This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

2582 

Vol. 86, No. 8 

Wednesday, January 13, 2021 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Parts 5, 92, 93, 200, 574, 576, 

578, 880, 882, 884, 886, 902, 982, 983 

and 985 

[Docket No. FR–6086–P–01] 

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, HUD. 

ACTION: Proposed rule. 

SUMMARY: This rule proposes a new 

approach to defining and assessing 

housing quality: The National Standards 

for the Physical Inspection of Real 

Estate (NSPIRE). This proposed rule is 

part of a broader effort across HUD to 

revise the way HUD-assisted housing is 

inspected and evaluated. The purpose of 

NSPIRE is to reduce regulatory burden 

and improve HUD oversight through the 

alignment and consolidation of the 

inspection regulations used to evaluate 

HUD housing across multiple programs, 

which are currently evaluating housing 

quality through differing standards, 

protocols, and frequencies. The goal of 

this alignment and consolidation is to 

create a unified assessment of housing 

quality. In advancement of HUD’s 

mission to create quality affordable 

housing and strong, sustainable, and 

inclusive communities, this rule would 

establish the method HUD will use for 

the implementation of specific NSPIRE 

standards, scoring, and processes 

through Federal Register notices. 

Additionally, the proposed rule seeks 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. 

DATES: Comment Due Date: March 15, 

2021. 

ADDRESSES: Interested persons are 

invited to submit comments to the 

Office of the General Counsel, Rules 

Docket Clerk, Department of Housing 

and Urban Development, 451 Seventh 

Street SW, Room 10276, Washington, 

DC 20410–0001. Communications 

should refer to the above docket number 

and title and should contain the 

information specified in the ‘‘Request 

for Comments’’ section. There are two 

methods for submitting public 

comments. 

1. Submission of Comments by Mail. 

Comments may be submitted by mail to 

the Regulations Division, Office of 

General Counsel, Department of 

Housing and Urban Development, 451 

7th Street SW, Room 10276, 

Washington, DC 20410–0500. Due to 

security measures at all federal agencies, 

however, submission of comments by 

mail often results in delayed delivery. 

To ensure timely receipt of comments, 

HUD recommends that comments 

submitted by mail be submitted at least 

two weeks in advance of the public 

comment deadline. 

2. Electronic Submission of 

Comments. Interested persons may 

submit comments electronically through 

the Federal eRulemaking Portal at 

http://www.regulations.gov. HUD 

strongly encourages commenters to 

submit comments electronically. 

Electronic submission of comments 

allows the commenter maximum time to 

prepare and submit a comment, ensures 

timely receipt by HUD, and enables 

HUD to make comments immediately 

available to the public. Comments 

submitted electronically through the 

http://www.regulations.gov website can 

be viewed by other commenters and 

interested members of the public. 

Commenters should follow instructions 

provided on that site to submit 

comments electronically. 

Note: To receive consideration as 

public comments, comments must be 

submitted through one of the two 

methods specified above. Again, all 

submissions must refer to the docket 

number and title of the notice. 

No Facsimile Comments. Facsimile 

(fax) comments are not acceptable. 

Public Inspection of Comments. All 

comments and communications 

submitted to HUD will be available for 

public inspection and copying between 

8 a.m. and 5 p.m. weekdays at the above 

address. Due to security measures at the 

HUD Headquarters building, an advance 

appointment to review the public 

comments must be scheduled by calling 

the Regulations Division at (202) 708– 

3055 (this is not a toll-free number). 

Copies of all comments submitted are 

available for inspection and 

downloading at http://

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Timothy Weese and Samuel Franco, 

Real Estate Assessment Center, Office of 

Public and Indian Housing, Department 

of Housing and Urban Development, 

550 12th St SW, Suite 100, Washington, 

DC 20410–4000, telephone number 202– 

708–1112 (this is not a toll-free 

number). Individuals with hearing or 

speech impediments may access this 

number via TTY by calling the Federal 

Relay during working hours at 800–877– 

8339 (this is a toll-free number). 

SUPPLEMENTARY INFORMATION: 

I. Background 

There are currently two inspection 

models used across the majority of HUD 

housing programs: The Housing Quality 

Standards (HQS) developed in the 

1970s, which are currently found at 24 

CFR 982.401, and the Uniform Physical 

Condition Standards (UPCS) developed 

in the 1990s, which are currently found 

at 24 CFR 5.703. Both remain largely 

unchanged since their inception. The 

housing portfolio that was once 

dominated by government-owned 

properties has changed in the past two 

decades to become largely increasingly 

owned by private entities. This shift has 

caused Congress and HUD’s evolving 

list of stakeholders to demand revisions 

to the physical inspection products and 

services that will both provide reliable 

evaluations of housing conditions and 

protect residents. 

HUD analyzed the way inspections 

are conducted under both models to 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 2583 

1 84 FR 162. 

2https://www.federalregister.gov/. 

3 24 CFR 5.703. 

4 24 CFR 982.1(a)(1). 

5U.S.C. 1437f(o)(8)(C). 

6U.S.C. 1437f(o)(8)(C). 

7U.S.C. 1437f(o)(8)(G). 

8U.S.C. 1437f(o)(8)(D)(i). 

9 Important to note that PBVs are part of the HCV 

program and PBV units under section 8(o)(13) are 

subject to the requirements under section 8(o)(8), 

thus, using the Housing Quality Standards similar 

to tenant-based voucher units. Thus, key elements 

of physical standard requirements for the PBVs 

align with the HCV program and by virtue of 

section 8(o)(8) will be distinct and separate from 

PBRA and public housing. 

better understand how housing quality 

regulations needed to evolve. HUD 

found that both inspection models can 

sometimes provide inaccurate and 

inconsistent results and can prevent 

HUD from effectively evaluating 

housing across programs. HUD 

determined that while the models are 

well-intentioned in design, neither 

model currently aligns with HUD’s 

priorities, the state of the housing 

industry and improvements in 

technology. This is partly because 

neither model includes mechanisms for 

continual update. This analysis also 

identified a disproportionate emphasis 

around the appearance of items that are 

otherwise safe and functional and paid 

inadequate attention to the health and 

safety conditions within the built 

environment. HUD has concluded that 

existing housing standards need to focus 

on habitability and the residential use of 

the structures, and most importantly, 

the health and safety of residents. 

To this end, HUD announced the 

implementation of NSPIRE through the 

publication of an August 21, 2019, 

notice,1 which described the 

development of a new inspection model 

for HUD programs. HUD began building 

the updated standards, procedures, and 

scoring methodologies, which will to be 

refined through a multistage NSPIRE 

demonstration. The demonstration will 

test and HUD will further refine the 

future state of HUD’s physical 

inspection model to best serve residents. 

NSPIRE programmatic provisions will 

be published in the Federal Register 

and will provide an opportunity for 

public comment.2 The improvements 

being refined through the NSPIRE 

demonstration are intended to occur in 

parallel to support and reinforce the 

changes being proposed by this rule. 

Regulatory Consolidation and 

Alignment 

As noted above, the proposed rule 

would consolidate and align housing 

quality requirements and associated 

inspection standards across programs 

wherever possible. To achieve this, 

housing quality regulations across HUD 

programs would be consolidated into 

one location at 24 CFR part 5. HUD 

understands, however, that regulations 

must be flexible enough to 

accommodate each program’s unique 

circumstances. Where differing statutory 

requirements or public policy 

considerations prevent alignment to 24 

CFR part 5, those program-specific 

requirements would be maintained in 

their respective program regulations and 

would supersede or supplement 24 CFR 

part 5. 

Current program regulations 

governing housing quality and 

inspections have a large regulatory 

footprint. Rather than being in a single 

location, they are located under 24 CFR 

part 5 and part 200 for programs 

governed by Uniform Physical 

Condition Standards (UPCS); 24 CFR 

982.401 for programs governed by HQS; 

and within each program’s individual 

regulations in 24 CFR parts 92, 93, 200, 

574, 576, 578, 880, 882, 884, 886, 902, 

982, 983, and 985. This means that 

finding and understanding the 

requirements across programs—even 

those governed by the same standard— 

is often cumbersome. Instead, this rule 

would consolidate 14 dispersed sections 

which are spread across 24 CFR, into 7 

consecutive sections. 

Further, there are often minor, 

unnecessary discrepancies in language 

across regulations. The use of ‘‘decent, 

safe, and sanitary’’ is a good example. 

The physical condition standards 

applicable to Public Housing and HUD’s 

Multifamily Housing program outlines 

that housing must be ‘‘decent, safe, 

sanitary, and in good repair.’’ 3 The 

Housing Choice Voucher (HCV) and 

Project-Based Voucher (PBV) program 

regulations state housing must be 

‘‘decent, safe, and sanitary rental 

housing of a modest (non-luxury) nature 

with suitable amenities.’’ 4 Meanwhile, 

regulations for the Home Investment 

Partnerships (HOME) program state 

housing be ‘‘decent, safe, sanitary and 

affordable.’’ HUD believes that all 

standards governing HUD housing are 

equivalent in that they mandate safe, 

habitable housing for residents. An 

alignment of these standards would 

create a single expectation of housing 

quality across these programs and 

remove these unnecessary 

discrepancies. 

Finally, programmatic alignment and 

consolidation is increasingly important 

as HUD’s inspection portfolio has 

shifted to include greater numbers of 

mixed finance properties which are 

subject to multiple inspection standards 

by the nature of their financing. A 

similar challenge is faced by PHAs and 

owners whose portfolio includes 

multiple HUD program types or that 

convert from one funding stream to 

another, such as through the Rental 

Assistance Demonstration (RAD) 

program. HUD acknowledges that the 

challenges a PHA faces are not always 

the same challenges that owners face, 

but in both cases, the lack of aligned 

requirements unduly increases the 

complexity and uncertainty associated 

with participating in HUD’s programs 

and may deter some owners from future 

involvement. 

Programmatic and Statutory Limits on 

Alignment 

Part of this alignment will consolidate 

and align the regulations governing the 

physical condition of HUD housing to 

create a shared expectation of housing 

quality across a wide array of distinct 

programs. The remainder of the 

alignment centers around program 

administration: Inspection protocols, 

processes, and procedures. 

Regarding these inspection protocols, 

processes, and procedures, the majority 

of the alignment that HUD is proposing 

involves the program regulations for the 

public housing and multifamily 

programs. However, given the unique 

nature of some HUD programs and the 

limits posed by existing statutory 

requirements, it is not possible for HUD 

to align all program administration 

regulations across all programs under 

this proposed rule. 

Within this proposed rule, the 

Housing Choice Voucher (HCV) 

program, comprised of the Project Based 

Voucher (PBV) and Tenant Based 

Voucher (TBV) programs, has been 

aligned with other HUD programs to the 

maximum extent possible, while also 

acknowledging that varying types of 

rental housing and unique geographic 

features conditions nationwide 

necessitate separate requirements in 

certain areas. HUD’s approach for 

aligning these programs accounts for 

the: 

• Unique statutory requirements 

related to the standards of individual 

units rather than the project as a 

whole; 5

• Nature of the entity responsible for 

conducting inspections 6 (the PHA 

rather than HUD); 

• Relationship of housing quality 

standards to State and local codes; 7

• Pass/fail nature of inspections; and 

• Frequency of inspections.8

All of these differ greatly from other 

HUD programs, particularly projectbased assistance programs.9

2584 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 

Similarly, while the proposed rule 

aligns the Office of Community 

Planning and Development (CPD) 

programs whenever possible, CPD 

programs pose unique challenges to 

alignment, both across HUD and within 

CPD. CPD programs provide housing 

assistance, one-time or time-limited 

assistance (such as mediation with a 

property owner or a one-time payment 

of rental arrears to help a family avoid 

eviction from their existing housing, or 

payment of rental application fees to 

help a person in shelter get back into 

housing), and special housing needs 

programs. CPD programs also fund 

various services, such as legal assistance 

and mediation to prevent eviction and 

housing search and placement, for 

special needs populations. The variety 

of housing assistance and services 

offered through CPD programs required 

HUD to adopt, as proposed here, unique 

inspection frequencies and protocols 

that account for the needs of these 

different programs and assistance types. 

Furthermore, this alignment accounts 

for the fact that CPD programs are 

administered differently. For example, 

CPD’s formula grant-based programs are 

provided to States, eligible units of local 

government, the District of Columbia, 

U.S. Territories and Tribal governments, 

which often follow local code 

requirements. 

Through the rulemaking process, 

HUD invites recommendations on 

opportunities to further consolidate 

similar regulatory provisions. 

With regard to consolidation, HUD is 

requesting public comments on the 

following questions: 

Question for Comment #1: The 

Economic Growth and Recovery Act 

mandates that for small public housing 

agencies, the same standards apply to 

small public housing agencies for the 

acceptable condition of public housing 

projects also apply to projects assisted 

under Section 8. Is there a preferable 

approach to implementing the statutory 

provision that requires the same 

standards for small rural Section 8 

projects and PHA public housing 

projects? If so, how should the 

standards for and small rural PHA 

Section 8 projects and public housing 

projects differ from the standards 

employed for all other public housing 

and HCV units while ensuring that all 

HUD housing must be free of health and 

safety hazards? 

Why HUD Is Implementing NSPIRE 

Through Rulemaking 

As previously noted, the current 

regulatory footprint of all housing 

standards is sprawling. HUD believes 

that consolidating these standards—a 

total of 16 regulations containing many 

administrative and procedural 

differences—is required to reduce 

administrative burden and increase 

resident safety. 

While some of the programmatic 

modifications made by this proposed 

rule could have been implemented 

without formal rulemaking, proceeding 

with this proposed rule provides a 

framework for continued stakeholder 

engagement and ensures transparency 

throughout the process. 

During the NSPIRE implementation 

and in parallel to formal rulemaking, 

HUD plans to draft Federal Register 

notices that would outline the specific 

standards, scoring, and protocols under 

NSPIRE. All updated standards and 

scoring methodologies would be 

published—as required by this proposed 

rule—through a Federal Register Notice 

at least once every 3 years with the 

opportunity for public comment prior to 

implementation. This would provide 

opportunity for both industry 

stakeholders and the general public to 

examine the proposed changes, provide 

pertinent comments, and suggest the 

inclusion of any relevant industry best 

practices. This would also allow HUD to 

be more responsive to the changing 

portfolio and evolving needs in the field 

and would allow HUD to further ensure 

resident safety remains at the forefront. 

II. The Proposed Rule 

There are three sections under this 

heading representing the four types of 

changes this rule is making: Section A 

covers amendments and additions to 24 

CFR part 5, which make up the bulk of 

the changes proposed;’’ Section B covers 

HUD’s implementation of its statutory 

mandate regarding Small rural PHAs;’’ 

and Section C discusses other changes 

which the proposed rule would make to 

regulations for programs which are 

being integrated under NSPIRE. 

A: Amendments and Additions to 24 

CFR Part 5 

Amending 24 CFR part 5 would allow 

HUD to consolidate multiple physical 

condition requirements into a single 

regulation. This would align 

overarching policies related to the 

frequency of inspections, the method of 

appealing results, and the actors 

responsible for conducting inspections. 

It would also make several technical 

modifications to other regulations. 

These changes would ensure 

transparency, consolidate regulatory 

sprawl, and reduce overall burden for 

PHAs and owner/agents. 

HUD’s consolidation and alignment of 

the inspections regulations under this 

part broadly fall into two categories. 

First, amended and aligned § 5.703 

would generally apply across all HUD 

programs covered under the proposed 

rule. These regulations are meant to 

convey clear expectations of housing 

quality and maintenance requirements 

across HUD programs, ensuring 

residents have a shared expectation of 

safe, habitable housing regardless of 

program type. Second, changes and 

alignment in § 5.705 through § 5.713 are 

generally only applicable to the public 

housing and multifamily programs as 

they deal with administrative 

procedures and scoring for HUDconducted inspections. To clarify, by 

nature of their differing statutory 

requirements and programmatic 

considerations, § 5.705 through § 5.713 

in part 5 generally do not apply to 

Section 8(o) programs (HCV and PBV), 

Moderate Rehabilitation, or certain CPD 

programs (i.e., HOME and Housing 

Trust Fund (HTF)). 

HUD proposes the following 

amendments and additions to 24 CFR 

part 5: 

a. Section 5.701 Applicability 

The current regulations at § 5.701 

state that the physical condition 

standards in 24 CFR part 5 apply to 

Public Housing and certain programs 

administered under HUD’s Office of 

Multifamily Housing, including all 

project-based Section 8 programs and 

any housing with mortgages insured or 

held by HUD or receiving insurance 

from HUD. 

Amended § 5.701 would extend this 

subpart to the HCV (part 982) and PBV 

programs (part 983). CPD programs 

would adopt these standards by 

reference in the applicable CPD 

regulations to include: The HOME 

Program (part 92); HTF) (part 93); 

Housing Opportunities for Persons with 

Aids (HOPWA) (part 574); Emergency 

Solutions Grants (ESG) Program (part 

576); and Continuum of Care (CoC) (part 

578). 

b. Section 5.703 National Standards 

for the Condition of HUD Housing 

HUD’s housing condition standards 

are located in two areas in the 

regulations today: Existing § 5.703 

applies to public housing, multifamily, 

and some CPD programs while existing 

§ 982.401 applies to HCV and PBV, and 

to some other CPD programs via crossreference. CPD programs do not apply 

any scoring, weighting, ranking or 

enforcement from Part 5. This is 

outlined in the CPD program rules (e.g., 

HOME rule at 24 CFR 92.251(f)(1)(i).)). 

CPD programs are fundamentally 

different than many of the programs 

subject to REAC inspections as they are 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 2585 

programs administered by local 

governments subject to local decision 

making. CPD programs have their own 

means of enforcement specified in each 

program regulation. These functions are 

instead performed by HUD CPD staff, 

and can include requiring the 

participating jurisdiction or grantee 

repaying the full amount of subsidy 

provided to the project. Amended 

§ 5.703(a) through (e) consolidates and 

replaces both § 5.703 and § 982.401. 

These provisions parallel the specific 

directives at 42 U.S.C. 1437(f)(2) and 42 

U.S.C. 1437(o)(8)(B) that require the 

Secretary to establish quality standards 

that ensure housing is safe and 

habitable. In these provisions, HUD 

proposes to define ‘‘safe, habitable 

dwellings’’ as those for which ‘‘the 

items and components located inside 

the building, outside the building, and 

within the units of HUD housing . . . 

[are] functionally adequate, operable, 

and free of health and safety hazards.’’ 

HUD believes the requirement of 

‘‘functionally adequate, operable, and 

free of health and safety hazards’’ is 

generally equivalent to ‘‘decent, safe, 

and sanitary.’’ The intentional shift in 

language would serve as a uniting 

phrase across programs. Additionally, 

the shift would help the public 

differentiate between the old and the 

new regulatory frameworks. It would 

further allow HUD to establish clear, 

objective, and aligned property 

inspection standards (described later in 

this rule at § 5.705(a) and § 5.709) by 

creating identifiable limits that are 

comparable across housing programs. 

For example, the terms ‘‘functionally 

adequate’’ and ‘‘operable’’ may be 

defined based on universal habitability 

requirements and design specifications 

for an item or component. In contrast, 

‘‘decent,’’ is a highly subjective term. 

Perceptions of decency vary from 

person to person and location to 

location. The terms ‘‘health’’ and 

‘‘safety’’ can also be measured 

universally and quantitatively by using 

standard public health and safety 

metrics related to morbidity and 

mortality. ‘‘Health’’ as used here would 

be inclusive of ‘‘sanitary;’’ HUD believes 

that term ‘‘health’’ would be more 

useful for assessment of a broader range 

of impacts. HUD intends this new 

description to make clear that the built 

environment’s effect on the health and 

safety of residents is more important 

than any building damage that is strictly 

cosmetic in nature. The new definition 

would also simplify the way in which 

this rule names the inspectable areas of 

a property by reducing the number of 

areas from five to three. This change is 

intended to increase readability, 

streamline the inspection process, and 

emphasize to stakeholders the 

importance of resident units. 

Section 5.703(a) would limit the ways 

in which the quality requirements apply 

to units occupied by HCV and PBV 

participants, as well as common areas 

and exterior areas which either service 

or are associated with such units. This 

limitation is generally derived from the 

unique statutory requirements for these 

programs related to the application of 

housing quality standards to units (as 

opposed to projects). Other factors that 

make this limitation appropriate is the 

entity responsible for conducting the 

inspections (the PHA), the relationship 

of the housing quality standards to local 

codes, and the frequency of those 

inspections. 

HUD also proposes to consolidate into 

§ 5.703(d) several provisions currently 

found in one section of the regulations 

but implied in others. For example, the 

proposed rule would make it clear that 

certain unit features, like having a 

kitchen area, are minimum habitability 

requirements across programs. Most 

renters would expect to have the ability 

to store and prepare food in their home. 

While not new requirements, they 

reinforce the importance that this rule 

places on residents’ units and the 

primarily residential nature of HUD 

housing. Similarly, amended § 5.703(d) 

would add the word ‘‘safe’’ to the 

current requirement that units have an 

adequate source of potable water. ‘‘Safe’’ 

in this context would be defined by 

HUD through future rulemaking after 

receiving public comments. 

This portion of the rule would also 

incorporate requirements currently 

described more clearly by the HCV 

regulations for smoke detectors, 

including those for hearing impaired 

persons and the requirement for hot and 

cold running water, and would replace 

current paragraph (f) concerning health 

and safety concerns. So that all the 

habitability provisions are in one place, 

paragraph (e)(2) would maintain 

language found in the current regulation 

at § 5.703(f) regarding lead-based paint 

but would add information on 

applicability. 

The remaining provisions in (f) 

through (h) discuss the relationship of 

local codes to HUD housing and identify 

when alternatives to § 5.703 would 

apply. 

New paragraph (g) would clarify that 

§ 5.703 may be replaced or 

supplemented by a state or local 

standard under the HCV and PBV 

program in line with the statutory 

exception for those programs found at 

42 U.S.C. 1437f(o)(8)(B). Additionally, 

for special housing types, such as Single 

Room Occupancies or congregate 

housing, that may have incompatible 

design requirements, like shared 

bathroom or kitchen facilities, 

paragraph (h) would clarify that the 

provisions in § 5.703 may be modified 

by program specific requirements which 

would continue to be found in the same 

program-specific sections of the 

regulations as they are today. 

With regard to standards, HUD is 

requesting public comments on the 

following questions: 

Question for Comment #2: HUD has 

the following questions regarding water 

safety: 

(a) How can HUD best define what is 

meant by safe or potable water? 

(b) Should ‘‘safe’’ mean water 

provided by a public water system that 

is in compliance with the Safe Drinking 

Water Act (42 U.S.C. 300f et seq.) as 

implemented by the EPA? 

(c) How should HUD monitor whether 

water is safe? 

(d) What elements should be reviewed 

during the physical inspection to 

determine water safety? 

(e) Should inspectors verify that a 

municipal water supply authority is in 

compliance with EPA’s Safe Drinking 

Water Act? How would they best do 

this? 

Question for Comment #3: HUD is 

specifically seeking comment on 

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 seeks comments on whether all of 

the explicit standards should be 

included or if there are certain site and 

neighborhood standards that HUD 

should consider changing? 

Question for Comment #4: The 

proposed rule would establish a subset 

of minimum NSPIRE standards to apply 

to rehabilitation of rental and owneroccupied or homebuyer housing and 

homebuyer acquisition of standard 

housing (i.e., down payment assistance) 

assisted with HOME or HTF at 

§§ 92.251(b) and (c)(3) and §§ 93.301(b) 

and (c)(3), and to HOME- and HTFassisted rental projects throughout the 

affordability period at § 92.251(f) and 

§ 93.301(e), and for units occupied by 

tenants receiving HOME Tenant-based 

rental assistance (TBRA) in accordance 

with § 92.251(f)What minimum housing 

condition standards should HUD apply 

to HOME- and HTF-assisted 

rehabilitation activities for rental or 

owner-occupied housing and what 

minimum condition standard should 

apply to HOME-assisted homebuyer 

acquisition activities at completion to 

ensure that the housing is decent, safe, 

2586 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 

sanitary and in good repair? In addition, 

what minimum housing condition 

standards should HUD apply 

throughout the affordability period to 

HOME- and HTF-assisted rental projects 

and units occupied by tenants receiving 

HOME TBRA to ensure that the housing 

remains decent, safe, sanitary and in 

good repair? 

Question for Comment #5: How do 

the NSPIRE standards in this proposed 

rule compare to minimum deficiencies 

that must be corrected in HOME- and 

HTF-assisted rehabilitation projects at 

§ 92.251(b) and § 93.301(b) or which 

must be corrected prior to HOME- and 

HTF-assisted homebuyer acquisition of 

standard housing (i.e., down payment 

assistance) to ensure that upon 

completion the housing is decent, safe, 

sanitary and in good repair? 

Question for Comment #6: Should 

HUD establish different minimum 

deficiencies that must be corrected in 

HOME- or HTF-assisted rental housing 

and homebuyer or owner-occupied 

housing rehabilitation projects at 

§ 92.251(b) and § 93.301(b)? If so, what 

should HUD consider when establishing 

minimum standards for the 

rehabilitation of rental housing, 

homebuyer housing, or owner-occupied 

housing? 

Question for Comment #7: Should 

HUD establish different minimum 

deficiencies that must be corrected in 

large and small HOME- or HTF-assisted 

rehabilitation projects at § 92.251(b) and 

§ 93.301(b)? If so, what should HUD 

consider when establishing minimum 

standards and what should HUD define 

as a large housing project? 

Question for Comment #8: Should 

HUD establish different minimum 

deficiencies that must be corrected for 

HOME or HTF-assisted rehabilitation 

and homebuyer or owner-occupied 

acquisition of standard housing (i.e., 

down payment assistance) projects at 

§ 92.251(c)(3) and § 93.301(c)(3)? If so, 

what should HUD consider when 

establishing minimum standards for 

rehabilitation projects and homebuyer 

acquisition projects? 

Question for Comment #9: Should 

HUD establish minimum written 

property standards requirements for 

housing occupied by tenants receiving 

HOME TBRA at § 92.251(f) that exceed 

or are different than minimum 

requirements for the ongoing condition 

of HOME-assisted rental housing? 

Should HUD establish a list of 

minimum deficiencies that must be 

corrected if found during an onsite 

physical inspection of HTF-assisted 

rental housing? If so, what elements 

should be required in the written 

property standards? 

Question for Comment #10: 

Alternatively, should HUD apply the 

NSPIRE standards established in 

accordance with this proposed rule (not 

to include the inspection procedures, 

administrative processes for scoring and 

ranking, or the enforcement 

requirements of NPSIRE) to housing 

occupied by tenants assisted receiving 

HOME TBRA at § 92.251(f)? HUD could 

require inspection of the assisted unit; 

the items and components within the 

primary and secondary means of egress 

from the unit’s entry door(s) to the 

public way; the 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 unit similar to the exceptions that 

are included in the proposed rule for 

HCV and PBV. Is there another national 

housing quality or condition standard 

that HUD should apply to housing 

occupied by tenants assisted with 

HOME TBRA? 

Question for Comment #11: Should 

HUD establish a list of minimum 

deficiencies that must be corrected if 

found during an onsite physical 

inspection of HOME- or HTF-assisted 

rental housing or housing occupied by 

a tenant receiving HOME TBRA at 

§ 92.251(f)? If so, should HUD establish 

separate lists for HOME and HTFassisted rental housing and housing 

occupied by a tenant receiving HOME 

TBRA? What should HUD consider in 

the development of such lists of 

deficiencies? 

Question for Comment #12: Section 

5.703(h) of the proposed rule identifies 

unique standards to special types of 

housing—single room occupancy (SRO) 

housing; congregate housing; group 

home; shared housing; manufactured 

home; cooperative housing; and 

homeownership—but applies this 

section only to the HCV, PBV, and 

Moderate Rehabilitation Programs. 

Should any of these unique standards— 

specifically SRO, congregate housing, 

shared housing, and manufactured 

homes—apply to the CoC, ESG, and 

HOPWA programs? 

Question for Comment #13: HUD is 

considering adding certain affirmative 

requirements at the final rule stage. 

Currently under consideration are 

related to ground-fault circuit 

interrupter (GFCI), an arc-fault circuit 

interrupter (AFCI); Heating, ventilation, 

and air conditioning (HVAC); Guardrail; 

and Lighting-Interior. In alignment with 

HUD’s prioritization of resident safety, 

HUD welcomes public comment on all 

issues, but is specifically seeking 

feedback regarding implementing the 

following: 

a. Electrical Outlet and Switch—HUD 

is considering adding a deficiency 

under the Electrical Outlet and Switch 

Standard regarding an inadequate 

number of outlets (i.e., either 2 working 

outlets or 1 working outlet and a 

permanent light) within all habitable 

rooms due to potential safety hazards, 

usability barriers, and inadequate 

illumination. 

b. GFCI & AFCI—HUD is considering 

adding a deficiency under the GFCI & 

AFCI Standard regarding the lack of 

GFCI protection where required (e.g., 

within 6 feet of sinks, tubs, showers; or 

exterior, garage, or unfinished basement 

areas) due to potential safety hazards, 

such as shock or electrocution. 

c. HVAC—HUD is considering adding 

a deficiency under the HVAC Standard 

regarding the lack of a permanently 

installed heating source due to potential 

health safety hazards, such as fire or 

carbon monoxide exposure. 

d. Guardrail—HUD is considering 

adding a deficiency under the Guardrail 

Standard to require a guardrail when 

there is an elevated walking surface 

with a drop off of 30 inches or greater 

measured vertically. 

e. Lighting—Interior—HUD is 

considering adding a deficiency under 

the Lighting—Interior Standard 

regarding the absence of a permanently 

mounted light fixture in the kitchen or 

bathroom due to potential safety 

hazards and inadequate illumination. 

c. Section 5.705 Inspection 

Requirements 

The current § 5.705 states that entities 

must inspect covered HUD housing 

programs annually in accordance with 

HUD-prescribed physical condition 

standards unless program regulations or 

HUD provide otherwise. Amended and 

expanded § 5.705 would align 

inspection standards (including 

provisions pertaining to frequency), 

would identify entities responsible for 

conducting inspections, would outline 

timing of inspections and reinspection 

fees, and would mandate access to 

properties. Centralizing these standards 

would provide greater clarity and ease 

of access for stakeholders and oversight 

authorities. 

Section 5.705(a)(1) continues to 

require that any entity responsible for 

conducting an inspection of HUD 

housing determine compliance with this 

subpart. However, (a)(1) would require 

that entities must inspect such HUD 

housing in accordance with the 

standards and procedures set out by the 

Secretary and published in the Federal 

Register as described in § 5.711, and 

would allow HUD to establish aligned 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 2587 

10 42 U.S.C. 1437(f)(o)(8)(g). 

inspection standards across HUD 

programs. 

New paragraph (b)(1) would 

incorporate existing provisions from 

§ 200.855 describing the entity 

responsible for inspecting HUD housing. 

New paragraph (b)(2) would provide an 

exception for the HCV, PBV and Mod 

rehab programs in cases where the PHA 

is required to conduct the inspection. 

New subparagraph § 5.705(c)(1) 

would pull elements from existing 

regulations which outline that a 

property must be inspected before the 

property is approved for participation in 

any of the HUD housing programs under 

this part unless the property is already 

a participant in another HUD program 

under this part. It would also continue 

to require that an entity responsible for 

conducting an inspection of HUD 

housing must determine compliance 

with this subpart and must inspect such 

housing annually, unless otherwise 

specified below. 

Current inspection requirements for 

public housing and multifamily 

programs are risk-based with 

frequencies ranging from annually to 

once every three years. The proposed 

rule would maintain risk-based annual 

inspection requirements. The proposed 

rule would expand this time period to 

between 2 and 5 years. The criteria 

under which a PHA or owner/agent may 

qualify for a longer inspection cycle 

would be described in a future Federal 

Register Notice and will be based on a 

risk assessment. This change in 

inspection frequency would further 

incentivize performance without any 

anticipated degradation in housing 

quality as it would not obviate the 

expectation of continuous compliance 

with housing quality requirements. 

Further, since proposed § 5.707 would 

require properties to conduct an annual 

self-inspection and submit results to 

HUD, the Agency believes that 

submission of self-inspection results 

and status of repair would mitigate risk 

associated with longer inspection 

frequencies. In all cases, HUD housing 

would be required to remain in 

compliance with all applicable laws and 

regulations, including the quality 

standards in § 5.703, regardless of the 

date of the next inspection. 

Due to different statutory and 

programmatic requirements, 

requirements surrounding inspections 

frequencies for some programs would 

continue to be governed by current 

applicable regulations, including HCV, 

PBV, and Moderate Rehabilitation. 

Further, small rural PHAs would be 

exempted from the annual inspection 

requirement and would instead follow 

provisions of the Economic Growth and 

Recovery Act outlined later in this 

notice. Finally, HUD may exempt 

assisted-living facilities, board and care 

facilities, and intermediate care 

facilities, and any other Section 232 

facilities if they meet certain criteria as 

outlined in the regulation. 

New paragraph (d) would incorporate 

and align existing language regarding 

reinspection costs from the public 

housing and multifamily regulations. 

The proposed rule would allow, but not 

require, the responsible entity (as 

identified in proposed § 5.705(a)(1)) to 

charge a property owner (including 

PHAs) a reasonable reinspection fee 

when an owner notifies the responsible 

entity that a repair has been made, or 

the allotted time for repairs has elapsed, 

and a reinspection reveals the 

deficiency was not corrected. 

New paragraph (a)(3) would outline 

variants in inspection standards for the 

HCV and PBV programs by 

incorporating existing regulations at 

§ 982.401(a)(ii). As required by statute, 

the proposed rule would continue to 

give PHAs the ability to consider 

variations in local laws and practices 

and provide appropriate flexibility to 

facilitate the efficient provision of 

assistance.10

With regard to inspection, HUD is 

requesting public comments on the 

following questions: 

Question for Comment #14: HUD is 

soliciting comment on the risk-based 

annual inspection requirement 

expansion from 2 to 5 years. Is a 

different range merited? If so, what 

should HUD consider in setting and 

adjusting the ranges? 

Question for Comment #15: HUD is 

soliciting comment on how to involve 

tenants in helping REAC identify poor 

performing properties. For example, 

could tenants provide a ‘‘1–5 rating’’ of 

their units with ‘‘1’’ being ‘‘poor’’ and 

‘‘5’’ being ‘‘excellent?’’ Could tenants 

recommend their units for inspection 

separate from the statistical sample for 

scoring purposes to inform HUD’s risk 

analysis of the property? 

d. Section 5.707 Uniform SelfInspection Requirement and Report 

While 42 U.S.C. 1437(d)(f)(3) requires 

that each PHA inspect all public 

housing projects annually, current 

regulations governing other covered 

HUD housing programs, such as those 

for Multifamily Housing, do not 

explicitly require an annual selfinspection of all units. The proposed 

rule would add a new regulation at 

§ 5.707 which would explicitly require 

annual self-inspections of all units in a 

project and would add a new electronic 

reporting requirement. The results of the 

electronic reporting requirement would 

be an integral part of HUD’s real estate 

inspection process. With advances in 

technology, HUD believes it is now 

possible and practical to collect this 

type of property data electronically. The 

procedures for this reporting would be 

outlined in a future Federal Register 

Notice with an opportunity for public 

comment. 

By making regular, comprehensive 

self-inspections and reporting a part of 

each covered property’s physical 

assessment regimen, HUD would once 

again signal a focus on identifying and 

mitigating risks to resident health and 

safety. Self-inspections are a key 

component of ensuring properties are 

maintained year-round and encourage 

regular, preventative maintenance rather 

than ‘‘just in time’’ repairs ahead of 

HUD-conducted inspections. 

It should be noted that due to the 

unique statutory requirements of the 

HCV, PBV, and CPD programs, they 

would be exempted from this electronic 

reporting requirement. Additionally, 

Moderate Rehabilitation would continue 

to follow program requirements 

described in the current regulations. 

With regard to self-inspection, HUD is 

requesting public comments on the 

following questions: 

Question for Comment #16: HUD is 

soliciting comment on how the 

clarification to self-inspect all HUD 

housing units in certain programs to 

ensure that units are being maintained 

in accordance with HUD housing 

quality standards will impact the 

operations of PHAs, owners and agents? 

What advantages and disadvantages 

would arise from extending this selfinspection requirement to the programs 

that do not explicitly require an annual 

self-inspection of all units (such as 

HCV, PBV, Moderate Rehabilitation, and 

CPD programs)? 

Question for Comment #17: Is there 

an alternative to the self-inspection 

protocol (§ 5.707 Uniform selfinspection requirement and report) that 

would allow HUD to achieve the 

objective that families live in safe and 

habitable units, and what are the risks 

and benefits of that alternative? 

e. Section 5.709 Administrative 

Process for Defining and Revising 

Inspection Criteria 

The proposed rule would add § 5.709 

which would require HUD to establish 

an administrative process for regularly 

receiving public comments on scoring 

and ranking criteria through Federal 

Register notices. 

2588 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 

11 ‘‘The UPCS physical inspection emphasizes 

health and safety (H&S) deficiencies because of 

their crucial impact on the well-being of residents. 

A subset of H&S deficiencies is exigent health and 

safety (EHS) deficiencies. These are life threatening 

(LT) and require immediate action or remedy. EHS 

deficiencies can substantially reduce the overall 

project score.’’ See, 76 FR 10055 https://

www.federalregister.gov/documents/2011/02/23/ 

2011-2633/changes-to-the-public-housingassessment-system-phas-physical-conditionscoring-notice. 

New paragraph (a)(1) would establish 

a timeframe for revisions of standards of 

every 3 years, or every 3 years after the 

most recent revision, whichever is later. 

The inclusion of this regulation would 

allow HUD to respond to the changing 

needs of an evolving housing portfolio 

and technological changes that may 

impact the inspections process. This 

proposed rule would mandate that the 

Agency update the scoring and ranking 

criteria regularly and would further 

demonstrate HUD’s commitment to 

ensure scoring is reasonable, responsive, 

and current. 

New paragraph (a)(2) would allow 

HUD to publish a notice without 30 

days of public comment in the case of 

an emergency. For § 5.709, an 

emergency would be defined as a 

significant health hazard, a new safety 

concern due to changing construction 

technology, or another event as 

determined by the Secretary. This 

section would further highlight the 

Secretary’s commitment to being 

responsive to the needs and safety of 

residents. 

Question for Comment #18: In 

alignment with HUD’s desire to increase 

clarity and decrease ambiguity, HUD is 

considering definitions for kitchens and 

sanitary facilities. HUD seeks public 

input on the following: 

a. Should HUD define what 

constitutes a kitchen and its related 

components required for functional 

adequacy (e.g., cooking appliance, 

means of refrigeration, food preparation 

and storage)? 

b. Should HUD define what 

constitutes a sanitary facility and its 

related components required for 

functional adequacy (e.g., bathtub or 

shower, toilet, ventilation, sink)? 

f. Section 5.711 Scoring, Ranking 

Criteria, and Appeals 

The proposed rule would add a new 

regulation at § 5.711 which would 

incorporate and streamline existing 

regulations governing the scoring and 

ranking of covered properties, chiefly 

multifamily and public housing 

properties. Further, it would include the 

responsibilities of PHAs and owner/ 

agents after an inspection and outline 

the process for appealing inspection 

results. Proposed § 5.711 would also 

incorporate and replace the current 

scoring and ranking process under 

§ 200.857 as well as the prior appeals 

process for physical inspections under 

the Public Housing Assessment System 

(PHAS) at §§ 902.22, 902.24, 902.26, and 

902.68. By aligning similar language 

across programs, HUD believes the 

proposed rule will increase clarity and 

ease of compliance while creating a 

standardized set of expectations. 

New paragraph (a) would exempt the 

HCV and PBV programs which would 

continue to be assessed under the 

Section Eight Management Assessment 

Program (SEMAP) as well as small rural 

PHAs which would be assessed under 

new subpart D of 985. As part of the 

streamlining in the proposed rule, new 

paragraph (b) moves the existing 

regulation at § 200.857(a)(1) to part 5. 

New paragraph (b)(2) would clarify 

that Public Housing projects would 

continue to be scored and ranked under 

the Public Housing Assessment System 

(PHAS) outlined in part 902. New 

paragraph (c)(1) would introduce the 

category of severe health or safety (SHS) 

deficiencies which are the most serious 

types of conditions that can be cited as 

violations of § 5.703 and replaces the 

current exigent health and safety (EH&S) 

category of deficiencies found in 

§ 902.22. Similar to the use of new 

language in § 5.703, the change in 

terminology would serve as a visual 

marker to help a reader differentiate 

between the existing and proposed 

regulations. It would also help to 

minimize confusion across the aligned 

programs. The term ‘‘exigent health and 

safety’’ has been associated with more 

than one definition in the past and has 

been confused with the term ‘‘lifethreatening.’’ For example, HUD’s 

notice at 76 FR 10055 employed EH&S 

and life threatening synonymously 

despite the different meanings.11

While generally equivalent in purpose 

to the way EH&S is being used today, 

the new phrase, ‘‘severe health or 

safety’’ would provide a clear 

expression of the seriousness of these 

types of issues which would also be 

reflected in the proposed default 

timeframe of repair of 24 hours. HUD 

acknowledges that current regulations 

are inconsistent in describing how soon 

an EH&S deficiency must be corrected, 

establishing a singular provision at 

§ 5.711(c)(1) for the correction of SHS 

deficiencies for most programs would 

address these inconsistencies. 

Additionally, the Housing 

Opportunity Through Modernization 

Act of 2016 (HOTMA) limited HUD’s 

flexibility in defining the timeframes for 

repair of deficiencies in the HCV or PBV 

programs. That act requires that life 

threatening conditions be addressed in 

24 hours and all other deficiencies 

within 30 days. In order to 

accommodate that statutory constraint, 

HUD would identify in the notice 

described in § 5.709 which of the SHS 

deficiencies are life threatening and 

which ones are non-life threatening. 

Section 5.711 would also require the 

correction of non-SHS health or safety 

deficiencies within 30 days, for all 

programs. 

Further, proposed § 5.711 would 

incorporate and condense the 

administrative review and enforcement 

action provisions found at § 200.857(h) 

and § 200.857(i) to align with HUD’s 

current procedures and eliminate 

inconsistencies with Section 219, Title 

II, Division H of the Consolidated 

Appropriations Act, 2020, Public Law 

116–94, December 20, 2019. As 

previously noted, CPD programs do not 

apply any scoring, weighting, ranking or 

enforcement from Part 5. This is 

outlined in the HOME rule at 24 CFR 

92.251(f)(1)(i). CPD programs are 

fundamentally different than many of 

the programs subject to REAC 

inspections as they are programs 

administered by local governments 

subject to local decision making. CPD 

programs have their own means of 

enforcement specified in each program 

regulation. These functions are instead 

performed by HUD CPD staff, and can 

include requiring the participating 

jurisdiction or grantee repaying the full 

amount of subsidy provided to the 

project. New paragraph (d)(2) would 

consolidate current regulations 

governing the process for technical 

reviews into one section with an aligned 

set of procedures applicable to 

properties inspected by HUD. 

With regard to tenant-induced 

damage, HUD is requesting public 

comments on the following questions: 

Question for Comment #19: HUD is 

soliciting comment on how to fairly 

approach tenant-induced damage to 

units and properties in such a way that 

it will have a positive impact on HUDassisted properties. What could be used 

as incentives or disincentives to 

discourage tenant-induced damage? 

Question for Comment #20: HUD 

seeks input on the scoring threshold 

that should be used to refer a property 

to the Departmental Enforcement Center 

(DEC): What factors should be 

considered by HUD in setting the 

threshold, and whether should this be a 

stationary threshold or one that is 

updated periodically? 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 2589 

12 84 FR 4097, February 14, 2019. 13 85 FR 11381, February 27, 2020. 

g. Section 5.713 Second- and ThirdParty Rights 

The proposed rule would add new 

§ 5.713, which would incorporate and 

modify existing language at § 982.407 on 

enforcement of inspection requirements. 

The new regulation would mirror 

existing regulations in place for the HCV 

and PBV programs—which in no way 

create any right to assert any claim 

against HUD or the PHA for damages, 

injunction, or other relief for alleged 

failure to enforce inspection standards, 

and would expand it to other programs 

under NSPIRE. 

B: Addition of Part 902, Subpart H and 

Part 985, Subpart D Regarding Small 

Rural PHAs 

Small rural PHAs generally operate in 

a very different financial environment 

and rental housing market than larger 

PHAs in major metropolitan areas. 

These PHAs often have less access to 

private capital and their small size 

typically means that they operate with 

fewer staff and outside consulting 

services. Accordingly, regulatory burden 

often falls more heavily on small rural 

PHAs, reducing their ability to serve 

low-income families. 

On May 24, 2018, President Trump 

signed the Economic Growth and 

Recovery, Regulatory Relief and 

Consumer Protection Act (‘‘Economic 

Growth Act’’) into law. Section 209 of 

the Act added section 38 to the United 

States Housing Act of 1937 (42 U.S.C. 

1437 et seq.) and made several 

amendments pertaining to small rural 

PHAs. Certain statutory amendments 

made by section 209 became effective 60 

days after enactment, and HUD 

published a notice in the Federal 

Register on February 14, 2019,12 which, 

read together with the statutory 

language, was intended to aid HUD 

program participants and the public in 

understanding the reasons for deferred 

action with respect to specific statutory 

provisions. HUD published a notice in 

the Federal Register on February 27, 

2020,13 explaining how HUD designates 

small rural PHAs and described which 

209 provisions were being 

implemented. The notice also stated 

that HUD would undertake future 

rulemaking for full implementation of 

other provisions, including defining 

small rural PHAs in the regulations. 

This proposed rule would implement 

this definition of small rural PHA as 

well as a new assessment system for 

their public housing and HCV programs. 

HUD believes that the Economic Growth 

Act’s focus on inspections and the 

directive to follow the same standards 

for small, rural public housing as that 

for projects assisted under Section 8 

make the inclusion of the act’s 

provisions in this rule a logical fit. 

The proposed rule would create new 

Subpart H under the current 902 

regulations for the Public Housing 

Assessment System (PHAS). Section 

209(a)(2) of the Economic Growth Act 

defined ‘‘small public housing agency’’ 

and directed HUD to use the existing 

definition of ‘‘rural area’’ contained in 

the regulations governing the Consumer 

Financial Protection Bureau (CFPB) at 

12 CFR 1026.35(b)(2)(iv)(A). In the 

February 27, 2020 notice, HUD further 

refined this definition by defining PHAs 

that ‘‘predominantly operate in a rural 

area’’ and clarifying that these PHAs 

would be referred to as ‘‘small rural 

PHAs’’ to avoid confusion with other 

small PHA designations employed by 

HUD. The proposed rule would fully 

implement these definitions through 

§ 902.101. 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 percent of its combined 

public housing units and voucher units 

in rural areas. The methodology for 

identifying a small rural PHA was 

identified in the February 27, 2020 

notice and § 902.101(b) would require 

that HUD make this determination once 

every three years. PHAs would have the 

ability to appeal this determination in 

accordance with § 902.101(c). 

The proposed rule would amend the 

current regulations for the Public 

Housing Assessment System (PHAS) to 

exempt small rural PHAs and would 

instead implement an alternate 

performance indicator and rating 

system. Under proposed § 902.103, 

small rural PHAs would be assessed 

based on the physical condition of their 

public housing properties. Proposed 

§ 902.103(b) would establish an 

assessment frequency of no more than 

once every three years, as required 

under Section 209(c)(1)(A) of the 

Economic Growth Act, except that a 

troubled small rural PHA would be 

subject to an annual assessment. 

A small rural PHA’s public housing 

program would be designated as 

troubled under § 902.105 if: 

• The weighted average score of all 

property inspections is below 70 

percent of the total available points; or 

• If a the 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. 

Troubled small rural PHAs would be 

referred to their local field office or 

other designated HUD office(s) for 

remedial action, oversight, and 

monitoring. HUD would negotiate and 

develop a Corrective Action Agreement 

(CAA) as described in § 902.105(c) 

within 30 days of the PHA’s notification 

of their designation as troubled. Section 

902.105(c) through (i) would outline the 

requirements and process for the CAA. 

Proposed § 902.107 would describe the 

situation under which HUD may 

withhold, deny, or rescind a troubled 

designation. Conditions for appealing 

troubled designations are outlined in 

proposed § 902.109. Sanctions for small 

rural PHAs that remain troubled as well 

as incentives for small rural PHAs that 

are high performers would remain the 

same as those currently described in the 

PHAS regulations. 

The Economic Growth Act provides 

that HUD may designate a small rural 

PHA as a troubled PHA with respect to 

its HCV program if HUD determines the 

agency has failed to comply with HCV 

inspection requirements, HUD is 

proposing to add a new subpart D to 24 

CFR part 985, Section 8 Management 

Assessment Program (SEMAP). 

Under proposed § 985.201, PHAs that 

meet the definition of small rural under 

§ 902.101 would no longer be subject to 

SEMAP requirements but would instead 

be assessed on the basis of the 

performance indicators and rating 

system under subpart D. In assessing 

whether a small rural PHA’s HCV 

program is a high performer, standard 

performer, or troubled, HUD would take 

four indicators into consideration, all of 

which are related to the small rural 

PHA’s compliance with the inspection 

requirements. Each indicator would be 

scored on a pass/fail basis. The 

inspection indicators described in the 

proposed § 985.203 include: 

• Inspection standards which would 

confirm the PHA is applying the 

applicable NSPIRE standards to HCV or 

PBV-assisted units or a HUD-approved 

variation under § 5.703. The PHA would 

pass the indicator if all HCV and PBV 

units were inspected using the correct 

standards; 

• Initial unit inspections which 

would validate the PHA is conducting 

initial inspections within the 

appropriate timeframes. The PHA 

would pass the indicator if at least 98 

percent of newly leased units passed 

inspection prior to the beginning of 

assistance; 

• Frequency of HQS inspections 

which would verify the PHA inspects 

tenant-based units under HAP contract 

and the required sample of PBV units at 

least once during the three-year period 

2590 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 

from the last PHA inspection. The PHA 

would pass the indicator if at least 98 

percent of the units were inspected; and 

• Unit condition enforcement would 

confirm the PHA is taking corrective 

action as required in cases where the 

owner fails to correct an identified unit 

deficiency in accordance with HUD 

requirements. The PHA would pass the 

indicator if 98 percent of inspections 

with identified life-threatening or other 

deficiencies were corrected within the 

required timeframe. 

In order for the small rural PHA to be 

designated as a high performer, 

additional requirements related to 

funding would also apply. Proposed 

§ 985.205(a) would state that for a PHA 

to be designated as a high performer, the 

PHA must: 

• Either utilize at least 98 percent of 

its HCV budget authority for the most 

recent calendar year or the percent of 

HCV units leased by renters or occupied 

by homeowners for the most recent 

calendar year must be at least 98 

percent; 

• Not end the calendar year with 

excess HAP reserves; and 

• Not end the calendar year in a 

funding shortfall or receive shortfall 

prevention funding from HUD. 

If the small rural PHA passes all four 

inspection indicators and meets the 

funding criteria listed above, the PHA is 

designated as a high performer. If a PHA 

passes all four inspection indicators but 

does not meet the funding criteria listed 

above, the PHA will be designated as a 

standard performer. If the small rural 

PHA fails any one of the four inspection 

indicators, regardless of whether or not 

it meets the funding requirements, the 

PHA is designated as troubled. 

In accordance with statutory 

requirements contained in the Economic 

Growth Act, proposed § 985.207 would 

establish an assessment frequency of no 

more than once every three years, 

except that a troubled small rural PHA 

would be subject to an annual 

assessment in accordance with 

§ 985.204. 

Proposed § 985.209 would cover 

requirements that apply to small rural 

PHAs designated as troubled, including 

the statutorily mandated appeals 

process and the required corrective 

action agreement. 

Proposed § 985.211 would state that 

HUD would maintain small rural PHAs’ 

assessment files, including designations, 

appeals, and agreements, for at least 3 

years. 

With regard to small rural PHAs, HUD 

is requesting public comments on the 

following questions: 

Question for comment #21: HUD is 

considering establishing the threshold 

for troubled PHAs under the small rural 

assessment as a PHA that either has a 

weighted average of less than 70 percent 

of all available points on physical 

inspections, or a PHA that has a 

weighted average of between 70 and 80 

percent of all available points and that 

also has at least one property that 

received a score of less than 70 percent 

of available points. HUD is seeking 

comment on how this threshold will 

impact PHAs and residents, and what 

alternative thresholds HUD should use 

to define a troubled PHA? 

Question for comment #22: HUD is 

specifically seeking 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. Are the indicators 

proposed to make such determination 

appropriate? If not, are there better 

alternatives? 

Question for comment #23: HUD is 

specifically seeking comment on the 

criteria it is proposing to determine if 

the PHA is a high performer or a 

standard performer. Are the conditions 

related to funding utilization 

appropriate? If not, are there better 

alternatives? Should HUD be 

considering other criteria besides 

utilization to designate a PHA a high 

performer as opposed to a standard 

performer? If so, what other 

performance measures should be taken 

into account? How would HUD verify 

the PHA’s performance on any 

suggested additional or alternative 

performance criteria, keeping in mind 

HUD’s preference to move away from 

reliance on self-certifications wherever 

possible and to not require PHAs to 

report or submit data for PHA 

assessments that is not already collected 

as part of normal HCV PHA operations 

and HUD oversight? 

Question for comment #24: What 

specifically should be required in the 

corrective action agreement? 

C: Other Regulatory Changes 

As discussed above, § 5.701 would 

expand the scope of part 5, subpart G. 

Therefore, this proposed rule would 

amend regulations for the HCV (part 

982), PBV (part 983), HOME (part 92), 

HTF (part 93), HOPWA (part 574), ESG 

(part 576), and CoC (part 578). 

The proposed rule would align HOME 

property standards requirements for 

housing with the requirements for 

ongoing property condition standards of 

rental housing at § 92.251(f). 

Participating jurisdictions would be 

required to establish written property 

standards for housing occupied by 

tenants that meet minimum 

requirements at § 92.251(f) including 

compliance with State and local codes 

and ordinances, health and safety, and 

lead-based paint requirements. 

While most participating jurisdictions 

are subject to State and local building or 

rehabilitation codes, many are not 

subject to comprehensive property 

condition or habitability codes. The 

program regulations at § 92.251(f) do not 

provide a uniform standard for housing 

that is decent, safe, and sanitary and in 

good repair where State and local codes 

are absent. HUD is proposing a uniform 

standard for what must be inspected 

during, and corrected as the result of, an 

ongoing physical inspection of HOMEassisted rental housing during the 

period of affordability or an annual 

inspection of housing occupied by a 

resident. 

Also under the proposed rule, the 

Housing Trust Fund (HTF) program 

regulations would be revised to make 

conforming changes to the HTF property 

standards requirements at 

§ 93.301(b)(1)(viii), (c)(3), and (e)(i). The 

specific deficiencies will be a subset of 

the deficiencies defined for NSPIRE and 

published in the Federal Register in 

accordance with § 5.705. 

The proposed rule would also make 

conforming changes to apply § 5.703 to 

the Housing Opportunities for Persons 

with AIDS (HOPWA), Continuum of 

Care (CoC), and Emergency Solutions 

Grants (ESG) programs. The rule 

proposes to amend the HOPWA 

regulations at § 574.310; the CoC 

regulations at § 578.75; and the ESG 

regulations at § 576.403 to cite to 

§ 5.703. The CoC regulations at 

§ 578.75(b) regarding lead-based paint 

requirements would be amended only to 

apply § 5.703 where § 982.401 currently 

applies; this proposed rule makes no 

substantive changes to the lead-based 

paint requirements. The ESG regulations 

would be amended to include § 5.703 in 

the minimum standards for permanent 

housing but not emergency shelters. 

These amendments are intended to 

replace program-specific standards with 

references to part 5. Further, § 5.711 

would incorporate and condense the 

administrative review and enforcement 

action provisions at §§ 200.857(h) and 

200.857(i) to align with HUD’s current 

procedures and to eliminate 

inconsistencies with Section 219, Title 

II, Division H of the Consolidated 

Appropriations Act, 2020, Public Law 

116–94, December 20, 2019. 

HUD is also proposing technical 

changes for HAP contracts at §§ 880.612, 

884.217, 886.123 and 886.323 to require 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 2591 

14U.S. Department of Housing and Urban 

Development. (2019). National Standards for 

Physical Inspection of Real Estate (NSPIRE) 

Standards. Retrieved from: https://www.hud.gov/ 

program_offices/public_indian_housing/reac/ 

nspire/standards. 

15U.S. Department of Housing and Urban 

Development. (2019). The Demonstration to Assess 

the National Standards for the Physical Inspection 

of Real. Estate Retrieved from: https://

www.hud.gov/program_offices/public_indian_

housing/reac/nspire/demonstration. 

16U.S. Department of Housing and Urban 

Development. (2019). The Demonstration to Test 

Proposed New Method of Assessing the Physical 

Conditions of Voucher-Assisted Housing. Retrieved 

from: https://www.hud.gov/sites/dfiles/PIH/ 

documents/upcsvdemoparticpation.pdf. 

annual compliance with the expanded 

part 5, subpart G. 

Under this proposed rule, the 

Moderate Rehabilitation program 

regulations at § 882.516(b) would be 

revised to clarify that PHAs must 

inspect (or cause to be inspected) units 

at least annually and at other times as 

necessary in accordance with the 

NSPIRE standards established under 

§ 5.703. HUD would continue to 

conduct the inspections in accordance 

with the NSPIRE standards for mod 

rehab projects that are managed by the 

PHA as provided under § 882.516(d). In 

addition, the proposed rule would 

change the title of § 882.516(c) from 

‘‘Units not decent, safe, and sanitary’’ to 

‘‘Units with health and safety hazards’’ 

and add a title to § 882.516(e) for clarity. 

D. Other Rulemakings 

HUD notes that there is some overlap 

in the proposed changes with HUD’s 

Housing Opportunity Through 

Modernization Act of 2016: 

Implementation of Sections 102, 103, 

and 104 proposed rule (84 FR 48820). 

HUD further notes that HUD intends to 

publish a proposed rule concerning the 

implementation of requirements to 

install carbon monoxide detectors in 

HUD-assisted and -Insured Housing, 

which would also overlap with this 

proposed rule. At the final rule stage, 

HUD will make any changes necessary 

to address any conflicts between these 

rules. 

III. NSPIRE Improvements Beyond This 

Rule 

In addition to the regulatory changes 

being proposed by this rule, HUD is 

making other improvements to its 

physical inspection program. HUD is 

committed to extending the same 

principles reflected in this rule to other 

aspects of the NSPIRE effort. HUD has 

continued to move forward with the 

‘‘top-to-bottom review’’ of its inspection 

process directed by the Secretary to 

ensure taxpayer-supported housing is 

healthy, safe, and habitable for the 

millions of families HUD serves. The 

regulation will signal to the public 

HUD’s clear intent to change its 

business approach. HUD is proactively 

aligning Public Housing, HCV, and 

other programs, through establishing an 

approach to revise and publish 

inspection standards, testing and 

validating a new inspection scoring 

model, and continuously engaging with 

the public in HUD’s improvement 

efforts. 

To ensure stakeholders can provide 

input on all aspects of NSPIRE, HUD 

launched listening sessions about 

making improving HUD’s inspections 

better. That approach of early and often 

feedback has continued. For example, in 

the development of the physical 

inspection standards, HUD published 

drafts on the NSPIRE website for public 

input.14 For reference, these are the 

standards which will apply to all 

inspections (see § 5.705(a)) and will be 

published formally for public comment 

prior to implementation (see § 5.709). 

HUD has received hundreds of 

suggestions on the draft NSPIRE 

standards and has closely reviewed all 

the comments. The majority were 

successfully incorporated into revisions. 

HUD’s analysis, supported by 

stakeholder feedback, has identified that 

the current Uniform Physical Condition 

Standards (UPCS) and Housing Quality 

Standards (HQS) specifications do not 

always clearly identify or explain the 

particular harm or hazard that HUD is 

trying to avoid. To address this concern, 

HUD applied best practices from risk 

analysis frameworks that feature 

predominantly in the public health 

discipline to help all stakeholders 

understand the ‘‘why’’ or the 

‘‘rationale’’ for each deficiency. A 

‘‘rationale’’ is a plainly written riskbased assessment that describes the 

harm or negative result that could occur 

if that issue were to be present at a 

property. It justifies why that issue is 

critical to housing quality. By taking 

this approach, HUD can ground each 

standard in a clear and defensible 

explanation based in sound science. 

Given the approach described above— 

and because it is important to ensure the 

standards remain up to date—HUD is 

working to establish an ‘‘infrastructure 

of partnerships’’ to provide continuous 

technical input and scientific guidance 

for standards development. HUD started 

this effort by collaborating with partners 

across the public and private sectors— 

including other Federal agencies—and 

academic and non-profit organizations. 

HUD anticipates that the continued 

expansion of these relationships will 

help to provide the input into the threeyear updates to which HUD commits in 

this rule. 

Along with the efforts already 

described, HUD has launched two 

demonstrations: (1) The Demonstration 

to Assess the National Standards for the 

Physical Inspection of Real Estate (84 

FR 43536) and (2) the Demonstration to 

Test Proposed New Method of Assessing 

the Physical Conditions of VoucherAssisted Housing (81 FR 26759). These 

demonstrations are among the first steps 

in implementing an aligned inspection 

protocol for public housing, multifamily 

housing, and voucher programs. More 

information about those demonstrations 

can be found on the NSPIRE 15 and 

ISDV 16 websites. 

Strategically, the demonstration 

programs give HUD and properties an 

opportunity to ‘‘stress test’’ processes in 

a real-world setting to ensure they are 

stable and ready to scale out to the full 

population of Property Owner Agent 

(POA). In addition to being reasonable, 

HUD wants to ensure that its inspection 

standards are performable across a wide 

variety of inspectors. The 

demonstrations allow HUD the ability to 

make sure its administrative processes 

that support physical inspections are 

efficient and responsive. HUD is also 

leveraging technology to eliminate 

manual processes and to realize the 

benefits of having aligned programs. 

The information coming out of both 

demonstrations also informs the 

development and refinement of property 

scoring approaches. HUD has worked 

diligently to identify the most 

appropriate scoring models to improve 

the accuracy, objectivity, and 

consistency of assessment across 

different property configurations. Along 

with modifications to the current model, 

HUD is currently exploring alternative 

scoring models based instead on datadriven methodologies, including those 

based on probabilistic approaches. 

Finally, aligning HUD’s oversight to 

property risk will benefit both HUD and 

the POAs. For example, HUD has 

proposed in this rule that a risk model 

inform the extension of the frequency of 

inspections up to 5 years in some 

programs. Taking a risk-based oversight 

approach allows high-performing 

properties to continue to do those things 

that make them successful while 

ensuring struggling properties are able 

to get the attention needed. While HUD 

will maintain a ‘‘pass/fail’’ result for 

HCV and PBV inspections as required 

by statute, moving to NSPIRE with 

consistent inspection standards allows 

large volumes of inspection and housing 

quality data to be compared across 

programs for the first time. HUD 

believes that better data will lead to the 

2592 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 

development of more refined risk 

models and also allow rigorous 

assessment of the impacts of 

deficiencies, individually and in 

combination, on residents. 

IV. 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 proposed 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 proposed 

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. 

Executive Order 13771, Regulatory Costs 

Executive Order 13771, entitled 

‘‘Reducing Regulation and Controlling 

Regulatory Costs,’’ was issued on 

January 30, 2017. This proposed rule is 

expected to be an Executive Order 

13771 deregulatory action. The 

requirements this proposed rule would 

place on the public are comparable to 

pre-existing requirements. This rule 

would also provide relief to small rural 

PHAs and certain qualifying properties 

and would provide relief by removing 

inconsistencies across HUD’s programs, 

reducing compliance costs. 

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 proposed rule 

would not change the substantive 

requirement that HUD program 

participants are required to maintain the 

physical condition of HUD housing. The 

proposed rule would also, in most cases, 

maintain the same level of review for 

compliance in the form of physical 

inspections. Regulatory flexibility 

would be increased by allowing HUD to 

require less frequent inspections for 

high-performing PHAs under PHAS. 

Regulatory relief would also be 

provided to small rural PHAs, which 

would only be subject to triennial 

inspections under PHAS. Accordingly, 

the undersigned certifies that the 

proposed rule will not have a significant 

economic impact on a substantial 

number of small entities. 

Notwithstanding HUD’s determination 

that this rule will not have a significant 

effect on a substantial number of small 

entities, HUD specifically invites 

comments regarding any less 

burdensome alternatives to this rule that 

will meet HUD’s objectives as described 

in the preamble to this rule. 

Environmental Impact 

A Finding of No Significant Impact 

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 

Finding of No Significant Impact is 

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. The 

FONSI is also available through the 

Federal eRulemaking Portal at http://

www.regulations.gov. 

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 proposed rule 

would merely revise 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 would 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 proposed rule 

would 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. 

Except for the self-inspection report 

requirements, the information collection 

requirements contained in this proposed 

rule have been approved by OMB under 

the Paperwork Reduction Act and 

assigned OMB control numbers 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)), and 2577–0169 (HCV 

Program and Tribal HUD–VASH). The 

collection requirements will be 

amended to reflect the altered burden 

contained in this proposed rule. The 

current PRA ‘‘HCV Program and Tribal 

HUD–VASH’’ (OMB 2577–0169) 

authorizes collection of unit inspection 

data from PHAs as part of their 

participation in the HCV and PBV 

programs. This proposed rule will not 

require a modification to this approved 

collection. 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 2593 

The current PRA package ‘‘National 

Standards for the Physical Inspection of 

Real Estate (NSPIRE)’’ (OMB 2577– 

02890) authorizes collection of selfinspection data from properties 

participating in HUD’s NSPIRE 

Demonstration. As NSPIRE moves from 

demonstration to implementation, the 

number of responses will increase to 

accommodate the full portfolio of 

properties required to submit selfinspection results to HUD. 

The current PRA package 

‘‘Administrative Process for Scoring, 

Ranking, and Appeals’’ (OMB 2577– 

0257) authorizes the collection of data 

associated with data base adjustments, 

technical reviews, and appeals (Public 

Housing only) for Multifamily and 

Public Housing properties. HUD 

anticipates this number to remain 

constant upon implementation of 

NSPIRE. 

The current PRA package ‘‘Uniform 

Physical Standards and Physical 

Inspection Requirements’’ (OMB 2502– 

0369) authorizes the collection of data 

associated with inspections of HUDinsured mortgages. HUD expects this 

number to increase slightly due to 

higher unit sampling as part of the 

NSPIRE protocol. 

The current PRA package ‘‘Other 

Reporting Requirements’’ (OMB 2577– 

0241) only authorizes the collection of 

electronic certifications by PHAs for 

corrected/mitigated Exigent Health and 

Safety (EH&S) deficiencies. The new 

number of responses and burden reflect 

the inclusion of all programs, beyond 

Public Housing, that will now be 

required to submit electronic closeout of 

all health and safety deficiencies, not 

just EH&S deficiencies. 

The burden of the information 

collections in this proposed rule is 

estimated as follows: 

Information collection 

Number of responses Burden hours per 

response Hourly 

cost * 

Total annual cost 

Current New Current New Current New 

Inspection Reporting (HCV) (OMB 2577–0169) ................... 3,680,527 3,680,527 .44 .44 $34 $55,060,684.00 $55,060, 684.00 

Self-inspection Reporting (OMB 2577–0289) ....................... 4,500 38,000 2.7 2.7 34 413,100.00 2,335,176.00 

Administrative Process for Scoring, Ranking, and Appeals 

(OMB 2577–0257 .............................................................. 1,510 1,510 7.7 7.7 34 51,366.00 51,366.00 

Uniform Physical Standards and Physical Inspection Requirements (OMB 2502–0369) .......................................... 12,100 12,100 6.0 8.0 34 2,468,400.00 3,291,200.00 

Other Reporting Requirements (OMB 2577–0241) .............. 971 16,000 .28 1.0 34 9,244.00 544,000.00 

Totals ............................................................................. 3,699,608 3,748,137 ................ ................ ................ 58,002,794.00 61,282,426.00 

* Estimates assume a blended hourly rate that is equivalent to a GS–12, Step 5, Federal Government Employee. 

In accordance with 5 CFR 

1320.8(d)(1), HUD is soliciting 

comments from members of the public 

and affected agencies concerning the 

information collection requirements in 

the proposed rule regarding: 

(1) Whether the proposed collection 

of information is necessary for the 

proper performance of the functions of 

the agency, including whether the 

information will have practical utility; 

(2) The accuracy of the agency’s 

estimate of the burden of the proposed 

collection of information; 

(3) Whether the proposed collection 

of information enhances the quality, 

utility, and clarity of the information to 

be collected; and 

(4) Whether the proposed information 

collection minimizes the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated collection 

techniques or other forms of information 

technology (e.g., permitting electronic 

submission of responses). 

Interested persons are invited to 

submit comments regarding the 

information collection requirements in 

this rule. Under the provisions of 5 CFR 

part 1320, OMB is required to make a 

decision concerning this collection of 

information between 30 and 60 days 

after the publication date. Therefore, a 

comment on the information collection 

requirements is best assured of having 

its full effect if OMB receives the 

comment within 30 days of the 

publication. This time frame does not 

affect the deadline for comments to the 

agency on the proposed rule, however. 

Comments must refer to the proposed 

rule by name and docket number (FR– 

6123) and must be sent to: 

HUD Desk Officer, Office of 

Management and Budget, New 

Executive Office Building, 

Washington, DC 20503, Fax number: 

202–395–6947 

and 

Colette Pollard, HUD Reports Liaison 

Officer, Department of Housing and 

Urban Development, 451 7th Street 

SW, Room 2204, Washington, DC 

20410 

Interested persons may submit 

comments regarding the information 

collection requirements electronically 

through the Federal eRulemaking Portal 

at http://www.regulations.gov. HUD 

strongly encourages commenters to 

submit comments electronically. 

Electronic submission of comments 

allows the commenter maximum time to 

prepare and submit a comment, ensures 

timely receipt by HUD, and enables 

HUD to make them immediately 

available to the public. Comments 

submitted electronically through the 

http://www.regulations.gov website can 

be viewed by other commenters and 

interested members of the public. 

Commenters should follow the 

instructions provided on that site to 

submit comments electronically. 

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 

2594 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 

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 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 880 

Grant programs—housing and 

community development, Rent 

subsidies, 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 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 proposes to amend 24 

CFR parts 5, 92, 93, 200, 574, 576, 578, 

880, 882, 883, 884, 886, 902, 982, 983 

and 985 as follows: 

PART 5—GENERAL HUD PROGRAM 

REQUIREMENTS; WAIVERS 

■ 1. The authority for 24 CFR 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. 

■ 2. 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 

and report. 

5.709 Administrative Process for Defining 

and Revising Inspection Criteria. 

5.711 Scoring, Ranking Criteria, and 

Appeals. 

5.713 Second- and Third-Party Rights. 

§ 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 part 983 of 

this title (referred to in this part as the 

HCV and PBV programs, or HCV and 

PBV housing); 

(3) All project-based Section 8 

programs; 

(4) Section 202 Program of Supportive 

Housing for the Elderly (Capital 

Advances); 

(5) Section 811 Program of Supportive 

Housing for Persons with Disabilities 

(Capital Advances); 

(6) Section 202 loan program for 

projects for the elderly and handicapped 

(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. 1701et 

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 HUDassisted programs listed in paragraph 

(a). 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 conflict 

between the regulations of this subpart 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 2595 

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. 

§ 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 and PBV 

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 voucher unit. 

(b) Inside. Inside of HUD housing 

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, electricity, 

elevators, emergency power, fire 

protection, HVAC, and sanitary services. 

(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. 

(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 

bathroom, call-for-aid (if applicable), 

ceiling, doors, electrical systems, floors, 

water heater, HVAC (where individual 

units are provided), kitchen, lighting, 

outlets, switches, smoke detectors, 

stairs, walls, and windows. The unit 

must also meet the following affirmative 

requirements: 

(1) The unit must have hot and cold 

running water, including an adequate 

source of safe and potable water; 

(2) The unit must include its own 

sanitary facility, it must be in proper 

operating condition, usable in privacy, 

and adequate for personal hygiene and 

the disposal of human waste; 

(3) The unit must include at least one 

battery-operated or hard-wired smoke 

detector, in proper working condition, 

on each level of the unit installed as 

specified in National Fire Protection 

Association Standard (NFPA) 72 or 

successor standards. If the unit is 

occupied by any hearing-impaired 

person, smoke detectors must have an 

alarm system, designed for hearingimpaired persons; 

(4) The unit must have a living room 

and a kitchen 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. Children of 

opposite sex, other than very young 

children, may not be required to occupy 

the same bedroom or living/sleeping 

room. 

(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, mold, flammable materials or 

other fire hazards, electrical hazards, 

garbage and debris, handrail hazards, 

infestation, and lead-based paint. 

(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 part 35 of this title). 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 part 35 of this 

title 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, 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 code in order to comply 

with this subpart. 

(3) State and local code compliance is 

not part of the determination 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 

§ 5.705(a)(3)). 

(g) Use of an alternative or additional 

standard for HCV and PBV programs. A 

PHA is not subject to the standards set 

by this section when the PHA is 

approved by HUD to use an alternative 

standard in accordance with § 982.406 

of this title. 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 

(‘‘Agreement’’) as provided in 

§ 983.152(d)(2) of this title. 

(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. 

§ 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 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 § 5.711. 

(2) Inspection Scope. The inspection 

requirement for HUD housing generally 

requires the inside, outside and unit to 

be inspected, in accordance with 

§ 5.703. The inspection requirement for 

the tenant-based HCV program and the 

unit inspection for the PBV program 

only applies to units occupied or to be 

occupied by HCV and PBV 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. 

2596 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 

(ii) Acceptability criteria variations 

may only be approved by HUD pursuant 

to paragraph (a)(3)(i) 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. 

(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 

unit receiving assistance under section 

8(o) of the 1937 act must be inspected 

by an independent entity as specified in 

§ 982.352(b)(iv) of this title. 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 § 882.412, in which 

case HUD is responsible for the 

inspections in accordance with 

§ 882.516(d) of this title. 

(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 the 

property is already a participant in 

another of the HUD programs under this 

part. 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 in the year that the 

inspection is due; however, an 

inspection must be completed before the 

end of the calendar year that the 

inspection is due. 

(2) Extended Inspection cycle. HUD 

housing other than HCV, PBV, and 

Moderate Rehabilitation housing shall 

be subject to annual inspection as 

described in paragraph (c)(1) of this 

section, except that the Secretary, based 

on appropriate evaluation of risk, may 

extend the inspection cycles of certain 

qualifying properties for a period 

between two and five years, through 

publication in the Federal Register, 

following notice and the opportunity to 

comment. 

(3) Triennial cycle for small rural 

PHAs. Small rural PHAs as defined in 

§ 902.101 of this title shall be assessed 

in accordance with part 902, subpart H 

of this title. 

(4) Housing Choice Vouchers. PHAs 

must inspect units subject to part 982 of 

this title in accordance with the 

frequency described in § 982.405 of this 

title. 

(5) Project Based Vouchers. PHAs 

must inspect units subject to part 983 of 

this title in accordance with the 

frequency described in § 983.103 of this 

title. 

(6) 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. 

(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— 

(1) HUD Inspections. Nothing in this 

subpart shall restrict the right of HUD, 

or an entity contracted by HUD, to 

inspect HUD housing. 

(2) Public housing projects. All PHAs 

are required to provide HUD or its 

representative with full and free access 

to all facilities in its projects. All PHAs 

are required to provide HUD or its 

representative with access to its projects 

and 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 PHA did not obtain keys. In the 

event that the PHA fails to provide 

access as required by HUD or its 

representative, the PHA shall be given a 

physical condition score of zero for the 

project or projects involved. This score 

of zero shall be used to calculate the 

physical condition indicator score and 

the overall assessment score for that 

PHA. 

§ 5.707 Uniform self-inspection 

requirement and report. 

All owners of HUD housing, other 

than owners participating in the HCV, 

PBV, and Moderate Rehabilitation 

Programs, are required to annually 

inspect their properties, including all 

units, to ensure the units are maintained 

in accordance with the standards in 

§ 5.703 and electronically report results 

to HUD, in accordance with the 

procedures set out by the Secretary and 

published in the Federal Register, 

following notice and the opportunity to 

comment. This self-inspection is 

independent of other HUD inspections 

discussed in § 5.705. 

§ 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 

comment, a list of deficiencies and 

methodologies to use for scoring and 

ranking HUD housing. The Federal 

Register notice will include the factors 

for determining if an HCV unit passes or 

fails the inspection in addition to the 

scoring and ranking of other HUD 

housing. After considering the public 

comments received on the Federal 

Register notice, HUD will publish a 

notice announcing the new inspections 

procedures, and the date on which the 

new procedures becomes effective. 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 2597 

(1) Revisions. HUD will issue a notice 

in the Federal Register published for 30 

days of public comment making any 

revisions to the inspection procedures 

HUD deems necessary, every three 

years, or three years after the most 

recent revision, whichever is later. 

(2) Emergency Revisions. The 

Secretary may publish a final notice 

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 public housing 

projects, after HUD makes a 

documented determination that such 

action is warranted due to: 

(i) A Severe Health or Safety 

deficiencies and other significant risks 

to safety as outlined in § 5.703; 

(ii) A new safety concern due to 

changing construction technology; or 

(iii) Other events as determined by the 

Secretary. 

§ 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 or PBV program. 

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 part 985 

of this title. 

(b) Scoring and ranking of HUD 

housing—(1) General. HUD’s Real Estate 

Assessment Center (REAC), or the 

appropriate entity either as described in 

§ 5.705(b), or as identified in the 

regulator agreement or contract for the 

property as described in § 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 § 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) Severe health or safety 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 § 5.705(b), will 

provide the owner or PHA or owner’s 

representative, a notice of any items 

classified as Severe Health or Safety 

(SHS) deficiencies. All SHS items must 

be mitigated within 24 contiguous hours 

of receipt of notice of these items, and 

the owner or PHA or owner’s 

representative must electronically 

certify and provide supporting evidence 

within 3 business days after the end of 

the inspection that the SHS items have 

been resolved or sufficiently abated 

such that they no longer pose a severe 

health or safety risk to residents of the 

property. SHS deficiencies (together 

with other types of deficiencies) will be 

fully described in a future Federal 

Register notice. 

(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 based on the inspecting 

entity’s inspection findings. Non-severe 

health or safety deficiencies must be 

corrected expeditiously, and electronic 

evidence provided of correction. 

(3) Identification of material errors or 

adverse conditions. If, after reviewing 

the inspection results, the owner or 

PHA reasonably believes that either an 

objectively verifiable and material error 

occurred in the inspection or that 

adverse conditions beyond the owner’s 

or PHA’s control negatively impacted 

the score, and that the error or adverse 

condition, if corrected or accounted for, 

would result in a significant 

improvement in the property’s overall 

score, the owner or PHA may 

electronically submit a request for a 

technical review. 

(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 release of the 

inspection report. 

(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 owner’s 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 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. The burden of proof rests with 

the owner 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 

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. There 

are four sources of error that are 

associated with an inspection score. 

After review of each type of error, the 

property’s score may be adjusted or 

other action taken. 

(i) Material errors. An objectively 

verifiable material error must be present 

to allow for a technical review of 

inspection results. Material errors are 

those that were not due to the fault of 

the owner and exhibit specific 

characteristics and meet specific 

thresholds. The three types of material 

errors are as follows. 

(ii) 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 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, building 

name, year built, etc., would not be 

considered material. 

(iii) 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. 

(iv) 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. 

2598 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 

(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). 

(7) Deficiencies. If any of the 

previously identified SHS deficiencies 

that the owner certified were corrected, 

remedied, or acted upon to abate are 

found during the reinspection not to 

have been corrected, remedied, or acted 

upon to abate, the score in the final 

inspection report will reflect a point 

deduction of triple the value of the 

original deduction, up to the maximum 

possible points for the unit or area, and 

the owner must reimburse HUD for the 

cost of the reinspection. 

(e) Independent HUD review. Under 

certain circumstances, HUD may find it 

appropriate absent a 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. These circumstances 

include, but are not necessarily limited 

to, inconsistencies between local code 

requirements and the inspection 

standards in paragraph (a); conditions 

which are permitted by variance or 

license or which are preexisting 

physical features non-conformities and 

are inconsistent with the inspection 

standards in paragraph (a); or cases 

where the owner has 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. 

(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, 

is not a valid 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 (c) of this 

section. If the owner or PHA files a 

request for technical review or score 

adjustments in accordance with 

paragraphs (c) and (d) 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 owners 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 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 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. 

(ii) Once the owner’s final inspection 

score is issued and published, the 

owner must make any additional 

information, such as the results of any 

reinspection, appeal requests, available 

for review and copying by its residents 

upon reasonable request during regular 

business hours. 

(iii) The owner must maintain the 

documents related to the inspection of 

the property, as described paragraphs (i) 

and (ii) above, for review by residents 

for a period of 60 days from the date of 

submission to the owner of the 

inspection score for the property in 

which the residents reside. 

(3) The owner must post a notice to 

the residents in the owner’s 

management office and on any bulletin 

boards in all common areas that advises 

residents of the availability of the 

materials described in this section. The 

notice should include, where 

applicable, the name, address, and 

telephone number of the HUD Project 

Manager. 

(4) Residents are encouraged to 

comment on this information provided 

by the owner and submit any comments 

directly to the applicable HUD Field 

Office or responsible entity. Should 

residents discover the owner 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 on 

its inspection will be referred to HUD’s 

Departmental Enforcement Center (DEC) 

for evaluation. 

(1) Notification to owner of 

submission of property file to the DEC. 

The Department will provide for 

notification to the 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 evaluation period, the DEC will 

perform an analysis of the property, 

which may include input from tenants, 

HUD officials, elected officials, 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 (h)(2). The DEC’s evaluation 

may include a site visit to the owner’s 

property. 

(3) Continuing responsibilities of 

Housing Program Offices and 

Mortgagee. During the period of DEC 

evaluation, HUD’s Housing offices 

continue to be responsible for routine 

asset management tasks on properties 

and all servicing actions (e.g., rent 

increase decisions, releases from reserve 

account approvals). In addition, during 

this period of evaluation, the mortgagee 

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 Housing, 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 Housing with 

respect to resolving identified physical 

deficiencies and owner noncompliance. 

(j) No limitation on existing 

enforcement authority. The 

administrative process provided in this 

section does not prohibit HUD, to take 

whatever action may be necessary when 

necessary (notwithstanding the 

commencement of this process), as 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 2599 

authorized under existing statutes, 

regulations, contracts or other 

documents, to protect HUD’s financial 

interests in HUD housing properties and 

to protect the residents of these 

properties. 

§ 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 Public Housing Authority, to 

require enforcement of the standards 

required by this subpart or to assert any 

claim against HUD or the Public 

Housing Authority for damages, 

injunction, or other relief for alleged 

failure to enforce the standards. 

PART 92—HOME INVESTMENT 

PARTNERSHIPS PROGRAM 

■ 3. The authority for 24 CFR part 92 

continues to read as follows: 

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

1701x and 4568. 

§ 92.2 [Amended] 

■ 4. Amend § 92.2 by removing the 

definition of ‘‘Uniform Physical 

Condition Standards’’. 

■ 5. In § 92.209, revise paragraph (i) to 

read as follows: 

§ 92.209 Tenant-based rental assistance: 

Eligible costs and requirements. 

* * * * * 

(i) Housing quality standards. 

Housing occupied by a family receiving 

tenant-based assistance under this 

section must meet the participating 

jurisdiction’s property standards under 

§ 92.251. The participating jurisdiction 

must inspect the housing initially and 

re-inspect it annually. 

* * * * * 

■ 6. Revise § 92.251 by: 

■ a. Revising paragraphs (b)(1)(viii) and 

(c)(3); 

■ b. Removing and reserving paragraph 

(d); and 

■ c. Revising paragraph (f)(1) 

introductory text, and paragraph 

(f)(1)(i). 

The revisions read as follows: 

§ 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, 

as referenced in 24 CFR 5.703. The 

requirements of 24 CFR 5.705–5.713 do 

not apply. At minimum, the specific 

deficiencies proscribed by HUD and 

published in the Federal Register must 

be corrected under the participating 

jurisdiction’s rehabilitation standards. 

HUD will establish the minimum 

deficiencies based on the applicable 

standards for the condition of HUD 

housing set out by the Secretary and 

published in the Federal Register 

pursuant to 24 CFR 5.705. 

* * * * * 

(c) * * * 

(3) Existing housing that is acquired 

for homeownership (e.g., downpayment 

assistance) must be decent, safe, 

sanitary, and in good repair as 

referenced in 24 CFR 5.703. 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 

proscribed by HUD and published in the 

Federal Register. HUD will establish the 

minimum deficiencies based on the 

applicable standards for the condition of 

HUD housing (National Standards for 

the Physical Inspection of Real Estate 

(NSPIRE)) set out by the Secretary and 

published in the Federal Register 

pursuant to 24 CFR 5.705. 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 

ensure that owners maintain the 

housing as decent, safe, and sanitary 

housing 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 

minimum deficiencies proscribed by 

HUD and published in the Federal 

Register for rental housing (including 

manufactured housing) and housing 

occupied by tenants receiving HOME 

tenant-based rental assistance. HUD will 

establish the minimum deficiencies 

based on the applicable standards for 

the condition of HUD housing set out by 

the Secretary and published in the 

Federal Register pursuant to 24 CFR 

5.705. The participating jurisdiction’s 

property standards are not required to 

use any inspection procedures, 

including scoring, item weight, or level 

of criticality required in 24 CFR 5.705– 

5.713. 

* * * * * 

■ 7. In § 92.504, revise paragraph 

(d)(1)(iii) to read as follows: 

§ 92.504 Participating jurisdiction 

responsibilities; written agreements; on-site 

inspections. 

* * * * * 

(d) * * * 

(1) * * * 

(iii) Annual inspections. Tenantbased rental assistance (TBRA). All 

housing occupied by tenants receiving 

HOME tenant-based rental assistance 

must meet the property standards of 

§ 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 

■ 8. The authority for 24 CFR part 93 

continues to read as follows: 

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

4568. 

■ 9. In § 93.301, revise paragraphs 

(b)(1)(viii), (c)(3), and (e)(1)(i) to read as 

follows: 

§ 93.301 Property standards. 

* * * * * 

(b) * * * 

(1) * * * 

2600 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 

(viii) HUD 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 and meet 

the standards in 24 CFR 5.703. The 

requirements of 24 CFR 5.705–5.713 do 

not apply. At minimum, the specific 

deficiencies proscribed by HUD and 

published in the Federal Register must 

be corrected under the grantee’s 

rehabilitation standards. HUD will 

establish the minimum deficiencies 

based on the applicable standards for 

the condition of HUD housing set out by 

the Secretary and published in the 

Federal Register pursuant to 24 CFR 

5.705. 

* * * * * 

(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 proscribed by HUD 

and published in the Federal Register. 

HUD will establish the minimum 

deficiencies based on the applicable 

standards for the condition of HUD 

housing set out by the Secretary and 

published in the Federal Register 

pursuant to 24 CFR 5.705. The grantee 

must inspect the housing and document 

this 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) * * * 

(i) At a minimum, the grantee’s 

ongoing property standards must 

provide that the property does not 

contain the specific minimum 

deficiencies proscribed by HUD and 

published in the Federal Register. HUD 

will establish the minimum deficiencies 

based on the applicable standards for 

the condition of HUD housing set out by 

the Secretary and published in the 

Federal Register pursuant to § 5.705 of 

this title. The grantee’s property 

standards are not required to use any 

inspection procedures, including 

scoring, item weight, or level of 

criticality required in §§ 5.705–5.713 of 

this title. 

* * * * * 

PART 200—INTRODUCTION TO FHA 

PROGRAMS 

■ 10. The authority for 24 CFR part 200 

continues to read as follows: 

Authority: 12 U.S.C. 1702–1715z–21; 42 

U.S.C. 3535(d). 

■ 11. Revise § 200.850 to read as 

follows: 

§ 200.850 Physical condition standards 

and physical inspection requirements. 

The requirements in part 5, subpart G 

of this title are applicable to the 

multifamily properties assisted or 

insured that are listed in § 5.701 of this 

title. 

§§ 200.853, 200.855, and 200.857 

[Removed and Reserved] 

■ 12. Remove and reserve §§ 200.853, 

200.855, and 200.857. 

PART 574—HOUSING 

OPPORTUNITIES FOR PERSONS WITH 

AIDS, SUBPART D—USES OF GRANT 

FUNDS 

■ 13. The authority for 24 CFR part 574 

continues to read as follows: 

Authority: 12 U.S.C. 1701x, 1701x–1; 42 

U.S.C. 3535(d) and 5301–5320. 

■ 14. In § 574.310, revise paragraph (b) 

introductory text and paragraph (b)(2), 

and add paragraph (b)(3) to read as 

follows: 

§ 574.310 General standards for eligible 

housing activities. 

* * * * * 

(b) * * *. The following standards 

apply for all housing for which HOPWA 

funds that are used under 

§ 574.300(b)(3), (4), (5), and (8), and 

when HOPWA funds are used under 

§ 574.300(b)(7) to pay an eligible 

person’s security deposit, utility hookup 

and processing costs, or other move-in 

costs, except rental application and 

credit check fees. 

* * * * * 

(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 

5.705–5.713 do not apply. 

* * * * * 

PART 576—EMERGENCY SOLUTIONS 

GRANTS PROGRAM 

■ 15. 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 

■ 16. In § 576.403, revise paragraph (c) 

and add paragraphs (d) through (f) to 

read as follows: 

§ 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 to 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). The 

recipient may also add standards that 

exceed these minimum standards. The 

requirements in 24 CFR 5.705–5.713 do 

not apply. 

(d) Housing inspections. For the first 

30 days in which a program participant 

receives homelessness prevention 

assistance, the recipient or subrecipient 

may provide services under 576.105(b) 

to help the program participant remain 

in their unit without inspecting the unit 

or determining it meets the requirement 

in this section. 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 paragraph (c) of this 

section. 

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(e) 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. 

(f) 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. 

PART 578—PROGRAM 

REQUIREMENTS 

■ 17. 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). 

■ 18. In § 578.75, revise paragraph (b) to 

read as follows: 

§ 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 5.703 of this 

title. For housing that is occupied by 

program participants receiving tenantbased 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 

5.705–5.713 do not apply. 

* * * * * 

PART 880—SECTION 8 HOUSING 

ASSISTANCE PAYMENTS PROGRAM 

FOR NEW CONSTRUCTION 

■ 19. The authority for 24 CFR part 880 

continues to read as follows: 

Authority: 42 U.S.C. 1437a, 1437c, 1437f, 

3535(d), 12701, and 13611–13619. 

■ 20. In § 880.612, revise paragraph (a) 

to read as follows: 

§ 880.612 Reviews during management 

period. 

(a) After the effective date of the 

Contract, the contract administrator will 

inspect the project and review its 

operation at least annually to determine 

whether the owner is in compliance 

with the Contract and the assisted units 

comply with the standards under part 5, 

subpart G of this title. 

* * * * * 

PART 882—SECTION 8 MODERATE 

REHABILITATION PROGRAMS 

■ 21. The authority for 24 CFR part 882 

continues to read as follows: 

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

§ 882.404 [Amended] 

■ 22. In § 882.404, remove paragraph 

(d). 

■ 23. In § 882.516, revise paragraphs (b), 

(c) and (e) to read as follows: 

§ 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 each 

unit under Contract in accordance with 

the standards under part 5, subpart G of 

this title 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 part 5, subpart G of 

this title, 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 part 5, subpart G of 

this title 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), 

termination of the Contract on the 

affected unit(s) and assistance to the 

Family in accordance with § 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 

■ 24. The authority for 24 CFR part 884 

continues to read as follows: 

Authority: 42 U.S.C. 1437a, 1437c, 1437f, 

3535(d), and 13611–13619. 

■ 25. Revise § 884.217 to read as 

follows: 

§ 884.217 Maintenance, operation and 

inspections. 

(a) Maintenance and operation. The 

Owner shall maintain and operate the 

project consistent with part 5, subpart G 

of this title, 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 he 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 and both shall certify, 

on forms prescribed by HUD, that they 

have inspected the unit and have 

determined it to be compliant with part 

5, subpart G of this title 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 each Contract unit 

and related facilities in accordance with 

the physical inspection requirements in 

part 5, subpart G of this title, and at 

such other times (including prior to 

initial occupancy and renting of any 

unit) as HUD (or the PHA) may 

2602 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 

determine to be necessary to assure that 

the Owner is meeting his obligation to 

maintain the units in accordance with 

part 5, subpart G of this title 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 part 5, subpart G of 

this title 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: 

(1) The unit is restored to in 

accordance with part 5, subpart G of this 

title; 

(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 

■ 26. The authority for 24 CFR part 886 

continues to read as follows: 

Authority: 42 U.S.C. 1437a, 1437c, 1437f, 

3535(d), and 13611–13619. 

§ 886.113 [Amended] 

■ 27. In § 886.113, remove and reserve 

paragraphs (b) and (i). 

■ 28. Revise § 886.123 to read as 

follows: 

§ 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 part 5, subpart G of this 

title, 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 and both shall certify, 

on forms prescribed by HUD that they 

have inspected the unit and have 

determined it to be compliant with part 

5, subpart G of this title 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 a 

reasonable sample of contract units 

according to the requirements in part 5, 

subpart G of this title 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 part 5, subpart G of this title 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. 

§ 886.307 [Amended]. 

■ 29. In § 886.307, remove and reserve 

paragraphs (b), (i), and (m). 

■ 30. Revise § 886.323 to read as 

follows: 

§ 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 part 5, subpart G 

of this title, 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 part 5, subpart G of this 

title. 

(c) Owner and family inspection. Prior 

to occupancy of any vacant unit by a 

family, the owner and the family shall 

inspect the unit, and both shall certify 

that they have inspected the unit and 

have determined it to be compliant with 

part 5, subpart G of this title. 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 part 5, subpart G of this 

title 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 part 

5, subpart G of this title 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 part 5, subpart G of this 

title, 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 

■ 31. The authority for 24 CFR part 902 

is revised to read as follows: 

Authority: 42 U.S.C. 1437d(j), 42 U.S.C. 

3535(d), 1437z–10. 

■ 32. Amend § 902.3 by: 

■ a. Removing the definition of 

‘‘Criticality’’; 

■ b. Revising the definitions of 

‘‘Dictionary of Deficiency Definitions’’ 

and ‘‘Inspectable areas (or area)’’; and 

■ c. Removing the definitions of ‘‘Item 

Weights and Criticality Levels 

document’’, ‘‘Normalized weights’’, 

‘‘Score’’, ‘‘Severity’’, ‘‘Statistically valid 

sample’’, and ‘‘Unit-weighted average’’. 

The revisions read as follows: 

§ 902.3 Definitions. 

* * * * * 

Dictionary of Deficiency Definitions 

means the document published in the 

Federal Register that contains the 

inspection standards and scoring values 

pursuant to part 5, subpart G of this 

title. 

* * * * * 

Inspectable areas (or area) mean any 

of the three major components of public 

housing that are inspected, which are: 

Inside, outside, unit. 

* * * * * 

§ 902.20 [Removed and Reserved] 

■ 33. Remove and reserve § 902.20. 

■ 34. Revise § 902.21 to read as follows: 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 2603 

§ 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 part 5, 

subpart G of this title. 

■ 35. Revise § 902.22 to read as follows: 

§ 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 part 5, subpart G of this title, to 

ensure projects meet acceptable basic 

housing conditions. Mixed-finance 

projects will be subject to the physical 

condition inspections. 

§§ 902.24, 902.26, and 902.68 [REMOVED 

AND RESERVED] 

■ 36. Remove and reserve §§ 902.24, 

902.26, and 902.68. 

■ 37. 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. 

Authority: 42 U.S.C. 1437d(j), 42 U.S.C. 

3535(d), 1437z–10. 

§ 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 

§ 902.101 of this title no later than 

[insert 120 days after the effective date 

of the final rule]. 

(2) HUD will determine if a PHA 

qualifies as a small rural PHA under 

paragraph (a) 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. 

§ 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 § 902.101 shall be assessed and 

scored based only on the physical 

condition of their public housing 

properties in accordance with part 5, 

subpart G of this title. Such agencies 

shall not be subject to PHAS except as 

noted below. 

(b) Triennial assessment. Public 

Housing programs operated by small 

rural Public Housing Authorities will be 

assessed no more than once every three 

years, except that a small rural Public 

Housing Authority shall be subject to 

annual inspection if it is designated by 

the Secretary as troubled as defined in 

§ 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, a standard or substandard 

performer would receive the first 

inspection 2 years after the most recent 

PHAS assessment, etc.). 

(2) For PHAs not subject to small PHA 

deregulation, the first inspection is 

based on the PHA’s overall weighted 

project PASS score (e.g., a PHA with a 

PASS score of 90 or greater would 

receive the first inspection three years 

after most recent PHAS assessment, a 

PHA with a PASS score of 80–89 would 

receive the first inspection two years 

after most recent PHAS assessment, 

etc.). 

§ 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 an 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 

§ 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 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 

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 

2604 Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 

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. (1) 

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. 

(2) [Reserved]. 

(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 courtordered 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. 

(1) 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. 

§ 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 nontroubled performer designation, in the 

case of a PHA that: 

(1) Is operating under a special 

agreement with HUD (e.g., a civil rights 

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 nontroubled 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. 

§ 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), 

(d), and (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 nontroubled 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 § 902.66 may make a 

written request for reinstatement within 

30 days of notification by HUD of the 

denial or rescission of the designation to 

the Assistant Secretary, and the request 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 2605 

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 other 

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. 

§ 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 

§ 902.108 will be the same as those 

sanctions for PHAs assessed under 

PHAs as described in § 902.83. 

§ 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 § 902.110(b) and 

§ 905.400(l) of this title. 

(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 § 902.71. 

PART 982—SECTION 8 TENANTBASED ASSISTANCE: HOUSING 

CHOICE VOUCHER PROGRAM 

■ 38. The authority for 24 CFR part 982 

continues to read as follows: 

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

■ 39. In § 982.4, amend paragraph (b) by 

revising the definition of ‘‘Housing 

quality standards (HQS)’’ to read as 

follows: 

§ 982.4 Definitions. 

* * * * * 

(b) * * * 

Housing quality standards (HQS). 

‘‘The minimum quality standards 

developed by HUD in accordance with 

§ 5.703 of this title for the PBV program 

or the HUD approved alternative 

standard for the PHA under § 5.703(g) of 

this title.’’ 

* * * * * 

■ 40. In § 982.352, revise paragraph 

(b)(1)(iv)(A)(3) to read as follows: 

§ 982.352 Eligible housing. 

* * * * * 

(b) * * * 

(1) * * * 

(iv) * * * 

(A) * * * 

(3) To inspect the unit for compliance 

with the HQS in accordance with 

§ 982.305(a) and § 982.405. The 

independent agency shall communicate 

the results of each such inspection to 

the family and the PHA. 

* * * * * 

■ 41. Revise § 982.401 to read as 

follows: 

§ 982.401 Housing quality standards. 

As defined in § 982.4, housing quality 

standards (HQS) refers to the minimum 

quality standards developed by HUD in 

accordance with § 5.703 of this title for 

housing assisted under the HCV 

program or a HUD approved alternative 

standard for the PHA under § 5.703(g). 

■ 42. In § 982.405, revise paragraph (a) 

to read as follows: 

§ 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 § 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 § 902.101 of this chapter must inspect 

a unit during occupancy at least once 

every three years. 

* * * * * 

PART 983—PROJECT-BASED 

VOUCHER (PBV) PROGRAM 

■ 43. The authority for 24 CFR part 983 

continues to read as follows: 

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

■ 44. In § 983.3, amend paragraph (b) by 

revising the definition of ‘‘Housing 

Quality Standards (HQS)’’ to read as 

follows: 

§ 983.3 PBV definitions. 

* * * * * 

(b) * * * 

Housing quality standards (HQS). 

‘‘The minimum quality standards 

developed by HUD in accordance with 

§ 5.703 of this title for the PBV program 

or the HUD approved alternative 

standard for the PHA under § 5.703(g) of 

this title.’’ 

* * * * * 

■ 45. In § 983.10, revise paragraph 

(b)(2)(ii) to read as follows: 

§ 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 

part 35, subparts A, B, H, and R of this 

title, apply to the PBC program. 

* * * * * 

■ 46. Revise § 983.101 to read as 

follows: 

§ 983.101 Housing quality standards. 

As defined in § 983.3, housing quality 

standards (HQS) refers to the minimum 

quality standards developed by HUD in 

accordance with § 5.703 of this title for 

housing assisted under the HCV 

program or a HUD approved alternative 

standard for the PHA under § 5.703(g) of 

this title. 

■ 47. In § 983.103, revise the heading of 

paragraph (d) and add paragraph (d)(4) 

to read as follows: 

§ 983.103 Inspecting units. 

* * * * * 

(d) Periodic inspections. * * * 

(4) Instead of biennially, a small rural 

PHA as defined in § 902.101 of this title 

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must inspect the random sample of 

units in accordance with paragraph 

(d)(1) at least once every three years. 

* * * * * 

PART 985—SECTION 8 MANAGEMENT 

ASSESSMENT PROGRAM (SEMAP) 

AND SMALL RURAL PHA 

ASSESSMENTS 

■ 48. The authority citation for 24 CFR 

part 985 is revised to read as follows: 

Authority: 42 U.S.C. 1437a, 1437c, 1437f, 

1437z–10, and 3535(d). 

■ 49. Revise the heading of Part 985 to 

read as set forth above. 

■ 50. In § 985.1, revise paragraph (b) and 

add paragraph (c) to read as follows: 

§ 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 title), the project-based voucher 

program (part 983 of this title) 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 selfsufficiency program (FSS) (part 984 of 

this title). 

(c) Small rural PHA assessments. 

Subpart D covers the HCV and PBV 

assessment for a small rural PHA as 

defined in § 902.101 of this title. Section 

985.3 and subparts B and C of this part 

do not apply to small rural PHAs. 

■ 51. 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. 

Authority: 42 U.S.C. 1437a, 1437c, 1437f, 

1437z–10, and 3535(d). 

§ 985.201 Applicability. 

(a) This subpart applies to small rural 

PHAs as defined in § 902.101 of this 

title. 

(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. 

§ 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 

applies the correct inspection standards 

to HCV and PBV unit inspections 

(2) HUD verification method. The 

PHA’s assessment certification and onsite 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 determines, for units that 

have been under HAP contract for at 

least three years, whether the PHA reinspected 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 that the percentage of 

units above 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 described above have been reinspected within the required three-year 

period from the last inspection. The 

PHA fails the indicator if fewer than 98 

percent of the units described above 

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 §§ 982.404 

and 983.103 of this title. 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. (§ 982.404 of this title) 

(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% 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 notice, 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 the PHA will be designated as 

troubled under the small rural PHA 

assessment. 

§ 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 § 985.203 and the PHA has: 

(i) Utilized at least 98 percent of its 

HCV budget authority based on the most 

recent calendar year data or the percent 

of HCV units leased by renters or 

occupied by homeowners for the most 

recent calendar year was at least 98 

percent; 

(ii) Did not end that calendar year 

with excess HAP reserves; and 

Federal Register / Vol. 86, No. 8 / Wednesday, January 13, 2021 / Proposed Rules 2607 

(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 reserve in 

the Federal Register, and such notice 

shall provide for public comment before 

becoming effective. 

(b) Standard performer designation. A 

PHA that passed all for 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 § 985.201 is designated as 

troubled PHA under the small rural 

PHA assessment. 

§ 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 under SEMAP 

qualify for 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 § 985.204. 

§ 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 he 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 an 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 agreement 

when HUD determines the PHA is no 

longer troubled; 

(11) Provide that in the event of 

substantial noncompliance by the PHA 

under the agreement, 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 

corrective action plan 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 assigned 

designated troubled may not use any 

part of the administrative fee reserve for 

other housing purposes (see § 982.155(b) 

of this title). 

(f) Upgrading poor performance 

rating. HUD shall change an 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 corrective 

action agreement as required by HUD 

constitutes a default under the ACC. 

§ 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. 

Brian D. Montgomery, 

Deputy Secretary. 

[FR Doc. 2021–00098 Filed 1–12–21; 8:45 am] 

BILLING CODE 4210–67–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 1 and 301 

[REG–115057–20] 

RIN 1545–BP98 

Mandatory 60-Day Postponement of 

Certain Tax-Related Deadlines by 

Reason of a Federally Declared 

Disaster 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTIONS: Notice of proposed 

rulemaking. 

SUMMARY: This document contains 

proposed regulations relating to the new 

mandatory 60-day postponement of 

certain time-sensitive tax-related 

deadlines by reason of a Federally 

declared disaster. This document also 

contains proposed regulations clarifying 

the definition of ‘‘Federally declared 

disaster.’’ These proposed regulations 

affect individuals who reside in or were 

killed or injured in a disaster area, 

businesses that have a principal place of 

business in a disaster area, relief 

workers who provide assistance in a 

disaster area, or any taxpayer whose tax 

records necessary to meet a tax deadline 

are located in a disaster area. This 

document invites comments from the 

public regarding these proposed 

regulations. 

DATES: Written or electronic comments 

and requests for a public hearing must 

be received by March 15, 2021. Requests 

for a public hearing must be submitted 

as prescribed in the ‘‘Comments and 

Requests for a Public Hearing’’ section. 

ADDRESSES: Commenters are strongly 

encouraged to submit public comments 

electronically. Submit electronic 

submissions via the Federal 

eRulemaking Portal at 

www.regulations.gov (indicate IRS and