NSPIRE Proposed Rule: In-Depth Analysis

On Jan. 13, HUD released the “Economic Growth Regulatory Relief and Consumer Protection Act: Implementation of National Standards for the Physical Inspection of Real Estate (NSPIRE)” proposed rule in the Federal Register. NSPIRE aims to create a unified assessment of housing quality through inspections across multiple HUD programs. The proposed rule establishes the method HUD will use to implement specific NSPIRE standards, scoring, and processes through Federal Register notices. The proposed rule applies to the Public Housing program, Project-Based Rental Assistance (PBRA) units, Housing Choice Voucher (HCV) units, and Project-Based Voucher (PBV) programs. Certain HUD Community Planning and Development (CPD) programs would also be required to adopt theses new standards. These programs include the HOME Program, Housing Opportunities for Persons with AIDS (HOPWA), Emergency Solutions Grants (ESG) Program, and Continuum of Care (CoC). Comments are due March 15, 2021.  

Similar to the NSPIRE Demonstration, the proposed rule works to apply a “safe, habitable dwellings” standard, reduce the categories of current inspectable areas for physical condition standards for covered housing programs from five to three, implement a new annual self-inspection and reporting requirement for certain HUD housing, establish an administrative process for the treatment of health and safety deficiencies, and incorporate provisions of the Economic Growth and Recovery, Regulatory Relief and Consumer Protection Act that will reduce administrative burden on small rural PHAs. A small rural PHA would be defined as a PHA that administers 550 or fewer combined public housing and Section 8 voucher units and either has a primary administrative building with a physical address in a rural area or more than 50% of its combined public housing units and voucher units in rural areas. HUD is using the existing definition of “rural area” contained in the Consumer Financial Protection Bureau (CFPB) regulations. 

The proposed rule centralizes inspection standards across HUD programs in the regulations. Inspections remain risk-based; however, the proposed rule would include criteria for longer periods in between inspections (two to five years) depending on prior scores. Both public housing and PBRA units would be required to have annual self-inspections conducted by the PHA or owner. The proposed rule adds an electronic reporting requirement for these self-inspections with an aim of encouraging regular preventative maintenance on units as issues occur in real time. The proposed rule does not include any changes to the HCV/PBV/Mod Rehab inspection timelines and HCV/PBV/CPD programs are also exempted from electronic reporting requirements. Small, rural PHAs would be exempted from the annual inspection requirement. 

The NSPIRE proposed rule would reduce the number of inspectable areas of a building from five to three. In NSPIRE, the three inspectable building areas would be inside the building, outside the building, and the specific unit. HCV and PBV units would be limited to just the units and common and exterior areas associated with the units. HUD is also hoping to incorporate a requirement for “safe” potable water for all inspectable units but will promulgate future rulemaking to determine how “safe” is defined. 

NSPIRE aims to streamline existing regulations for scoring, ranking, and appeals. The proposed rule would allow HUD to update NSPIRE inspection standards every three years. This process would require HUD to ask for public comments in the Federal Register on inspection scoring and ranking criteria. HCV/PBV units would still be assessed under the Section 8 Management Assessment Program (SEMAP) and public housing would still be assessed through the Public Housing Assessment System (PHAS). The proposed rule would add a new category to PHAS, Severe Health and Safety (SHS) deficiencies, which would replace Exigent Health and Safety (EH&S) deficiencies. Though some SHS deficiencies would be considered life-threatening (meaning they need to be addressed with 24 hours); some SHS deficiencies would be considered non-life threatening. SHS deficiencies that are non-life threatening must be addressed within 30 days. HUD will publish a list that includes all life-threatening SHS deficiencies in the future. 

In the proposed rule, inspectors would be allowed, not required, to charge a property owner a reasonable reinspection fee if a repair has been made or if the allotted time for repairs has elapsed and a rejection reveals the deficiency was not corrected. 

The proposed NSPIRE rule would exempt small, rural PHAs from PHAS and SEMAP and would instead implement an alternate performance indicator and rating system. In the proposed rule, small, rural PHAs would be assessed based on the physical condition of their public housing properties no more than once every three years. Troubled small, rural PHAs would remain subject to an annual assessment. A small, rural PHA would be considered troubled in their public housing program if the weighted score of all inspections is below 70 % or the PHA has a weighted average score of 70 to 80 % with at least one property below 70 %. Troubled small, rural PHAs would need to contact their Field Office and develop a corrective Action Agreement that explains what the PHA is required to do to become non-troubled. Sanctions for troubled small, rural PHAs remain the same as those described in PHAS. High performing small, rural PHAs also maintain the same benefits that any public housing high-performer PHA would receive in PHAS.  

Small, rural PHAs would also no longer be subject to SEMAP requirements but would instead be assessed based on the NSPIRE performance indicators and rating system (see Subpart G Section 5.703 of the proposed rule). A small, rural Section 8 program is considered troubled if it fails one of the following four requirements: 1) Must be inspected to NSPIRE Standards; 2) Must have 98 % of units inspected before beginning rental assistance; 3) Must ensure that 98 % of tenant-based units under HAP contract are inspected once every three years; 4) Must have 98 % of inspections with identified life-threatening or other deficiencies corrected within the required timeframe. If a PHA meets all 4 requirements, they are standard. If a standard PHA also utilizes at least 98 % of their HCV budget authority for the most recent calendar year or the percentage of leased HCV units for the rest of the calendar year is at least 98 %, does not end the calendar year with excess HAP reserves, and does not end the calendar year in funding shortfall or receive a shortfall funding prevention for HUD, they are considered high-performing. HUD will assess small, rural Section 8 programs once every three years, unless the program is troubled.  

Comments on HUD’s NSPIRE proposed rule are due March 15, 2021. The proposed rule can be found here.