Inspired by NSPIRE
By Nushin Huq
10 min read
New Inspection Protocols Focus on Livability
In August, the Department of Housing and Urban Development began its first round of public housing inspections under a new, more stringent model, which aims to prioritize health and safety and correct any functional defects in housing.
HUD’s Real Estate Assessment Center’s (REAC) new standards, called the National Standards for the Physical Inspection of Real Estate, or NSPIRE, replace the decades-old Uniform Physical Condition Standards (UPCS). In addition to its focus on health and safety, NSPIRE also aligns multiple HUD programs, including public housing, multifamily and voucher programs, to a single set of inspection standards, so that housing quality expectations are consistent across HUD programs.
NSPIRE Brings Change
HUD published the final rule for NSPIRE on May 11, the final Standards notice on June 22 and the Scoring Notice on July 7 in the Federal Register. The NSPIRE Administrative Notice was published on June 30 as a Department Notice. The first official NSPIRE inspections of the public housing portfolio took place in early August – 28 days after the agency sent out notices to public housing authorities and multifamily owner agents, according to a HUD official.
On October 1, NSPIRE became effective for HUD’s multifamily and voucher programs. It will be effective for the Department’s Community Planning and Development (CPD) programs on Oct. 1, 2024. A couple of smaller CPD programs, such as the Single Room Occupancy Program, are currently not covered by NSPIRE.
“They’re really trying to focus on livability,” says Denise Muha, executive director of National Leased Housing Association. “A lot of the prior inspection protocols also included a lot of cosmetic things that people were graded on, which really didn’t affect the functionality or safety.”
The three inspection areas covered by NSPIRE are the inside of the building, the outside of the building and the individual units. NSPIRE also tries to be more precise about what the inspectable areas will be, Muha says. While the inspection standards aren’t that different from the previous standards, gone are the days that a property could pass based on curb appeal alone.
“They’re saying, we’re not worried about foggy glass that’s got condensation in it,” Muha says. “They’re focused on something in the unit that might be more pertinent to people’s health and safety. At the end of the day, they’re inspecting these properties to make sure that they’re decent, safe and sanitary for the residents.”
Getting NSPIREd
While inspection standards are more stringent under NSPIRE than HUD’s UPCS, in many cases the new standards bring HUD in line with what is already required in many local communities, a HUD official says. The cost of compliance nationwide is expected to cost between $20 and $30 million according to a regulatory impact analysis, but this cost is offset by the significant benefits of improved health and safety and preventing the loss of life.
ALCO Management, which manages about 6,000 units in nine states, expects to spend money on electrical changes in some of its properties to bring those properties up to the new protocol standards, says Amy Greer, ALCO vice-president of property management.
“Some of our properties are very small and that is going to be a challenge for us to figure out how we do this and still make the properties successful,” Greer says.
About 90 percent of ALCO management properties participated in HUD’s NSPIRE demonstration, which allowed HUD to test the NSPIRE standards and protocols ahead of the final rules and get feedback from stakeholders.
While the NSPIRE program is a big change, now that most of the “kinks” have been worked out, Greer says, she believes the new protocols will be a positive change.
A notable change in NSPIRE relates to scoring and prioritization of unit conditions under the new program. Under the old UPCS, a HUD property could pass its inspection with a score of 65 on a 100-point scale with zero points given to the unit. A passing score is 60 and units were only attributed 35 of the 100 points.
“We do see that every year with a very small percentage of properties,” a HUD official says. “Certainly outliers, but what Congress essentially told us, ‘Your scoring mechanism, HUD, and your approach to inspections cannot result in a property with very bad units passing your inspection.’”
HUD expects under the new NSPIRE standards, there will be a slight increase in the percentage of troubled properties. Using the 25-year history under the UPCS as a benchmark, in any given year, between four and seven percent of multifamily properties have low scores. Those numbers are expected to increase slightly because the standards are more stringent. On the other hand, HUD also expects more properties to score above 80 and 90 under the new scoring methodology, resulting in fewer properties with scores in the middle tier.
Under NSPIRE, there are also self-inspections in addition to HUD-performed NSPIRE inspections. While ALCO hasn’t begun self-inspections under NSPIRE protocol, it did have an NSPIRE inspection through HUD but have not received scores as of mid-September. It’s also scheduled for eight more in the coming weeks.
REAC’s NSPIRE inspection is a similar schedule based on a 100-point scale – the same as in the past. Top-tier scoring results in an NSPIRE inspection every three years, lower scores result in more frequent inspections. In NSPIRE, HUD affirmed the right to perform an inspection at any time, if deemed necessary.
What’s changed, says Muha, is that inspection results appeals are a more streamlined process. All appeals will be under a technical review.
All properties will now be expected to be self-inspected every year. Multifamily owners, operators and public housing agencies have confirmed with HUD that they started using the NSPIRE standard for their self-inspections.
“The idea is that you’re monitoring yourself,” Muha says. “Once you know the standards, you’re monitoring to that standard, and so when HUD does come in and does an NSPIRE inspection, theoretically, you should be in good shape.”
Incorporating NSPIRE
At ALCO, the biggest operational change involves the learning and development department, which will develop training, says Greer. As far as the maintenance of properties is concerned, the company doesn’t expect much operational change.
“We have a lot of long-term employers who know how to prepare for a UPCS inspection,” Greer says. “They don’t know how to prepare that well for NSPIRE, so we need to bring the focus back to the unit rather than the focus to the outside of the property.”
ALCO is in the process of developing and redoing all its processes and procedures to fit into NSPIRE, including looking at a program within its property management software that will allow them to complete the annual self-inspection, Greer says.
“I think in the end, after you do all the cumbersomeness of change, this is going to be a very good thing for properties,” Greer says. “It will help owners and managers focus on things that do affect the resident.”
Property management software giant Yardi presented its NSPIRE software to public housing agencies (PHAs) at its annual conference in September and plans to release the software later in the month.
“There was a lot of development effort that went into accommodating the new standards into our existing tools that we have,” says Michael James, Yardi project manager who was responsible for assisting the company’s design and testing of NSPIRE tools. “We wanted to take an approach that would be as easy as possible for the PHAs and their inspectors so that there wasn’t going be a lot of training, at least on the technology side.”
The feedback from clients during the conference was positive, James says. Yardi offers customers two different mobile apps for inspections, and both apps will be updated with the NSPIRE standards.
The software will allow users to create NSPIRE self-inspection schedules and assign them to inspectors. The app will route inspectors through the 63 inspection standards in the three sections of the property, units, indoor spaces and outdoor spaces. They will be able to take photos, note deficiencies and create work orders.
Yardi is working on providing a compliant solution for Housing Choice Voucher NSPIRE inspections, the replacement for the Housing Quality Standards previously used in the voucher program, James says.
For REAC NSPIRE inspections, HUD has created its own app and deficiencies noted by HUD inspectors will be uploaded into a Salesforce system HUD is using.
With HUD’s new database, there will be a lot more visibility into what is wrong with the condition of the units and the properties themselves, and what managers can do to improve them, James says.
NSPIREd Feedback
The rule affirms HUD’s authority to collect self-inspection results, which were only routinely collected if the property failed, or received less than 60 points. This requirement is now in place consistently for all housing inspected by HUD.
The new NSPIRE rule requires HUD to update or revisit the standards every three years, which will be an ongoing process, according to the HUD official. This should prevent drastic changes every couple of decades and can help address situations in a changing world. For example, over the summer, HUD is having internal dialogues on whether future updates should include unit cooling standards given the extreme heat in many parts of the country, like Phoenix.
“If we’re updating standards a half a dozen at a time every two to three years, that’s going be a lot better and more predictable and stable for housing operators than making huge changes of the standards every 25 years,” the HUD official says.
Looking Ahead
HUD is actively working with the Internal Revenue Service and the U.S. Department of Agriculture to share information to help them determine if NSPIRE inspections would be acceptable standards for their programs. If these programs adopt or recognize NSPIRE, landlords that participate in multiple affordable housing programs could avoid multiple inspections to differing standards.
The agency has also been working with other offices within HUD to create a customer experience survey for residents. Additionally, the NSPIRE rule allows HUD to have residents select up to five units to inspect. Those inspections will not be included as part of the NSPIRE score but as a way to get feedback from residents, according to HUD.
HUD also wants to get feedback from property managers on the inspection process, including information on the inspection experience and the inspector, the HUD official adds.
“We’ll be factoring that into our analysis of inspections moving forward,” the official says. “If we get, for example, feedback about an inspector that, looks like across the board that we’re not getting positive feedback about them, we want be able to hold them accountable because it’s critical that our inspection program is unbiased and repeatable.”
Inspections should be consistent despite which inspector is conducting them.
“I think what is important here is that HUD has really made an effort to listen to what people’s concerns have been about inspections and to try to use the best technology available,” Muha says. “We all want the inspections at the end of the day to be accurate. We do not want people who have bad properties to get a good score or vice versa. We want them to be reliable because that helps us all. We go to Capitol Hill and we have to defend these programs, so we want to make sure that we can say with certainty that, ‘99.6 percent of the properties have good inspections.’ That’s the goal.”
