    HUD Response: HUD appreciates the comments regarding the safety and 
well-being of residents and quality of the HUD-assisted housing stock. 
Without artificial illumination, residents may not have a means of 
illumination at night when natural light is not available. Lighting is 
critical for safe egress during a potentially life-threatening 
emergency, allows people to see unsanitary and unsafe conditions, and 
thus leads to a healthier and safer living environment. Proper lighting 
also removes usability barriers allowing people to fully utilize the 
features of the built environment. HUD will take this feedback into 
consideration as it drafts the final Standards notice, which will be 
subject to further public comment.
    With respect to historic properties, HUD's position is that a light 
source in the kitchen and bathrooms is the minimum standard for health 
and safety and has added this as an affirmative requirement in Sec.  
5.703. In the rare case that a historic property designation would not 
permit a permanent light fixture in the kitchen and bathroom, the PHA 
or owner may apply to HUD for a waiver of this affirmative requirement. 
If the unit is occupied, HUD will suspend the correction timeframe 
until the waiver is reviewed.

Question for Comment #14: Risk-Based Annual Inspection Requirement 
Expansion

    HUD solicited comment on the proposed risk-based annual inspection 
requirement expansion from 2 to 5 years and received comments both for 
and against the proposal.
    Several commenters supported the proposal, noting that most 
properties are compliant with inspection standards and therefore do not 
need such frequent inspection. Another noted generally that the 
proposed 2-5-year inspection cycle would be reasonable and welcome. 
Several commenters focused on the relief the proposal would provide to 
high performers and low risk properties. Two commenters noted that the 
proposal's flexibility will allow PHAs to shift inspection capacity and 
resources

[[Page 30465]]

to properties, units and households with the greatest need, with one 
adding that the inspection process is very costly for PHAs and the 
expansion of the requirement from 2 to 5 years would be consistent with 
the ever-decreasing funding.
    Commenters specifically noted the appropriateness of the proposal 
in connection with self-inspections. Two commenters, in indicating 
strong support for the proposal, opined that paired with the annual 
self-inspection requirement, a risk-based inspection schedule would 
provide adequate oversight over the portfolio. Another commenter stated 
since HUD is adding an annual self-inspection requirement for its 
insured multifamily properties, project-based assisted properties, and 
public housing portfolio, this change is appropriate, and that 
expanding the time between risk-based physical inspections will reward 
high-performing properties, alleviate administrative burdens associated 
with inspections, minimize disruptions to residents and allow HUD to 
focus its resources on lower scoring properties that may require more 
oversight. One commenter, while supporting the proposal, urged HUD to 
leverage self-inspection reporting to require onsite inspector presence 
less often and recommended that HUD should maintain portfolio data 
through self-inspections that can continue to insulate against 
criticism of the condition of the portfolio.
    Conversely, multiple commenters were opposed to the proposed risk-
based annual inspection requirement expansion from 2 to 5 years, 
believing that such a change is not reflective of HUD's desire to 
improve oversight over assisted properties. These commenters generally 
felt that five years is too long between inspections and suggested a 
maximum interval of three years. Commenters stated that 5 years, and 
even 2 years, is a long time and a property may fundamentally change 
within that time, citing potential adverse occurrences within a five-
year timeframe, including high turnover in the industry leading to 
change in management or ownership, natural disasters, unexpected 
capital needs or discovery of environmental hazards, mold caused by 
water line ruptures, fire hazards, heating/cooling systems breakdowns, 
pest infestations, and hazards resulting from extreme weather events.
    A commenter stated that stretching REAC inspections out over a five 
year, rather than three-year maximum period, would be an extremely 
risky move, not warranted by any evidence that owners are suddenly more 
compliant with health and safety codes than they have been in the past. 
Another commenter noted that Public Housing and Multifamily housing 
properties are already in extremely poor condition, another agreed and 
stated that even one property with poor living conditions is one too 
many and urged HUD to catchup on its backlog of inspections and focus 
resources on the lowest performing properties. Another commenter noted 
that while inspections on a more frequent basis are arguably costly for 
housing providers, it is localities that often bear the brunt of the 
cost burden when a property is not adequately maintained--both through 
inspection costs and the cost to the community if residents lose their 
housing or are forced to relocate due to dangerous conditions.
    With respect to self-inspections, a commenter pointed out that 
self-inspections necessitated by the COVID pandemic were not 
appropriately diligent and that many units failed subsequent 
inspections, in some cases requiring relocation of tenants, and 
suggested that all units should have annual inspections for the first 
five years under this system in order to properly enforce the 
requirements.
    A commenter suggested that for the Multifamily Section 8 or PBRA 
programs, the Contract Administrators could be a second source to 
``inspect'' or follow-up on the units/property during years that an 
official REAC inspection is not performed and to verify POA self-
inspections and work order system efficacy, and that the combination of 
POA self-inspections (annually), Contract Administration MOR 
inspection/follow-up, and REAC Inspections would ensure the physical 
health of the property and safe, habitable unit dwellings for the 
residents, all within a 3-4 year cycle.
    A commenter noted specifically that the proposed rule also allows 
for changes in the inspection protocol to happen three years after 
implementation of previous changes to the inspection protocol, and that 
coupling five-year inspections with changes in the inspection protocol 
may result in a property being inspected under different protocols, 
calling into question the reliability of the assessment of the 
property's physical health.
    Several commenters provided mixed support for the proposal. One 
commenter noted that in addition to providing a strong positive 
incentive for POA performance, the prospect of less-frequent unit 
inspections is likely to be attractive for many residents, for whom the 
unit inspection can feel invasive and traumatic but also noted that the 
criteria for determination of inspection frequency, including the 
proposed risk assessment, will be crucial to ensuring this system both 
protects residents and provides incentives for strong performance and 
strongly urged HUD to work closely with stakeholders to develop these 
criteria, including publication of draft criteria for comment in the 
Federal Register. This commenter suggested that such criteria include 
not only the recent performance of the subject property, but also the 
POA's track record of performance at other HUD-assisted properties as 
well as the timespan since the property's construction or most recent 
renovation.
    One commenter expressed that increasing the number of years in 
between inspections should be looked at in the context of the annual 
self-inspection and how burdensome that process will be as well as the 
triggers for reinspection, and that the proposed rule is not clear 
around the reinspection procedures, and suggested that HUD should make 
clear that only an owner or manager of HUD housing may request a 
reinspection and HUD may determine whether it is advisable and should 
specify the grounds on which HUD will make this determination. Another 
commenter expressed general support for the proposal, suggesting that 
if the property is in good shape and has passed all previous health and 
safety inspections the time for the next inspection should be pushed to 
5 years, while cautioning that inspection intervals should always be 
based on the condition of the property and how well the inspections are 
conducted.
    Some commenters suggested specific metrics related to proposal. One 
commenter suggested that a property achieving a score in the 90s could 
be inspected every 5 years, in the 80s every 4 years, in the 70s every 
3 years, and in the 60s or below every 2 years. Another commenter 
suggested every 5 years for a score of 96-100; every 4 years for a 
score of 90-95, every 3 years for a score of 80-89, every 2 years for a 
score of 70-79 and annually for a score below 70. Two commenters 
suggested that 5-year inspection cycles should be reserved only for the 
highest-performing properties (90-100), with the inspection frequency 
increasing as the score drops by every 10 points. The commenters 
further suggested that HUD maintain the ability to override this 
schedule if needed, e.g., in the case of significant tenant-input to 
HUD that seems to indicate a poor building quality.
    A commenter noted that the risk of a major problem increases in 
older properties and suggested that an option may be to require regular 
inspection

[[Page 30466]]

every 1-2 years for older properties, and 2-3 years for newer 
constructions and that, intermingled throughout each period, it might 
be convenient to have less invasive, virtual home assessments which 
have the right sensitivity to capture health and safety hazards caused 
by major sudden events in the home.
    One commenter distinguished between Public Housing and HCV, 
recommending that for the former inspection should occur every other 
year on a pass/fail basis, and for the latter that the interval between 
inspections be no more than three years, and then only for landlords 
with a good history of maintaining their units.
    One commenter expressed that it would be best to implement an 
inspection schedule based on a risk-based method. Another commenter 
suggested that HUD should reform REAC's scoring system, improve tenant 
participation and otherwise adopt lessons learned from NSPIRE to secure 
housing improvements first, before considering the relaxation of 
inspection protocols.
    One commenter opined that HUD should give PHAs the discretion to 
define higher and lower risk categories, i.e., a PHA should have the 
ability to place in the high-risk category those property owners who 
consistently take multiple attempts to pass inspections and/or have a 
high number of abatements while those who consistently pass on the 
first attempt can be placed in a low-risk category.
    Three commenters expressed general support for the proposal but 
noted the need for additional details on how it would be put into 
practice. One commenter noted that under the current scheme properties 
that score 90 or over are scheduled for their next inspection on the 
3rd anniversary, while those scoring 80-89 are inspected on the 2nd 
anniversary, and those scoring 79 or less annually. The commenter 
questioned how HUD is proposing to spread the scores over a 1-5 year 
period. Another commenter opined that HUD needs to provide additional 
information about how they would evaluate whether PHAs qualify for a 2- 
to 5-year inspection cycle, and that it would oppose an extended 
inspection cycle based on requirements that include submitting all 
self-inspection results and related work orders to HUD, which would 
likely negate any resource savings achieved through an extended 
inspection cycle. Another commenter expressed that determining the 
criteria that HUD will use to decide whether a PHA qualifies for a 
longer inspection time period or not must be clear and attainable, and 
that if the criteria for a longer inspection time period is too 
stringent then the incentive PHAs have for expanded inspection periods 
would be decreased.
    HUD Response: HUD appreciates the comments on the timeline for 
inspections, and has gained valuable insight into this issue as a 
result of the ongoing COVID-19 pandemic. REAC UPCS inspections resumed 
in June of 2021 and the almost two-year break in third-party 
inspections proved to be too long for some properties with performance 
issues. Five years is a very long period of time to go without visiting 
a property and presents a risk to the tenants and the Department--even 
a high-quality property could degrade in that time. Therefore, HUD 
supports maintaining the current risk-based inspection requirements 
ranging from 1 to 3 years (3-2-1).
    For small rural PHAs the statute requires a three-year inspection 
cycle unless the PHA is Troubled. For PHAs that will continue to be 
assessed under PHAS and for multi-family properties, the inspection 
frequency would be either a 3-, 2-, or 1-year cycle based on the 
anniversary of the last inspection. HUD will continue to evaluate 
efforts to provide administrative relief to high performing properties, 
including the circumstances under which self-inspections may be 
accepted, through subordinate notices and additional public comment.
    With respect to the suggestion that the entire portfolio of Public 
Housing and Multifamily assisted housing be inspected annually for the 
first five years under NSPIRE, HUD does not consider it feasible to do 
so with current resources. Because HUD is declining to adopt an 
extended timeline of two to five years for physical inspections, there 
is no need to provide information about how properties will be 
assessed, the process for implementation, and what information will be 
considered to allow less frequent inspections of up to five years. HUD 
notes that small rural PHAs that are not troubled under 902.105 will be 
inspected every three years.
    HUD appreciates the feedback regarding self-inspections as it 
relates to risk-based annual inspections. HUD's risk-based approach 
seeks to balance administrative burden on owners and management and HUD 
will continue to review the appropriateness of self-inspection 
processes for its public housing and project-based portfolios in 
context with inspection timing. For the requirement for self-inspection 
reporting at Sec.  5.705, HUD has limited the collection of these 
reports to those properties that receive a score of less than 60. This 
aligns with the current process for Multifamily Housing programs. HUD 
will continue to rely on the results of independent, HUD-funded 
inspectors for scoring and to determine inspection frequency.

Question for Comment #15: Tenant Involvement

    HUD solicited comments on how tenants could be involved in 
identifying poor performing properties.
    Commenters asked HUD to provide more context around these ideas and 
how HUD would use these ideas so that the industry can respond in a 
more productive way. Some commenters opposed resident involvement in 
the inspection process, noting that tenant reviews, like consumer 
reviews, could be biased and unreliable and that disgruntled tenants 
may unduly influence inspection results, analogizing to 
disproportionate numbers of 1- or 5-star reviews for restaurants and 
products online. Commenters stated that tenant involvement would 
complicate the tenant-landlord relationship. For example, a tenant may 
give an unearned good review to gain favor with a landlord, or urge 
residents to participate in a survey prior to inspection could obligate 
property staff to please residents to get a positive review.
    Several commenters opined that tenant involvement in the inspection 
process is simply not needed, noting that inspectors are the best, most 
reliable source for inspecting and reporting on the property, that 
residents have always had the ability to notify HUD when their work 
orders or repairs are not completed in a timely manner, that owners are 
already required to inform residents of their rights to notify HUD of 
any such concerns, and that tenants are already adequately protected by 
local landlord tenant laws, by the REAC process generally and by the 
residents' relationship with the HUD Account Executive. As an 
alternative to an added review program, commenters urged that HUD make 
sure that the reporting systems work well to inform the appropriate HUD 
staff of conditions and to ensure that these resources are fully 
staffed and communicated to residents through multiple channels. 
Another alternative offered was that HUD explore ways to facilitate and 
clarify this complaint/enforcement process through the NSPIRE 
demonstration and intervene to enforce its physical standards and 
compel owner/agents (OAs) to resolve identified issues.
    Several commenters focused on the appropriate weight that should be 
assigned to tenant input, suggesting that resident reviews should not 
be given so

[[Page 30467]]

much weight as to disrupt the value of the random selection of units 
under the current scheme; that creating a separate inspection agenda 
that does not contribute to the final inspection result would create 
confusion; and that the results of tenant surveys should not increase 
or alter sample size, or affect the frequency of inspections. 
Commenters cautioned that an inspection not based on a statistical 
random sample is not a legitimate representation of the property's 
physical condition. A commenter noted that residents would only want 
units inspected that they feel illustrate deficiencies, another noted 
that pre-identifying units to be inspected would allow prior targeting 
of those units either by OAs or residents to influence scoring.
    Two commenters urged HUD not to turn the REAC inspection into a 
complaint-based inspection scheme and suggested investigation of tenant 
complaints should remain outside the purview of the REAC inspector.
    HUD received a large number of comments with respect to the use of 
tenant surveys, with several commenters suggesting that a proper survey 
to all tenants could yield higher-than-average concerns about specific 
deficiencies which HUD could treat as a factor among others in 
determining inspection frequency or intensity.
    Commenters advocating the use of surveys sounded several common 
themes: that HUD or its contract administrators administer the tenant 
survey to ensure confidence in the survey's independence; that tenant-
based questions should not be subjective and should include clear 
definitions for a rating system with significant training and 
administrative system to avoid subjectivity; that surveys solicit 
specific information so responses would be less subjective; that 
surveys include random, anonymous questionnaires to residents; and that 
the survey be accessible to persons with disabilities and include a 
paper option.
    Some commenters suggested a single, targeted question or short 
series of questions asked by inspectors to some residents during 
inspection, while another suggested an annual mailing to residents with 
a request to rate specific performance issues. A commenter suggested a 
simple, accessible tenant inspection form uploaded in a similar manner 
to owner self-inspection and on the same frequency/timeline. A 
commenter supported REAC's initial protocols (dropped in early 2000s), 
which required a Tenant Survey, by mail, of a sample of REAC-inspected 
properties; however, another commenter opined that this resident 
questionnaire was not representative of the property.
    Commenters recommended tenant surveys include questions about 
health and safety generally, water leaks, mold, insects such as 
bedbugs, rodents, lead-based paint, smoke detectors, carbon monoxide 
detectors, and other environmental hazards, management performance and 
treatment of tenants, the right to organize, and the existence of a 
working stove. A commenter suggested anonymized survey data be provided 
to properties to permit responses with respect to identified issues. 
Commenters suggested that tenant survey data (together with REAC 
scores) could be used by HUD to evaluate the accuracy of self-
inspections. A commenter suggested that survey information that 
identifies a life-threatening condition(s) should trigger an 
inspection.
    Commenters also suggested that tenants be allowed to recommend 
their unit for inspection. Commenters recommended adding five units to 
REAC's random selection if requested by a tenant organization. A 
commenter suggested that residents should be allowed to recommend homes 
for inspection as they are best positioned to direct HUD to conditions 
on the property, another opined that allowing tenants to designate 
substandard units for inspection will help offset the ``point loss 
cap'' bias built into the REAC system. A commenter suggested that an 
additional procedure to account for extra units inspected per resident 
request could be developed; one commenter suggested a resident council 
could work to ensure adding a more representative group of individuals' 
units to the inspection sample. A commenter supported the inclusion of 
units/issues subject to such enforcement action within the sample for 
the next REAC/NSPIRE inspection, to ensure ongoing compliance.
    HUD Response: HUD appreciates the comments related to tenant 
involvement in the NSPIRE inspection process. HUD regularly hears from 
groups representing tenants about how residents can be more engaged in 
the inspection process and sought comment through the proposed rule as 
a way of advancing this conversation and agrees that HUD should 
consider working through resident councils and tenant organizations, 
for example. HUD's process will be addressed further in a subordinate 
notice specifically on tenant engagement.
    HUD does not intend for resident feedback to supersede trained 
inspectors, nor does it intend to use resident ratings to score 
properties. HUD's intent in proposing a rating of 1 (poor) through 5 
(excellent) was to provide a mechanism for residents to identify 
additional units for inspection; however, HUD does not intend for these 
units to comprise part of the property score. HUD can direct owners and 
PHAs to repair identified deficiencies even if those deficiencies are 
not scored, because the requirement for housing to be maintained in 
accordance with 5.703 always applies. Based on public comment and other 
analysis, HUD will further evaluate scaled 1 to 5 responses as 
suggested in the question and other means of collecting tenant 
feedback. This aligns with comments about eliminating as much 
subjectivity as possible. HUD will also continue to explore tenant 
participation in an accessible manner to align feedback with potential 
deficiencies. The NSPIRE Scoring notice will provide more information 
about the sample that will be considered for the score. HUD agrees that 
professional inspectors are the most reliable source for assessing 
property conditions but believes tenant involvement in NSPIRE and 
feedback about the condition of properties is also very meaningful and 
should be taken seriously. HUD will continue to evaluate how the NSPIRE 
inspection process design best results in independent assessments of 
property condition while balancing a desire for more tenant feedback 
about property condition. HUD does not consider these two objectives 
mutually exclusive.
    HUD takes into account the potential administrative burden on both 
the owners and the residents and plans to add additional units to the 
NSPIRE inspection if they are requested by the residents. Additional 
details will be provided in the Administrative Notice. With respect to 
tenant-selected units in the sample biasing an inspector, HUD will 
consider ways to protect anonymity of personally identifying factors, 
such as unit address and number. HUD will also consider the suggestion 
that an inspection be triggered or when a survey identifies the 
existence of a life-threatening condition.
    HUD agrees with the comments regarding existing channels for 
tenants to report property conditions and engage with OAs and HUD 
Account Executives. HUD will look at ways to strengthen the existing 
operational protocols while exploring ways to expand tenant engagement 
in the NSPIRE process. Residents can also contact the State HUD field 
office.
    HUD appreciates the feedback suggesting strengthening existing 
procedures before adding tenant participation into the unit selection

[[Page 30468]]

process. HUD agrees that more robust communication about REAC processes 
and final scores could improve overall conditions of HUD-assisted 
properties. HUD also agrees with the sentiment of improving REAC 
through NSPIRE--and the demonstration program--to compel OAs to resolve 
identified issues. HUD believes that NSPIRE's focus on health and 
safety of the residents will lead to better living conditions and 
outcomes. NSPIRE procedures for inspections, scoring, and collection of 
resident-nominated units will be in the NSPIRE Administrative notice.
    With respect to comments about tenant-selected units influencing 
the overall inspection outcome and potential to turn into an 
alternative complaint process, HUD does not intend for tenant feedback 
to HUD to supersede existing work order and tenant complaint processes. 
HUD sees tenant involvement in the inspection process as an additional 
means to improve the overall quality of HUD-assisted housing by 
bringing the resident's voice to the table. HUD sees this as useful 
where random sampling falls short--e.g., it's possible that a random 
sample could completely miss units with infestation, and where pests 
are active only at night. Tenant involvement also provides an 
opportunity for HUD to ensure that known deficiencies raised by tenants 
are corrected. HUD will take into consideration the suggestions to 
engage Tenant Organizations, resident councils and other means to allow 
residents to select certain units to be included in the inspection 
sample, but these units will not impact the overall score, unless they 
were already randomly selected as part of the REAC inspection sample. 
HUD considered the suggestion that tenants to designate certain units 
for the inspection could help offset the ``point loss cap'' for system-
based scoring and ensure accurate deductions for deficiencies, but 
determined that resident-selected units would not be scored unless 
randomly selected as part of the inspection performed by HUD. 
Additionally, as provided in the proposed Scoring notice, 88 FR 18268 
(Mar. 28, 2023), HUD is proposing to eliminate point-loss caps allowed 
under UPCS.

Other Suggestions

    HUD received a number of additional comments regarding tenant 
involvement that relate to current REAC processes. Commenters 
recommended tenants be notified about REAC matters and results and 
given the opportunity to comment and that HUD remove the current 60-day 
limitation on the availability to tenants of REAC Reports, scores, and 
related correspondence. Commenters also suggested REAC inspectors 
should access local code reports in localities if available online, as 
well as summary work order reports that many management companies 
maintain to provide a REAC inspector with a quick overview of how many 
repairs were reported, how long it took to complete them, and tenant 
satisfaction. Commenters requested HUD require a meeting between a REAC 
inspector and any legitimate tenant organization before starting an 
inspection and allow a representative of any legitimate tenant 
organization to accompany an inspector if a tenant organization 
requests, but not into an individual unit unless invited by a tenant. 
Commenters also suggested that tenants should have the opportunity to 
trigger a REAC inspection when at least 25 percent of the residents, or 
the local government, request one.
    Other comments related to tenant involvement include a suggestion 
that HUD develop a separate and distinct program, with allocated 
funding and resources, to engage residents in evaluating their housing 
experience and the quality of their housing; that HUD require owners 
and agents to make tenants aware of reporting options, for example by 
requiring the phone number(s) to be posted or distributed with lease 
documents; and that HUD support tenants' right to organize and support 
building tenant association capacity by making $10 million annually in 
Section 514 funding to local nonprofit tenant assistance organizations. 
In connection with the last suggestion, commenters noted that Congress 
has made available funding through Section 514 of MAHRAA to provide for 
tenant organizing and capacity building, and HUD currently has 
available funding for this purpose.
    A commenter suggested that HUD resident feedback measures adopted 
for Multifamily and Public Housing could, in principle, be extended to 
any HUD-supported apartment complex, including RAD converted 
properties, Mod Rehab and PBVs.
    HUD Response: HUD appreciates feedback regarding communication with 
residents regarding the REAC inspection results, including the 
opportunity to comment and suggested participation of tenant 
organizations. HUD regularly publishes its REAC physical inspection 
scores on its website and will continue to do so. Tenants also have the 
opportunity to review the REAC inspection report after the score is 
finalized. The owner must make the physical inspection report and all 
related documents available to residents during regular business hours 
upon reasonable request for review and copying. Related documents 
include the owner's survey plan, plan of correction, certification, and 
related correspondence. HUD will take this feedback into consideration 
as it seeks to improve communication with HUD-assisted residents.
    The comment suggesting a separately funded tenant evaluation 
program in parallel with the REAC NSPIRE inspection process is outside 
the scope of this rulemaking.
    With respect to the suggestion that management provide HUD and REAC 
inspectors with summary work order reports for evaluation, HUD and/or 
its Performance Based Contract Administrators currently review work 
order processes as a component of their management reviews. HUD will 
take into consideration the suggestion to include evaluation of local 
code violations.
    Regarding the comment suggesting that HUD require owners to inform 
residents about their rights and responsibilities, specifically in 
regard to complaints and physical conditions, HUD programs already 
require Owner/Agents to inform residents of the procedures for raising 
complaints and the various appeals available if the landlord, 
management agent, or Housing Authority is unresponsive. HUD will 
nonetheless take this feedback into consideration as it looks at ways 
to reinforce tenant education.
    HUD appreciates comments on tenants' right to organize and supports 
building tenant association capacity but has not proposed changes in 
this rulemaking. Additional information about resident opportunities to 
provide HUD feedback will be provided in the NSPIRE Administrative 
notice and in a subsequent notice once HUD considers public and 
stakeholder burden. Comments about expanding resident feedback to other 
HUD-assisted programs, such as RAD conversions, Mod Rehab and PBVs, 
were shared with the program offices. At this time, HUD is not planning 
to require a resident feedback requirement in properties not inspected 
by REAC, as that would be new requirement and burden on PHAs and other 
owners that was not proposed. HUD will also take into consideration 
comments suggesting that appropriate triggers for an inspection should 
include when 25 percent of tenants request one.

[[Page 30469]]

Section 5.705 Inspection Requirements

Comments Regarding Sec.  5.705(a), Procedures

    A commenter suggested HUD extend the exception for Section 8 
housing in proposed Sec.  5.705(a)(3) to public housing, and that PHAs 
should be able to use variant inspection standards based on local 
building codes; otherwise, a PHA's inspection score may be adversely 
impacted even though the condition comports with local codes and has 
been determined to be safe.
    HUD Response: HUD appreciates this feedback. With NSPIRE, HUD 
intends to further align the inspection standards for the Public 
Housing and Multifamily portfolios, while acknowledging the Housing 
Choice Voucher and Project-Based Voucher programs have some unique 
qualities that are taken into consideration with variant inspection 
standards in Sec.  5.705(a)(3), as these are privately owned 
properties. HUD does not support expanding those to public housing 
because public housing does not have these unique qualities and under 
the U.S. Housing Act must meet HUD-defined standards for decent, safe, 
sanitary and in good repair. HUD recognizes that there may be 
situations in which a property comports with local codes, but still 
does not meet the standard for public housing. In those instances, HUD 
believes that the public housing must meet the higher NSPIRE standards.

Comments Regarding Sec.  5.705(b), Entity Conducting Inspections

    A commenter stated that in Sec.  5.705(b)(2), the reference to the 
voucher regulation should be corrected to reference Sec.  
982.352(b)(1)(iv).
    HUD Response: HUD thanks the commenter and has made this correction 
in this final rule.

Comments Regarding Sec.  5.705(c), Timing of Inspections

    A commenter suggested revising paragraph (c)(6) regarding Section 
232 facilities to require a case-by-case analysis, remove a 
``complaint'' as a basis of information received, and take into 
consideration whether the physical integrity of the project is at risk.
    Another commenter objected to changing the timing of inspection 
from being linked to the previous inspection date to being linked with 
the property's anniversary date. This commenter recommended amending 
paragraph (c) such that, during the transition from the current timing 
protocol to the proposed timing protocol, HUD requires the inspection 
to take place on the earliest of either the previous inspection date or 
the property's anniversary date, rather than delaying the inspection.
    HUD Response: While HUD appreciates the commenters' concern about 
the quality of assisted living, board and care, and intermediate care 
facilities, HUD does not agree with these suggested revisions to Sec.  
5.705(c)(6). This final rule tracks with current policy and allows 
flexibility where needed for special circumstances, such as complaints 
about assisted living and care facilities. HUD has the authority to 
inspect properties where there are concerns about the safety of 
residents or project preservation.
    With respect to the suggestion regarding inspection timing, HUD 
believes that the commenter misunderstood the meaning of 
``anniversary'' in the proposed rule. This was meant to still be linked 
to the previous inspection date, not to any other date. With the 
exception of small PHAs as described in Sec.  902.13(a), public housing 
properties will no longer be scored based on the fiscal year end for 
the portfolio and previous PHAS score, and properties will be assessed 
based on the anniversary and score of the previous inspection.

Comments Regarding Sec.  5.705(d), Inspection Costs

    Two commenters, while supporting a reinspection fee to increase 
accountability, urged HUD to clarify that it is not establishing a new 
reinspection protocol, only the ability for a fee to be imposed if the 
work that was reported complete is not in fact complete. The commenters 
further urged HUD to establish and maintain caps or benchmarks on 
reinspection fees to encourage reasonableness and standardization and 
to clarify whether the fee is authorized for Video Remote Inspections 
or only for onsite inspections.
    Another commenter suggested limiting the reinspection payment to an 
amount no more than $500, and also allowing such payment to be passed 
on to the household residing in the unit when the tenant has caused the 
damage at issue. A commenter noted that paragraph (d) does not provide 
for the imposition of such a reinspection fee on PHAs and suggested 
that the language should be amended to include PHAs.
    HUD Response: HUD appreciates the commenters' recommendations 
regarding reinspection fees but is not making these changes in this 
final rule. A fee cap could be problematic if this requirement is in 
place indefinitely and does not allow for inflation. Additionally, 
landlords and PHAs can collect fees for tenant-caused damages in 
accordance with their lease and policies and existing regulations. 
Adjusting a fee at the time it is assessed would create an additional 
burden. However, HUD took these comments into consideration in the 
subordinate notice for Administrative Procedures, which will specify 
the circumstances and details for re-inspections. For units in the HCV 
and PBV programs, HOTMA Section 101(a)(3) allows for the PHA to 
consider tenant-caused damage as a factor for HQS enforcement.

Comments Regarding Sec.  5.705(e), Access to Property for Inspection

    Commenters stated that giving a PHA a physical condition score of 
zero if the inspector is unable to access even one unit is unreasonably 
punitive, is a higher standard than the standard placed on other POAs 
and could lead to penalization for actions of residents beyond the 
PHA's control, such as where a tenant prevents an inspection or is ill. 
Another commenter suggested that HUD should not require access to an 
apartment where there is a sufficient number of similar apartments that 
the inspector can visit as alternates, as it is unreasonable to require 
all households to either stay home all day or have an adult present 
throughout the inspection, and that, in the alternative, inspectors 
should select a higher sample and larger number of alternate apartments 
or visit any additional units to reach the sample size required before 
providing a physical condition score of zero for the project. Another 
commenter suggested amending paragraph (e) to require reasonable 
advance notice of an inspection to the property owner.
    A commenter noted that the opening paragraph of Sec.  5.705(e) 
refers to HUD inspections of ``HUD housing,'' yet paragraph (e)(2) 
provides important details applicable only to public housing. The 
commenter suggested that paragraph (e)(2) should be revised to apply to 
all HUD housing.
    HUD Response: HUD thanks the commenters for feedback concerning 
access to the property, advance notice and conformity of language 
concerning HUD housing. Because these matters are related to scoring 
methodology, HUD will further specify its scoring methodology including 
how access to the property impacts the methodology by which HUD scores 
or assesses property condition through the forthcoming NSPIRE Scoring 
notice. HUD continues to believe, however, that property access is a 
fundamental component of independent assessment. HUD will similarly 
address the notice of inspections requirements for its NSPIRE

[[Page 30470]]

inspections under the forthcoming subordinate Administrative Procedures 
notice, but believes its recent, existing notice period (ranging from 
14-28 days) is reasonable. HUD declines the suggestion to include 
language in Sec.  5.705(e) requiring reasonable advance notice of an 
inspection to the owner in regulation and will continue to provide 
advance notice of inspections to allow PHAs and owners may comply with 
lease agreements that require reasonable notice for residents. In this 
final rule HUD has, where appropriate, revised ``public housing'' where 
it meant to state ``HUD housing'' in the proposed rule.

Section 5.707 Uniform Self-Inspection Requirement and Report

Question for Comment #16 and Question for Comment 17 Regarding Self-
Inspection

    HUD solicited comment on how the clarification to self-inspect all 
HUD housing units in certain programs would impact operations.
Comments Supporting Requiring Self-Inspection
    Many commenters supported annual self-inspections, noting that this 
requirement is a generally accepted best practice and it is good for 
HUD to make it a formal requirement. A commenter supported extending 
this requirement to any programs that do not currently require them; 
another noted that expanding the scope of the inspection across all the 
three inspectable areas will promote increased confidence in the self-
inspection process, on the whole. Commenters noted that the self-
inspection process has the potential advantage of decreasing the 
financial cost to HUD or the PHA of conducting a physical inspection.
    A commenter stated that the time cost to the property was worth it 
because self-inspections allow staff to catch maintenance issues that 
might otherwise go unnoticed or unreported by the tenant. This 
commenter noted that if the maintenance problem is severe or persistent 
it could negatively impact the health of the tenant or cause long-term 
physical maintenance issues for the building.
    Another commenter noted that a random unit selection like that used 
in a housing inspection cannot capture all maintenance issues, so it is 
important that the managing agent sees each unit firsthand annually.
    HUD Response: With respect to the self-inspection requirement, HUD 
notes that an annual self-inspection was already required for the 
Public Housing program at 42 U.S.C. 1437d(f)(3), and the requirement in 
the proposed rule was intended to mitigate gaps in inspections with the 
2-5-year REAC inspection time frame, to ensure that unit conditions do 
not deteriorate in between inspections. HUD has retained the regulation 
that added this requirement to properties participating in Multifamily 
Housing programs. HUD considered the burdens associated with submission 
of self-inspection results of all properties and decided not to 
implement the proposed regular submission of self-inspection results 
for all properties. The full process for conducting self-inspections 
according to the NSPIRE standards will be detailed in the NSPIRE 
Administrative notice.
Comments Regarding Third Party Self-Inspections
    A commenter cautioned against allowing a third party to complete 
self-inspections because allowing properties to shop for a friendly 
inspection company defeats the purpose of this potentially eye-opening 
tool. Conversely, another commenter suggested HUD require that annual 
inspections be conducted by a neutral third party, which often 
motivates PHAs and owners to finally address long overdue maintenance.
    HUD Response: HUD appreciates these observations concerning the 
pros and cons of third-party self-inspections and will take this 
feedback into consideration as it further refines and details the 
NSPIRE self-inspection requirements in subordinate implementing 
notices. HUD will design quality assurance processes to achieve a high 
degree of confidence in the quality and objectivity of all types of 
inspections conducted under NSPIRE.
Comments Regarding Implementation and Enforcement of a Self-Inspection 
Requirement
    Commenters had several questions about how HUD would implement a 
self-inspection requirement. Commenters suggested HUD provide a user-
friendly and intuitive public software tool to perform the inspections 
at the property level. A commenter suggested including a mechanism for 
triggering a direct electronic report to HUD where an inspection 
revealed serious deficiencies. Another commenter asked what computer 
hardware would be required to perform the inspection and advised 
against requiring expensive hardware.
    A commenter asked how property staff would be able to know all the 
rules that REAC NSPIRE inspectors are required to know, which the 
commenter stated may require training and technical knowledge.
    A commenter suggested self-inspection should be waived on years 
that an NSPIRE inspection is due to occur. A commenter asked how the 
requirements of a self-inspection approach align with a potential risk-
based model.
    Commenters urged HUD to provide details regarding the submission 
methods and self-inspection criteria that will be expected of owners 
and agents and urged HUD to carefully consider the feasibility of the 
new reporting requirements. A commenter cautioned that the process will 
not be efficient if owners aren't providing HUD with sufficient 
information in a usable format. A commenter noted that owners currently 
inspect different components of the unit during self-inspections, and 
flexibilities for COVID-19 have further adjusted self-inspection 
techniques. A commenter urged HUD to be transparent about what the 
submitted data/information will be used for and how it will be handled 
by the agency. A commenter urged the self-inspection protocol be as 
simple and intuitive as possible. A commenter recommended safe harbor 
guidelines around unit inspections, since issues such as tenants not 
allowing access often arise.
    A commenter urged HUD to weigh the benefits of a standardized 
approach, which would supply data to the agency and allow HUD to 
compare ``apples to apples'' in terms of the state of the portfolio, 
vs. the ease of submission or completion of this requirement. This 
commenter urged HUD to maintain the lowest lift possible for owners to 
complete the self-inspection and reporting requirements.
    A commenter urged HUD to make clear that the self-inspections can 
take place at any point throughout the year instead of all at once.
    Commenters suggested HUD could seek to rely on local code 
enforcement history for a property, which is frequently complaint 
driven. A commenter suggested HUD should also accept complaints by 
local legal aid offices, public health officers, or other entities who 
have observed poor housing conditions or potential violations of State 
or local code violations. This commenter supported the NSPIRE 
demonstration's requirement that local code violations must be reported 
to HUD by participants and suggested HUD expand it to other complaints 
received.
    A commenter urged HUD to utilize systems already in place for 
submitting information to HUD (e.g., the annual recertification 
process) or conducting

[[Page 30471]]

oversight (for example file reviews) instead of creating new systems 
for properties to submit self-inspection results to HUD. This commenter 
noted that if communities could simply document in the file that they 
have inspected 100 percent of units at any point throughout the year, 
or if they could submit a certification to that effect during the 
annual recertification process, it would eliminate the need to create 
new processes and systems.
    A commenter asked what ramifications a property would face for 
failing to complete an inspection to REAC's expectations and how REAC 
would know if a 100 percent inspection is valid and reliable 
statistically.
    A commenter asked how HUD will use information gathered from the 
self-inspections and what penalties housing providers could face as a 
result of the information obtained.
    Another commenter suggested HUD make clear that any submitted 
results of self-inspections do not have any bearing on a property's 
official property inspection score. A commenter urged that the REAC 
inspection should be the central evidence for that claim.
    A commenter suggested a self-inspection requirement must be coupled 
with an auditing process to verify the veracity of self-inspection 
reports. A commenter asked whether HUD has sufficient staff to review 
annual submissions from all covered properties. A commenter suggested 
HUD or PHAs verify self-inspection results when available, potentially 
every other year, but noted the administrative cost of doing so.
Comments Regarding Self-Inspection in Particular Programs
    Commenters urged HUD to consider the differences between inspection 
requirements for the Public Housing program and the HCV, PBV, Mod 
Rehab, and CPD programs. A commenter stated that HCV landlords, 
especially small landlords, would be unable to absorb the cost of 
additional self-inspection.
    A commenter suggested that the HCV, PBV, Mod Rehab, and CPD 
programs, which currently do not require self-inspection, should 
benefit from a reduction in risk-based annual inspections, similar to 
the 2-5-year inspection time period proposed for the Public Housing 
program. Other commenters stated that because these projects have 
annual or biennial unit inspections, they should not also have self-
inspection requirements. A commenter stated it appeared that 232 health 
care facilities would have NSPIRE inspections waived and asked if they 
would still be required to perform the annual 100 percent inspections.
    A commenter asked who HUD believes would be responsible for self-
inspections of voucher holder units. Commenters noted that since CoC-
funded rental assistance projects have annual unit inspections, an 
additional self-inspection is onerous on the subrecipient as well as 
the PHA that would have to track and monitor subrecipients' compliance 
to this new requirement and recommended HUD not extend the self-
inspection requirement to CPD programs.
    A commenter advised against requiring self-inspections in the HOME 
program, which has a significantly different regulatory framework than 
the covered programs.
    HUD Response: HUD notes that the requirement for a self-inspection 
was already a statutory requirement for public housing under 42 U.S.C. 
1437d(f)(3) and was proposed to be extended to other programs under 
NSPIRE, except for owners participating in the HCV, PBV, and Moderate 
Rehabilitation Programs under proposed Sec.  5.707. The final 
regulations include edits to clarify HUD's expectations for electronic 
submission only for properties scoring under 60 and retains the 
language that provides for additional notice with public comment before 
implementation. Generally, results of self-inspections will be used by 
HUD to monitor resolution of deficiencies and ongoing compliance with 
the NSPIRE Standards in failing properties, or those that score under 
60 points. Requiring them broadly for all properties will help PHAs and 
Multifamily Housing owners ensure properties are regularly monitored 
and maintained. Reducing reporting burden for these inspections serves 
to align the Public Housing program with existing procedures in 
Multifamily Housing Programs.
    HUD appreciates comments regarding the use of technology to 
facilitate self-inspection and swift transfer of information between 
the property and HUD. The Department is in the process of developing 
technology solutions and will take this feedback into consideration. 
Regarding concerns about the cost of hardware, HUD is developing a 
technology solution based off of the Salesforce platform. Inspection 
results will be uploaded via a phone, tablet, or computer--no 
specialized equipment will be necessary for the inspection, except a 
moisture meter as proposed in the NSPIRE Standards notice, if 
finalized. HUD also appreciates concerns regarding methods for 
uploading/transferring inspection data to HUD, inspectable areas, how 
data will be used, timing, and user experience of inspection reporting 
systems. HUD's REAC is developing new technology to help facilitate 
easy transfer of the inspection results without any specialized 
hardware.
    HUD agrees that adding this burden to small landlords participating 
in tenant-based programs may discourage landlords from accepting 
residents participating in the programs. PBV and moderate 
rehabilitation units are already subject to frequent inspections by the 
PHA, including PHA inspections resulting from tenant complaints. 
Additionally, the HCV, PBV, and Moderate Rehabilitation inspections are 
not numerically scored. Section 5.707 exempts owners participating in 
the HCV, PBV, and Moderate Rehabilitation Programs from self-inspection 
requirements. HUD declines to include Healthcare Programs, CPD-funded 
programs and Office of Multifamily properties that do not have an 
assistance contract at this time. The requirement to perform and upload 
an NSPIRE inspection would be a new burden for these programs.
    When HUD implements the self-inspection requirements, training 
opportunities will be provided along with the implementing notice. 
Self-inspections performed to comply with Sec.  5.707 shall be done in 
accordance with the NSPIRE Standards.
    With respect to the comment about waiving self-inspections on the 
same year as the NSPIRE inspection of record, HUD has not allowed this 
flexibility under the NSPIRE rule because it would conflict with the 
statutory requirements for public housing under 42 U.S.C. 1437d(f)(3). 
Revisions to Sec.  5.711(c)(2) allow PHAs and owners to fulfill this 
requirement in conjunction with the follow-up already required under 
that regulation.
    With regard to the comments regarding local code violations or 
input from local organizations, HUD continues to seek ways to 
facilitate information sharing with local authorities. HUD-assisted 
housing will continue to be subject to local code requirements as 
covered in the regulations, but local code violations will not be 
included in the NSPIRE Standards or scoring at this time.
Comments Regarding How To Involve Residents in Self-Inspection
    Commenters urged HUD to require the self-inspection be reported to 
residents and provided at no cost and also to add a provision providing 
a formal mechanism for residents to raise challenges to the HUD Field 
Office that must be investigated and addressed by

[[Page 30472]]

Field Office staff, requiring owners to cure any material deficiencies.
    A commenter suggested that the tenant and the landlord walk the 
unit together and sign certifying the results, which would allow PHAs 
to have a reward program for tenants and landlords with good track 
record of completing the universal inspection certification (UIC). 
Another commenter urged HUD to make clear that self-inspections do not 
need to have a tenant signature attesting to the inspection, because 
many inspections occur while the residents is outside the unit.
    A commenter urged HUD to implement the system allowing tenants to 
provide a ``1-5'' rating of their units, applied to categories 
including ``HVAC,'' ``water,'' and ``electrical,'' and recommended HUD 
aggregate these ratings for multi-unit properties to identify common 
issues at a single location. This commenter further recommended 
allowing feedback to be submitted both electronically and via regular 
mail to ensure involvement of all age demographics and avoid 
technological barriers.
    A commenter requested HUD require PHAs and Owners provide at least 
48 hours advance notice of inspections and notice of the completion of 
the inspection to residents and any present tenant organization, with 
information about the inspection that is accessible to the family.
    A commenter recommended that during COVID the resident can do a 
self-evaluation inspection distributed by the management/owner with 
work orders being generated for completion, noting that it would cost 
less money to know that repairs are done immediately and not allowed to 
cause further damage.
    HUD Response: HUD appreciates the suggestions related to tenant 
involvement in self-inspections but declines to implement them at this 
time. The self-inspection process will be spelled out in the NSPIRE 
Administrative notice, and HUD will provide an opportunity for tenant 
feedback in other areas of NSPIRE. There are formal procedures in place 
for residents to submit complaints regarding their property or unit and 
residents of HUD-assisted housing may call their local HUD office when 
they are unsure of how to navigate this process, as it varies by 
program. Public housing and HCV program residents can also bring 
concerns to their Board of Commissioners and attend board meetings. PHA 
Boards of Commissioners usually include at least one resident member. 
HUD also has field office coverage for every State and territory, see 
www.hud.gov/local.
Comments Opposing the Self-Inspection Standard and Suggesting 
Alternatives
    Commenters stated that a self-inspection requirement is 
unnecessary, stating that most owners already do self-inspections and 
take good care of their property, rendering a requirement unnecessary 
and burdensome for owners and managers as they familiarize themselves 
with yet another protocol of inspection and reporting, especially if 
the owner chooses to hire a third party; that there is no convincing 
rationale for why REAC needs this level of information or how they plan 
to use it; and that HUD's assumption that a universal self-inspection 
requirement would increase the quality of HUD-assisted housing is false 
because, were it true, there would be substantial differences in 
inspections scoring between Public Housing where self-inspections are 
required and other programs that do not require self-inspections. One 
commenter urged against new requirements being merely a ``signal'' and 
suggested new requirements must lead to improved outcomes which are 
predicted by data, particularly when there is no direct statutory basis 
for the requirement.
    Other commenters opposed the self-inspection requirement as too 
costly, noting the increase in administrative burdens on staff and the 
PHA itself. Commenters expressed concerns that a self-inspection 
requirement would cause capacity constraints to private landlords that 
rent to voucher holders, threaten the ability to recruit and retain 
landlords, and prevent these landlords from urgently addressing move in 
inspection issues A commenter opposed the requirement on the grounds 
that an annual self-inspection requirement might also be overly 
intrusive to tenants who are able to successfully care for their units, 
especially since many tenants in tax-credit properties also undergo 
inspections as part of tax-credit compliance.
    Other commenters expressed an inability to assess the magnitude of 
the proposed requirement without understanding the parameters of the 
self-inspection or self-reporting requirements.
    Commenters also stated that the proposed requirement would go 
beyond the Housing Act, which requires that PHAs ``shall make an annual 
inspection of each Public Housing project to determine whether units in 
the project are maintained in accordance with'' housing quality 
standards and noted the statute does not require that PHAs inspect each 
unit annually. A commenter noted that in a HUD Public Housing 
Management E-newsletter in January 2012, HUD recognized that Congress 
did not intend that every unit be inspected every year, and noted that 
using another method, such as inspecting a representative sample of 
units or inspecting historically problematic units more frequently 
allows PHAs to ``free up resources, especially those necessary to 
provide unit maintenance.''
    As an alternative, a commenter suggested HUD work with Congress to 
remove the annual self-inspection requirement to be replaced by the 
risk-based inspection protocol as established by HUD to further 
deregulate and devolve control of public housing units to their owners.
    Finally, commenters expressed concern that a self-inspection may 
not be effective if the inspector is not qualified to conduct a proper 
inspection and therefore will likely miss or misreport important 
issues. A commenter additionally expressed concern that housing 
providers might falsely self-certify compliance with lead-based paint 
certification and the remediation of defects.
    HUD received the following comments in response to HUD's request 
for alternatives to the self-inspection protocol.
    Two commenters stated that the current annual self-inspection is 
adequate. Another suggested HUD require PHAs to inspect each public 
housing unit once every two years, rather than annually.
    A commenter suggested HUD allow a documented entry for a 
maintenance purpose, during which a smaller scale inspection for safety 
hazards is conducted, to count as a self-inspection.
    A commenter recommended implementing a Quality Control program that 
would provide Healthy Homes Assessment capacity to PHAs to ensure 
uniformity/consistency in the way the PHAs identify, evaluate, 
prioritize, and manage the hazards found in the home and provide random 
QC-checks to inspected homes using a combination of on-site and virtual 
home assessments.
    Commenters suggested making the self-inspection protocol less 
burdensome. One recommended creating a self-inspection protocol that is 
the least burdensome possible, including no more than three categories, 
less than 5 sub-categories, and either paper or electronic submissions; 
another suggested HUD allow properties to simply document the 
inspections and work orders in the file instead of requiring the actual 
submission of an electronic report until requested by

[[Page 30473]]

HUD or monitored in an MOR. A commenter expressed concern over the 
submission of a self-inspection report, or a requirement that all a 
property's work order receipts for a rolling year be provided, as 
overly burdensome to property owners, and questioned what role the 
information will play in the REAC inspection or scoring.
    Commenters suggested that HUD limit the reporting requirement so 
that properties will only report on the Health and Safety Risks 
identified and corrected at property within a given year. These 
commenters noted a narrower scope will ensure that the NSPIRE 
requirements are practicable while providing HUD with data on each 
property's most critical maintenance activities.
    A commenter suggested that owners should not be allowed to self-
certify that they have addressed severe health and safety citations on 
the grounds that HUD should not trust the certification.
    Commenters suggested giving autonomy or options to residents to 
minimize the inconvenience or trauma of unit inspections, such as 
requiring 48 hours notice to residents before self-inspection, as well 
as allowing residents to opt in to doing a self-inspection, potentially 
with photo or video documentation. A commenter suggested allowing a 
resident to opt into less frequent inspections where historically the 
unit has been in very good condition. A commenter urged HUD to require 
that the annual inspections be no more than annual.
    HUD Response: HUD appreciates the thoughtful feedback regarding 
self-inspections, and that property owners, managers and PHAs 
understand their obligation to provide decent, safe, sanitary housing 
in good repair at all times. HUD agrees that regular inspections should 
be occurring in well-managed properties, and that annual self-
inspections should result in improved conditions and outcomes.
    The United States Housing Act of 1937 requires that all PHAs ``make 
an annual inspection of each Public Housing project to determine 
whether units in the project are maintained in accordance with the 
requirements.'' \13\ The requirement to perform an annual self-
inspection in public housing did not change with the NSPIRE rule; 
however, in this rule, HUD has added a requirement for self-inspections 
for housing participating in Multifamily Housing programs, and a new 
regulatory requirement to electronically transmit the results of self-
inspections for all properties that score less than 60. Collecting 
self-inspections of every unit is consistent with current Multifamily 
Housing policy.\14\ HUD disagrees that self-inspections are overly 
burdensome and unnecessary and reminds PHAs and owners that they should 
not rely solely on HUD's inspections to manage their properties. If 
self-inspections are occurring as part of routine operations, or for 
compliance with the Housing Act, a new regulation clarifying this 
requirement is not a new burden.
---------------------------------------------------------------------------

    \13\ 42 U.S.C. 1437d(f).
    \14\ See Housing Notices H 2015-02 and H 2018-08.
---------------------------------------------------------------------------

    HUD clarifies that self-inspections submitted to HUD should include 
all units. Inspecting every unit during a self-inspection (vs. 
sampling) was discussed in the preamble to the ``Uniform Physical 
Condition Standards (UPCS) and Physical Inspection Requirements for 
Certain HUD Housing'' rule published on September 1, 1998.\15\ While 
this final rule requires self-inspections for all properties on an 
annual basis, only properties scoring below 60 will be required to 
transmit a report with the results of the inspection to HUD. Self-
inspections submitted to HUD must also adhere to the NSPIRE standards. 
The process for performing a self-inspection and transmitting it to HUD 
will discussed in detail in a subordinate notice.
---------------------------------------------------------------------------

    \15\ 63 FR 46566.
---------------------------------------------------------------------------

    HUD is aware of the obligation on owners to certify to lead-based 
paint compliance through other processes and its limitation. These 
requirements are not included or changed in the NSPIRE rule. HUD agrees 
that results of self-inspection will not be used as part of calculating 
the physical inspection score, and instead will be part of the follow 
up HUD performs on properties that are failing, i.e., score below 60. 
This requirement creates an incentive for PHAs and owners to ensure 
their properties are maintained and in good repair. If HUD program 
offices or the DEC are following up on results, they may request 
additional documentation, such as work orders, but the regulation at 
Sec.  5.707 does not require that. For self-inspections, HUD continues 
to allow the use of remote video inspections as described in PIH Notice 
2020-31, which could be done in coordination with the resident. PHAs 
and owners should continue to follow lease agreements for notice to 
residents before an inspection occurs.
    HUD understands that residents are interested in the results of 
NSPIRE inspections and self-inspections, but because inspections 
contain detailed information down to the unit level, they may contain 
sensitive information. For example, residents with pest infestations 
may not want that information made public along with their unit number. 
Information from REAC-performed inspections will be available to 
residents as described in Sec.  5.711(h).
    HUD acknowledges the suggestion to include Mod Rehab, PBVs and 
other CPD-funded programs in the self-inspection requirement but 
declines to include such a requirement at this time. First, these 
properties are not scored as Multifamily Housing and Public Housing 
programs. Secondly, for the PBV and Mod Rehab programs, these owners 
work directly with PHAs and do not submit reports to HUD. Moreover, 
under CPD-funded programs such as HOME and HTF, grantees already have 
the flexibility to require self-inspection as part of their ongoing 
property standards. To minimize the burden of inspections, HUD has 
allowed flexibility to PHAs and owners to combine the self-inspection 
requirement in the years HUD performs an inspection with the follow up 
inspection in Sec.  5.711(c)(2). With respect to ``Healthy Homes 
Assessments'' and their use to identify, evaluate, prioritize, and 
manage the hazards found in the home, REAC collaborates with HUD's 
Office of Lead Hazard Control and Healthy Homes to help ensure 
inspections include hazards that can cause death, illness, and injury 
in residents, and intends to include many elements of a health and 
safety assessment in the NSPIRE Standards notice. HUD will require that 
self-inspections use the NSPIRE Standards so that results are 
consistent and can be compared to inspections performed by REAC. For 
quality assurance, HUD will provide information on the qualifications 
and training recommended for persons performing self-inspections. 
Additional details about the self-inspection process will be discussed 
in detail in the Administrative notice. This process will also allow 
PHAs and owners additional time to establish or modify a self-
inspection program.

Section 5.709 Administrative Process for Defining and Revising 
Inspection Criteria

Comments Regarding Updating Revisions to Inspection Procedures Every 3 
Years

    Commenters supported revisions of standards every three years to 
allow HUD to respond to the changing needs of an evolving housing 
portfolio. One commenter opposed any new changes to inspection 
standards and requirements

[[Page 30474]]

that are made outside of the Federal Register.
    Some commenters cautioned that HUD should avoid upending inspection 
standards every three years. One commenter, while supporting the 
transparency behind continual updates to standards on a 3-year cycle, 
noted concerns with respect to the impact on building systems and 
suggested that HUD should be mindful of costs and impacts on housing 
owners, managers, and tenants caused by significant updates and 
changes. Commenters suggested HUD adopt advisory scores and transition 
times for major changes to standards, and support properties as they 
make significant new upgrades, including when new standards are first 
implemented, and that stakeholders be given ample time to comment and 
understand the guidelines. A commenter recommended 30 days' notice 
prior to new procedures becoming effective.
    HUD Response: HUD believes that a periodic scheduled review of the 
Standards and Scoring Model will allow for iterative improvements to 
the NSPIRE inspection process, adapting to changing technologies and 
circumstances in our portfolio. The routine triennial revision process 
will allow for a public comment period of no less than 30 days in the 
Federal Register. HUD will take feedback related to advisory scores and 
transition times for major changes into consideration. Scoring under 
PHAS may have a transition period to be announced at a later date. 
Additional guidance will be in subordinate notices which will be 
published in the Federal Register and available for public comment.

Comments Regarding Emergency Revisions to the NSPIRE Standards

    Some commenters opposed the proposed changes to Sec.  5.709(a)(2), 
which would allow HUD to publish a notice implementing changes to the 
inspection standards without public comment in an emergency, defined as 
``a significant health hazard, a new safety concern due to changing 
construction technology, or another event as defined by the 
Secretary.'' One commenter stated that HUD did not provide an example 
of what changes would constitute an emergency under this definition, 
and urged HUD to provide a comment period for all significant changes 
made to the standards so that various stakeholders have an opportunity 
to weigh in. Another commenter suggested that no type of severe health 
or safety deficiencies, new safety concerns, or other events would 
necessitate the Secretary to publish a final notice without 30 days of 
public comment in the case of an emergency that permanently changes 
inspection standards and scoring methodology. This commenter suggested 
that the regulation should be amended to make it clear that any 
regulations published without notice and comment will be implemented on 
an emergency basis, time-limited, and subject to notice and comment 
prior to final implementation. Another commenter suggested that if HUD 
decides to proceed with emergency provisions without such a comment 
period, there must be a grace-period of at least 30 days for 
inspections that occur immediately following the release of the 
emergency revision, and that such deficiencies should not negatively 
impact a property's score for the first inspection which such emergency 
revisions are included. A commenter expressed preference for a 30-day 
public comment period on all published notices but understood health 
and safety emergencies require swift action.
    Commenters also noted that Sec.  5.709(a)(2) concerning emergency 
revisions refers only to public housing and suggested that the 
provision in the final rule should include all HUD housing.
    HUD Response: HUD thanks commenters for their suggestions about the 
process to announce and implement emergency provisions without public 
comment. HUD believes that there are types of LT and Severe concerns 
that would require an emergency notice, and as written in the final 
rule the provision is available for ``HUD housing'', or programs 
covered by this rule. When a significant health or safety hazard 
exists, allowing 30 days for public comment before taking corrective 
action may cause severe injury or loss of life. HUD intends to weigh 
the exigency of the situation in advance of decisions and limit 
provisions to a reasonable timeframe, or to the duration of the 
declared emergency. HUD may also consider notices that are final upon 
issuance but still include an option for comment.

Question for Comment #18: Definitions for Kitchens and Sanitary 
Facilities

    HUD sought input on whether and how it should define kitchens and 
sanitary facilities. HUD received the following responses.

Comments Regarding Whether To Define Kitchens and Sanitary Facilities

    Many commenters supported definitions for both kitchens and 
sanitary facilities, stating that definitions would ensure everyone is 
inspecting and providing the same standard across the board and that 
doing so would help eliminate ambiguity during inspections.
    Other comments opposed defining these facilities, suggesting they 
are already adequately represented by local building codes and any 
effort to standardize these definitions nationally could result in a 
discrepancy between HUD's definitions and State or local approaches. A 
commenter cautioned that defining these rooms could limit the number of 
units available to voucher holders and may risk owner participation in 
the HCV program if units do not meet HUD's proposed specifications.
    Other commenters had suggestions for both standards. Commenters 
suggested that HUD defer to local code or go no further than local 
code. One commenter stated that a definition should be defined by the 
number of fixtures, another stated that definitions should apply only 
to new construction or properties that are renovated, and only if the 
definitions match current building code. A commenter recommended that 
if HUD decides to amend or change these definitions, HUD do so in a 
uniform manner across programs; another suggested that the definitions 
used in the HCV program are reasonable and should be used as a guide 
for the purposes of NSPIRE.
    A commenter suggested that the definitions be broad enough to 
account for different types and eras of housing, such as variations in 
SROs, micro-studios, and older housing. This commenter noted the NSPIRE 
standards currently require kitchen ventilation or a range hood that 
filters air to the exterior, a building design that is uncommon in 
older homes and apartment buildings and which could be costly for some 
owners to upgrade.

Comments Regarding How To Define Kitchen and Sanitary Facilities and 
Their Related Components

    Commenters supported defining a kitchen and its related components.
    Commenters recommended that a kitchen be defined as having an 
approved cooking appliance (such as a stove or oven with overhead vent 
fan, range, or heating plate), a sink (with hot and cold running 
water), a refrigeration unit, and a garbage disposal, sufficient light 
and ventilation, and a minimum clear working space of 30 inches. A 
commenter cautioned that HUD should keep in mind the size of the units. 
A commenter recommended using the IPMC.

[[Page 30475]]

    A commenter cautioned that HUD should not define ``functional 
adequacy'' to allow stoves and refrigerators when they have outlived 
their ``useful life'' because residents should not be saddled with 
outmoded, unsightly, antiquated appliances that send a message that HUD 
tenants are ``second class citizens'' or that that HUD tenants do not 
deserve the best.
    A commenter recommended HUD provide some flexibility to ensure that 
units, like SROs for example, that do not have cook tops or other 
components typically associated with kitchens are not penalized if the 
unit does not come equipped with those components. A commenter urged 
HUD not to regulate by equipment type.
    Commenters supported defining a sanitary facility and its related 
components, noting that the quality of these facilities in closely tied 
to the ability of residents to be safe and healthy in their homes, and 
HUD should clearly identify its expectations for these critical 
facilities. A commenter stated that because bathrooms are more standard 
than kitchens, it is appropriate to define a bathroom in the standards.
    Commenters suggested HUD require a toilet, sink, and bathtub or 
shower in sanitary, safe working condition. A commenter noted that this 
would be consistent with the IPMC. A commenter noted that the bathroom 
should have hot and cold running water.
    Some commenters recommended a ventilation requirement to avoid 
mold. Another comment noted that many building codes across the country 
do not require bathroom ventilation, and as such ventilation should not 
be considered a component required for functional adequacy unless it is 
required by local codes.
    A commenter suggested standards should reflect appropriate 
standards for compact and micro units. A commenter suggested that a 
bathtub be replaced with only a way of washing that is not necessarily 
a shower or bathtub depending on the size of the unit. Another 
commenter suggested a sanitary facility should also provide privacy to 
those using the facility.
    A commenter opposed adding a definition for sanitary facility and 
stated that the inspectors are trained professionals and based on 
general HUD guidance should be able to assess each component/fixture 
normally tested during the NSPIRE inspection.
    HUD Response: HUD appreciates the diverse comments received on 
kitchens and sanitary facilities and agrees that there are variations 
in different types and eras of housing, and that some level of 
definition is needed. HUD will include definitions that align with the 
American Housing Survey in the Administrative notice. Further, all HUD-
assisted units should meet a minimum standard for habitability, but 
this definition could allow for some flexibility. HUD also reviewed how 
kitchens and sanitary facilities are defined in the American Housing 
Survey. As provided in the final regulation at Sec.  5.703(d) as an 
affirmative habitability requirement, kitchens must have a sink with 
hot and cold water, a cooking appliance, a refrigerator, food 
preparation area and a food storage area. Sanitary facilities must have 
a sink with hot and cold water, a bathtub or shower, interior flushable 
toilet and be usable in private. For the HCV and PBV programs, the 
regulations for Special Housing Types at part 982 subpart M will 
continue to apply.
    Outside of the minimum affirmative habitability requirements, the 
NSPIRE standards will also account for health and safety concerns 
related to kitchens and bathrooms, such as minimum ventilation and 
mold. Additional information on the individual components, their 
definition and functionality will be in the NSPIRE Standards notice, 
within the relevant standard (e.g., Bathtub and Shower Standard, 
Kitchen Countertop Standard).

Section 5.711 Scoring, Ranking Criteria, and Appeals

Comments Regarding Sec.  5.711(a), Applicability

    A commenter recommended HUD include a cross-reference to the 
Section Eight Management Assessment Program regulations in Sec.  
5.711(a).
    HUD Response: HUD notes that this cross-reference already existed 
in HUD's proposed rule. HUD is keeping this cross-reference at the 
final rule stage.

Comments Regarding Sec.  5.711(c)(1), Inspection Requirements

    A commenter objected to expanding what qualifies as an exigent 
health and safety deficiency in need of a 24-hour work order as 
unnecessary.
    A commenter urged HUD to provide a formal mechanism for residents 
to raise challenges to the certification and supporting evidence to the 
HUD Field Office that must be investigated and addressed.
    Commenters noted that the proposed rule's preamble stated that 
severe health or safety deficiencies would have to be addressed within 
24 hours, while other deficiencies would need to be corrected within 30 
days, but the text of paragraph (c)(1) only discusses severe health or 
safety deficiencies that must be ``mitigated'' within 24 hours and 
paragraph (c)(2) merely directs an owner to correct non-life-
threatening severe health and safety deficiencies ``expeditiously''--
not within 30 days. Commenters urged HUD to clearly require an owner to 
correct non-life-threatening severe health and safety deficiencies 
within 30 days. A commenter noted that establishing clear timelines for 
redressing deficiencies is paramount to health and safety of citizens, 
and noted that deficiencies may be regionally contextual, such as the 
failure of HVAC in a warm climate in summertime.
    Commenters objected to the term ``mitigated'' as it does not mean 
to eliminate or abate and recommended HUD use ``corrected or resolved 
or sufficiently abated.''
    A commenter recommended that HUD should state the party responsible 
for the physical inspection will provide the owner and PHA with the 
entire physical inspection report (electronically through the internet 
or by mail), which provides the physical inspection results and other 
information relevant to inspections, including all deficiencies, 
similar to the language currently in Sec.  200.857(c)(1).
    HUD Response: HUD is designing its NSPIRE standards with the goal 
of prioritizing the health and safety of residents. In this final rule, 
the term ``Severe Health and Safety'' is revised to LT to better align 
NSPIRE to the terminology and correction time frames in HOTMA. As 
described in the NSPIRE Standards notice, LT deficiencies are those 
that, if evident in the home or on the property, present a high risk of 
death or severe illness or injury to a resident. For the HCV and PBV 
programs, HOTMA also defines the response times for LT deficiencies to 
be corrected within 24 hours, and for all other deficiencies to 30 
days. Because different deficiencies will have different ways to 
resolve the deficiency, the expectation for what can be completed in 
these time frames will be adjusted, while still allowing for some local 
flexibility and discretion. For a LT deficiency in the context of 
Multifamily and Public Housing, ``corrected'' means that the PHA or 
owner has either completed all repairs, or at least controlled or 
blocked access to the hazard in a manner that it no longer poses a 
severe health or safety risk to residents of the property. HUD 
recognizes that to permanently repair some deficiencies, the PHA or 
owner may need additional time for a licensed professional or 
specialized supplies that may not be available in a 24-hour

[[Page 30476]]

timeframe. Guidance for correction timeframes and evidence that 
correction is complete is in the Administrative notice. Repairs will 
vary by the component and level of deficiency, and some mitigations 
will be approved on a case-by-case basis to meet the statutory and 
regulatory timeframes. For example, if a PHA has to procure specialized 
or certified trades professionals, it may take 30 days just to prepare 
a request for proposals and get approval from the Board of 
Commissioners.
    HUD does not agree that all non-life-threatening deficiencies can 
be completely resolved in 30 days or less and wants to retain the 
flexibility already available. Some deficiencies may be property-wide, 
require special expertise, and/or the services may not be readily 
available to fully address the deficiency. HUD also appreciates that 
some deficiencies may be exacerbated by local conditions, especially 
local climates, and this should be considered to ensure the health and 
safety of residents. For LT deficiencies, HUD has used the term 
``corrected'' to align with HOTMA. If the PHA or owner at least 
prevents or blocks potential harm to residents in 24 hours, more 
extensive repairs can be done over a longer time frame, with approval 
from HUD and as described in the NSPIRE Administrative notice. HUD can 
also allow temporary relocation of residents as a method to prevent 
harm to residents while repairs are completed. In some cases, temporary 
relocation of residents is required.\16\ Under Sec.  5.711(c)(1), the 
deficiency must be corrected, and owners and PHAs cannot simply block 
access in perpetuity. With respect to comments about providing the 
owner with a copy of the inspection report, HUD is developing 
technology solutions to provide quick, seamless transmittal of results 
to owners and agents.
---------------------------------------------------------------------------

    \16\ See, e.g., Sec.  35.1345(a)(2).
---------------------------------------------------------------------------

Comments Regarding Sec.  5.711(c)(2), Post-Report Inspection

    A commenter stated that submitting all work orders related to an 
NSPIRE inspection would be an unnecessary administrative burden and 
noted HUD did not provide a rationale for requiring this data or plan 
for how HUD would use it. This commenter questioned whether HUD has the 
capacity to review and respond to such a data flood effectively and 
consistently and asked if HUD is going to require PHAs/POAs to use a 
specific type of maintenance work order reporting platform.
    A commenter suggested Sec.  5.711(c)(2) should be modified to 
remove the extra post-inspection 100 percent self-inspection, noting 
that this is now a second 100 percent self-inspection and a REAC 
inspection in one year, and that three inspections in one year is 
burdensome to owners and managers.
    HUD Response: At the final rule stage, HUD has changed the 
reporting requirement to only apply to LT and Severe deficiencies, and 
offered flexibility to combine the self-inspection under Sec.  5.707 
with the post-report inspection described in Sec.  5.711(c)(2).

Comments Regarding Sec.  5.711(c)(4), Technical Review of Inspection 
Results

    Commenters noted in Sec.  5.711(c)(4) the language references 
``four sources of error'' but there appear to be only three sources. 
Commenters supported making the ``fourth source of error'' the 
currently entitled ``database adjustment'' and suggested it should be 
moved to this section.
    A commenter recommended HUD indicate that the basis for a technical 
review is a material error associated with the physical inspection 
score, and that building data errors, unit count errors, and non-
existent deficiency errors are types of material errors.
    A commenter suggested that paragraph (c)(4)(ii) be amended such 
that HUD's system of records do not actually need to be updated, but 
the owner only needs to notify HUD and request that HUD's system of 
records is updated, to account for situations in which it is not the 
owner's fault that the system is not updated.
    HUD Response: HUD agrees that the numbering of this part of the 
proposed rule was incorrect. HUD has corrected this numbering. HUD is 
also amending the final rule to restore the language for database 
adjustments in Sec. Sec.  902.24 and 200.857.

Comments Regarding Sec.  5.711(d), Technical Reviews

    A commenter supported the extension of technical review submission 
from the current 30 days to 45 days and the ability for electronic 
submissions. Another commenter opposed the change because the increased 
time period to submit a request for a technical review would unduly 
delay the remediation of deficiencies at properties, particularly in 
light of HUD not including a time period for which a PHA or owner must 
complete its survey of the property and remediation of any non-life 
threatening severe health and safety defects. This commenter also asked 
HUD to define what day will be considered the ``day of release'' of the 
physical inspection report.
    HUD Response: In this final rule, HUD has retained 45 days in Sec.  
5.711(d) for technical reviews. The technical review process should not 
delay the process to remediate deficiencies. LT conditions will still 
require correction in 24 hours. With regard to ``day of release,'' HUD 
has revised this term to be ``the day the inspection report is provided 
to the owner or PHA.''

Comments Regarding Sec.  5.711(d)(2), Request for Technical Review

    A commenter noted that currently REAC can issue a new physical 
condition score or keep the same physical condition score and asked why 
HUD needed to change this option. This commenter stated that in order 
to fully comment on this HUD should provide the parameters pursuant to 
which REAC will make these determinations and urged that REAC should 
only undertake a new inspection if the owner requests it. Another 
commenter urged HUD to accept for review any property's technical 
review regardless of the number of points at stake for any individual 
property.
    HUD Response: HUD appreciates the feedback and will discuss this 
matter in the subordinate Administrative Procedures notice.

Comments Regarding Sec.  5.711(d)(3), Burden of Proof That Error or 
Adverse Conditions Occurred

    A commenter agreed that the burden of proof should rest with the 
PHA/POA, but noted HUD has the obligation to carefully consider the 
evidence presented, to research and carefully examine the protocol, 
guidance and precedent, and to provide a response that lists what was 
considered and the reasoning for the decision so that the response 
serves as a teaching tool, providing insight about the deficiency in 
question, not just to those who requested the technical review, but to 
others as well.
    A commenter suggested all technical reviews and decisions need to 
be available and accessible to the public to provide residents the 
ability to know more about the final result of the inspection, serve as 
a teaching tool for PHAs/POAs who can see if there is any precedent for 
a deficiency they are attempting to appeal, and ensure a more 
consistent application of the protocol by inspectors who will be able 
to see if they are citing deficiencies that are non-existent. This 
commenter noted that REAC has rejected documentation and arguments that 
they previously accepted without any explanation as to the change in 
standards.
    A commenter recommended HUD should revise ``owner'' to read ``owner 
or PHA'' in Sec.  5.711(d)(3) for clarity.

[[Page 30477]]

    HUD Response: Details regarding burden of proof are included in the 
Administrative Procedures notice which will be published before this 
final rule is effective. HUD regularly used ``owner'' for either the 
PHA or Multifamily owner entity but has revised the regulations that 
apply to both PHAs and owners to indicate applicability more clearly.

Comments Regarding Sec.  5.711(d)(5), Significant Improvement

    A commenter asked how ``significant improvement'' is to be 
interpreted and noted that for any one property, even a 1-5 point 
improvement in a score might not move that property's ranking from one 
level (such as standard) to another (high performer), but can 
collectively within a portfolio improve the PHA's overall PHAS score.
    HUD Response: HUD agrees that moving a ranking level up (e.g., 
substandard vs. standard) is significant. The term ``significant 
improvement'' was included to ensure that PHA, owner and government 
resources are used efficiently. Additional details about the technical 
review are in the Administrative Procedures notice.

Comments Regarding Sec.  5.711(d)(6) Reinspection

    A commenter believed that HUD should bear the expense from 
reinspection where HUD determines that the reinspection is required, 
and suggested that if there is a threat to the inspecting party of 
bearing the cost if the new inspection score results in a significant 
improvement, then that inspection will not be impartial. This commenter 
also noted that if a PHA/POA has the threat of bearing the cost if no 
significant improvement occurs, that will have the effect of 
discouraging them from requesting the technical review even if they 
strongly believe there was an error.
    A commenter cautioned that an inspector could fail a site to get 
additional money from reinspection, and also that tenant-induced damage 
or a tenant's refusal to allow access could lead to a fail that 
management does not deserve.
    Commenters asked for clarification on what HUD considers a 
reasonable inspection fee. A commenter opposed HUD determining whether 
a reinspection is appropriate and suggested that the inspection occur 
only upon request from an owner or manager, and that HUD should make 
the inspection within 30 days of the owner's request.
    HUD Response: HUD appreciates the comments on issues surrounding 
reinspection and cost, but has decided not to change this language at 
the final rule stage. If a new inspection is undertaken by the 
inspecting party and the new inspection score results in a significant 
improvement in the property's overall score, the entity responsible for 
the inspection shall bear the expense of the new inspection. If no 
significant improvement occurs, then the owner or PHA responsible for 
the property must bear the expense of the new inspection. Owners and 
PHAs can collect reasonable fees for tenant damages through lease 
enforcement.

Comment Regarding Sec.  5.711(d)(7), Deficiencies

    A commenter suggested Sec.  5.711(d)(7) is punitive and the triple 
point deduction should be removed as it would bar earnest owners and 
managers from appealing or requesting reinspection.
    HUD Response: HUD appreciates the commenter's feedback and accepts 
this recommendation. The regulations include other enforcement 
mechanisms to ensure that deficiencies are corrected.

Comments Regarding Sec.  5.711(e) Independent HUD Review

    A commenter also suggested that ``modernization work in progress,'' 
which is a common ground for appeal for aged properties undergoing 
moderate substantial rehabilitations, should be grounds for independent 
HUD review. A commenter noted the language in the proposed text mirrors 
24 CFR 200.857(e)(1), but the proposed language does not include 
``owners'' and recommended HUD include ``owners'' in the proposed 
language along with PHAs to ensure clarity. A commenter also urged HUD 
to include the process and timing for requesting a score adjustment in 
the final rule for clarity.
    HUD Response: Modernization work in progress was previously 
included in Sec.  902.24(c) and was not included in the proposed rule. 
HUD has added this language at the final rule stage. The final rule 
keeps the proposed rule's requirement that a score adjustment request 
be made no later than the 45th calendar day following the release of 
the inspection report. Because the basis for the technical correction 
may be complicated, HUD has not provided a limit on the time it may 
take to review these requests. HUD intends to provide additional 
information on this issue in guidance.

Comment Regarding Sec.  5.711(f) Responsibility of Final Score and 
Publication of Scores

    A commenter stated there should be no reinspection mandated by HUD 
outside of the 2-5-year range or as required by statute and only the 
owner should be able to request reinspection. This commenter also 
suggested HUD should have clear guidelines around when and how it will 
grant a reinspection to requesting parties and noted that the new 
inspection score should be considered the final score only if the owner 
requested it.
    HUD Response: HUD appreciates the feedback but disagrees with the 
commenter's perspective. Reinspection can be a necessary tool for HUD 
to review score disputes and to conduct oversight at properties and 
ensure compliance with the regulatory agreement at the property. While 
having some guidelines around how reinspections will be conducted is 
appropriate, HUD needs to have the flexibility to make dynamic 
decisions to reinspect in response to emergency situations. Once a 
reinspection occurs the resulting score will become a score of record 
and will be made available to the owner.

Comments Regarding Sec.  5.711(g) Issuance of Final Score and 
Publication of Score

    A commenter stated it is unclear whether posting of the final score 
will be publicly available and suggested HUD must maintain 
confidentiality in terms of providing access to reports or ownership 
information and this should be clarified. Another commenter requested 
HUD correct Sec.  5.711(g)'s two references to paragraph (c), stating 
that both of these references should be references to paragraph (e).
    HUD Response: The final rule keeps the proposed rule's language at 
Sec.  5.711(g) that HUD will make final scores public on HUD's internet 
site or other appropriate means. Section 5.711(h) also provide a 
process for owners, managers or PHAs to notify residents of inspections 
and make the results available. HUD regularly publishes its REAC 
inspection scores on the HUD website for both Public Housing and 
Multifamily properties: www.huduser.gov/portal/datasets/pis.html. HUD 
program areas also maintain websites with certain data. The Office of 
Multifamily Housing regularly publishes REAC inspection scores here: 
www.hud.gov/program_offices/housing/mfh/rems/remsinspecscores/remsphysinspscores.

[[Page 30478]]

    Under Sec.  5.711(h)(2), tenants may request to view inspection 
reports after the 45-day appeals process is complete. Section 5.711(h) 
is based on and replacing the old Multifamily Housing requirement which 
was previously included in 24 CFR 200.857(g). HUD has corrected the 
citation to paragraph (c) to paragraph (e) and thanks this commenter 
for identifying this incorrect citation.

Comments Regarding Paragraph (h)(1), Notification to Residents

    Commenters suggested HUD require 7-days notice to residents before 
an inspection, with a minimum notice of 48 hours, or at least the time 
period proscribed by State and local law. A commenter noted that the 
current 24 hours is not enough time for residents to prepare their 
units or make appropriate arrangements.
    Commenters suggested owners be required to explain to residents the 
details about the inspection such as why it is happening, residents 
must be informed of their right to be present during an inspection, to 
identify problems to the inspector, to meet with the inspector prior to 
its start, and to designate a tenant representative to accompany the 
inspector on their rounds. Commenters recommended HUD prescribe 
specific, plain language for owners to utilize regarding REAC 
inspections, as it does for Section 8 Opt Out Notices, to mitigate this 
problem.
    A commenter suggested that HUD clarify that notification to 
residents must be done in accordance with the resident lease.
    HUD Response: HUD appreciates the feedback but declines to expand 
the language in this provision to include a 48-hour to 7-day 
notification window for unit/property inspection. Notification 
requirements are already included in leases and will vary by owner and 
program. In the Public Housing program, for example, the model lease 
requires at least 48-hours notice. HUD therefore declines to revise 
this requirement in this rulemaking.
    With respect to additional tenant guidance regarding the inspection 
process, this final rule does require owners and PHAs to post in the 
management office and on common bulletin boards availability of the 
final inspection report for review along with supporting documents and 
correspondence as specified in Sec.  5.711(h)(2). HUD continues to seek 
avenues to expand tenant participation in the NSPIRE inspection process 
which will be addressed in subordinate notices via the Federal Register 
and available for public comment.
    HUD supports the suggestion to include language that notification 
should also be in accordance with the resident lease, as this is 
consistent with current practices.

Comments Regarding Paragraph (h)(2), Availability of Documents for 
Review

    Commenters recommended that these documents should be provided at 
no additional cost. A commenter recommended HUD specify that documents 
available for review, including but not limited to the REAC inspection 
Report and related correspondence and the results of any re-inspection 
and appeals, should be available for residents to copy during normal 
business hours upon request.
    Commenters recommended owners and agents should be required to 
retain these documents for inspection or review by tenants or the 
tenant association for five years, not just the current 60-day 
limitation. A commenter stated this would echo the five-year retention 
and availability provision of the statute creating the Comprehensive 
Housing Affordability Strategy (CHAS), one of the statutory 
underpinnings of the Consolidated Plan. Another commenter recommended 
removing the time limit requirement entirely.
    HUD Response: As stated in Sec.  5.711(h)(2)(i) of this rule, 
tenants of HUD housing have a right to review and copy the final 
inspection report and related documents upon reasonable request during 
regular business hours. There is no cost associated with reviewing the 
documents. The rule language specifies related documents include the 
owner's survey plan, plan of correction, certification, related 
correspondence, appeals, reinspection, etc.
    HUD declines to mandate a longer document tenant-review period. 
Program record retention periods are determined in accordance with 
agency document retention policies and applicable Federal law. Because 
property conditions can change over time, inspections that are four or 
five years old may not still be current. Members of the public 
interested in older property inspection information from REAC can 
submit a Freedom of Information Act (FOIA) request to HUD.

Comments Regarding Paragraph (h)(3)

    A commenter asked for more details regarding the required date on 
which the notice must be posted and the duration of the posting.
    Commenters recommended HUD add that the materials provided by the 
owner for resident inspection should include the owner's certification 
that severe health and safety deficiencies have been abated within 
three days and the owners' materials should also be provided to any 
legitimate tenant association, as defined by HUD at 24 CFR part 245, 
subpart B.
    Commenters also recommended HUD require that the notices in Sec.  
5.711(h)(3) should encourage residents to comment directly to the HUD 
Field Office with the name of the responsible Field Office staff and 
their direct phone number and email address, and Field Office staff 
must acknowledge receipt of comments from residents with seven days of 
receipt and respond substantively within 14 days.
    HUD Response: HUD agrees and added a requirement that owners and 
PHAs post this notice within three days of the inspection. HUD also 
appreciates the feedback that the rule should require owner 
certification that severe health and safety deficiencies have been 
corrected. This final rule keeps language from the proposed rule that 
states that certification must be made available for tenant review and 
copying, which would include severe health and safety certification. 
HUD believes the final rule language addresses the commenters' concerns 
by keeping language from the proposed rule that requires that the 
owner's posts include the name, work address and telephone number of 
the HUD Account Executive and tenants are encouraged to contact HUD 
with any concerns or noted discrepancies.

Comments Regarding Sec.  5.711(i) Administrative Review of Properties

    Commenters recommended residents should receive notice and DEC 
should be obligated to consult residents when evaluating the property.
    Commenters recommend that HUD add that owners must post the notice 
regarding submission of the property for DEC evaluation and enforcement 
to tenants explaining what a below 30 score means, why the property has 
been referred, and what that implies. A commenter suggested the 
explanation must state that transfer of the file does not mean the 
subsidy will be terminated but is a process to address concerns and 
bring the property into compliance. A commenter suggested tenants and 
their representatives should be encouraged to submit their own comments 
to DEC, if they choose. A commenter noted it has often been the efforts 
of residents and advocates that have resulted in the preservation of 
assisted properties and improved housing conditions for families.
    A commenter recommended HUD amend paragraph (i) to clarify that 
documents, reports and correspondence

[[Page 30479]]

between the owner and DEC shall be made available to residents and 
their representatives, with the aim of including their input in DEC's 
analysis, recommendations and remedial action, before final decisions 
are made, consistent with Housing Notice 2018-8.
    Commenters supported paragraph (i)(2) but stated that DEC's 
analysis ``may'' include input from tenants, along with HUD, elected 
officials and others and requested should be changed to ``shall'', and 
that any subsequent site visit by DEC to the property include a meeting 
with residents and/or the legitimate tenants association, if any.
    A commenter recommended HUD clarify that ownership and management 
need 2-week advance written notice of DEC evaluation site visits.
    A commenter noted that the proposed rule did not incorporate 
important language about DEC's compliance and enforcement from 24 CFR 
200.857(h)(2) and (i) and urged HUD to include it, especially regarding 
supporting and relevant information and documentation, and the 
development of a compliance plan.
    A commenter suggested HUD should make information regarding 
enforcement actions taken by HUD publicly available and noted proactive 
residents and local advocates are essential to the type of efficiency 
HUD says it is seeking, such that HUD must publicly provide property-
level information regarding conditions, mortgage maturity dates, 
housing assistance payment contract expiration dates, and HUD's actions 
to enforce its programmatic requirements.
    HUD Response: Referrals to the DEC will be automatic for Public 
Housing and Multifamily Housing properties that score 30 or below. 
Properties receiving two successive scores of less than 60 may also be 
referred. Additional information about this process will be in the 
Administrative notice including a requirement that the PHA, owner or 
agent must provide a copy of notification of referral to the Department 
Enforcement Center to residents and certify it has done so by 
reasonable means such as leaving a notice under each door, posting in a 
mail room and on each floor, which is consistent with past practice 
outlined in Housing Notice 2018-08. HUD is not planning any additional 
notice or communication to residents or the public about referrals to 
the DEC, or information about the investigation and follow up, but the 
public has the right to submit a Freedom of Information Act Request. If 
a DEC review includes unit inspections, residents will receive 
notification in accordance with their lease. HUD declines to include a 
two-week notification requirement to owners and PHAs in regulation for 
site visits. HUD acknowledges the role tenants and advocates play in 
identifying conditions in housing and advocating for repair and 
preservation of existing affordable housing but declines to require 
that all administrative reviews include tenant input by adding 
``shall.'' HUD believes that the addition of tenant participation into 
the REAC inspection process via the NSPIRE final rule gives residents a 
substantive feedback apparatus and that additional tenant participation 
during a DEC referral should be at the discretion of the DEC after 
consultation with program offices. Additional administrative procedures 
will be provided in a subordinate notice. This notice will include 
guidance on supporting and relevant information and documentation and 
the development of a compliance plan.

Other Comments Regarding Sec.  5.711

    A commenter suggested HUD remove ``significant'' from ``significant 
improvement'' in paragraphs (c)(3) and (d)(2), and other instances. 
This commenter stated there is no intent to waste the Department's time 
with appeals and to make an appeal takes time and resources from the 
owner or manager appellant, such that this is a sufficient bar to 
frivolous appeals. This commenter noted that under the current scoring 
system, it is not simple to ascertain whether different appeals will 
result in improvements to the score and going from a 29 score to a 
score of 32 may not be ``significant'' in terms of scoring, but is 
significant enough to withdraw a trigger for DEC referral. This 
commenter noted that increasing your score from a 59 to a 61, while not 
being a ``significant'' improvement in score, does take an owner or 
manager from ``failing'' to ``passing.''
    A commenter recommended generally that tenants, legitimate tenant 
associations, and their representatives be given Notice, Comment and 
Appeal rights parallel to owners and agents, at each step of the REAC 
process and requested that HUD recognize this explicitly at each step, 
and allow tenants to post comments and photos electronically and/or in 
writing, in response to each stage, from initial inspection report; a 
final report after technical appeals; and an owners certification that 
severe health and safety citations have been addressed.
    A commenter recommended HUD set a stationary scoring threshold to 
be used to refer properties to the Departmental Enforcement Center 
(DEC) and retain HUD's ability to send properties scoring higher than 
the stationary threshold to DEC so that HUD sets clear expectations for 
the owner, residents, and advocates regarding what will trigger HUD's 
enforcement action. This commenter noted HUD's current enforcement 
practices for specific properties are often inaccessible or unknown to 
residents and advocates. This commenter stated that the stationary 
scoring threshold should not be lower than 30 and suggested HUD also 
consider if properties scoring at the specified threshold generally 
have numerous life-threatening severe health and safety deficiencies, 
have difficulty correcting the defects within the HUD given timeframe, 
have difficulty substantially raising their score in the subsequent 
inspection, and have numerous State or local code violations.
    HUD Response: HUD appreciates the feedback but declines to 
implement the suggested revisions with respect to use of the term 
``significant'' in paragraphs (c)(3) and (d)(2). This language was 
added to discourage owners and PHAs from requesting technical reviews 
that will likely not result in substantial change to the score. In 
drafting this regulation, HUD considered current Federal resources and 
the administrative burden that technical reviews require and 
establishes a basis for HUD to decline a request.
    With regard to expanding tenant participation in the appeals 
process, HUD will continue to explore the appropriate ways in which to 
engage tenants in the NSPIRE inspection process outside of what is 
already included in Sec.  5.711(i)(2). Adding a required tenant element 
to this process would be administratively challenging for HUD, the DEC, 
PHAs and owners and could delay case resolution. Consultation with 
residents will remain as an option under the regulations. Tenant 
participation outside of administrative referrals will be outlined in 
future subordinate notices published in the Federal Register.
    The scoring threshold for DEC referrals will be 30 and under, and 
properties that score under 60 in two successive inspections. The 
language in Sec.  5.711(i)(1) and (3) has been revised to reflect that 
this process will include both Multifamily housing programs and Public 
Housing and the relevant HUD program offices. The addition of 
properties with scores of less than 60 in two successive inspections 
matches the current process outlined in Housing Notices H 2015-02 and 
2018-08. HUD notes that an administrative referral to the DEC is not 
the only way HUD's program offices follow up on physical deficiencies. 
Staff in HUD's program

[[Page 30480]]

offices, field offices and the Performance-based Contract 
Administrators (PBCAs) also do this oversight and follow-up. HUD will 
take this feedback into consideration as it details administrative 
procedures in subordinate notices.

Question for Comment #19: How To Approach Tenant-Induced Damage

    HUD solicited comment on how to fairly approach tenant-induced 
damage and received the following responses.
Comments Regarding Problems Caused by Tenant-Induced Damage
    Commenters noted that tenant-induced damages can be expensive and 
often go unreimbursed. A commenter stated that HUD has long been aware 
of the problem of tenant-induced damage and should have acted long ago. 
Commenters noted HUD's intended update to inspectable areas would 
increase the weight of in-unit scoring, which has the potential to 
significantly increase the impact of tenant-induced damage on the 
scoring.
    Commenters stated that the biggest problem with tenant-induced 
damage isn't the cost of repair but being penalized by HUD for the 
damage. A commenter noted that most repairs can be easily handled in 
due course, another noted that tenant-induced damage can be inside and 
outside the unit.
    Commenters noted that properties are often not aware of tenant-
induced damage and that scoring physical deficiencies caused by tenants 
forces owners to invade residents' privacy to check for tenant-induced 
damage.
    A commenter identified the following as types of tenant-induced 
damage: (i) deficiencies for blocked egress where a tenant has moved 
furniture in front of doors and windows, even after owner or its agent 
has requested that the item be moved and verified that it was moved; 
(ii) resident installed fans and air conditioning units; (iii) improper 
storage of items in the oven by residents; and (iv) condition of tenant 
owned appliances over which the owner has no control.
    A commenter stated that owners and managers often use ``tenant 
induced damage'' as an excuse to avoid responsibility for ordinary wear 
and tear, or other damage not induced by the tenant to pass along 
charges to tenants, and to harass tenants. This commenter noted that 
owners and agents blame tenants for mold in their units, when the mold 
is due to the presence of moisture caused by water leaks and poor 
ventilation. This commenter stated that owners and managers seek to 
foist on residents charges through questionable ``House Rules'' for 
items which should be part of the ordinary maintenance of the property 
such as lightbulb or lock/key replacement. This commenter recommended 
HUD investigate this matter further and carefully construct future 
rules on this matter with consultation from tenant leaders and legal 
service agencies.
Support for HUD's Current Method of Handling Tenant-Induced Damage
    Commenters stated that HUD should not treat tenant-induced damage 
differently because tenant-induced damage is still damage and an 
indicator of a problem that needs to be addressed by property 
management.
    Commenters stated that sufficient protections are already in place, 
noting that: tenant-induced damages are already addressed by current 
regulatory provisions under family obligations which covers 
disincentives and program termination; the owner already has the right 
to pursue damages against the tenant; many housing authorities already 
include tenant damage charges in their ACOP and in their standard 
leases; properties can collect security deposits, and properties can 
have systems in place to deal with extraordinary damage caused by 
tenants.
    HUD Response: HUD understands the commenters' concerns about the 
potential impact of tenant-induced damage on costs, scoring, and the 
burden of additional owner/management inspections. The Department also 
appreciates the comments and concerns about normal wear and tear and 
ownership responsibilities of maintaining units. PHAs and landlords can 
use policies and lease enforcement to prevent and collect fees for 
tenant damages. With the addition of affirmative habitability 
requirements in Sec.  5.703(d) there is a clear expectation that the 
landlord is responsible for certain elements of the unit. If there are 
tenant-owned items cited in the inspection, the PHA or owner can 
request a technical review.
    For units in the HCV and PBV programs, HOTMA provides that if a PHA 
determines that any damage (other than any damage resulting from 
ordinary use) was caused by the tenant, the agency may waive the 
applicability of the housing quality standards, except as it applies to 
the tenant. As HUD progresses with notices around Scoring and 
Standards, the Department will continue to seek to strike a balance to 
hold all parties accountable to their responsibilities outlined in 
their respective contractual documents and HUD guidance in caring for 
and maintaining units.
    HUD generally agrees with the sentiment that damage, regardless of 
the source, must be addressed and that excessive tenant-induced damage 
may also indicate problems with property management and enforcement of 
lease provisions and house rules. Lease agreements and security 
deposits are essential vehicles for managing these issues.
Comments Regarding Incentives
    Several commenters stated that landlords should use existing tools 
to handle tenant-induced damage. Commenters suggested that property 
owners should hold residents accountable for severe damage to units by 
issuing lease violations, going through mediation, charging for the 
damages, terminating the tenancy, and evicting tenants. Commenters 
recommended that properties use minimum monthly repayment agreements. 
Commenters suggested that providing a list of potential charges at 
move-in might help discourage a tenant from damaging the unit beyond 
normal wear and tear; one commenter suggested properties serve a 3-day 
notice to quit in situations where the amount of damage is equal to a 
year of rent.
    Commenters recommended several incentives to tenants for 
maintaining their units, including: a gift card for the best kept unit 
administered by the management/owner, yearly community awards, 
privileges, recognition ceremonies for the apartment/unit/block/
building kept in best conditions, rent incentives, a small saving 
account with deposits for taking care of units, or a new microwave. 
Other commenters noted that the incentive to maintain the unit should 
be the opportunity to live in the unit, and most do maintain their 
units. A commenter suggested that owners and PHAs can establish 
incentive programs if they want to.
    A commenter noted that non-MTW PHAs do not have funding flexibility 
to provide creative incentives outside of current regulatory provisions 
and funding levels; another noted a disincentive requiring residents to 
pay additional charges due to damage and neglect would not work because 
residents would not be able to afford to pay.
    HUD Response: HUD agrees that owners and agents must abide by their 
rights and responsibilities which includes enforcing lease provisions 
and house rules and PHA policies alongside of their responsibilities to 
maintain the physical condition of the property. PHAs and owners can 
ensure that

[[Page 30481]]

residents are aware of policies, understand their responsibilities, and 
collect reasonable fees for damages. PHAs and owners can also stay 
abreast of property conditions with regular inspections and the annual 
self-inspection process included in NSPIRE. HUD also agrees that 
additional punitive financial charges above what is allowed in the 
lease provisions and security deposit administration would likely not 
be an effective means to discourage tenant-induced damage.
Comments Regarding How Inspections Should Take Into Account Tenant-
Induced Damage
    Commenters stated that tenant-induced damage should not be scored 
against an owner or PHA. One commenter stated, in the alternative, that 
tenant-induced damage should result in the minimum point deduction; 
another suggested that tenant-induced damage should count only if the 
PHA failed to address it. Commenters suggested adding an appeal option 
to allow demonstrating that damage is repeatedly caused by tenants and 
repaired by the owner. A commenter suggested that if the owner can show 
the tenant caused the damage, the owner should not be sanctioned or see 
score reductions through the NSPIRE process.
    Commenters suggested that HUD should use an advisory approach which 
allows properties to remove deficiencies for superficial damage that is 
likely to have occurred in the days immediately preceding the 
inspections, or if the damage was not reported to the property by the 
tenant, if the owner submits work orders showing the repairs within a 
certain number of days following the inspection. A commenter suggested 
that inspectors negate any point deductions where the housing authority 
can provide documentation to substantiate resident noncompliance as is 
often required when these lease infractions are taken before local 
courts.
    A commenter suggested that HUD allow a property to negate points if 
they can identify a significant number of such deficiencies 
attributable to an individual unit that are not present in other units 
in the sample and are otherwise unreflective of the property condition. 
A commenter suggested an inspector should be given latitude to assign 
blame for damage to a resident and not the property management. Another 
commenter suggested that a property could gain points back based on 
especially pristine condition of a property.
    HUD Response: HUD appreciates the feedback but disagrees with the 
comments suggesting that tenant-induced damage not be scored as part of 
an inspection. HUD believes this approach would be overly subjective as 
it is not always clear what damage may be tenant-induced versus normal 
wear and tear. Additionally, inspectors would not be able to account 
for poor property management or other potential factors. Scoring should 
reflect the overall condition of the property regardless of the source 
of the damage, and inspectors will not be able to fully assess and 
determine responsibility for damages while onsite. With respect to the 
comment regarding pristine properties, HUD believes NSPIRE will result 
in scores that accurately reflect the health and safety of a property. 
If a property is pristine, it will be reflected in the inspection 
score.
Other Suggested Changes
    Commenters recommended that HUD support lessor rights under the 
lease. Other commenters recommended that the HUD lease be modified to 
include language such that the lease is more enforceable regarding 
property damage.
    Commenters made several additional specific recommendations with 
respect to tenant-induced damage, including: that HUD clearly define 
``tenant-induced damage,'' provide guidance on what timeline is 
appropriate for tenant-induced damage, and provide guidance on what 
legal recourse is available to the owner; that HUD make distinctions 
between tenant-induced damage and wear-and-tear and provide clear 
examples; and that tenants receive training on how to maintain their 
home and how the condition of their home impacts their health and 
safety.
    Commenters recommended HUD allow the collection of a security 
deposit or increased security deposit that can cover damages, with one 
commenter noting that many programs currently have a limit on what can 
be collected. A commenter requested that HUD permit payment of surety 
bonds in programs where payment of security deposits is an eligible 
program expense which would result in a cost-savings to the tenant and 
the program, and would protect the asset to a greater degree for less 
cost than a traditional security deposit.
    A commenter suggested that tenant-induced costs should be 
reportable similar to debts owed to PHAs. Commenters suggested that 
tenant-induced damage could be a sign that the tenant needs additional 
resources from HUD such as resident service coordinator assistance, or 
help with behavioral or other problems.
    Commenters suggested that PHAs should have the discretion to 
disallow transfers both within the program and between programs (from 
Public Housing to HCV for example) if the tenant has caused damage. A 
commenter suggested HUD explore reduced utility reimbursements, or 
ineligibility to receive utility reimbursements, for tenants who cause 
damage.
    A commenter recommended that HUD require notice and opportunity to 
respond, with copies to HUD, to tenants who are assessed charges or 
fees for alleged ``tenant-induced'' damage. A commenter suggested HUD 
conduct listening sessions with both tenant and owner stakeholders on 
this topic to determine the best path forward.
    HUD Response: Regarding comments on lessors and the lease, HUD 
supports a balanced approach where all parties to the lease agreements 
understand their rights and responsibilities. HUD appreciates the 
feedback on providing further clarification and guidance on tenant-
induced damage. Regarding HUD's ability to provide guidance on legal 
recourse, State and local jurisdictions administer landlord-tenant laws 
and eviction processes vary by jurisdiction.
    Regarding resident training or service coordinators, HUD encourages 
Multifamily owners and agents to speak with their Account Executive 
about service coordinator funding opportunities and eligibility. HUD 
also encourages owners and agents to explore local social service 
providers who may help assisted residents with housekeeping skills. Any 
participation with social services must be voluntary, and providers 
must comply with nondiscrimination laws.
    With respect to suggestions related to security deposits, surety 
bonds, debt reporting, and punitive responses to tenant-based damage, 
HUD believes these program issues are beyond the scope of this rule.
Insufficient Information
    A commenter stated that due to the weight HUD will place on unit 
condition, there is insufficient information about how HUD will address 
tenant-created issues.
    HUD Response: REAC inspectors will not consider whether tenants 
caused the damages that lead to the deficiency, because they will not 
be able to fully assess and determine responsibility for damages while 
onsite. For the HCV and PBV programs, however, the PHA may provide more 
flexibility to owners as provided in a future HOTMA rulemaking. HUD 
will publish a Scoring notice before this final rule becomes effective.

[[Page 30482]]

Question for Comment #20: Scoring Threshold for Referring Properties to 
the DEC

    HUD sought input on the scoring threshold to use for referring a 
property to the Departmental Enforcement Center. HUD received the 
following responses.
Factors To Consider
    Commenters recommended HUD periodically review its referral system, 
and a commenter recommended this review be in consultation with tenants 
and other stakeholders. A commenter recommended HUD develop a threshold 
that includes automatic referral to the DEC when certain significant 
issues are discovered, such as: structural concerns, severe roof 
conditions, foundation failure, significant water intrusion, or severe 
exterior dilapidation or deterioration. Another commenter recommended 
that HUD consider building code violations, abatements and emergency 
fail items.
    A commenter recommended that HUD elaborate that the DEC may include 
input from residents in its analysis of the property, noting that 
tenants have not been able to consult with the DEC recently and that 
FOIA requests to the DEC for a copy of REAC report and scores have 
denied on the grounds that the referral is a ``judicial proceeding.'' 
This commenter noted that this type of consultation is important to 
ensure that HUD pursues the proper remedies and pursues termination or 
abatement only as a last resort option, by seeking input from residents 
as to the most appropriate remedy.
    HUD Response: HUD will take the input regarding its referral system 
and factors that it should evaluate in its administrative referrals to 
the DEC into consideration. The basis for referrals under NSPIRE will 
be the property score. More information on the scoring process will be 
provided in the NSPIRE Scoring notice. Section 5.711(i) covers 
administrative enforcement of the NSPIRE Standards and regulations, 
which may include elements of structural concerns, severe roof 
conditions, foundation failure. Other building code violations that are 
not in the NSPIRE Standards would not be enforced by HUD unless 
specified in HUD program regulations (e.g. 24 CFR part 92 for HOME and 
24 CFR part 93 for HTF). HUD will consider better information sharing 
with State and local code enforcement agencies. Regarding sharing of 
information under review by the DEC, many areas of enforcement are 
exempted under FOIA. HUD will provide other avenues for resident input 
and notification through its field offices. Where there are direct 
impacts to residents--such as a need for temporary or permanent 
relocation, there are other resident notification processes in other 
HUD regulations. That process is not part of the NSPIRE rulemaking.
Point Based Referrals
    Commenters recommended that HUD keep the DEC threshold as stable as 
possible and maintain the 30-point automatic referral and the 31-59 
optional referral, paired with the additional requirements of owners 
below the 60-point threshold.
    A commenter urged HUD to adopt the recommendations put forth by the 
Government Accountability Office in their 2019 report titled ``Real 
Estate Assessment Center: HUD Should Improve Physical Inspection 
Process and Oversight of Inspectors'' (GAO-19-254) to strengthen its 
oversight mechanisms and ensure adequate quality of life in HUD-
assisted communities. The 2019 report calls attention to the 
discrepancy between the 2017 and 2018 Consolidated Appropriations Acts 
(which stipulate that HUD must provide a notice to owners of properties 
that score 60 or below on the REAC physical inspection), and current 
and long-standing HUD practice (which is to send notices at scores 59 
and below). The report also discusses the sampling margin of error, in 
particular instances in which the longer range of the margin could 
encompass scores of 59 or below, and yet because the score itself is 
above 60, no administrative consequence results. The report states that 
``If REAC were to resume reporting on sampling errors and develop a 
process to address properties that fall below certain cutoff scores 
when the sampling error is taken into account, it would have the 
information it needs to identify properties that may require more 
frequent inspections or enforcement actions''.
    HUD Response: HUD evaluated the GAO Report as part of its efforts 
to identify mechanisms to improve its inspection program under NSPIRE. 
HUD will take this input into consideration as part of the 
Administrative Procedures notice. This notice will include information 
about its sampling methodology. For administrative referrals, HUD 
clarifies in this final rule that these referrals will be essentially 
consistent for both Public Housing and Multifamily housing programs.
Suggested Standards for Referring Properties to the DEC
    Commenters suggested that a property should be referred to the DEC 
only when there is blatant disregard for the property condition and/or 
the significant presence of health and safety issues. Commenters noted 
that an inspection can have as little as 5-6 specific deficiencies, 
some of which could be fixed in seconds or are unknown to property 
staff and fail the UPCS inspection. Another commenter noted that some 
repairs may be expensive but not relevant to maintaining a safe living 
environment. A commenter noted that an agency may not be aware of all 
tenant-induced damage on their property.
    Several commenters stated that HUD should refer a property to the 
DEC only where there are multiple low scores or repeat failures on the 
same issue. Commenters expressed that due to the wide variance in how 
HUD inspectors evaluate properties, a single score, that could be an 
outlier, should not trigger corrective action.
    Commenters suggested DEC referrals should be reserved for serious 
cases of malfeasance or misappropriations of funds that rise to 
potential violations of the law. A commenter noted that DEC does not 
have the resources to be utilized as an additional entity providing 
oversight to the physical condition of assisted properties and 
inspection scoring should be considered as one element in determining 
if referral to the enforcement center is warranted; another stated that 
HUD should consider the history and condition of other properties in an 
owner's portfolio before referral.
    Commenters suggested that, if a property is about to undergo a 
renovation (or is in the midst of a renovation) which will address the 
factors leading to a score which might otherwise lead to its referral 
to DEC, HUD should factor the renovation scope into its decision as to 
whether to refer.
    A commenter suggested lenience for older properties regarding 
certain areas that are not avoidable and are not necessarily health and 
safety issues.
    HUD Response: Properties that score under 60 under the NSPIRE 
Standards will have health and safety hazards that merit follow up, and 
in some cases, administrative review by the DEC or HUD. The method for 
scoring properties under NSPIRE will be discussed further in the NSPIRE 
Scoring notice. HUD's process regarding administrative or DEC referrals 
will be for properties that score 30 or less or have two successive 
scores of under 60, as described in Housing

[[Page 30483]]

notices 2015-02 and 2018-08. The DEC can also investigate cases under 
the False Claims Act, including situations when a PHA or owner 
certifies that deficiencies have been corrected when they have not. 
Additional information on administrative referrals will be provided in 
the NSPIRE Administrative notice.
    Regarding scores that did not consider renovations, owners or PHAs 
can request a technical review of the inspection to determine if the 
inspection considered these factors. If these conditions would raise a 
score over 30 or 60, HUD would consider that significant. For tenant-
induced damages, REAC inspectors will not attempt to determine this at 
the site, and owners and PHAs already have options under their lease 
and policies to discourage damage and collect fees.
Timeline for Repair of Severe Health and Safety Defects
    A commenter suggested that the requirement of severe health or 
safety defects being repaired within 24 hours should be conditional on 
what the deficiency is, and that replacing a smoke detector battery on 
5-10 units is reasonable to perform in 24 hours, but, in cases where 
some disagreement exists as to whether a fix is required due to the 
potential for an appeal or local code allowances, an alternative to 
this requirement should be in place. This commenter also suggested 
that, for issues found outside of normal resident access areas, 
especially in cases requiring the use of qualified professionals 
outside of the property for proper repair, there should be alternative 
requirements for repair timelines.
    This commenter stated that the requirement of all non-life-
threatening defects to be repaired within 30 days is burdensome because 
certain capital improvements may require time to analyze, budget, and 
obtain bids for and complete. This commenter noted that areas affected 
by natural disasters frequently have labor shortages that need to be 
considered, and non-catastrophic repairs of roofing, siding, trip 
hazards or repairs associated with concrete or asphalt repairs may be 
delayed or made impossible by seasonal weather delays.
    HUD Response: HUD appreciates this feedback about the timeline of 
correcting severe health and safety defects, now referred to as LT to 
align the NSPIRE rule with HOTMA statute. Under HOTMA Section 101(a)(3) 
life threatening conditions must be corrected within 24 hours after 
such notice has been provided, and non-life-threatening conditions 
within 30 days after such notice has been provided or such longer 
period as the PHA may establish. Because NSPIRE is aligning 
requirements across its programs, these timeframes will also apply to 
Public Housing and Multifamily housing programs, except that Severe 
deficiencies for Public Housing and Multifamily housing will require 24 
hour repairs, HUD will provide additional flexibility for Public 
Housing and Multifamily housing programs on what is considered an 
acceptable correction within the timeframes for other programs covered 
by this rulemaking. HUD understands that in 24 hours, PHAs and owners 
may only be able to prevent exposure to a hazard and that some 
permanent repairs may take longer, and also that that some repairs may 
require specialized services that will need to be procured, or 
professionals that may not be immediately available. These 
determinations will be made case-by-case, with the understanding that 
HUD can allow flexibility on what is acceptable given the time frame, 
provided the immediate hazard is corrected. PHAs and owners should 
avoid relying on ``quick fixes'' and plan for effective or permanent 
repair (e.g., at least 20 years) where possible, so that hazards do not 
re-develop. More detail about correcting deficiencies will be published 
in the subordinate NSPIRE Administrative notice.
Not Enough Information To Respond
    Commenters responded that this question cannot be adequately 
commented upon until the scoring model is released because it is known 
that it will be different from the model currently in existence, and 
therefore using the current model to assess findings under an unknown 
model is incomplete and unreliable.
    HUD Response: HUD appreciates this feedback. The NSPIRE Scoring 
notice will be final before this regulation is effective. More detail 
about correcting deficiencies will be published in subordinate notices.

Section 5.713 Second- and Third-Party Rights

    Commenters opposed the proposed exclusion of third-party 
beneficiary rights to tenants and others regarding enforcement of HUD 
contracts with owners or PHAs. A commenter noted that when HUD or 
owners fail to enforce standards, tenants should have the opportunity 
to pursue remedies in court. This commenter also noted that some HUD 
Multifamily programs, such as Mark Down to Market, already include 
tenant third-party rights and HUD has not been overburdened with 
frivolous claims.
    Another commenter suggested there is no need to include this 
language in 24 CFR part 5 because the ability to assert second- or 
third-party beneficiary status is already prohibited because many, if 
not all, of the regulatory agreements and subsidy contracts already 
include a clause disclaiming third-party beneficiary status to 
residents. This commenter suggested removing second- and third-party 
beneficiary status in part 5, and other changes in Part A of this 
notice, are just a continuation of HUD's ``old'' business approach and 
stated that HUD's clients are the families assisted through these 
programs and statutory and regulatory law has consistently included the 
identification of poor physical conditions and maintenance concerns as 
an area in which active resident participation is critical. This 
commenter stated that HUD continues to hamper residents' ability to be 
a partner to HUD and housing providers by making HUD's enforcement 
actions opaque to residents, and by limiting residents' rights that 
they normally should have as direct beneficiaries of the contracts 
between HUD and its housing providers. This commenter noted the slow 
pace in which HUD often holds PHAs and owners accountable for gross and 
flagrant violations of housing condition standards, and that HUD should 
not be concerned about getting sued for failure to act because HUD is 
already being sued.
    HUD Response: HUD declines to make revisions to Sec.  5.713 in this 
final rule. This regulation acknowledges that covered programs have 
different mechanisms for addressing second- and third-party beneficiary 
status, as it can be covered in the Annual Contributions Contract 
(ACC), Housing Assistance Payments (HAP) agreement subsidy contracts, 
and regulatory agreements. The NSPIRE rule is not intended to override 
existing program requirements. Tenant participation and feedback is 
already included in many areas of these regulations.

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

Question for Comment #21: Threshold for Troubled PHAs Under the Small 
Rural Assessment

    HUD sought comment on the proper threshold for troubled PHAs under 
the small rural assessment. A commenter recommended that HUD assure 
that if a reduced score would result in action by

[[Page 30484]]

HUD that would affect a resident's occupancy, the action should not be 
taken until HUD has provided an alternative housing option to the 
tenant. Another commenter suggested that adding a second property below 
70 percent creates a more accurate picture of whether an agency is 
troubled or not as it shows a pattern of struggling developments. 
Multiple commenters responded that without details of the scoring 
protocol, commenters could not provide informed input as to the 
threshold for designation a troubled agency regardless of size.
    HUD Response: HUD acknowledges the impact reduced assessment scores 
may have on a resident and the need for alternative housing. Residents 
of HUD-assisted housing are protected by the Uniform Relocation 
Assistance and Real Property Acquisition Policies Act of 1970, as 
amended (42 U.S.C. 4601 et seq.) (URA) and other HUD requirements. A 
failing inspection or PHAS score would not displace residents, as PHAs 
are provided time to correct the deficiency. When a public housing 
property is approved for demolition or disposition under Section 18 of 
the 1937 Act (42 U.S.C. 1437p), residents must be offered comparable 
housing or provided a tenant protection voucher. As provided in the 
final rule at Sec.  902.103, small rural PHAs shall be assessed and 
scored based only on the physical condition of their public housing 
properties, which will include all projects. Additional information 
about the scoring protocol will be provided in the Scoring notice.

Question for Comment #22: Indicators To Determine if the PHA is Failing 
To Fulfill Its Responsibilities, Small Rural PHA Assessment

    HUD requested 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.
    Two commenters supported the proposed indicators. A commenter 
stated that a score of 70 or better to prevent being designated as 
troubled seemed lofty and suggested using the current level. This 
commenter expressed that the HQS system for Section 8 HCV has worked 
well since inception and any additional requirements added to those in 
place for owners will likely discourage participation.
    A commenter responded that the threshold HUD proposed to determine 
if the PHA has passed or failed the indicator is overly stringent 
because provisions in HOTMA allow agencies to move families into 
Section 8 units before a unit inspection occurs if there was an 
inspection before like LIHTC or one that is as stringent as HQS and 
requiring 98 percent of all units to be inspected before a tenant moves 
into the unit defeats this flexibility. This commenter also expressed 
concern about the provision requiring 98 percent of units to be 
inspected every 3 years because if HUD provides the HCV program the 
flexibility to have risk-based assessments every 2 to 5 years, then 
this acts as a disincentive for agencies to benefit from 5-year 
inspection time periods. This commenter recommended either reducing the 
98 percent threshold for those provisions or including a caveat for 
units with non-HQS inspections before move-in to count toward the 
threshold and changing language to note that 98 percent of units are 
inspected in the time period they should be inspected, as specified by 
HUD criteria.
    A commenter proposed the following Indicators: (1) Failing to 
recognize hazards with potentially extreme or severe outcomes; (2) 
Failing to evaluate and prioritize the hazards; (3) Failing to 
recommend adequate housing measures to address hazards; (4) Failing to 
develop a comprehensive, integrated, and prescriptive scope of work 
that can be effectively used by subcontractors installing the measures.
    A commenter responded that it is difficult to comment on the 
indicators without knowing how deficiencies will be rated or scored.
    HUD Response: HUD appreciates comments on the Small Rural PHA 
Assessment program for SEMAP indicators and PHAS scoring. The NSPIRE 
standards, as proposed, will include the list of ``life threatening'' 
conditions, which were proposed as severe health and safety 
deficiencies so that the NSPIRE regulations are consistent with HOTMA. 
With this final rule, the NSPIRE standards are the applicable housing 
quality standards for the HCV and PBV programs, and these define the 
deficiencies. HCV and PBV housing inspections will still be on a pass/
fail rating system and not scored. The Standards notice affirmed the 
elective allowance under HOTMA to have residents move into units with 
only non-life-threatening conditions is retained, and the proposed time 
frame of risk-based inspections every 2 to 5 years does not apply to 
the HCV and PBV programs. Section 5.705(c)(4) and (5) reference 
existing regulations for the timing of inspections. Section 
985.203(c)(2) accounts for the PHA initial inspection option for non-
life threatening deficiencies or alternative inspections. Alternative 
inspections will be accepted by HUD if they meet the NSPIRE standards 
for health and safety.
    HUD acknowledges the comment about a score of 70 or better to 
prevent being designated as Troubled for public housing, which is 
referencing the score of 60 or less used as the Troubled standard for 
other PHAs. HUD declines to revise Sec.  902.105(a) to 60 at this time. 
Small Rural PHAs will be assessed for physical conditions only and will 
no longer be scored under the financial, management and Capital Fund 
indicators of 24 CFR part 902. Removing this administrative burden of 
managing performance of other indicators will offer Small Rural PHAs 
more time to focus on improving the physical conditions of their 
properties. A score of 70 or better should be easily attainable for all 
HCV programs. For SEMAP, the indicators in part 985 are provided as 
pass/fail. HUD retained the language that a PHA that failed any of the 
four indicators under Sec.  985.201 will be designated as troubled, as 
these indicators measure compliance with the program regulations, are 
required activities, and rarely missed. The final rule also retains 
indicator levels at 98 percent to be consistent with the SEMAP ratings 
for PHAs that are not small rural. Achieving 98 percent for these 
indicators is the norm for PHAs regardless of size. To provide more 
flexibility, under Sec.  985.205(a)(i), HUD will consider budget 
authority utilization based on the most recent two calendar years prior 
to the assessment.
    HUD generally appreciates the proposal to revise the indicators to 
be more focused on hazards, but did not include these revisions for 
small rural PHAs to remain consistent with the SEMAP regulations for 
other PHAs, which are not proposed for revision with this rule. HUD 
will consider these comments for future revisions to the SEMAP 
regulations for all PHAs.
    With respect to the suggestion to create an integrated scope of 
work (SOW) that could be used by subcontractors, HUD does not prescribe 
the methods by which the PHA resolves issues identified during the 
inspection. It is the PHA's responsibility to repair the deficiencies 
by either using its maintenance staff, external vendors or contracts, 
or other means. Any identified life-threatening deficiencies are 
required to be mitigated within 24 hours. Regarding how deficiencies 
will be rated or scored, the NSPIRE Standards notice will provide the 
standards and the pass/fail rating already in place for HCV and PBV

[[Page 30485]]

programs. Individual HCV and PBV properties will not be scored under 
NSPIRE, per Sec.  5.711(a).

Question for Comment #23: Criteria To Determine if the PHA is a High 
Performer or a Standard Performer, Small Rural PHA Assessment Under 
SEMAP

    HUD asked for comment on the criteria for determining if a PHA is a 
high performer or a standard performer. Commenters supported the 
current scoring system. A commenter supported recognizing the 
challenging environment in which small rural HAs operate HCV programs 
by predominantly focusing the ratings on the functions under the 
control of the PHA.
    Commenters noted that there is a small margin for error for small 
PHAs, which have up to 550 combined Public Housing and HCV units, and 
suggested that the scoring percentage should be widened, with two 
commenters suggesting moving from 98 percent to 90 percent, and one of 
these commenters suggesting this move for small HCV programs (250 or 
fewer units). A commenter noted that small agencies may have difficulty 
achieving high performer status if it is predominately based on funding 
utilization and pointed out that voucher program utilization can 
fluctuate because of housing availability and fair market rent (FMR) 
fluctuations, and that this can be especially true in rural areas where 
there is often a lack of decent, affordable rental housing available. A 
commenter noted this is unfair and contrary to Congress' deregulatory 
goals. A commenter urged HUD that Housing availability and FMR 
fluctuations, which are outside of the control of PHAs, should not be 
held against an agency. This commenter also noted that special-purpose 
vouchers, like HUD-VASH can also be challenging to meet utilization 
thresholds--especially in rural areas and recommended excluding 
special-purpose vouchers for the utilization rate requirement. Another 
commenter suggested there should be more differentiation on point 
scoring between the High Performer status and Troubled status.
    Commenters also advised that without understanding the property 
inspection scoring protocol, it is hard to evaluate the Public Housing 
Assessment System.
    HUD Response: For small rural agencies, Public Housing, HCV and PBV 
properties will be inspected using the NSPIRE Standards. The proposed 
indicators for Small Rural SEMAP are retained in the final rule to 
remain consistent with the SEMAP program for other PHAs. However, Small 
Rural PHAs will undergo a SEMAP assessment only every three years as 
provided in Sec.  985.207, and indicators will be evaluated only on a 
pass/fail basis. Individual properties will not be scored under NSPIRE.

Other Small Rural Comments

    A commenter expressed concern that updating the small rural PHA 
list every three years may add undue uncertainty to PHAs that qualify 
as small rural as there is a chance their status may change depending 
on factors outside of their control such as population growth or 
changes to regulations at the CFPB. This commenter recommended that HUD 
allow for agencies determined to be small rural to be grandfathered 
into the small rural definition, unless there is significant and 
substantial change to the agency, to provide additional consistency to 
small rural agencies so that they do not have to worry about their 
inspection protocol potentially changing every three years. 
Alternatively, this commenter suggested at least allowing an agency to 
be grandfathered in for one additional 3-year period after falling 
outside of the definition of ``small rural'' to ensure the agency would 
have ample time update their inspection process and prepare for the new 
inspection protocol.
    HUD Response: HUD appreciates the commenter's concern regarding the 
definition of small rural PHAs and the timeframe for updates to the 
list of every three years. HUD does not expect that the list will 
change from year to year given the relatively stable indicators 
provided in statute and Sec.  902.101, but HUD did not have discretion 
on this definition as it is statutory. All PHAs will be provided time 
before the final rule is effective, and small rural PHAs will have an 
additional 120 days after the rule is effective for HUD to designate 
small rural status per Sec.  902.101(b).

Insufficient Information To Provide Meaningful Opportunity To Comment

    Several commenters stated that they were unable to provide 
meaningful comments on the proposed rule because information had not 
been released. Commenters stated that they lacked key information 
about: NSPIRE Standards; NSPIRE scoring methodologies; Criteria to 
qualify for longer risk-assessment inspection periods; Electronic data 
collection of self-inspections; List of deficiencies including severe 
health and safety deficiencies and which of those deficiencies are 
life-threating and which are not; Deficiencies and methodologies to use 
for scoring and ranking HUD housing; Factors for HCV unit pass/fail; 
Specific minimum project and unit deficiencies for multiple programs, 
including HOME and homeownership; Minimum property standards 
deficiencies; Submission of PHA certifications for small rural PHAs; 
Calculation for determining excess HAP reserve for small rural PHAs; 
the criteria required for PHAs to qualify for a longer inspection 
cycle; and flexible protocols to accommodate the unique circumstances 
of each program and housing type.
    A commenter urged HUD to provide detail about whether REAC will 
begin to provide the necessary information regarding deferred 
maintenance as required by investors who provide liquidity to the 
market.
    A commenter noted that they are unable to consider HUD's HOTMA 
rulemaking and the NSPIRE rulemaking for lack of information about the 
new NSPIRE inspection model.
    A commenter noted that they lacked key information about the status 
of electronic submission, the result of reducing inspectable areas, how 
the new deficiencies improved inspector objectivity, and how inspection 
results compare to past inspections.
    Because of the lack of information available, commenters requested 
extension. Commenters suggested HUD extend the demonstration period 
until scoring methodologies can be incorporated into the Standards 
notice so reviewers can weigh all factors before commenting. Commenters 
suggested that the demonstration has not been able to provide as much 
information due to the COVID-19 pandemic.
    HUD Response: HUD appreciates this feedback. The NSPIRE Standards 
were proposed on June 17, 2022, and the NSPIRE Scoring notice was 
proposed on March 28, 2023, for public comment. HUD will consider 
additional comment before making these requirements final, and NSPIRE 
inspections will not begin until after HUD publishes final NSPIRE 
Standards and Scoring notices. HUD does not have details regarding 
deferred maintenance as required by investors who provide liquidity to 
the market, as that is outside the scope of this rulemaking. 
Information about the status of electronic submission will be provided 
in a notice to implement the new self-inspection requirements in Sec.  
5.707. Information on inspectable areas and deficiencies will be in the 
NSPIRE Standards notice. Information on improved inspector objectivity 
is discussed above in this preamble. Information on how NSPIRE 
inspection results compare to past inspections performed under UPCS is 
not yet available. Additional notices and rules

[[Page 30486]]

under HOTMA since the NSPIRE proposed rule and notices were published. 
HUD will consider comments on Standards and Scoring before they are 
final and effective for HUD housing.

Environmental Justice Issues

    Two commenters asked, pursuant to the January 20, 2021, Regulatory 
Freeze Pending Review memorandum from Ronald A. Klain, Assistant to 
President Biden and White House Chief of Staff, (``Klain memo'') which 
was published in the Federal Register on January 28, 2021,\17\ for an 
extension until such time as there can be further consideration of 
environmental justice issues and the impact of the outdoor environment 
on the residents who live in HUD-assisted housing. These commenters 
noted that statutes and implementing regulations have largely failed to 
address the common environmental risks present in the outdoor 
environment surrounding HUD-assisted housing, unless an environmental 
review has been triggered under the National Environmental Policy Act. 
42 U.S.C. 4321 et. seq. (1969). This commenter noted that on February 
21, 2021, HUD's Office of Inspector General (HUD OIG) issued a report, 
Contaminated Sites Pose Potential Health Risks to Residents at HUD 
funded properties, in which HUD OIG found that HUD's current approach 
to identifying and addressing contaminated sites has resulted in 
federally-assisted housing residents experiencing prolonged exposure to 
toxic contamination, including dangerously high level of lead and 
proximity to Superfund sites that continue to present significant risks 
to human health. This commenter noted that the proposed rule was silent 
on the issue of inspecting the outdoor environment at HUD-assisted 
sites, including inspecting adjacent soil or the proximity of the 
housing to Superfund sites.
---------------------------------------------------------------------------

    \17\ https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/regulatory-freeze-pending-review/ (86 FR 7424).
---------------------------------------------------------------------------

    HUD Response: HUD notes that the NSPIRE final rule is one 
rulemaking and one component of HUD's broader approach to addressing 
environmental justice, which involves other offices within HUD as well 
as coordination with other Federal agencies such as EPA. HUD does not 
view this proposed rule as requiring regulatory freeze. The regulations 
at Sec.  5.703(c) include the building site, and Sec.  5.703(e) affirms 
that the outside must be free of health and safety concerns. Additional 
information is in the NSPIRE Standards notice published on June 17, 
2022, for public comment. HUD's regulations at 24 CFR parts 50 and 58 
include a process for considering site contamination and are not within 
the scope of this rulemaking. Additional information about HUD's 
efforts with EPA on HUD-assisted sites and Superfund sites will be made 
public as part of that effort, and not within the context of the NSPIRE 
rulemaking. HUD will take the commenters' feedback into consideration 
and encourages additional public comment on subsequent NSPIRE 
Subordinate Notices and other HUD rulemaking or policymaking concerning 
environmental justice.

Other Comments

Resident Rights

    Several commenters expressed that inspection information should be 
made available for comment to residents and their representatives. Such 
information noted by commenters included severe health and safety 
citations, notice before inspections, notice regarding submission of 
the property for DEC evaluation and inspection, certification and 
supporting evidence of repairs within 3 days of when a severe health 
and safety risk has been corrected, and notification of inspection.
    Commenters requested that the information provided include a named 
HUD contact official with their contact information, include tenant 
organizations, be accessible, be posted in the owners' management 
office and bulletin boards in common areas, at no cost to residents, be 
in plain language, provide information about what is happening and why.
    HUD Response: REAC inspection data is available online at 
www.huduser.gov/portal/datasets/pis.html, and NSPIRE inspection data 
will also be online once inspections commence. Residents will be 
provided notice before inspections in accordance with their leases, and 
PHAs and owners will make inspection information available per Sec.  
5.711(h). All information collected by HUD is available through FOIA, 
and residents can contact their local HUD office (see https://www.hud.gov/local) to seek more information or for complaints. 
Information related to enforcement referrals and actions is usually 
confidential until the matter is closed and exempted from FOIA. Because 
of the many ways residents are kept informed of the NSPIRE process, HUD 
does not agree that resident rights must be included the NSPIRE 
regulations.
    HUD has sought public comment on tenant participation in the NSPIRE 
inspection process and will continue to explore ways to engage 
residents. Initially, this will include inspecting additional units 
recommended by residents or resident groups. Additional details 
regarding resident engagement in forthcoming subordinate notices 
published in the Federal Register and available for public comment.

Requests Due to the Coronavirus Pandemic

    A commenter urged HUD to waive the shortened physical inspection 
notification timeframe (14 days) for assisted housing properties, as 
announced on February 22, 2019, through PIH Notice 2019-02 and return 
to the 30-to-60-day timeframe to ensure the maximum safety of 
residents, management staff, and inspectors.
    A commenter noted that during the COVID-19 pandemic, personnel have 
had to meet difficult standards at risk to their own personal health, 
and some residents have been hesitant to allow facility personnel into 
their dwelling units for fear of infection, and therefore owners and 
managers have fallen behind on unit repairs that will take several 
months to catch up with. This commenter cautioned that NSPIRE's scoring 
methodology more heavily scrutinizes and penalizes in-unit 
deficiencies, which owners and managers need time to catch up on. This 
commenter therefore called for HUD to suspend REAC inspections in 
elderly facilities, specifically those inspections under the new NSPIRE 
standard, for a minimum of one year. This commenter also noted that 
many of the reports of poor assisted housing focused on certain pockets 
of the US, and many focused on the property portfolios of specific 
owners/management agents. This commenter urged HUD not to punish other 
regions and properties.
    Commenters urged HUD to learn from the pandemic and expand 
electronic communication and remote listening sessions to gather 
stakeholder feedback video remote inspections to HUD Multifamily 
properties, utilize properties' existing software mechanisms to check 
work orders and proof of annual self-inspections, and examine how 
ventilation and other health retrofits are incorporated into physical 
condition standards for HUD-assisted housing.
    HUD Response: Adjustment of inspection notification timeframes due 
to COVID-19 is an issue outside of this final rule. HUD can adjust 
certain requirements when there is a national emergency in effect. 
Inspection administration protocol will be outlined in subordinate 
notices that will be published in the Federal Register and available 
for public comment.

[[Page 30487]]

    On June 1, 2021, the Secretary announced that REAC inspections 
would resume after a 15-month pause due to the COVID pandemic. While 
the NSPIRE Demonstration is underway, HUD continues to use UPCS to 
conduct inspections of record. Inspections under the NSPIRE Standards 
will not phase in until the Standards and Scoring notices are final, 
and the rule is effective. HUD takes the health and safety of residents 
and property staff very seriously and has strict protocols in place.
    In response to the pandemic and in preparation for future concerns, 
HUD issued a notice on Remote Video Inspections, PIH Notice 2020-31. 
HUD is also developing new technology solutions to facilitate 
convenient transfer of information including inspection findings, 
photographic evidence and certification of completion of repairs. 
Regarding time for PHAs, owners and agents to inspect and update units 
after the pandemic, HUD resumed REAC inspections on June 1, 2021, and 
has not observed a significant reduction in scores. The timeline 
discussed earlier in this preamble, will give PHAs, owners, and agents 
additional time to prepare for the transition. PHAs are reminded that 
the requirement for self-inspections was in place before the NSPIRE 
regulation, and owners may commence self-inspections at any time.
    HUD has considered the comments about retrofits for health and 
well-being in light of the pandemic and resident health and safety were 
a key consideration in developing the NSPIRE Standards.

Additional Suggestions

    A commenter urged HUD to build robust oversight systems and 
consider accountability and feasibility. This commenter urged HUD to 
consider cost and time impacts of newly required technical/building 
upgrades; the breadth and scope of inspections, paired with the 
staffing capacity at HUD and at HUD-assisted communities; and the 
impact of inspections on residents' lives and private living spaces.
    A commenter asked HUD to consider integrating or coordinating 
revisions with the Management and Occupancy Review (MOR) process so 
that these two monitoring tools are complementary.
    A commenter suggested that PHAs and owners/agents should be 
incentivized or rewarded for maintaining a higher level of on-going 
maintenance of the property/units, as determined by REAC scoring and 
ranking of covered units.
    One commenter noted that consistent with the notion of fairness to 
parties not responsible for adverse conditions, third party management 
companies should be rated based on the performance of their duties in 
the context of the resources provided, and that management companies 
with no identity-of-interest relationship to the owner should be able 
to note their performance in the context of resources made available to 
them by the ownership. The commenter further suggested while decent, 
safe and sanitary housing must be provided, administrative conclusions, 
sanctions and ``flags'' should be sensitive to the owner's performance 
based on the possible available funding and recapitalization 
alternatives where all funds were efficiently spent on operations.
    A commenter cautioned that HUD should avoid setting new 
requirements for the sake of alignment where it lacks statutory 
authority.
    A commenter applauded the alignment of inspections in projects with 
multiple HUD funding and/or subsidy sources and recommended the same 
alignment of inspections in circumstances involving funding sources 
outside of HUD, e.g., State or Federal historic preservation funds.
    HUD Response: HUD appreciates the additional suggestions on its 
oversight systems, and accountability and feasibility. The NSPIRE rule 
did not propose revisions to the Management and Occupancy Review (MOR) 
process, but HUD appreciates comments to streamline oversight 
processes. PHAs and owners/managers that have higher assessment scores 
will be rewarded with reduced inspection frequency under NSPIRE. High 
performing PHAs may receive additional funds under the Public Housing 
Capital Fund program. The comments on fairness to parties not 
responsible for adverse conditions and third-party management companies 
are noted but are outside the scope of the regulations. The NSPIRE 
Standards will include information on the deficiencies, and the NSPIRE 
Scoring notice will cover how properties will be scored, regardless of 
management type. With respect to the comments about statutory 
authority, HUD has ensured that this rulemaking is consistent with its 
authority as provided by Congress and the relevant statutes.

HOME/HTF

    A commenter suggested that, because the Housing Trust Fund 
regulations were modeled on the HOME regulations, Sec. Sec.  
93.301(c)(3) and 93.301(e)(1)(i) should be modified to provide cross-
references back to the regulations at Sec.  5.703 that would, under the 
proposed rule, govern HOME, as well as a specific reference to NSPIRE.
    HUD Response: HUD appreciates the comment and has made changes as 
appropriate in the final rule.

Inspector Issues

Comments Regarding Inspector Qualifications
    Several commenters noted problems with inconsistent or subjective 
inspections that could not be effectively appealed. Commenters 
cautioned against punishing agencies due to growing pains associated 
with a new program. A commenter suggested dedicating substantial time 
and effort to training inspectors in NSPIRE before implementing the new 
inspection protocol; another recommended HUD itself train inspectors. A 
commenter recommended requiring inspector certification with 
availability of voluntary training with a link and phone number.
    Several commenters suggested HUD require a level of training or 
qualification for inspectors. A commenter recommended at least basic 
standards such as the current Inspector Qualifications for REAC UPCS 
Inspector Certification Training candidates.\18\
---------------------------------------------------------------------------

    \18\ See: UPCS Inspection Certification Training, Page 2, (1) B. 
https://www.hud.gov/sites/dfiles/PIH/documents/UPCSInspectorCertificationTraining.pdf).
---------------------------------------------------------------------------

    A commenter noted that since 1970, State licensure of home 
inspectors has expanded and 36 States regulate home inspectors, 
requiring education, field training, and a number of supervised 
inspections.
    A commenter recommended inspectors have two years of experience in 
the last four years as a full-time combination inspector or similar 
government-certified position, or two years of full-time experience as 
a licensed Home Inspector, or in States without licensing, two years 
within the last four years of full-time experience and documentation of 
passage of the National Home Inspector Examination. This commenter 
recommended inspectors be required to have completed a minimum of 250 
physical commercial real estate or residential inspections as sole 
inspector. The commenter recommended FEMA inspections, termite 
inspections, appraisals, and site visits not be included. This 
commenter also recommended HUD require providing 25 inspections 
completed on an excel spreadsheet, inspectors be required to possess 
general computer skills, and inspectors be required to possess a high 
school education or equivalent.

[[Page 30488]]

    A commenter cautioned that inspectors not familiar with the 
property and local codes may not follow the HUD inspection standards 
and noted that the owner/agent may pay for pre-inspection by a third 
party.
    A commenter stated that inspectors are corrupt and in league with 
property management teams, thereby ignoring clear maintenance issues, 
and that landlords ignore tenant complaints and seek to constructively 
evict complaining tenants.
    HUD Response: HUD appreciates the comments regarding inspector 
qualifications, experience, and training. Inspections performed by REAC 
will continue to include contract-based inspectors for the Public 
Housing and Multifamily housing programs. In addition to revising the 
inspections standards and scoring, REAC will revise the contract model 
to include performance expectations and metrics and require that 
awarded firms have an internal quality assurance and training program. 
These requirements will supplement the technical assistance and 
oversight performed by HUD's Quality Assurance (QA) division. These 
enhancements will help ensure that inspectors are experienced at hire 
and will become proficient through training so they can consistently 
assess and score properties against the NSPIRE standards. Knowledge of 
local code requirements of the building are not necessary if the 
inspector is adhering to the NSPIRE standards, but this information 
could be assessed as part of self-inspections. REAC's goal is to ensure 
that contract inspectors will have experience in home inspections but 
will become proficient in the NSPIRE Standards through training and 
hands-on field work. Licensed and/or certified home inspectors will 
qualify for hire and complete training on the NSPIRE standards before 
performing inspections of records. HUD agrees that the model followed 
by State-licensed home inspectors is valuable and will consider that 
for the new contract requirements. The recommendations for minimum 
hours and inspections completed is also very helpful and a model REAC 
will consider in the contract design. Lastly, with the new system 
supporting inspection data and scoring, HUD QA staff will be better 
able to see and act on scoring anomalies, and perform enhanced 
monitoring.
    HUD's expectations for inspector training and qualifications will 
be detailed in the Administrative notice issued with this rule so that 
PHAs and external firms can mirror their own programs on the REAC 
model. The NSPIRE Standards and system will be available in electronic 
format for public use before the requirements are effective.
    With respect to the comment about perceived bias of housing 
inspectors, HUD's oversight of the physical inspection process and 
resolution should help curb anomalies and abuse. Residents can continue 
to report concerns to HUD offices at hud.gov/local. Residents of HUD-
assisted properties are protected from retaliation by their lease and 
HUD regulations. Program terminations must be for cause, and residents 
in many programs have grievance rights available to review terminations 
in advance of eviction.
    HUD is aware that properties may employ outside inspectors to 
review their property before a REAC inspection. This practice could be 
used to help satisfy the requirements of the self-inspection, where 
required, if the inspection follows the NSPIRE standards. While the 
NSPIRE regulations do not require a review for local codes, combining 
this with a regular inspection could reduce administrative burden on 
PHAs and owners.
Comments Regarding an Inspector Shortage
    A commenter advised that its pool of inspectors certified to 
conduct a REAC inspection is so minimal that it is impossible for all 
lenders to complete their REAC inspection responsibilities within the 
current prescribed timeframes. This commenter therefore opposed the 
current rule that an inspection must be conducted within three months 
before the Ideal Future Date (IFD) and three months after the IFD.
    A commenter recommended adopting a version of the GSEs' current 
certification standards and processes to not further shrink the pool of 
FHA inspectors and create further timing and cost issues.
    A commenter recommended allowing servicing mortgagees (SMs) or 
their inspection contractors to set up a parallel program of inspector 
training including the ability to recruit candidates, submit them to 
HUD for approval and then facilitate their training until they are 
certified. This commenter noted that, since REAC is moving away from 
training inspectors, SMs need the ability to train inspectors to use to 
perform NSPIRE (and UPCS) inspections, and if REAC requires an 
associated Quality Control program developed like what it requires for 
HUD Contracted companies, SMs should be allowed to do so. This 
commenter suggested SMs can develop their QC program in a parallel 
fashion to assure inspector and inspection validity and reliability, 
and whatever privileges that are given to HUD Contractors working in 
the Public/Multi-Family side to recruit and train inspectors should be 
extended to the SM community.
    A commenter noted that because of the alignment between programs, 
more new inspections may fall under HUD's consolidated inspection 
protocol than were covered previously and cautioned that HUD should be 
clear about how it will handle the additional inspections and who will 
be conducting them. Another commenter urged HUD to consider the impacts 
of additional inspections under REAC's umbrella, and to be clear about 
workload adjustments and capacities, noting that more new inspections 
may fall under HUD's consolidated inspection protocol than were covered 
previously.
    HUD Response: HUD appreciates the comments with respect to 
inspector shortages, inspector management and administration. HUD's 
requirement that all REAC inspectors be certified through the current 
process helped contribute to the inspector shortage. HUD also agrees 
that a regulatory requirement that inspections be completed within 
three months before the anniversary (or Ideal Future Date (IFD)) and 
three months after the IFD in the same calendar year is restrictive and 
removed ``calendar'' from the regulation and added language to reflect 
the current process of allowing extensions for good cause. 
Additionally, HUD may need more time to meet this schedule in the first 
year of NSPIRE implementation, and so the final rule allows for up to 
six months in the initial year of NSPIRE implementation. With respect 
to comments about servicing mortgagees establishing training programs, 
at this time HUD is not planning to review or recognize other 
organizations' training programs. HUD's NSPIRE Standards, scoring and 
system will be publicly available, and HUD will also make its own 
training programs available. This will also help PHAs establish and 
manage their own inspector programs for the HCV and PBV programs. HUD 
has provided more details on inspector administration and oversight in 
the NSPIRE Administrative notice.
    With respect to additional inspections and who will be conducting 
them, the NSPIRE rule aligns the different HUD assistance programs but 
does not change the organization responsible for performing the 
inspection. For example, PHAs will continue to inspect HCV and PBV 
units, and PJs will continue their normal inspection processes.

[[Page 30489]]

V. 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 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 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.
    HUD prepared a Regulatory Impact Analysis (RIA) that addresses the 
costs and benefits of the final rule. HUD's RIA is part of the docket 
file for this rule at http://www.regulations.gov. HUD strongly 
encourages the public to view the docket file at www.regulations.gov.

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 rule does 
not change the substantive requirement that HUD program participants 
are required to maintain the physical condition of HUD housing. The 
rule also, in most cases, maintains the same level of review for 
compliance in the form of physical inspections. Regulatory relief would 
also be provided to small rural PHAs, which would only be subject to 
triennial inspections under PHAS and SEMAP. Accordingly, the 
undersigned certifies that the rule will not have a significant 
economic impact on a substantial number of small entities.

Environmental Impact

    A Finding of No Significant Impact (FONSI) 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 FONSI is 
available through the Federal eRulemaking Portal at http://www.regulations.gov. The FONSI is also 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.

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 rule merely 
revises 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 does 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 rule does 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. Generally, the information collection 
requirements contained in this rule have already been approved by OMB 
under the Paperwork Reduction Act and assigned OMB control numbers, but 
these final regulations include additional requirements not previously 
considered. Given that, HUD will consolidate existing information 
collections into a new collection for the NSPIRE final rule prior to 
the effective date of the new requirements. The information collection 
requirements when approved will be assigned an OMB approval number and 
the public will be notified of this number.
    Related collections that will be incorporated include 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)), 2577-0169 (HCV Program and Tribal HUD-VASH), 2577-0289. HUD 
estimates that the burden under 2502-0369 (Uniform Physical Standards 
and Physical Inspection Requirements) will be approximately the same as 
described in the proposed rule. The inspection time burden will 
slightly increase from the proposed rule's estimate because inspection 
sample may also include up to five units recommended by residents, 
which was not considered during the proposed rule. The Self-inspection 
burden will be substantially less than in the proposed rule, however, 
as HUD will only collect results for properties that score 60 and 
below, instead of all properties.
    Additionally, in the proposed rule, HUD requested comment on how 
HUD could utilize tenant feedback to better achieve its goals of 
identifying poor performing properties. In the PRA package associated 
with this final rule, HUD is including an additional information 
collection for resident feedback. HUD will request that the property 
representative identify the resident council or tenant organization for 
the property. HUD will communicate with that resident group to ask 
about housing conditions and ask the group to

[[Page 30490]]

identify additional units for HUD to inspect. HUD expects that it will 
add up to five resident-nominated units regularly scheduled 
inspections. HUD anticipates the burden of this additional collection 
will be minimal at about five minutes for the property representative 
per property and about thirty minutes for each resident group that 
chooses to respond.
    The collection requirements will be amended to reflect the altered 
burden contained in this final rule.

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 standards, Lead poisoning, Loan 
programs--housing and community development, Mortgage insurance, 
Organization and functions (Government agencies), Penalties, Reporting 
and recordkeeping requirements, Social security, Unemployment 
compensation, and Wages.

24 CFR Part 570

    Administrative practice and procedure, American Samoa, Community 
development block grants, Grant programs--education, Grant programs--
housing and community development, Guam, Indians, Loan programs--
housing and community development, Low and moderate income housing, 
Northern Mariana Islands, Pacific Islands Trust Territory, Puerto Rico, 
Reporting and recordkeeping requirements, Student aid, Virgin Islands.

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 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 965

    Government procurement, Grant programs--housing and community 
development, Lead poisoning, Loan programs--housing and community 
development, Public housing, Reporting and recordkeeping requirements, 
Utilities.

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 amends 24 CFR parts 
5, 92, 93, 200, 570, 574, 576, 578, 882, 884, 886, 902, 965, 982, 983, 
and 985 as follows:

PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS

0
1. The authority for 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.


0
2. Effective July 1, 2023, revise subpart G to read as follows:
Subpart G--Physical Inspection of Real Estate
Sec.
5.701 Applicability.
5.703 National standards for the condition of HUD housing.
5.705 Inspection requirements.
5.707 Uniform self-inspection requirement.
5.709 Administrative process for defining and revising inspection 
criteria.
5.711 Scoring, addressing, and appealing Findings.
5.713 Second- and third-party rights.

Subpart G--Physical Inspection of Real Estate


Sec.  5.701  Applicability.

    (a) Scope. This subpart applies the national standards for the 
physical inspection of real estate standards to the following HUD 
programs:
    (1) All Public Housing programs (programs for housing assisted 
under the U.S. Housing Act of 1937 other than section 8 of the Act);
    (2) The Housing Choice Voucher program under section 8(o) of the 
U.S. Housing Act of 1937, part 982 of this title and the Project-Based 
Voucher program under section 8(o)(13) of the Act and the regulations 
at 24 CFR part 983 (referred to in this part as the HCV

[[Page 30491]]

and PBV programs, or HCV and PBV housing);
    (3) All project-based Section 8 programs;
    (4) Section 202 Supportive Housing for the Elderly (Capital 
Advances);
    (5) Section 811 Supportive Housing for Persons with Disabilities 
(Capital Advances);
    (6) Section 202 direct loan program for projects for the elderly 
and persons with disabilities as it existed before October 1, 1991 
(including 202/8 projects and 202/162 projects); and
    (7) Housing with mortgages insured or held by HUD, or housing that 
is receiving assistance from HUD, under the following authorities:
    (i) Section 207 of the National Housing Act (NHA) (12 U.S.C. 1701 
et seq.) (Rental Housing Insurance);
    (ii) Section 213 of the NHA (Cooperative Housing Insurance);
    (iii) Section 220 of the NHA (Rehabilitation and Neighborhood 
Conservation Housing Insurance);
    (iv) Section 221(d)(3) of the NHA (Market Interest Rate (MIR) 
program);
    (v) Section 221(d)(3) and (5) of the NHA (Below Market Interest 
Rate (BMIR) program);
    (vi) Section 221(d)(4) of the NHA (Housing for Moderate Income and 
Displaced Families);
    (vii) Section 231 of the NHA (Housing for Elderly Persons);
    (viii) Section 232 of the NHA (Mortgage Insurance for Nursing 
Homes, Intermediate Care Facilities, Assisted Living Facilities, Board 
and Care Homes);
    (ix) Section 234(d) of the NHA (Rental) (Mortgage Insurance for 
Condominiums);
    (x) Section 236 of the NHA (Rental and Cooperative Housing for 
Lower Income Families);
    (xi) Section 241 of the NHA (Supplemental Loans for Multifamily 
Projects). (Where, however, the primary mortgage of a Section 241 
property is insured or assisted by HUD under a program covered in this 
part, the coverage by two HUD programs does not trigger two 
inspections); and
    (xii) Section 542(c) of the Housing and Community Development Act 
of 1992 (12 U.S.C. 1707 note) (Housing Finance Agency Risk Sharing 
program).
    (b) Conflicts. The regulations in this subpart may be supplemented 
by the specific regulations for the HUD-assisted programs listed in 
paragraph (a) of this section. The program-specific regulations may 
address the frequency of inspections, who performs the inspections and 
whether alternative inspections are available given the statutory and 
regulatory framework for the program. When there is a conflict between 
the regulations of this subpart and the program-specific regulations, 
the program-specific regulations govern.
    (c) HUD housing. For purposes of this subpart, the term ``HUD 
housing'' means the types of housing listed in paragraph (a) of this 
section.


Sec.  5.703  National standards for the condition of HUD housing.

    (a) General. To ensure that all residents live in safe, habitable 
dwellings, the items and components located inside the building, 
outside the building, and within the units of HUD housing must be 
functionally adequate, operable, and free of health and safety hazards. 
The standards under this section apply to all HUD housing. HUD housing 
under the HCV, PBV, and Moderate Rehabilitation programs shall be 
subject to these standards only for:
    (1) The subsidized unit itself; and
    (2) Items and components within the primary and secondary means of 
egress from a unit's entry door(s) to the public way, those 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 subsidized unit.
    (b) Inside. Inside of HUD housing (or ``inside areas'') refers to 
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. 
Examples of building systems include those components that provide 
domestic water such as pipes, electricity, elevators, emergency power, 
fire protection, HVAC, and sanitary services. The inside area must meet 
the following affirmative requirements:
    (1) The inside area must include at least one battery-operated or 
hard-wired smoke detector, in proper working condition, on each level 
of the property. The Secretary may establish additional standards 
through Federal Register notification;
    (2) Except for housing subject to this subpart only through Sec.  
5.701(a)(6) or (7), or housing otherwise exempt from this requirement 
as provided elsewhere in this title, the inside area must meet or 
exceed the carbon monoxide detection standards set by the Secretary 
through Federal Register notification;
    (3) For the inside area, any outlet installed within 6 feet of a 
water source must be ground-fault circuit interrupter (GFCI) protected;
    (4) The inside area must have a guardrail when there is an elevated 
walking surface with a drop off of 30 inches or greater measured 
vertically;
    (5) The inside area must have permanently mounted light fixtures in 
any kitchens and each bathroom; and
    (6) The inside area may not contain unvented space heaters that 
burn gas, oil, or kerosene.
    (c) Outside. 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. Components found 
on the exterior of the building are also considered outside areas, and 
examples may include doors, attached porches, attached patios, 
balconies, car ports, fire escapes, foundations, lighting, roofs, 
walls, and windows. The outside area must meet the following 
affirmative requirements:
    (1) For the outside area, outlets within 6 feet of a water source 
must be GFCI protected; and
    (2) The outside area must have a guardrail when there is an 
elevated walking surface with a drop off of 30 inches or greater 
measured vertically.
    (d) Units. A 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. The unit must also 
meet the following affirmative requirements:
    (1) The unit must have hot and cold running water in both the 
bathroom and kitchen, including an adequate source of safe drinking 
water in the bathroom and kitchen;
    (2) The unit must include its own bathroom or sanitary facility 
that is in proper operating condition and usable in privacy. It must 
contain a sink, a bathtub or shower, and an interior flushable toilet;
    (3) (i) The unit must include at least one battery-operated or 
hard-wired

[[Page 30492]]

smoke detector, in proper working condition, in the following 
locations:
    (A) On each level of the unit;
    (B) Inside each bedroom;
    (C) Within 21 feet of any door to a bedroom measured along a path 
of travel; and
    (D) Where a smoke detector installed outside a bedroom is separated 
from an adjacent living area by a door, a smoke detector must also be 
installed on the living area side of the door.
    (ii) If the unit is occupied by any hearing-impaired person, the 
smoke detectors must have an alarm system designed for hearing-impaired 
persons;
    (iii) The Secretary may establish additional standards through 
Federal Register notification;
    (iv) Following the specifications of National Fire Protection 
Association Standard (NFPA) 72 satisfies the requirements of this 
paragraph (d)(3);
    (4) The unit must have a living room and a kitchen area with a 
sink, cooking appliance, refrigerator, food preparation area, and food 
storage area;
    (5) For units assisted under the HCV or PBV program, the unit must 
have at least one bedroom or living/sleeping room for each two persons;
    (6) Except for units subject to this subpart only through Sec.  
5.701(a)(6) or (7), or housing otherwise exempt from this requirement 
as provided elsewhere in this title, the unit must meet or exceed the 
carbon monoxide detection standards set by HUD through Federal Register 
notification;
    (7) The unit must have two working outlets or one working outlet 
and a permanent light within all habitable rooms;
    (8) Outlets within 6 feet of a water source must be GFCI protected:
    (9) For climate zones designated by the Secretary through notice, 
the unit must have a permanently installed heating source. No units may 
contain unvented space heaters that burn gas, oil, or kerosene;
    (10) The unit must have a guardrail when there is an elevated 
walking surface with a drop off of 30 inches or greater measured 
vertically; and
    (11) The unit must have a permanently mounted light fixture in the 
kitchen and each bathroom.
    (e) Health and safety concerns--(1) General. The inside, outside 
and unit must be free of health and safety hazards that pose a danger 
to residents. Types of health and safety concerns include, but are not 
limited to carbon monoxide, electrical hazards, extreme temperature, 
flammable materials or other fire hazards, garbage and debris, handrail 
hazards, infestation, lead-based paint, mold, and structural soundness.
    (2) Lead-based paint. HUD housing must comply with all requirements 
related to the evaluation and control of lead-based paint hazards and 
have available proper documentation of such (see 24 CFR part 35). The 
Lead-based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the 
Residential Lead-based Paint Hazard Reduction Act of 1992 (42 U.S.C. 
4851-4856), and the applicable regulations at 24 CFR part 35 apply.
    (f) Compliance with State and local codes. (1) The standards for 
the condition of HUD housing in this section do not supersede State and 
local housing codes (such as fire, mechanical, plumbing, carbon 
monoxide, property maintenance, or residential code requirements).
    (2) All HUD housing other than units assisted under the HCV and PBV 
programs must comply with State or local housing codes in order to 
comply with this subpart.
    (3) State and local code compliance is not part of the 
determination of whether a unit passes the standards for the condition 
of HUD housing under this section for the HCV and PBV programs (except 
in accordance with Sec.  5.705(a)(3)).
    (g) Use of an alternative inspection or additional standard for HCV 
and PBV programs. A PHA is not subject to the standards set by this 
section when the PHA is relying on an alternative inspection in 
accordance with 24 CFR 982.406. PHAs may also elect to establish 
additional requirements for quality, architecture, or design of PBV 
housing, and any such additional requirements must be specified in the 
Agreement to enter into a HAP Contract or HAP Contract as provided in 
24 CFR part 983.
    (h) Special housing types in the HCV, PBV and Moderate 
Rehabilitation programs. Part 982, subpart M, of this title identifies 
special housing types which require standards unique to special types 
of housing. Unless modified by program-specific regulations, NSPIRE 
Standards will apply for these special housing types.


Sec.  5.705  Inspection requirements.

    (a) Procedures--(1) General. Any entity responsible for conducting 
an inspection of HUD housing to determine compliance with this subpart, 
must inspect and score such HUD housing in accordance with the 
standards and procedures for identifying safe, habitable housing set 
out by the Secretary and published in the Federal Register as described 
in Sec.  5.711. The entity conducting the inspection shall identify 
each deficiency as ``Life Threatening'', ``Severe,'' ``Moderate'', or 
``Low.''
    (2) Inspection scope. The inspection requirement for HUD housing 
generally requires the inside, outside and unit to be inspected, in 
accordance with Sec.  5.703. The inspection requirement for the tenant-
based HCV program and the unit inspection for the PBV and Moderate 
Rehabilitation programs only applies to units occupied or to be 
occupied by HCV, PBV, and Moderate Rehabilitation participants, and 
common areas and exterior areas which either service or are associated 
with such units.
    (3) HCV and PBV variant inspection standards. (i) HUD may approve 
inspection criteria variations for the following purposes:
    (A) Variations which apply standards in local housing codes or 
other codes adopted by the PHA; or
    (B) Variations because of local climatic or geographic conditions.
    (ii) Acceptability criteria variations may only be approved by HUD 
pursuant to paragraph (a)(3)(i) of this section if such variations 
either:
    (A) Meet or exceed the performance requirements; or
    (B) Significantly expand affordable housing opportunities for 
families assisted under the program.
    (iii) HUD will not approve any inspection criteria variation if HUD 
believes that such variation is likely to adversely affect the health 
or safety of participant families, or severely restrict housing choice.
    (iv) Approved variations must be added to the Administrative Plan 
as described in 24 CFR 982.54(d)(21).
    (b) Entity conducting inspections. HUD housing must be inspected by 
the appropriate entity as described in paragraph (b)(1) of this 
section, except as described in paragraph (b)(2) of this section.
    (1) General. The owner, lender, contract administrator, or HUD is 
the entity responsible for performing inspections of HUD housing as 
provided in this title, or a regulatory agreement or contract. For 
properties with more than one HUD-insured loan, only the first mortgage 
lender is required to conduct the inspection. The second mortgage 
lender will be provided a copy of the physical inspection report by the 
first mortgage lender.
    (2) Exception. Under the HCV and PBV programs, the Public Housing 
Agency is responsible for inspecting HUD housing under those programs, 
unless another entity is assigned the inspection by the program 
regulations governing the housing, regulatory agreements or contracts. 
A PHA-owned

[[Page 30493]]

unit receiving assistance under section 8(o) of the 1937 act must be 
inspected by an independent entity as specified in 24 CFR parts 982 and 
983. Under the Moderate Rehabilitation program, the PHA is responsible 
for inspecting the HUD housing unless the PHA is managing units on 
which it is also administering the HAP Contract in accordance with 24 
CFR 882.412, in which case HUD is responsible for the inspections in 
accordance with 24 CFR 882.516(d).
    (c) Timing of inspections--(1) Generally. A property must be 
inspected before the property is approved for participation in any of 
the HUD housing programs under this part unless there is a program 
specific exception to this requirement. An entity responsible for 
conducting an inspection of HUD housing to determine compliance with 
this subpart must inspect such housing annually unless specified 
otherwise below. An inspection shall be conducted no earlier than 3 
months before and no later than 3 months after the date marking the 
anniversary of the previous inspection, except that inspections due on 
or before July 1, 2024, shall be conducted no earlier than 6 months 
before and no later than 6 months after the date marking the 
anniversary of the previous inspection. HUD may approve requests by an 
owner or PHA for extensions of the deadline for an inspection for good 
cause as determined by HUD and HUD may extend inspection deadlines 
without owner request, as deemed necessary by the Secretary.
    (2) Extended inspection cycle. HUD housing, except as specified 
below, shall be scored and ranked in accordance with the methodology 
provided through Federal Register notification.
    (i) Standard 1 performing property. If a property receives a score 
of 90 points or higher on its physical condition inspection, the 
property will be designated a standard 1 performing property. 
Properties designated as standard 1 performing properties will be 
required to undergo a physical inspection once every three (3) years.
    (ii) Standard 2 performing property. If a property receives a score 
of 80 points or higher but less than 90 on its physical condition 
inspection, the property will be designated a standard 2 performing 
property. Properties designated as standard 2 performing properties 
will be required to undergo a physical inspection once every two (2) 
years.
    (iii) Standard 3 performing property. If a property receives a 
score of less than 80 points, the property will be designated a 
standard 3 performing property. Properties designated as standard 3 
performing properties will continue to undergo an annual physical 
inspection as currently required under covered HUD programs.
    (3) Triennial cycle for small rural PHAs. Small rural PHAs as 
defined in 24 CFR 902.101 shall be assessed in accordance with part 
902, subpart H of this title.
    (4) Triennial cycle for small PHAs. Small PHAs as defined in 24 CFR 
902.13(a) shall be assessed in accordance with 24 CFR 902.13(a).
    (5) Housing choice vouchers. PHAs must inspect units subject to 
part 982 of this title in accordance with the frequency described in 24 
CFR 982.405.
    (6) Project based vouchers. PHAs must inspect units subject to 24 
CFR part 983 in accordance with the frequency described in 24 CFR 
983.103.
    (7) FHA insured mortgages section 232 facilities. HUD may exempt 
assisted-living facilities, board and care facilities, and intermediate 
care facilities from physical inspections under this part if HUD 
determines that the State or local government has a reliable and 
adequate inspection system in place, with the results of the inspection 
being readily and timely available to HUD. For any other section 232 
facilities, the inspection will be conducted only when and if HUD 
determines, on the basis of information received, such as through a 
complaint, site inspection, or referral by a State agency, on a case-
by-case basis, that inspection of a particular facility is needed to 
assure protection of the residents or the adequate preservation of the 
project.
    (8) Section 8 Moderate Rehabilitation program. PHAs must inspect 
units subject to the Moderate Rehabilitation program under 24 CFR part 
882 in accordance with the frequency described in 24 CFR 882.516.
    (d) Inspection costs. The cost of an inspection shall be the 
responsibility of the entity responsible for the inspection as 
identified in paragraph (a) of this section, except that a reasonable 
fee may be required of the owner of a property for a reinspection if an 
owner notifies the entity responsible for the inspection that a repair 
has been made or the allotted time for repairs has elapsed and a 
reinspection reveals that any deficiency cited in the previous 
inspection that the owner is responsible for repairing was not 
corrected. No fee may be passed along to the household residing in the 
unit or units.
    (e) Access to property for inspection. Nothing in this subpart 
shall restrict the right of HUD, or an entity contracted by HUD, to 
inspect a property. All owners and PHAs are required to provide HUD or 
its representative with full and free access to all HUD-assisted 
properties. All owners and PHAs are required to provide HUD or its 
representative with access to all units and appurtenances in order to 
permit physical inspections, monitoring reviews, and quality assurance 
reviews under this part. Access to the units shall be provided whether 
or not the resident is home or has installed additional locks for which 
the owner or PHA did not obtain keys. In the event that an owner or PHA 
fails to provide access as required by HUD or its representative, the 
owner or PHA shall be given a physical condition score of zero for the 
project or projects involved. A score of zero for an owner or PHA shall 
be used to calculate the physical condition indicator score and the 
overall assessment score for that owner or PHA.
    (f) Tenant involvement in inspections. HUD will establish, through 
notice, a procedure for tenants to recommend to HUD particular units 
which HUD may choose to inspect either during or separate from its 
standard inspection. HUD will evaluate the condition of these units and 
issue a report on findings, but they will not be included in the 
official score unless they were randomly selected independent of the 
tenant's recommendation. The owner or PHA is required to correct any 
deficiency HUD identifies within the timeframes HUD has established for 
the identified deficiency.


Sec.  5.707  Uniform self-inspection requirement and report.

    All PHAs and owners of HUD housing subject to an assistance 
contract, other than owners participating in the HCV, PBV, and Moderate 
Rehabilitation programs, are required to annually self-inspect their 
properties, including all units, to ensure the units are maintained in 
accordance with the standards in Sec.  5.703. The owner or PHA must 
maintain the results of such self-inspections for three years and must 
provide the results to HUD upon request. This self-inspection is 
independent of other HUD inspections discussed in Sec.  5.705. The 
owner or PHA may choose to conduct this inspection after a HUD 
inspection to satisfy this requirement and the post-report survey 
requirement at Sec.  5.711(c)(2) simultaneously.


Sec.  5.709  Administrative process for defining and revising 
inspection criteria.

    (a) Inspection standards and scoring methodology. The Secretary 
will publish in the Federal Register, following notice and the 
opportunity to

[[Page 30494]]

comment, a standards notification with a list of deficiencies and the 
relative severity of these deficiencies to use for inspecting HUD 
housing. This Federal Register document will also include the factors 
for determining if an HCV, PBV, or Moderate Rehabilitation unit passes 
or fails the inspection. The Secretary will also publish in the Federal 
Register, following notice and opportunity to comment, a scoring 
notification containing the methodologies to use for scoring and 
ranking HUD housing. After considering the public comments received on 
these Federal Register documents, the Secretary will publish documents 
announcing the new inspections standards and scoring methodologies, and 
the date on which these notifications become effective.
    (1) Revisions. The Secretary will issue a notification in the 
Federal Register published for at least 30 days of public comment 
making any revisions to the inspection and scoring procedures HUD deems 
necessary, at least once every three years, or three years after the 
most recent revision, whichever is later.
    (2) Emergency revisions. The Secretary may publish a notification 
without 30 days of public comment in the case of an emergency to 
protect Federal financial resources or the health or safety of 
residents of HUD housing, after HUD makes a documented determination 
that such action is warranted due to:
    (i) A Life-Threatening deficiency or Severe deficiency and other 
significant risks to safety as outlined in Sec.  5.703;
    (ii) A new safety concern due to changing construction technology; 
or
    (iii) Other events as determined by the Secretary.
    (b) [Reserved]


Sec.  5.711  Scoring, ranking criteria, and appeals.

    (a) Applicability. Administrative process for scoring and ranking 
the physical condition of HUD housing properties under this section 
does not apply to the HCV, PBV or Moderate Rehabilitation programs. 
PHAs administering HCV and PBV programs will be assessed under the 
Section 8 Management Assessment Program (``SEMAP'') or the small rural 
PHA assessment in accordance with 24 CFR part 985, and PHAs 
administering the Moderate Rehabilitation programs are subject to HUD 
review in accordance with 24 CFR 882.517.
    (b) Scoring and ranking of HUD housing--(1) General. HUD's Real 
Estate Assessment Center (REAC), or the appropriate entity either as 
described in Sec.  5.705(b), or as identified in the regulator 
agreement or contract for the property as described in Sec.  
5.705(b)(1), will score and rank the physical condition of HUD housing 
properties in accordance with the procedures set out by the Secretary 
in Sec.  5.709.
    (2) Public housing programs. PHAs operating public housing will be 
scored and ranked under the Public Housing Assessment System (``PHAS'') 
outlined in part 902 of this title.
    (c) Inspection report requirements. (1) Life-Threatening 
deficiencies and Severe deficiencies. Upon completion of an inspection, 
or at the end of each day on a multiple-day inspection, REAC, or the 
appropriate party as described in Sec.  5.705(b), will provide the 
owner or PHA or owner's representative, a notice of any items 
classified as Life-Threatening or Severe deficiencies. All Life-
Threatening items must be corrected within 24 hours of receipt of 
notice of these items, unless HUD approves a variation. All Severe 
items must be corrected within 24 hours of receipt of notice, unless 
indicated otherwise within the individual inspection standards 
published in the Federal Register with notice and the opportunity for 
comment, or HUD approves a variation. The owner or PHA or owner's 
representative must electronically certify and provide supporting 
evidence within 2 business days after the deadline to correct the Life-
Threatening and Severe items that the items have been resolved or 
sufficiently corrected such that they no longer pose a severe health or 
safety risk to residents of the property, or that the hazard is blocked 
until permanent repairs can be completed. If permanent repair will take 
longer than the allowable time in the relevant standard for the 
deficiency, the owner or PHA must provide HUD a timeframe for 
completing permanent repairs for HUD approval.
    (2) Post-report inspection. The owner or PHA must carefully review 
the inspection report and is responsible for conducting its own survey 
of the total property. Moderate deficiencies must be corrected within 
thirty days and Low deficiencies must be corrected within sixty days, 
unless indicated otherwise within the individual inspection standards 
published in the Federal Register with notice and the opportunity for 
comment or within such other reasonable time prescribed by a HUD notice 
to the owner or PHA. For properties that scored at or above 60, the 
survey may be limited to inspecting for deficiencies based on the 
inspecting entity's inspection findings. For properties that scored 
below 60, the owner or PHA must conduct a survey of the entire project, 
including all units, inside areas, and outside areas, for any 
deficiency, and must electronically submit a copy of the results of the 
survey to HUD.
    (d) Technical review of inspection results--(1) Timing. A request 
for a technical review of inspection results must be submitted 
electronically and must be received by the inspecting entity no later 
than the 45th calendar day following the day the inspection report is 
provided to the owner or PHA.
    (2) Request for technical review. The request must be accompanied 
by the owner's or PHA's relevant evidence that an objectively 
verifiable and material error occurred or adverse conditions beyond the 
owner or PHA's control occurred, which if corrected will result in a 
significant improvement in the overall score of the property. A 
technical review of the inspection results will not be conducted based 
on conditions that were corrected subsequent to the inspection. Upon 
receipt of this request from the owner or PHA, the REAC will review the 
inspection and the evidence. If the REAC review determines that an 
objectively verifiable and material error (or errors) or adverse 
condition(s) beyond the owner's or PHA's control has been documented 
and that it is likely to result in a significant improvement in the 
property's overall score, the REAC will take one or a combination of 
the following actions:
    (i) Undertake a new inspection;
    (ii) Correct the original inspection; or
    (iii) Issue a new physical condition score.
    (3) Burden of proof that error or adverse conditions occurred rests 
with owner or PHA. The burden of proof rests with the owner or PHA to 
demonstrate that an objectively verifiable and material error (or 
errors) or adverse conditions occurred in the REAC's inspection through 
submission of evidence, which if corrected will result in a significant 
improvement in the property's overall score. The REAC will apply a 
rebuttable presumption that the inspection was conducted accurately. To 
support its request for a technical review of the physical inspection 
results, the owner or PHA may submit photographic evidence, written 
material from an objective source with subject matter expertise that 
pertains to the item being reviewed such as a local fire marshal, 
building code official, registered architect, or professional engineer, 
or other similar evidence.
    (4) Basis for technical review. An objectively verifiable material 
error must be present, or an adjustment to the score must be necessary, 
to allow for a

[[Page 30495]]

technical review of inspection results. The basis for a technical 
review must not be due to the fault of the owner or PHA and must 
exhibit specific characteristics and meet specific thresholds. The 
applicable types of material errors and bases for adjustment are as 
follows.
    (i) Building data error. A building data error occurs if the 
inspector inspected the wrong building or a building that was not owned 
by the property, including common or site areas that were not a part of 
the property. Incorrect data due to the failure of an owner or PHA to 
ensure HUD's systems of records are updated cannot form the basis of a 
review. Incorrect building data that does not affect the score, such as 
the address and building name would not be considered material.
    (ii) Unit count error. A unit count error occurs if the total 
number of units considered in scoring is incorrect due to the fault of 
HUD. Since scoring uses total units, REAC will examine instances where 
the participant can provide evidence that the total units used was 
incorrect and that the results were not representative of the condition 
of the property.
    (iii) A non-existent deficiency error. A non-existent deficiency 
error occurs if the inspection records an observed deficiency that does 
not satisfy or does not meet a reasonable interpretation of the 
definition of that deficiency as defined by inspection procedures.
    (iv) Adjustments for factors not reflected or inappropriately 
reflected in physical condition score. HUD may determine it is 
appropriate to review the results of a property's physical inspection 
if facts and circumstances affecting the owner's or PHA's property are 
not reflected in the inspection or are reflected inappropriately in the 
inspection. The circumstances addressed in this may include 
inconsistencies between local code requirements and the HUD physical 
inspection protocol; conditions that are permitted by local variance or 
license or which are preexisting physical features that do not conform 
to, or are inconsistent with, HUD's physical condition protocol; or the 
project or PHA having been scored for elements (e.g., roads, sidewalks, 
mail boxes, resident-owned appliances, etc.) that it does not own and 
is not responsible for maintaining.
    (v) Adjustments for adverse conditions beyond the control of the 
owner or PHA. HUD may determine that certain deficiencies that 
adversely and significantly affect the physical condition score of the 
project were caused by circumstances beyond the control of the owner or 
PHA. The correction of these conditions, however, remains the 
responsibility of the owner or PHA. The circumstances addressed by this 
paragraph may include, but are not limited to, damage caused by third 
parties (such as a private entity or public entity undertaking work 
near a Public Housing project that results in damage to the project) or 
natural disasters.
    (vi) Adjustments for modernization work in progress. HUD may 
determine that occupied dwelling units or other areas of a property, 
which are subject to physical inspection, and which are undergoing 
modernization work, require an adjustment to the physical condition 
score. An occupied dwelling unit or other areas of an owner's or PHA's 
property undergoing modernization are subject to physical inspection; 
the unit(s) and other areas of the property are not exempt from 
physical inspection. All elements of the unit or of the other areas of 
the owner or PHA's project that are subject to inspection and are not 
undergoing modernization at the time of the inspection (even if 
modernization is planned) will be subject to HUD's physical inspection 
protocol without adjustment. For those elements of the unit or of the 
property that are undergoing modernization, deficiencies will be noted 
in accordance with HUD's physical inspection protocol, but the owner or 
PHA may request adjustment of the physical condition score as a result 
of current modernization or rehab work in progress.
    (5) Significant improvement. Significant improvement in the 
project's overall score refers to an increase in a score for the owner 
or PHA such that the new score crosses an administratively significant 
threshold.
    (6) Reinspection. If HUD determines that a reinspection is 
appropriate, it will arrange for a complete reinspection of the 
project(s) in question, not just the deficiencies previously 
identified. The reinspection will constitute the final inspection for 
the project, and HUD will issue a new inspection report (the final 
inspection report).
    (e) Independent HUD review. Under certain circumstances, HUD may 
find it appropriate absent an owner or PHA request for technical review 
to review the results of an inspection which are anomalous or have an 
incorrect result due to facts and circumstances affecting the inspected 
property which are not reflected in the inspection or reflected 
inappropriately in the inspection.
    (f) Responsibility for the cost of a new inspection. If a new 
inspection is undertaken by the inspecting party and the new inspection 
score results in a significant improvement in the property's overall 
score, then the entity responsible for the inspection shall bear the 
expense of the new inspection. If no significant improvement occurs, 
then the owner or PHA responsible for the property must bear the 
expense of the new inspection. The inspection cost of a new inspection, 
if paid by the owner or PHA, is not an eligible project operating 
expense. The new inspection score will be considered the final score.
    (g) Issuance of final score and publication of score. (1) The score 
of the property is the final score if the owner or PHA files no request 
for technical review, as provided in paragraph (d) of this section, or 
for other adjustment of the physical condition score, as provided in 
paragraph (e) of this section. If the owner or PHA files a request for 
technical review or score adjustments in accordance with paragraphs 
(d), or there is a HUD review under paragraph (e) of this section, the 
final inspection score is the score issued by HUD after any adjustments 
are determined necessary and made by HUD at the conclusion of these 
processes.
    (2) HUD will make public the final scores of the properties of the 
owners and PHAs through posting on HUD's internet site, or other 
appropriate means.
    (h) Responsibility to notify residents of inspection; and 
availability of documents to residents--(1) Notification to residents. 
An owner or PHA must notify its residents of any planned inspections of 
their units or the housing development generally.
    (2) Availability of documents for review. (i) Once a final score 
has been issued the owner or PHA must make the physical inspection 
report and all related documents available to residents during regular 
business hours upon reasonable request for review and copying. Related 
documents include the owner's or PHA's survey plan, plan of correction, 
certification, and related correspondence.
    (ii) Once the owner's final inspection score is issued and 
published, the owner or PHA must make any additional information, such 
as the results of any reinspection or appeal requests, available for 
review and copying by its residents upon reasonable request during 
regular business hours.
    (iii) The owner or PHA must maintain the documents related to the 
inspection of the property, as described in paragraphs (h)(2)(i) and 
(ii) of this section, for review by residents for a

[[Page 30496]]

period of 60 days from the date HUD provides the inspection score for 
the property in which the residents reside.
    (3) Posting on the availability of materials. The owner or PHA must 
post a notice to the residents in the owner's or PHA's management 
office and on any bulletin boards in all common areas on the date of 
submission to the owner of the inspection score for the property in 
which the resident resides that advises residents of the availability 
of the materials described in this section. The notice must be 
translated into other languages if necessary to provide meaningful 
access for limited English proficient (LEP) individuals. The notice 
should include, where applicable, the name, address, and telephone 
number of the HUD field office contact.
    (4) Residents are encouraged to comment on this information 
provided by the owner or PHA and submit any comments directly to the 
applicable HUD field office or responsible entity. Should residents 
discover the owner or PHA provided HUD with a false certification 
during the review, they are encouraged to notify the applicable HUD 
field office where appropriate inquiry and action will be taken.
    (i) Administrative review of properties. The file of a property 
that receives a score of 30 points or less, or two successive scores 
under 60, on its inspection will be subject to additional 
administrative review. Properties that receive two successive scores 
under 60 may be referred to HUD's Departmental Enforcement Center (DEC) 
for evaluation. Properties that receive a score of 30 points or less 
shall be automatically referred to the DEC for evaluation.
    (1) Notification to owner of submission of property file to the 
DEC. Upon referral to the DEC, the Department will provide for 
notification to the PHA or owner that the file on the owner's property 
is being submitted to the DEC for evaluation. The notification will be 
provided at the time the REAC issues the inspection report to the owner 
or at such other time as a referral occurs.
    (2) Evaluation of the property. During the DEC's evaluation period, 
the DEC will perform an analysis of the property, which may include 
input from tenants, HUD officials, elected officials, maintenance staff 
and others as may be appropriate. Although program offices will assist 
with the evaluation, the DEC will have primary responsibility for the 
conclusion of the evaluation of the property after taking into 
consideration the input of interested parties as described in this 
paragraph. The DEC's evaluation may include a site visit to the PHA's 
or owner's property.
    (3) Continuing responsibilities of HUD program offices and 
mortgagee. During the period of DEC evaluation, HUD's program offices 
continue to be responsible for routine business, oversight, and 
monitoring. In addition, during this period of evaluation, the 
mortgagee, as applicable, shall continue to carry out its duties and 
responsibilities with respect to the mortgage.
    (4) Enforcement action. Except as otherwise provided by statute, 
if, based on the DEC's evaluation and in consultation with HUD program 
offices, the DEC determines that enforcement actions are appropriate, 
it may take those actions for which the DEC has delegated authority 
and/or make recommendations to HUD program office with respect to 
resolving identified physical deficiencies and owner or PHA 
noncompliance.
    (j) No limitation on existing enforcement authority. The 
administrative process provided in this section does not prohibit HUD 
from taking whatever action may be necessary (notwithstanding the 
commencement of this process), as authorized under existing statutes, 
regulations, contracts, grant agreements or other documents, to protect 
HUD's interests in HUD housing properties and to protect the residents 
of these properties.


Sec.  5.713  Second- and third-party rights.

    Nothing in this subpart is intended to create any right of the 
family residing in HUD Housing or any party, other than HUD or a PHA, 
to require enforcement of the standards required by this subpart or to 
assert any claim against HUD or the PHA for damages, injunction, or 
other relief for alleged failure to enforce the standards.

PART 92--HOME INVESTMENT PARTNERSHIPS PROGRAM

0
3. The authority for part 92 continues to read as follows:

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


Sec.  92.2  [Amended]

0
4. Effective October 1, 2023, amend Sec.  92.2 by removing the 
definition of ``Uniform Physical Condition Standards (UPCS)''.

0
5. Effective October 1, 2023, amend Sec.  92.209 by revising paragraph 
(i) to read as follows:


Sec.  92.209  Tenant-based rental assistance: Eligible costs and 
requirements.

* * * * *
    (i) Housing standards. Housing occupied by a family receiving 
tenant-based rental assistance under this section must meet the 
participating jurisdiction's property standards under Sec.  92.251. The 
participating jurisdiction must inspect the housing initially and re-
inspect it annually.
* * * * *

0
6. Effective October 1, 2023, amend Sec.  92.251 by:
0
a. Revising paragraphs (b)(1)(viii) and (c)(3);
0
b. Removing and reserving paragraph (d); and
0
c. Revising the paragraph (f) heading and paragraphs (f)(1) 
introductory text and (f)(1)(i).
    The revisions read as follows:


Sec.  92.251  Property standards.

* * * * *
    (b) * * *
    (1) * * *
    (viii) HUD housing standards. The standards of the participating 
jurisdiction must be such that, upon completion, the HOME-assisted 
project and units will be decent, safe, sanitary, and in good repair. 
This means that the HOME-assisted project and units will meet the 
standards in 24 CFR 5.703, except that the carbon monoxide detection 
requirements at 24 CFR 5.703(b)(2) and (d)(6) shall not apply. For all 
HOME-assisted projects and units, the requirements at 24 CFR 5.705 
through 5.713 do not apply. At minimum, the participating 
jurisdiction's rehabilitation standards must require correction of the 
specific deficiencies published in the Federal Register for HOME-
assisted projects and units. For SRO housing, 24 CFR 5.703(d) shall 
only apply to the extent that the SRO unit contains the room or 
facility referenced in 24 CFR 5.703(d).
* * * * *
    (c) * * *
    (3) Existing housing that is acquired for homeownership (e.g., 
downpayment assistance) must be decent, safe, sanitary, and in good 
repair. The participating jurisdiction must establish standards to 
determine that the housing is decent, safe, sanitary, and in good 
repair. At minimum, the standards must provide that the housing meets 
all applicable State and local housing quality standards and code 
requirements and the housing does not contain the specific deficiencies 
established by HUD based on the applicable standards in 24 CFR 5.703 
and published in the Federal Register

[[Page 30497]]

for HOME assisted projects and units. The participating jurisdiction 
must inspect the housing and document this compliance based upon an 
inspection that is conducted no earlier than 90 days before the 
commitment of HOME assistance. If the housing does not meet these 
standards, the housing must be rehabilitated to meet the standards of 
this paragraph (c)(3) or it cannot be acquired with HOME funds.
* * * * *
    (f) Ongoing property condition standards: Rental housing and 
housing occupied by tenants receiving HOME tenant-based rental 
assistance--(1) Ongoing property standards. The participating 
jurisdiction must establish property standards for rental housing 
(including manufactured housing) that apply throughout the 
affordability period and for housing occupied by tenants receiving HOME 
tenant-based rental assistance. The standards must require that owners 
maintain the housing as decent, safe, sanitary, and in good repair. The 
participating jurisdiction's description of its property standards must 
be in sufficient detail to establish the basis for a uniform inspection 
of HOME rental projects and housing occupied by tenants receiving HOME 
tenant-based rental assistance. The participating jurisdiction's 
ongoing property standards must address each of the following:
    (i) Compliance with State and local codes, ordinances, and 
requirements. The participating jurisdiction's standards must require 
the housing to meet all applicable State and local code requirements 
and ordinances. In the absence of existing applicable State or local 
code requirements and ordinances, at a minimum, the participating 
jurisdiction's ongoing property standards must provide that the 
property does not contain the specific deficiencies established by HUD 
based on the applicable standards in 24 CFR 5.703 and published in the 
Federal Register for rental housing (including manufactured housing) 
and housing occupied by tenants receiving HOME tenant-based rental 
assistance. The requirements in 24 CFR 5.705 through 5.713 do not apply 
to the participating jurisdiction's ongoing property standards.
* * * * *

0
7. Effective October 1, 2023, amend Sec.  92.504 by revising paragraphs 
(d)(1)(ii)(D) and (d)(1)(iii) to read as follows:


Sec.  92.504  Participating jurisdiction responsibilities; written 
agreements; on-site inspections.

* * * * *
    (d) * * *
    (1) * * *
    (ii) * * *
    (D) Inspections must be based on a statistically valid sample of 
units appropriate for the size of the HOME-assisted project, as set 
forth by HUD through a document published in the Federal Register. For 
projects with one-to-four HOME-assisted units, a participating 
jurisdiction must inspect all of the HOME-assisted units and all 
inspectable areas for each building with HOME-assisted units.
    (iii) Annual inspections. Tenant-based rental assistance (TBRA). 
All housing occupied by tenants receiving HOME tenant-based rental 
assistance must meet the property standards of Sec.  92.251. The 
participating jurisdiction must perform annual on-site inspections of 
rental housing occupied by tenants receiving HOME-assisted TBRA to 
determine compliance with these standards.
* * * * *

PART 93--HOUSING TRUST FUND

0
8. The authority for part 93 continues to read as follows:

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


0
9. Effective October 1, 2023, amend Sec.  93.301 by revising paragraphs 
(b)(1)(viii), (c)(3), (e)(1) introductory text, and (e)(1)(i) to read 
as follows:


Sec.  93.301  Property standards.

* * * * *
    (b) * * *
    (1) * * *
    (viii) Housing standards. The standards of the grantee must be such 
that, upon completion, the HTF-assisted project and units will be 
decent, safe, sanitary, and in good repair. This means that the HTF-
assisted project and units will meet the standards in 24 CFR 5.703, 
except that the carbon monoxide detection requirement at 24 CFR 
5.703(b)(2) and (d)(6) shall not apply. For all HTF-assisted projects 
and units, the requirements at 24 CFR 5.705 through 5.713 do not apply. 
At minimum, the grantee's rehabilitation standards must require 
correction of the specific deficiencies published in the Federal 
Register for HTF-assisted projects and units. For SRO housing, the 
requirements at 24 CFR 5.703(d) shall only apply to the extent that the 
SRO unit contains the room or facility referenced in 24 CFR 5.703(d).
* * * * *
    (c) * * *
    (3) Existing housing that is acquired for homeownership (e.g., down 
payment assistance) must be decent, safe, sanitary, and in good repair. 
The grantee must establish standards to determine that the housing is 
decent, safe, sanitary, and in good repair. At minimum, the standards 
must provide that the housing meets all applicable State and local 
standards and code requirements, and the housing does not contain the 
specific deficiencies established by HUD based on the applicable 
standards in 24 CFR 5.703 and published in the Federal Register for 
HTF-assisted projects and units. The grantee must inspect the housing 
and document compliance based upon an inspection that is conducted no 
earlier than 90 calendar days before the date of commitment of HTF 
assistance. If the housing does not meet these standards, the housing 
must be rehabilitated to meet the standards of this paragraph or it 
cannot be assisted with HTF funds.
* * * * *
    (e) * * *
    (1) Ongoing property standards. The grantee must establish property 
standards for rental housing (including manufactured housing) that 
apply throughout the affordability period. The standards must require 
that owners maintain the housing as decent, safe, sanitary and in good 
repair. The grantee's description of its property standards must be in 
sufficient detail to establish the basis for a uniform inspection of 
HTF rental projects. The grantee's ongoing property standards must 
address each of the following:
    (i) Minimum Property Standards. At a minimum, the grantee's ongoing 
property standards must provide that the property does not contain the 
specific deficiencies established by HUD based on the applicable 
standards in 24 CFR 5.703 and published in the Federal Register for 
rental housing (including manufactured housing). The requirements in 24 
CFR 5.705 through 5.713 do not apply to the grantee's ongoing property 
standards.
* * * * *

0
10. Effective October 1, 2023, amend Sec.  93.404 by revising paragraph 
(d)(2)(v) to read as follows:


Sec.  93.404  Grantee responsibilities; written agreements; onsite 
inspections; financial oversight.

* * * * *
    (d) * * *
    (2) * * *
    (v) Inspections must be based on a statistically valid sample of 
units appropriate for the size of the HTF-

[[Page 30498]]

assisted project, as set forth by HUD through notification published in 
the Federal Register. For projects with one to four HTF-assisted units, 
the HTF grantee must inspect all of the HTF-assisted units and all 
inspectable areas for each building housing HTF-assisted units.
* * * * *

PART 200--INTRODUCTION TO FHA PROGRAMS

0
11. The authority for part 200 continues to read as follows:

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


0
12. Effective October 1, 2023, revise Sec.  200.850 to read as follows:


Sec.  200.850  Physical condition standards and physical inspection 
requirements.

    The requirements in 24 CFR part 5, subpart G, are applicable to the 
multifamily properties assisted or insured that are listed in 24 CFR 
5.701.


Sec. Sec.  200.853, 200.855, and 200.857  [Removed and Reserved]

0
13. Effective October 1, 2023, remove and reserve Sec. Sec.  200.853, 
200.855, and 200.857.

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

0
14. The authority citation for part 570 continues to read as follows:

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


0
15. Effective October 1, 2023, amend Sec.  570.208 by revising 
paragraph (b)(1)(iv) to read as follows:


Sec.  570.208  Criteria for national objectives.

* * * * *
    (b) * * *
    (1) * * *
    (iv) The assisted activity addresses one or more of the conditions 
which contributed to the deterioration of the area. Rehabilitation of 
residential buildings carried out in an area meeting the above 
requirements will be considered to address the area's deterioration 
only where each building rehabilitated is considered substandard under 
local definition before rehabilitation, and all deficiencies making a 
building substandard have been eliminated. At a minimum, the local 
definition for this purpose must be such that buildings that it would 
render substandard would also fail to meet the standards for the 
condition of HUD housing at 24 CFR 5.703.
* * * * *

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

0
16. The authority for part 574 continues to read as follows:

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


0
17. Effective October 1, 2023, amend Sec.  574.310 by revising 
paragraphs (b) introductory text and (b)(2) and adding paragraph (b)(3) 
to read as follows:


Sec.  574.310  General standards for eligible housing activities.

* * * * *
    (b) * * *. The following standards apply for all housing for which 
HOPWA funds are used under Sec.  574.300(b)(3), (4), (5), and (8).
* * * * *
    (2) HUD housing standards. Except for such variations as are 
proposed by the grantee and approved by HUD, the housing must meet the 
standards for HUD housing in 24 CFR 5.703, except that:
    (i) As applied to HOPWA, ``HUD housing'' in 24 CFR 5.703 means the 
units eligible persons occupy or will occupy, systems equipment that 
directly services those units, items and components within the primary 
and secondary means of egress from those units' doors to the public 
way, and common features related to the residential use of the building 
(e.g., the laundry room, community room, mail room).
    (ii) Housing that continues to meet the HOPWA housing quality 
standards that applied when the eligible person(s) moved into that 
housing shall not be required to meet new or different standards under 
24 CFR 5.703.
    (3) The requirements of 24 CFR 5.705 through 5.713 do not apply.
* * * * *

PART 576--EMERGENCY SOLUTIONS GRANTS PROGRAM

0
18. 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

0
19. Effective October 1, 2023, amend Sec.  576.403 by revising 
paragraph (c) to read as follows:


Sec.  576.403  Shelter and housing standards.

* * * * *
    (c) Minimum standards for permanent housing. When ESG funds are 
used for permanent housing under 24 CFR 576.105 or 576.106, the minimum 
standards in 24 CFR 5.703 apply, except that:
    (1) Definition of HUD housing. For the purposes of ESG, ``HUD 
housing'' in 24 CFR 5.703 means the program participant's unit, systems 
equipment that directly services those units, items and components 
within the primary and secondary means of egress from those units' 
doors to the public way, and common features related to the program 
participant's use of the building (e.g., the laundry room, community 
room, mail room).
    (2) Housing inspections. For the first 30 days in which a program 
participant receives homelessness prevention assistance, the recipient 
or subrecipient may provide services under 24 CFR 576.105(b) to help 
the program participant remain in their unit without inspecting the 
unit to determine whether it meets the minimum standards identified in 
this paragraph (c), except that the recipient or subrecipient must 
still comply with the requirements under 24 CFR part 35. Before 
otherwise using ESG funds under 24 CFR 576.105 or 576.106 to help a 
program participant remain in or move into specific housing, however, 
the recipient or subrecipient must inspect that housing to confirm that 
it meets the requirements in this section. In addition, recipient or 
subrecipient must inspect the housing at least once every 12 months 
during the period of assistance to confirm the housing continues to 
meet the minimum standards in this paragraph (c).
    (3) Correction of deficiencies. If an inspection reveals one or 
more deficiencies that prevent the housing from meeting the 
requirements in this section, ESG funds must not be used under 24 CFR 
576.105 or 576.106 with respect to that housing unless the owner 
corrects the deficiencies within 30 days from the date of the initial 
inspection and the recipient or subrecipient verifies that all 
deficiencies have been corrected.
    (4) Rental arrears. Housing for which rental arrears are paid is 
only subject to the requirements in this section, if a program 
participant is seeking to stay in that housing.
    (5) Additional standards. The recipient may also add standards that 
exceed these minimum standards.
    (6) Other exemptions from 24 CFR part 5, subpart G. The 
requirements in 24 CFR 5.703(b)(2) and (d)(6) and 5.705 through 5.713 
do not apply.

[[Page 30499]]

PART 578--CONTINUUM OF CARE PROGRAM

0
20. 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).


0
21. Effective October 1, 2023, amend Sec.  578.75 by revising paragraph 
(b) to read as follows:


Sec.  578.75  General operations.

* * * * *
    (b) Housing standards. Housing leased with Continuum of Care 
program funds, or for which rental assistance payments are made with 
Continuum of Care program funds, must meet the applicable standards 
under 24 CFR 5.703, except that the carbon monoxide detection 
requirement at 24 CFR 5.703(b)(2) and (d)(6) shall not apply. For 
housing that is occupied by program participants receiving tenant-based 
rental assistance, 24 CFR part 35, subparts A, B, M, and R apply. For 
housing rehabilitated with funds under this part, the lead-based paint 
requirements in 24 CFR part 35, subparts A, B, J, and R apply. For 
housing that receives project-based or sponsor-based rental assistance, 
24 CFR part 35, subparts A, B, H, and R apply. For residential property 
for which funds under this part are used for acquisition, leasing, 
services, or operating costs, 24 CFR part 35, subparts A, B, K, and R 
apply. Additionally, for tenant-based rental assistance, for leasing of 
individual units, and for sponsor based rental assistance where not all 
units in a structure are or will be assisted, the standards apply only 
to the unit itself, and to the means of ingress and egress from the 
unit to the public way and to the building's common areas.
    (1) Before any assistance will be provided on behalf of a program 
participant, the recipient, or subrecipient, must physically inspect 
each unit to assure that the unit meets 24 CFR 5.703. Assistance will 
not be provided for units that fail to meet 24 CFR 5.703, unless the 
owner corrects any deficiencies within 30 days from the date of the 
initial inspection and the recipient or subrecipient verifies that all 
deficiencies have been corrected.
    (2) Recipients or subrecipients must inspect all units at least 
annually during the grant period to ensure that the units continue to 
meet 24 CFR 5.703.
    (3) The requirements in 24 CFR 5.705 through 5.713 do not apply.
* * * * *

PART 882--SECTION 8 MODERATE REHABILITATION PROGRAMS

0
22. The authority for part 882 continues to read as follows:

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


Sec.  882.404  [Amended]

0
23. Effective October 1, 2023, amend Sec.  882.404 by removing 
paragraph (d).

0
24. Effective October 1, 2023, amend Sec.  882.516 by revising the 
section heading and paragraphs (b), (c), and (e) to read as follows:


Sec.  882.516  Maintenance, operation, and inspections.

* * * * *
    (b) Periodic inspection. In addition to the inspections required 
prior to execution of the Contract, the PHA must inspect or cause to be 
inspected the contract units in accordance with the physical inspection 
requirements under 24 CFR part 5, subpart G, at least annually, and at 
such other times as may be necessary to assure that the Owner is 
meeting the obligations to maintain the units so they are compliant 
with 24 CFR part 5, subpart G, and to provide the agreed upon utilities 
and other services. The PHA must take into account complaints and any 
other information coming to its attention in scheduling inspections.
    (c) Units with health and safety hazards. If the PHA notifies the 
Owner that the unit(s) under Contract are not being maintained in 
compliance with the standards under 24 CFR part 5, subpart G, and the 
Owner fails to take corrective action (including corrective action with 
respect to the Family where the condition of the unit is the fault of 
the Family) within the time prescribed in the notice, the PHA may 
exercise any of its rights or remedies under the Contract, including 
abatement of housing assistance payments (even if the Family continues 
in occupancy) or termination of the Contract on the affected unit(s) 
and assistance to the Family in accordance with Sec.  882.514(e).
* * * * *
    (e) Periodic reviews. Periodic PHA audits must be conducted as 
required by HUD, in accordance with 2 CFR part 200, subpart F.

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

0
25. The authority for part 884 continues to read as follows:

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


0
26. Effective October 1, 2023, revise Sec.  884.217 to read as follows:


Sec.  884.217  Maintenance, operation, and inspections.

    (a) Maintenance and operation. The Owner shall maintain and operate 
the project consistent with 24 CFR part 5, subpart G, and shall provide 
all the services, maintenance, and utilities which the Owner agrees to 
provide under the Contract, subject to abatement of housing assistance 
payments or other applicable remedies if the Owner fails to meet these 
obligations.
    (b) Inspection prior to occupancy. Prior to occupancy of any unit 
by a Family, the Owner and the Family shall inspect the unit. On forms 
prescribed by HUD, the Owner and Family shall certify, that they have 
inspected the unit and the owner shall certify that the unit is 
compliant with 24 CFR part 5, subpart G, and the criteria provided in 
the prescribed forms. Copies of these reports shall be kept on file by 
the Owner for at least 3 years, and may be required to be 
electronically submitted to HUD.
    (c) Periodic inspections. HUD (or the PHA, as appropriate) will 
inspect or cause to be inspected the contract units and related 
facilities in accordance with the physical inspection requirements in 
24 CFR part 5, subpart G, and at such other times (including prior to 
initial occupancy and renting of any unit) as HUD (or the PHA) may 
determine to be necessary to assure that the Owner is meeting the 
obligation to maintain the units in accordance with 24 CFR part 5, 
subpart G, and to provide the agreed upon utilities and other services.
    (d) Units with health and safety hazards. If HUD (or the PHA, as 
appropriate) notifies the Owner that the Owner has failed to maintain a 
unit that in accordance with 24 CFR part 5, subpart G, and the Owner 
fails to take corrective action within the time prescribed by notice, 
HUD (or the PHA) may exercise any of its rights or remedies under the 
Contract, including abatement of housing assistance payments, even if 
the Family continues to occupy the unit. If, however, the Family wishes 
to be rehoused in another unit with Section 8 assistance and HUD (or 
the PHA) does not have other Section 8 funds for such purposes, HUD (or 
the PHA) may use the abated housing assistance payments for the purpose 
of rehousing the Family in another unit. Where this is done, the Owner 
shall be notified that the Owner will be entitled to resumption of 
housing assistance payments for the vacated unit if:

[[Page 30500]]

    (1) The unit is restored to in accordance with 24 CFR part 5, 
subpart G;
    (2) The Family is willing to and does move back to the restored 
dwelling unit; and
    (3) A deduction is made for the expenses incurred by the Family for 
both moves.

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

0
27. The authority for part 886 continues to read as follows:

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


Sec.  886.113  [Amended]

0
28. Effective October 1, 2023, amend Sec.  886.113 by removing and 
reserving paragraphs (b) and (i).

0
29. Effective October 1, 2023, revise Sec.  886.123 to read as follows:


Sec.  886.123  Maintenance, operation, and inspections.

    (a) Maintenance and operation. The Owner shall maintain and operate 
the project so as to provide housing that is compliant with 24 CFR part 
5, subpart G, and the Owner shall provide all the services, 
maintenance, and utilities which the Owner agrees to provide under the 
Contract, subject to abatement of housing assistance payments or other 
applicable remedies if the Owner fails to meet these obligations.
    (b) Inspection prior to occupancy. Prior to occupancy of any unit 
by a Family, the Owner and the Family shall inspect the unit. On forms 
prescribed by HUD, the Owner and Family shall certify that they have 
inspected the unit, and the owner shall certify that the unit is 
compliant with 24 CFR part 5, subpart G, and with the criteria provided 
in the prescribed forms. Copies of these reports shall be kept on file 
by the Owner for at least three years.
    (c) Periodic inspections. HUD will inspect or cause to be inspected 
the contract units in accordance with the requirements in 24 CFR part 
5, subpart G, and at such other times as may be necessary to assure 
that the owner is meeting contractual obligations.
    (d) Units not free of health and safety hazards. If HUD notifies 
the Owner that the Owner has failed to maintain a unit that is 
compliant with the requirements in 24 CFR part 5, subpart G, and the 
Owner fails to take corrective action within the time prescribed by 
notice, HUD may exercise any of its rights or remedies under the 
Contract, including abatement of housing assistance payments, even if 
the Family continues to occupy the unit.


Sec.  886.307  [Amended].

0
30. Effective October 1, 2023, amend Sec.  886.307 by removing and 
reserving paragraphs (b), (i), and (m).

0
31. Effective October 1, 2023, revise Sec.  886.323 to read as follows:


Sec.  886.323  Maintenance, operation, and inspections.

    (a) Maintain housing free of health and safety hazards. The Owner 
shall maintain and operate the project so as to be compliant with 24 
CFR part 5, subpart G, and the Owner shall provide all the services, 
maintenance, and utilities which the Owner agrees to provide under the 
contract and the lease. Failure to do so shall be considered a material 
default under the contract and Regulatory Agreement, if any.
    (b) HUD inspection. Prior to execution of the contract, HUD shall 
inspect (or cause to be inspected) each proposed contract unit and 
related facilities to ensure that they comply with the requirements at 
24 CFR part 5, subpart G.
    (c) Owner and family inspection. Prior to occupancy of any vacant 
unit by a Family, the Owner and the Family shall inspect the unit. The 
Owner shall certify that they have inspected the unit, and the owner 
shall certify that the unit is compliant with 24 CFR part 5, subpart G. 
Copies of these reports shall be kept on file by the owner for at least 
3 years.
    (d) Periodic inspections. HUD will inspect the project (or cause it 
to be inspected) in accordance with the requirements in 24 CFR part 5, 
subpart G, and at such other times as HUD may determine to be necessary 
to assure that the owner is meeting the Owner's obligation to maintain 
the units and the related facilities in accordance with 24 CFR part 5, 
subpart G, and to provide the agreed-upon utilities and other services.
    (e) Failure to maintain housing. If HUD notifies the Owner that he/
she has failed to maintain a unit that is compliant with 24 CFR part 5, 
subpart G, and the Owner fails to take corrective action within the 
time prescribed in the notice, HUD may exercise any of its rights or 
remedies under the Contract, or Regulatory Agreement, if any, including 
abatement of housing assistance payments (even if the Family continues 
to occupy the unit) and rescission of the sale. If the Family wishes to 
be rehoused in another unit, HUD shall provide assistance in finding 
such a unit for the Family.

PART 902--PUBLIC HOUSING ASSESSMENT SYSTEM

0
32. Effective July 1, 2023, the authority for part 902 is revised to 
read as follows:

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


0
33. Effective July 1, 2023, amend Sec.  902.3 by:
0
a. Removing the definition of ``Criticality'';
0
b. Revising the definitions of ``Dictionary of Deficiency 
Definitions'', ``Inspectable areas (or area)'', and ``Inspectable 
item''; and
0
c. Removing the definitions of ``Item Weights and Criticality Levels 
document'', ``Normalized weights'', ``Score'', ``Severity'', 
``Statistically valid sample'' and ``Subarea''.
    The revisions read as follows:


Sec.  902.3  Definitions.

* * * * *
    Dictionary of Deficiency Definitions means the documents published 
in the Federal Register that contain the inspection standards and 
scoring values pursuant to 24 CFR part 5, subpart G.
* * * * *
    Inspectable areas (or area) mean any of the three major components 
of public housing that are inspected, which are: inside, outside, and 
unit.
    Inspectable item means the individual parts, such as walls, 
kitchens, bathrooms, and other things, to be inspected in an 
inspectable area.
* * * * *

0
34. Effective July 1, 2023, amend Sec.  902.13 by revising paragraph 
(b)(2) to read as follows:


Sec.  902.13  Frequency of PHAS assessments.

* * * * *
    (b) * * *
    (2) The physical condition score for each project will determine 
the frequency of inspections of each project in accordance with the 
inspection cycle laid out in 24 CFR 5.705(c). The PHAS physical 
condition indicator score for an assessment period shall be calculated 
by taking the unit-weighted average of the most recent physical 
condition score for each project, except that, starting July 1, 2023, 
no new physical condition indicator will be issued for a PHA until 
every project under the PHA has been inspected on or after July 1, 
2023.
* * * * *


Sec.  902.20  [Removed and Reserved]

0
35. Effective July 1, 2023, remove and reserve Sec.  902.20.

0
36. Effective July 1, 2023, revise Sec.  902.21 to read as follows:

[[Page 30501]]

Sec.  902.21  Physical condition standards for public housing.

    Public housing must be maintained in a manner that meets the 
physical condition standards set forth in 24 CFR part 5, subpart G.

0
37. Effective July 1, 2023, revise Sec.  902.22 to read as follows:


Sec.  902.22  Inspection of PHA projects.

    The PHA's score for the physical condition indicator is based on an 
independent inspection of a PHA's project(s) provided by HUD and using 
the requirements and timelines laid out in 24 CFR part 5, subpart G, to 
ensure projects meet acceptable basic housing conditions. Mixed-finance 
projects will be subject to the physical condition inspections.


Sec.  902.24  [Removed and Reserved]

0
38. Effective July 1, 2023, remove and reserve Sec.  902.24.


Sec.  902.26  [Removed and Reserved]

0
39. Effective July 1, 2023, remove and reserve Sec. Sec.  902.24, 
902.26, and 902.68.


Sec.  902.68  [Removed and Reserved]

0
40. Effective July 1, 2023, remove and reserve Sec. Sec.  902.24, 
902.26, and 902.68.

0
41. Effective July 1, 2023, add subpart H to read as follows:
Subpart H--Assessment of Small Rural Public Housing Agencies
Sec.
902.101 Definitions of small rural PHAs.
902.103 Public housing assessment of small rural PHAs
902.105 Troubled small rural PHAs
902.107 Withholding, denying, and rescinding troubled designation.
902.109 Right to petition and appeal troubled designation.
902.111 Sanctions for troubled small rural PHAs.
902.113 Incentives for small rural PHAs high-performers.

Subpart H--Assessment of Small Rural Public Housing Agencies


Sec.  902.101  Definition of small rural PHAs.

    (a) Definition. A PHA is a small rural PHA if it administers 550 or 
fewer combined public housing units and vouchers under section 8(o), 
and either:
    (1) Has a primary administrative building as determined with a 
physical address in a rural area as described in 12 CFR 
1026.35(b)(2)(iv)(A); or
    (2) More than 50 percent of its combined public housing units and 
voucher units under section 8(o) are in rural areas as described in 12 
CFR 1026.35(b)(2)(iv)(A).
    (b) Determination. (1) HUD will make the initial determination of 
PHAs that qualify as small rural as defined in this section no later 
than October 30, 2023.
    (2) HUD will determine if a PHA qualifies as a small rural PHA 
under paragraph (a) of this section every 3 years.
    (c) Appeals. A PHA may challenge HUD's determination concerning 
whether the PHA qualifies as small rural PHA by presenting an 
objectively verifiable material error which resulted in the incorrect 
determination, or by presenting information showing that the status of 
the PHA has changed to justify a redetermination.


Sec.  902.103  Public housing assessment of small rural PHAs.

    (a) Small rural public housing assessment. The public housing 
program of small rural PHAs as defined in Sec.  902.101 shall be 
assessed and scored based only on the physical condition of their 
public housing properties in accordance with 24 CFR part 5, subpart G, 
except that properties that meet the definition specified in Sec.  
902.44(b) of physical condition and neighborhood environment shall 
receive one additional point for physical condition and neighborhood 
environment. Such agencies shall not be subject to PHAS except as noted 
below.
    (b) Triennial assessment. Public housing programs operated by small 
rural PHAs will be assessed no more than once every three years, except 
that a small rural PHA shall be subject to annual inspection if it is 
designated by the Secretary as troubled as defined in Sec.  902.105.
    (c) Initial public housing assessment. (1) For PHAs subject to 
small PHA deregulation, the first assessment and inspections will be 
determined based on the PHA's next scheduled PHAS assessment (e.g., a 
higher performing PHA would receive the first inspection 3 years after 
the most recent PHAS assessment).
    (2) For PHAs not subject to small PHA deregulation, the first 
inspection is based on the PHA's overall weighted project physical 
condition indicator score (e.g., a PHA with a physical condition 
indicator score of 90 or greater would receive the first inspection 
three years after most recent PHAS assessment).


Sec.  902.105  Troubled small rural PHAs.

    (a) Definition of troubled small rural PHA. A small rural PHA will 
be determined to be troubled under the public housing program if the 
weighted average score of all property inspections is below 70 percent 
of the total available points, or if a small rural 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.
    (b) Referral to the local field office. Upon a PHA's designation as 
a troubled performer HUD must notify the PHA and shall refer the 
troubled performer PHA to the PHA's field office, or other designated 
office(s) at HUD, for remedial action, oversight, and monitoring. The 
actions to be taken by HUD and the PHA will include statutorily 
required actions, and such other actions as may be determined 
appropriate by HUD.
    (c) Corrective Action Agreement (CAA). Within 30 days of 
notification of a PHA's designation as a troubled performer, HUD will 
initiate activities to negotiate and develop a CAA. A CAA is required 
for a troubled performer. The final CAA is a binding contractual 
agreement between HUD and a PHA. The scope of the CAA may vary 
depending upon the extent of the problems present in the PHA. The term 
of the CAA will not exceed one year and is subject to renewal at the 
discretion of HUD if HUD determines that the circumstances requiring 
the CAA still exist at the expiration of the term of the CAA based on 
the annual assessment frequency as included in Sec.  902.103. It shall 
include, but not be limited to:
    (1) Baseline data, which should be data without adjustments or 
weighting but may be the PHA's score identified as a deficiency;
    (2) Performance targets for such periods specified by HUD (e.g., 
annual, semiannual, quarterly, monthly), which may be the attainment of 
a higher score or the description of a goal to be achieved; however, 
safety, health, and environmental performance targets and deadlines 
otherwise specified by regulation, including the lead safety 
regulations at 24 CFR part 35, are not superseded by the CAA 
performance targets;
    (3) Strategies to be used by the PHA in achieving the performance 
targets within the time period of the CAA, including the identification 
of the party responsible for the completion of each task and for 
reporting progress;
    (4) Technical assistance to the PHA provided or facilitated by HUD;
    (5) The PHA's commitment to take all actions within its control to 
achieve the targets;
    (6) The consequences of failing to meet the targets; and
    (7) A description of the involvement of local public and private 
entities, including PHA resident leaders, in carrying out the agreement 
and rectifying the PHA's problems. A PHA

[[Page 30502]]

shall have primary responsibility for obtaining active local public and 
private entity participation, including the involvement of public 
housing resident leaders, in assisting PHA improvement efforts. Local 
public and private entity participation should be premised upon the 
participant's knowledge of the PHA, ability to contribute technical 
expertise with regard to the PHA's specific problem areas, and 
authority to make preliminary commitments of support, financial or 
otherwise.
    (d) PHA review of the CAA. The PHA will have 10 days to review the 
CAA. During this 10-day period, the PHA shall resolve any claimed 
discrepancies in the CAA with HUD and discuss any recommended changes 
and target dates for improvement to be incorporated in the final CAA. 
Unless the time period is extended by HUD, the CAA is to be executed 30 
days following issuance of the draft CAA.
    (e) Maximum recovery period. Upon the expiration of the one-year 
period that started on the date on which the PHA receives initial 
notice of a troubled performer designation, the PHA shall improve its 
performance in order to no longer be considered troubled under the 
assessment.
    (f) Parties to the CAA. A CAA shall be executed by:
    (1) The PHA Board Chairperson (supported by a Board resolution), or 
a receiver (pursuant to a court-ordered receivership agreement, if 
applicable) or other AME acting in lieu of the PHA Board;
    (2) The PHA Executive Director, or a designated receiver (pursuant 
to a court-ordered receivership agreement, if applicable), or other 
AME-designated Chief Executive Officer; and
    (3) The field office.
    (g) Involvement of resident leadership in the CAA. HUD encourages 
the inclusion of the resident leadership in the execution of the CAA.
    (h) Failure to execute CAA or make substantial improvement under 
CAA. If a troubled performer PHA fails or refuses to execute an CAA 
within the period provided in paragraph (d) of this section, or a 
troubled performer PHA operating under an executed CAA does not achieve 
a passing physical inspection score, as provided in paragraph (e) of 
this section, the field office shall refer the PHA to the Assistant 
Secretary to determine such remedial actions, consistent with the 
provisions of the ACC and other HUD regulations, including, but not 
limited to, remedies available for substantial default.
    (i) Continuation of services to residents. To the extent feasible, 
while a PHA is in a troubled performer status, all services to 
residents will continue uninterrupted.


Sec.  902.107  Withholding, denying, and rescinding troubled 
designation.

    (a) Withholding designation. In exceptional circumstances, even 
though a PHA has satisfied the requirements for high performer or non-
troubled designations, HUD may conduct any review as it may determine 
necessary, and may deny or rescind incentives or high performer 
designation or non-troubled performer designation, in the case of a PHA 
that:
    (1) Is operating under a special agreement with HUD (e.g., a civil 
rights Conciliation or Voluntary Compliance Agreement);
    (2) Is involved in litigation that bears directly upon the physical 
performance of a PHA;
    (3) Is operating under a court order;
    (4) Demonstrates substantial evidence of fraud or misconduct, 
including evidence that the PHA's certifications, submitted in 
accordance with this part, are not supported by the facts, as evidenced 
by such sources as a HUD review, routine reports, an Office of 
Inspector General investigation/audit, an independent auditor's audit, 
or an investigation by any appropriate legal authority; or
    (5) Demonstrates substantial noncompliance in one or more areas of 
a PHA's required compliance with applicable laws and regulations, 
including areas not assessed under the small rural assessment. Areas of 
substantial noncompliance include, but are not limited to, 
noncompliance with civil rights, nondiscrimination and fair housing 
laws and regulations, or the ACC. Substantial noncompliance casts doubt 
on the capacity of a PHA to preserve and protect its public housing 
projects and operate them consistent with Federal laws and regulations.
    (b) High performer and standard designations. If a high performer 
designation is denied or rescinded, the PHA shall be designated either 
a non-troubled performer, or troubled performer, depending on the 
nature and seriousness of the matter or matters constituting the basis 
for HUD's action. If a non-troubled performer designation is denied or 
rescinded, the PHA shall be designated as a troubled performer.
    (c) Effect on score. The denial or rescission of a designation of 
high performer or non-troubled performer shall not affect the PHA's 
numerical small rural assessment score, except where the denial or 
rescission is under paragraph (a)(4) of this section.


Sec.  902.109  Right to petition and appeal troubled designation.

    (a) Appeal of troubled performer designation and petition for 
removal of troubled performer designation. A PHA may take any of the 
following actions:
    (1) Appeal its troubled performer designation;
    (2) Petition for removal of troubled performer designation; and
    (3) Appeal any refusal of a petition to remove troubled performer 
designation.
    (b) Appeal of small rural Assessment score. (1) If a PHA believes 
that an objectively verifiable and material error(s) exists in its 
small rural assessment score, which, if corrected, will result in a 
significant change in the PHA's score and its designation, the PHA may 
appeal its score in accordance with the procedures of paragraphs (c) 
through (e) of this section. A significant change in a score is a 
change that would cause the PHA's score to increase, resulting in a 
higher designation for the PHA (i.e., from troubled performer to non-
troubled performer, or from non-troubled to high performer).
    (2) A PHA may not appeal its score or designation based on the 
subsequent correction of deficiencies identified as a result of a 
project's physical inspection.
    (c) Appeal and petition procedures. (1) To appeal a troubled 
performer designation or petition for the removal of a troubled 
performer designation, a PHA must submit a request in writing to the 
Deputy Assistant Secretary of the Real Estate Assessment Center, which 
must be received by HUD no later than 30 days following the issuance of 
the score to the PHA.
    (2) To appeal the denial of a petition to remove a troubled 
performer designation, a PHA must submit a written request to the 
Deputy Assistant Secretary of the Real Estate Assessment Center, which 
must be received by HUD no later than 30 days after HUD's decision to 
refuse to remove the PHA's troubled performer designation.
    (3) An appeal of a troubled performer designation or an appeal of 
the denial of a petition for removal of a troubled performer 
designation must include the PHA's supporting documentation and reasons 
for the appeal or petition. An appeal of an assessment score must be 
accompanied by the PHA's evidence that a material error occurred. An 
appeal or petition submitted to HUD without supporting documentation 
will not be considered and will be returned to the PHA.
    (d) Denial, withholding, or rescission. A PHA that disagrees with 
the basis for denial, withholding, or rescission of its designation 
under Sec.  902.66 may make a written request for reinstatement within

[[Page 30503]]

30 days of notification by HUD of the denial or rescission of the 
designation to the Assistant Secretary, and the request shall include 
reasons for the reinstatement.
    (e) Consideration of petitions and appeals. (1) Consideration of a 
petition or the appeal of a final overall assessment score, of a 
troubled performer designation, or of a petition to remove troubled 
performer designation. Upon receipt of such an appeal or a petition 
from a PHA, HUD will evaluate the appeal and its merits for purposes of 
determining whether a reassessment of the PHA is warranted. HUD will 
review the PHA's file and the evidence submitted by the PHA to 
determine whether an error occurred.
    (2) Consideration of an appeal of refusal to remove a troubled 
performer designation. Upon receipt of an appeal of refusal to remove a 
troubled performer designation, HUD will evaluate the appeal and its 
merits for the purposes of determining whether a reassessment of the 
PHA is warranted. The HUD staff initially evaluating an appeal of 
refusal to remove a troubled performer designation will not be the same 
HUD staff who evaluated the PHA's petition to remove the troubled 
performer designation. The Assistant Secretary will render the final 
determination of such an appeal.
    (f) Notice and finality of decisions. (1) If HUD determines that 
one or more objectively verifiable and material error has occurred, HUD 
will undertake a new inspection of the project, adjust the PHA's score, 
or perform another reexamination of information, as appropriate in 
light of the nature of the error that occurred. A new score will be 
issued and an appropriate performance designation made by HUD. HUD's 
decision on appeal of an assessment score, issuance of a troubled 
performer designation, or refusal to remove a troubled performer 
designation will be final agency action. No reconsideration will be 
given by HUD of such decisions.
    (2) HUD will issue a written decision on all appeals and petitions 
made under this section.


Sec.  902.111  Sanctions for troubled small rural PHAs.

    The sanctions for small rural PHAs with troubled public housing 
programs that remain troubled as required by Sec.  902.108 will be the 
same as those sanctions for PHAs assessed under PHAS as described in 
Sec.  902.83.


Sec.  902.113  Incentives for small rural PHAs high-performers.

    (a) High performer. PHAs with a weighted average score for all 
inspections of at least 90 percent of all available points will be 
considered high performers and will be eligible for benefits as 
described in Sec.  902.113(b) and Sec.  905.400(l) of this chapter.
    (b) Incentives. High performer small rural PHAs under the public 
housing program will be eligible for the same incentives as high 
performer PHAs under PHAS as described in Sec.  902.71.

PART 965--PHA-OWNED OR LEASED PROJECTS--GENERAL PROVISIONS

0
42. The authority for part 965 continues to read as follows:

    Authority:  42 U.S.C. 1437, 1437a, 1437d, 1437g, and 3535(d). 
Subpart H is also issued under 42 U.S.C. 4821-4846.

Subpart I--[Removed and Reserved]

0
43. Effective July 1, 2023, remove and reserve subpart I, consisting of 
Sec. Sec.  965.800 and 965.805.

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

0
44. The authority for part 982 continues to read as follows:

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

Subpart A--General Information

0
45. Effective October 1, 2023, amend Sec.  982.4 in paragraph (b) by 
revising the definition of ``Housing quality standards (HQS)'' to read 
as follows:


Sec.  982.4  Definitions.

* * * * *
    (b) * * *
    Housing quality standards (HQS). The minimum quality standards 
developed by HUD in accordance with 24 CFR 5.703 for the HCV program or 
the HUD approved alternative standard for the PHA under 24 CFR 
5.703(g).
* * * * *

Subpart H--Where Family Can Live and Move

0
46. Effective October 1, 2023, amend Sec.  982.352 by revising 
paragraph (b)(1)(iv)(A)(3) to read as follows:


Sec.  982.352  Eligible housing.

* * * * *
    (b) * * *
    (1) * * *
    (iv) * * *
    (A) * * *
    (3) To inspect the unit for compliance with the HQS in accordance 
with Sec. Sec.  982.305(a) and 982.405. The independent entity shall 
communicate the results of each such inspection to the family and the 
PHA.
* * * * *

Subpart I--Dwelling Unit: Housing Quality Standards, Subsidy 
Standards, Inspection and Maintenance

0
47. Effective October 1, 2023, revise Sec.  982.401 to read as follows:


Sec.  982.401  Housing quality standards.

    As defined in Sec.  982.4, housing quality standards (HQS) refers 
to the minimum quality standards developed by HUD in accordance with 24 
CFR 5.703 for housing assisted under the HCV program or a HUD approved 
alternative standard for the PHA under 24 CFR 5.703(g).


Sec.  982.402  [Amended]

0
48. Effective October 1, 2023, amend Sec.  982.402 in paragraph (b)(2) 
by removing ``Sec.  982.401(d)'' and adding in its place ``Sec.  
982.401''.

0
49. Effective October 1, 2023, amend Sec.  982.405 by revising 
paragraph (a) to read as follows:


Sec.  982.405  PHA initial and periodic unit inspection.

    (a)(1) General requirements. The PHA must inspect the unit leased 
to a family prior to the initial term of the lease, at least biennially 
during assisted occupancy, and at other times as needed, to determine 
if the unit meets the HQS. (See Sec.  982.305(b)(2) concerning timing 
of initial inspection by the PHA.)
    (2) Small rural PHAs. Instead of biennially, a small rural PHA as 
defined in Sec.  902.101 of this chapter must inspect a unit during 
occupancy at least once every three years.
* * * * *

Subpart M--Special Housing Types

0
50. Effective October 1, 2023, amend Sec.  982.605 by revising 
paragraph (a) to read as follows:


Sec.  982.605  SRO: Housing quality standards.

    (a) HQS standards for SRO. As defined in Sec.  982.4, housing 
quality standards (HQS) refers to the minimum quality standards 
developed by HUD in accordance with 24 CFR 5.703 for housing assisted 
under the HCV program or a HUD approved alternative standard for the 
PHA under 24 CFR 5.703(g). However, the standards in this section apply 
in place of standards related to sanitary facilities, food preparation 
and refuse disposal, and space and security. Since the SRO units will 
not house children, the standards at 24 CFR part 35, subparts A, B, H, 
and

[[Page 30504]]

R, applying to the PBC program, concerning lead-based paint, do not 
apply to SRO housing.
* * * * *

0
51. Effective October 1, 2023, amend Sec.  982.609 by revising 
paragraph (a) to read as follows:


Sec.  982.609  Congregate housing: Housing quality standards.

    (a) HQS standards for congregate housing. As defined in Sec.  
982.4, housing quality standards (HQS) refers to the minimum quality 
standards developed by HUD in accordance with 24 CFR 5.703 for housing 
assisted under the HCV program or a HUD approved alternative standard 
for the PHA under 24 CFR 5.703(g). However, the standards in this 
section apply in place of standards related to food preparation and 
refuse disposal. Congregate housing is not subject to the requirement 
that the dwelling unit must have a kitchen area.
* * * * *

0
52. Effective October 1, 2023, amend Sec.  982.614 by revising 
paragraphs (a) and (b)(1) to read as follows:


Sec.  982.614  Group home: Housing quality standards.

    (a) Compliance with HQS. The PHA may not give approval to reside in 
a group home unless the unit, including the portion of the unit 
available for use by the assisted person under the lease, meets the 
housing quality standards. As defined in Sec.  982.4, housing quality 
standards (HQS) refers to the minimum quality standards developed by 
HUD in accordance with 24 CFR 5.703 for housing assisted under the HCV 
program or a HUD approved alternative standard for the PHA under 24 CFR 
5.703(g).
    (b) * * *
    (1) The standards in this section apply in place of standards in 24 
CFR 5.703 that relate to sanitary facilities, food preparation and 
refuse disposal, space and security, structure and materials, and site 
and neighborhood.
* * * * *

0
53. Effective October 1, 2023, amend Sec.  982.618 by revising 
paragraphs (b) and (c) to read as follows:


Sec.  982.618  Shared housing: Housing quality standards.

* * * * *
    (b) Applicable HQS standards. As defined in Sec.  982.4, housing 
quality standards (HQS) refers to the minimum quality standards 
developed by HUD in accordance with 24 CFR 5.703 for housing assisted 
under the HCV program or a HUD approved alternative standard for the 
PHA under 24 CFR 5.703(g). However, the HQS standards in this section 
apply in place of standards related to space and security in 24 CFR 
5.703.
    (c) Facilities available for family. The facilities available for 
the use of an assisted family in shared housing under the family's 
lease must include (whether in the family's private space or in the 
common space) a living room, sanitary facilities in accordance with the 
standards set in 24 CFR 5.703, and food preparation and refuse disposal 
facilities in accordance with 24 CFR 5.703.
* * * * *

0
54. Effective October 1, 2023, amend Sec.  982.621 by revising the 
introductory text to read as follows:


Sec.  982.621  Manufactured home: Housing quality standards.

    As defined in Sec.  982.4, housing quality standards (HQS) refers 
to the minimum quality standards developed by HUD in accordance with 24 
CFR 5.703 for housing assisted under the HCV program or a HUD approved 
alternative standard for the PHA under 24 CFR 5.703(g). A manufactured 
home also must meet the following requirements:
* * * * *

0
55. Effective October 1, 2023, amend Sec.  982.628 by revising 
paragraph (a)(4) to read as follows:


Sec.  982.628  Homeownership option: Eligible units.

    (a) * * *
    (4) The unit satisfies the HQS (see 24 CFR 5.703 and Sec.  
982.631).
* * * * *

PART 983--PROJECT-BASED VOUCHER (PBV) PROGRAM

0
56. The authority for part 983 continues to read as follows:

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


Sec.  983.2  [Amended]

0
57. Effective October 1, 2023, amend Sec.  983.2 in paragraph (c)(4) by 
removing ``Sec.  982.401(j)'' and adding in its place ``Sec.  
982.401''.

0
58. Effective October 1, 2023, amend Sec.  983.3 in paragraph (b) by 
revising the definition of ``Housing quality standards (HQS)'' to read 
as follows:


Sec.  983.3  PBV definitions.

* * * * *
    (b) * * *
    Housing quality standards (HQS). The minimum quality standards 
developed by HUD in accordance with 24 CFR 5.703 for the PBV program or 
the HUD approved alternative standard for the PHA under 24 CFR 
5.703(g).
* * * * *

0
59. Effective October 1, 2023, amend Sec.  983.10 by revising paragraph 
(b)(2)(ii) to read as follows:


Sec.  983.10  Project-based certificate (PBC) program.

* * * * *
    (b) * * *
    (2) * * *
    (ii) Lead-based paint requirements. The Lead-based Paint Poisoning 
Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-based Paint 
Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing 
regulations at 24 CFR part 35, subparts A, B, H, and R of this title, 
apply to the PBC program.
* * * * *

0
60. Effective October 1, 2023, amend Sec.  983.101 by revising 
paragraphs (a) through (c) to read as follows:


Sec.  983.101  Housing quality standards.

    (a) HQS applicability. As defined in Sec.  983.3, housing quality 
standards (HQS) refers to the minimum quality standards developed by 
HUD in accordance with 24 CFR 5.703 of this title for housing assisted 
under the PBV program or a HUD approved alternative standard for the 
PHA under 24 CFR 5.703(g).
    (b) Requirements for special housing types. For special housing 
types assisted under the PBV program, HQS applies to the PBV program 
except as specified in 24 CFR part 982, subpart M. Provisions contained 
within 24 CFR part 982 that are inapplicable to the PBV program 
pursuant to Sec.  983.2 are also inapplicable to special housing types 
under the PBV program.
    (c) Lead-based paint requirements. The Lead-based Paint Poisoning 
Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-based Paint 
Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing 
regulations at 24 CFR part 35, subparts A, B, H, and R, apply to the 
PBV program.
* * * * *

0
61. Effective October 1, 2023, amend Sec.  983.103 by revising the 
paragraph (d) heading and adding paragraph (d)(4) to read as follows:


Sec.  983.103  Inspecting units.

* * * * *
    (d) Periodic inspections. * * *
    (4) Instead of at least biennially, a small rural PHA as defined in 
Sec.  902.101 of this chapter must inspect the random sample of units 
in accordance with paragraph (d)(1) of this section at least once every 
three years.
* * * * *

[[Page 30505]]

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

0
62. Effective October 1, 2023, the authority citation for part 985 is 
revised to read as follows:

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


0
63. Effective October 1, 2023, revise the heading of part 985 to read 
as set forth above.

0
64. Effective October 1, 2023, amend Sec.  985.1 by revising paragraph 
(b) and adding paragraph (c) to read as follows:


Sec.  985.1  Purpose and applicability.

* * * * *
    (b) Applicability. This rule applies to PHA administration of the 
tenant-based Section 8 rental program (part 982 of this chapter), the 
project-based voucher program (part 983 of this chapter) to the extent 
that PBV family and unit data are reported and measured under the 
stated HUD verification method, and enrollment levels and contributions 
to escrow accounts for Section 8 participants under the family self-
sufficiency program (FSS) (part 984 of this chapter).
    (c) Small rural PHA assessments. Subpart D of this part covers the 
HCV and PBV assessment for a small rural PHA as defined in Sec.  
902.101 of this chapter. Section 985.3 and subparts B and C of this 
part do not apply to small rural PHAs.

0
65. Effective October 1, 2023, add subpart D to read as follows:
Subpart D--Small Rural PHA Assessment
Sec.
985.201 Applicability.
985.203 Assessment indicators and HUD verification methods.
985.205 Determination of assessment rating.
985.207 Frequency of assessments.
985.209 Troubled small rural PHAs.
985.211 Small rural PHAs assessment records.

Subpart D--Small Rural PHA Assessment


Sec.  985.201  Applicability.

    (a) This subpart applies to small rural PHAs as defined in Sec.  
902.101 of this chapter.
    (b) Small rural PHAs shall be assessed and rated on the indicators 
and methodology of this subpart and shall not be subject to the SEMAP 
requirements.


Sec.  985.203  Assessment indicators and HUD verification methods.

    (a) This section describes the performance indicators used to 
assess a PHA's designation as troubled resulting from the small rural 
PHA assessment. HUD will use the verification method identified for 
each indicator. The four indicators are determined on a pass or fail 
basis.
    (b)(1) Inspection standards. This indicator shows whether the PHA 
applied the correct inspection standards to HCV and PBV unit 
inspections.
    (2) HUD verification method. The PHA's assessment certification and 
on-site HUD review when applicable.
    (3) Rating. The PHA passes the indicator if it applied the correct 
inspection standards for all unit HCV and PBV unit inspections 
conducted during the assessment period. If the PHA applied the 
incorrect inspection standards for any HCV or PBV unit inspection 
during the assessment period, the PHA fails the indicator.
    (c)(1) Initial unit inspections. This indicator determines if the 
PHA conducted the initial HQS inspections within the required time 
period.
    (2) HUD verification method. HUD systems show percent of newly 
leased units where the beginning date of the assistance contract is 
before the date the unit passed the initial unit inspection or, if the 
PHA employed the PHA initial inspection option for non-life-threatening 
deficiencies or alternative inspections, the timing requirements for 
the applicable PHA initial inspection option.
    (3) Rating. The PHA passes the indicator if at least 98 percent of 
units placed under HAP contract during the assessment period passed the 
initial PHA HQS inspection within the required time period. If fewer 
than 98 percent of units placed under HAP contract during the 
assessment period passed the HQS inspection within the required time 
periods, the PHA fails the indicator.
    (d)(1) Frequency of HQS inspections. This indicator shows, for 
units that have been under HAP contract for at least three years, 
whether the PHA re-inspected 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.
    (2) HUD verification method. HUD systems show the percentage of 
units that have been under HAP contract for at least three years that 
have been re-inspected within the required three-year period from the 
last inspection.
    (3) Rating. The PHA passes the indicator if at least 98 percent of 
the units that have been under HAP contract for at least three years 
have been re-inspected within the required three-year period from the 
last inspection. The PHA fails the indicator if fewer than 98 percent 
of these units have been re-inspected within the required three-year 
period.
    (e)(1) Unit condition enforcement. This indicator shows whether, 
following the inspection of a unit under contract where the unit fails 
to meet the required standards, any cited life-threatening and non-
life-threatening deficiencies are corrected within the required cure 
period in accordance with Sec. Sec.  982.404 and 983.103 of this 
chapter. In addition, if HQS deficiencies are not corrected timely, the 
indicator shows whether the PHA stops (abates) housing assistance 
payments beginning no later than the first of the month following the 
specified correction period or terminates the HAP contract or, for 
family-caused defects, takes prompt and vigorous action to enforce the 
family obligations. (Sec.  982.404 of this chapter)
    (2) HUD verification method. The PHA certification and on-site HUD 
review (if performed), and HUD system data.
    (3) Rating. In order to pass the indicator, the applicable 
verification method, which may include sampling, determines that the 
PHA took corrective action within the required timeframes for at least 
98 percent of inspections with identified life-threatening or other HQS 
deficiencies.
    (f)(1) PHA submission of certifications. The PHA must submit its 
certifications for the applicable indicators within the designated 
timeframe required by HUD, and in the form and manner as required by 
HUD. HUD will issue instructions on the submission of PHA 
certifications by Federal Register notification, which will be subject 
to public comment.
    (2) Failure to submit. Failure of the PHA to submit any 
certification in accordance with this paragraph will result in the PHA 
failing the indicator and being designated as troubled under the small 
rural PHA assessment.


Sec.  985.205  Determination of assessment rating.

    (a) High performer designation. (1) A PHA is designated a high 
performer under the small rural PHA assessment if the PHA has passed 
all four indicators identified in Sec.  985.203 and the PHA:
    (i) Has utilized at least 98 percent of its HCV budget authority in 
the two most recent calendar years, or the percent of HCV units leased 
by renters or occupied by homeowners in the two most recent calendar 
years was at least 98 percent;
    (ii) Did not end that calendar year with excess HAP reserves; and

[[Page 30506]]

    (iii) Did not end that calendar year in a funding shortfall or 
receive shortfall prevention funding from HUD.
    (2) HUD shall publish the calculation for determining excess HAP 
reserves in the Federal Register, and such calculation shall provide 
for public comment before becoming effective.
    (b) Standard performer designation. A PHA that passed all four 
indicators but did not meet the funding utilization criteria for a high 
performer designation in paragraph (a) is designated as a standard 
performer.
    (c) Troubled PHA designation. A PHA that failed any of the four 
indicators under Sec.  985.201 is designated as a troubled PHA under 
the small rural PHA assessment.


Sec.  985.207  Frequency of assessments.

    (a) Frequency of small rural PHA assessments--(1) Initial 
assessment. The initial small rural PHA assessment will be effective 
when the PHA's next SEMAP assessment would have been applied. For PHAs 
that qualify for SEMAP biennial review as a small PHA (less than 250 
assisted units), the transition to the small rural PHA assessment will 
occur when the PHA's next biennial SEMAP assessment is required.
    (2) Triennial assessments. HUD shall assess small rural PHAs no 
more than once every three years, except that a troubled small rural 
PHA shall be subject to an annual assessment in accordance with Sec.  
985.209.
    (b) [Reserved]


Sec.  985.209  Troubled small rural PHAs.

    (a) Appeals--(1) HUD action. HUD must review, consider, and provide 
a final written determination to a small rural PHA that appeals its 
designation as a troubled PHA.
    (2) Deciding HUD official. The HUD decision on the PHA appeal shall 
be made by a HUD official who has not been involved in and is not 
subordinate to any person who has been involved in the original 
determination to designate the PHA as a troubled PHA under the small 
rural PHA assessment.
    (b) Corrective action agreement. No later than 60 days after the 
date on which the PHA is designated a troubled PHA, the PHA and HUD 
will enter into a corrective action agreement (CAA) under which the PHA 
shall take actions to correct the deficiencies upon which the troubled 
PHA designation is based. The PHA must comply with HUD requirements for 
the submission of the CAA, including but not limited to the date by 
which the CAA must be submitted to HUD. The CAA must:
    (1) Have a term of one year, and shall be renewable at the option 
of HUD;
    (2) Specify goals to be achieved;
    (3) Identify obstacles to goal achievement and ways to eliminate or 
avoid them;
    (4) Identify resources that will be used or sought to achieve 
goals;
    (5) Provide, where feasible, for technical assistance to assist the 
PHA in curing its deficiencies;
    (6) Identify a PHA staff person with lead responsibility for 
completing each goal;
    (7) Identify key tasks to reach each goal;
    (8) Specify time frames for achievement of each goal, including 
intermediate time frames to complete each key task;
    (9) Provide for regular evaluation of progress toward improvement;
    (10) Provide for the reconsideration of the PHA's designation as a 
troubled PHA no less than annually, and provide for the termination of 
the CAA when HUD determines the PHA is no longer troubled;
    (11) Provide that in the event of substantial noncompliance by the 
PHA under the CAA, HUD may (i) contract with another PHA or a private 
entity to administer the HCV program; and (ii) withhold funds otherwise 
distributable to the troubled PHA;
    (12) Be signed by the PHA board of commissioners chairperson and by 
the PHA executive director. If the PHA is a unit of local government or 
a State, the CAA must be signed by the Section 8 program director and 
by the chief executive officer of the unit of government or his or her 
designee.
    (c) Monitoring. The PHA and HUD must monitor the PHA's 
implementation of its CAA to ensure performance targets are met.
    (d) Annual small rural assessment. A troubled PHA shall be subject 
to the small rural assessment on an annual basis.
    (e) Use of administrative fee reserve prohibited. Any PHA 
designated as troubled may not use any part of the administrative fee 
reserve for other housing purposes (see Sec.  982.155(b) of this 
chapter).
    (f) Upgrading poor performance rating. HUD shall change a PHA's 
overall performance rating from troubled to standard or high performer 
if HUD determines that a change in the rating is warranted because of 
improved PHA performance and a standard or high designation on a 
subsequent small rural PHA assessment.
    (g) Default under the Annual Contributions Contract (ACC). HUD may 
determine that a PHA's failure to correct identified deficiencies 
resulting from its small rural PHA assessment or to execute and 
implement a CAA as required by HUD constitutes a default under the ACC.


Sec.  985.211  Small rural PHA assessment records.

    HUD shall maintain small rural PHA assessment files, including 
designations, notifications, appeals, corrective action agreements, and 
related correspondence for at least 3 years.

Adrianne Todman,
Deputy Secretary.
[FR Doc. 2023-09693 Filed 5-9-23; 8:45 am]
BILLING CODE 4210-67-P