II 

114TH CONGRESS 

2D SESSION S. 3398 

To reform the inspection process of housing assisted by the Department 

of Housing and Urban Development, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 27, 2016 

Mr. RUBIO introduced the following bill; which was read twice and referred 

to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To reform the inspection process of housing assisted by the 

Department of Housing and Urban Development, and 

for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘HUD Inspection Proc5 ess and Enforcement Reform Act of 2016’’. 


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1 SEC. 2. REDUCTION IN GRADE OR PAY OR REMOVAL FOR 

2 MISCONDUCT OR PERFORMANCE OF EM3 PLOYEES OF THE DEPARTMENT OF HOUSING 

4 AND URBAN DEVELOPMENT. 

5 (a) IN GENERAL.—Section 7(c) of the Department 

6 of Housing and Urban Development Act (42 U.S.C. 

7 3535(c)), is amended— 

8 (1) by striking ‘‘The Secretary is authorized’’ 

9 and inserting the following: ‘‘EMPLOYMENT, COM10 PENSATION, AUTHORITY, AND DUTIES OF PER11 SONNEL.— 

12 ‘‘(1) IN GENERAL.—The Secretary is author13 ized’’; and 

14 (2) by adding at the end the following: 

15 ‘‘(2) REDUCTION IN GRADE OR PAY OR RE16 MOVAL FOR MISCONDUCT OR PERFORMANCE OF EM17 PLOYEES.— 

18 ‘‘(A) DEFINITIONS.—For purposes of this 

19 paragraph— 

20 ‘‘(i) the term ‘covered employee’— 

21 ‘‘(I) means an individual holding 

22 a position in the civil service in the 

23 Department; and 

24 ‘‘(II) does not include any indi25 vidual— 


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1 ‘‘(aa) holding in a position 

2 described under sections 5312 

3 through 5316 of title 5, United 

4 States Code (relating to the Ex5 ecutive Schedule); 

6 ‘‘(bb) holding a position as a 

7 limited term appointee, limited 

8 emergency appointee, or non9 career appointee in the Senior 

10 Executive Service, as defined 

11 under paragraphs (5), (6), and 

12 (7), respectively, of section 

13 3132(a) of title 5, United States 

14 Code; or 

15 ‘‘(cc) holding a position of a 

16 confidential or policy-determining 

17 character under schedule C of 

18 subpart C of part 213 of title 5, 

19 Code of Federal Regulations; 

20 ‘‘(ii) the term ‘grade’ means a level of 

21 classification under a position classification 

22 system; 

23 ‘‘(iii) the term ‘misconduct’ includes 

24 neglect of duty, malfeasance, or failure to 

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1 company a position in a transfer of func2 tion; and 

3 ‘‘(iv) the term ‘pay’ means the rate of 

4 basic pay fixed by law or administrative 

5 action for the position held by a covered 

6 employee. 

7 ‘‘(B) ACTIONS COVERED.—This para8 graph— 

9 ‘‘(i) applies to a reduction in grade or 

10 pay or removal; and 

11 ‘‘(ii) does not apply to— 

12 ‘‘(I) a reduction in grade or pay 

13 or removal under section 7512 of title 

14 5, United States Code; 

15 ‘‘(II) a reduction in grade or pay 

16 or removal under section 7521 of title 

17 5, United States Code; 

18 ‘‘(III) a removal under section 

19 7532 of title 5, United States Code; 

20 or 

21 ‘‘(IV) a removal under section 

22 3592, 3595, or 7543 of title 5, United 

23 States Code. 

24 ‘‘(C) CAUSE AND PROCEDURE.— 


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1 ‘‘(i) IN GENERAL.—Notwithstanding 

2 any other provision of law, under regula3 tions prescribed by the Office of Personnel 

4 Management, the Secretary may, if the 

5 Secretary determines that the misconduct 

6 or performance of a covered employee war7 rants such action— 

8 ‘‘(I) remove the covered employee 

9 from the civil service; 

10 ‘‘(II) reduce the grade of the cov11 ered employee; or 

12 ‘‘(III) reduce the pay of the cov13 ered employee. 

14 ‘‘(ii) REDUCTION IN GRADE.—A cov15 ered employee subject to a reduction in 

16 grade under clause (i)(II) shall, beginning 

17 on the date that the reduction takes effect, 

18 receive the annual rate of pay applicable to 

19 such grade. 

20 ‘‘(iii) APPEAL PROCEDURES.— 

21 ‘‘(I) IN GENERAL.—Subject to 

22 subclause (II) and clause (iv), any re23 duction in grade or pay or removal 

24 under this paragraph may be appealed 

25 to the Merit Systems Protection 


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1 Board under section 7701 of title 5, 

2 United States Code. 

3 ‘‘(II) TIME FOR APPEAL.—An 

4 appeal under subclause (I) may only 

5 be made if such appeal is made not 

6 later than 7 days after the date of 

7 such reduction in grade or pay or re8 moval. 

9 ‘‘(iv) REVIEW ON APPEAL.— 

10 ‘‘(I) IN GENERAL.—Upon receipt 

11 of an appeal under clause (iii), the 

12 Merit Systems Protection Board shall 

13 refer the appeal to an administrative 

14 law judge pursuant to section 

15 7701(b)(1) of title 5, United States 

16 Code. The administrative law judge 

17 shall expedite any such appeal under 

18 such section and, in any such case, 

19 shall issue a decision not later than 

20 45 days after the date that the Board 

21 receives the appeal. 

22 ‘‘(II) INFORMATION AND ASSIST23 ANCE.—To the maximum extent prac24 ticable, the Secretary shall provide to 

25 the Merit Systems Protection Board, 


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1 and to any administrative law judge 

2 to whom an appeal under this para3 graph is referred, such information 

4 and assistance as may be necessary to 

5 ensure an appeal under this para6 graph is expedited. 

7 ‘‘(III) FINALITY.—Notwithstand8 ing any other provision of law, includ9 ing section 7703 of title 5, United 

10 States Code, the decision of an admin11 istrative law judge under subclause (I) 

12 shall be final and shall not be subject 

13 to any further appeal. 

14 ‘‘(IV) DELAYED DECISION.—In 

15 any case in which the administrative 

16 law judge cannot issue a decision in 

17 accordance with the 45-day require18 ment under subclause (I), the reduc19 tion in grade or pay or removal is 

20 final. In such a case, the Merit Sys21 tems Protection Board shall, within 

22 14 days after the date that such re23 duction in grade or pay or removal is 

24 final, submit to Congress a report 

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1 sion was not issued in accordance 

2 with such requirement. 

3 ‘‘(V) NO STAYS.—The Merit Sys4 tems Protection Board or administra5 tive law judge may not stay any re6 duction in grade or pay or removal ac7 tion under this paragraph. 

8 ‘‘(VI) EFFECT OF APPEAL OF

9 REMOVAL.—During the period begin10 ning on the date on which a covered 

11 employee appeals a removal from the 

12 civil service under this paragraph and 

13 ending on the date that the adminis14 trative law judge issues a final deci15 sion on such appeal, the covered em16 ployee may not receive any pay, 

17 awards, bonuses, incentives, allow18 ances, differentials, student loan re19 payments, special payments, or bene20 fits. 

21 ‘‘(v) WHISTLEBLOWER PROTEC22 TION.—In the case of a covered employee 

23 seeking corrective action (or on behalf of 

24 whom corrective action is sought) from the 

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1 leged prohibited personnel practice de2 scribed in section 2302(b) of title 5, 

3 United States Code, the Secretary may not 

4 reduce the grade or pay or remove the cov5 ered employee under this paragraph with6 out the approval of the Special Counsel 

7 under section 1214(f) of title 5, United 

8 States Code.’’. 

9 (b) APPLICATION.—The authority under paragraph 

10 (2) of section 7(c) of the Department of Housing and 

11 Urban Development Act, as added by subsection (a), shall 

12 apply to any covered employee (as defined in such para13 graph) appointed before, on, or after the date of enact14 ment of this Act. 

15 (c) CONFORMING AMENDMENTS.—Title 5, United 

16 States Code, is amended— 

17 (1) in section 4303(f)— 

18 (A) in paragraph (2), by striking ‘‘or’’ at 

19 the end; 

20 (B) in paragraph (3), by striking the pe21 riod at the end and inserting ‘‘, or’’; and 

22 (C) by adding at the end the following: 

23 ‘‘(4) the reduction in grade or removal of an 

24 employee under section 7(c)(2) of the Department of 


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1 Housing and Urban Development Act (42 U.S.C. 

2 3535(c)(2)).’’; 

3 (2) in section 7512— 

4 (A) in subparagraph (E), by striking ‘‘or’’ 

5 at the end; 

6 (B) in subparagraph (F), by striking the 

7 period at the end and inserting ‘‘, or’’; and 

8 (C) by adding at the end the following: 

9 ‘‘(G) a reduction in grade or pay or removal 

10 under section 7(c)(2) of the Department of Housing 

11 and Urban Development Act (42 U.S.C. 

12 3535(c)(2)).’’; 

13 (3) in section 7521(b), in the matter following 

14 paragraph (5)— 

15 (A) in subparagraph (B), by striking ‘‘or’’ 

16 at the end; 

17 (B) in subparagraph (C), by striking the 

18 period at the end and inserting ‘‘, or’’; and 

19 (C) by adding at the end the following: 

20 ‘‘(D) a reduction in grade or pay or removal 

21 under section 7(c)(2) of the Department of Housing 

22 and Urban Development Act (42 U.S.C. 

23 3535(c)(2)).’’; and 

24 (4) in section 7542, by striking ‘‘or to a re25 moval under section 3592 or 3595 of this title’’ and 


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1 inserting ‘‘to a removal under section 3592 or 3595 

2 of this title, to an action under section 713 of title 

3 38, or to a reduction in grade or pay or removal 

4 under section 7(c)(2) of the Department of Housing 

5 and Urban Development Act (42 U.S.C. 

6 3535(c)(2))’’. 

7 SEC. 3. ENFORCEMENT OF PHYSICAL CONDITION STAND8 ARDS AND TENANT PROTECTION. 

9 Section 8(o) of the United States Housing Act of 

10 1937 (42 U.S.C. 1437f(o)) is amended by adding at the 

11 end the following: 

12 ‘‘(21) MAINTENANCE OF PROPERTY.—Any enti13 ty receiving housing assistance payments with re14 spect to dwelling units covered by a housing assist15 ance payments contract shall— 

16 ‘‘(A) maintain decent, safe, and sanitary 

17 conditions at those dwelling units, as deter18 mined by the Secretary; and 

19 ‘‘(B) comply with any standards under ap20 plicable State or local laws, rules, ordinances, or 

21 regulations relating to the physical condition of 

22 those dwelling units. 

23 ‘‘(22) ENFORCEMENT OF PHYSICAL CONDITION

24 STANDARDS.— 


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1 ‘‘(A) IN GENERAL.—The Secretary shall 

2 take action under subparagraph (C) against an 

3 entity with a housing assistance payments con4 tract for project-based assistance with respect 

5 to a multifamily housing project if— 

6 ‘‘(i) the project receives a Uniform 

7 Physical Condition Standards (in this 

8 paragraph referred to as ‘UPCS’) inspec9 tion score of not more than 30; 

10 ‘‘(ii) the entity fails to certify in writ11 ing to the Secretary within 3 days of re12 ceiving the score under clause (i) that all 

13 exigent health and safety deficiencies iden14 tified by the inspector at the project have 

15 been corrected; or 

16 ‘‘(iii) the project receives a UPCS in17 spection score of more than 30 and less 

18 than 59 and has received consecutive 

19 scores of less than 60 on UPCS inspec20 tions. 

21 ‘‘(B) APPLICABILITY.—Subparagraph (A) 

22 shall— 

23 ‘‘(i) apply with respect to insured and 

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1 ceiving assistance under this section other 

2 than under paragraph (13); and 

3 ‘‘(ii) not apply to dwelling units re4 ceiving assistance with capital or operating 

5 funds under section 9. 

6 ‘‘(C) NOTIFICATION AND ENFORCE7 MENT.— 

8 ‘‘(i) IN GENERAL.—If an entity vio9 lates clause (i), (ii), or (iii) of subpara10 graph (A), the Secretary shall notify the 

11 entity and provide an opportunity for re12 sponse not later than 15 days after the 

13 date on which the results of the UPCS in14 spection are issued. 

15 ‘‘(ii) PLAN AND NOTICE OF DE16 FAULT.—If violations remain at a project 

17 after the 15-day period described in clause 

18 (i), the Secretary shall— 

19 ‘‘(I) develop a plan to bring the 

20 project into compliance not later than 

21 30 days after the date on which the 

22 results of the UPCS inspection are 

23 issued; and 

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1 ment, any mortgagees, and any con2 tract administrator of the project with 

3 a Notice of Default with a specified 

4 timetable, determined by the Sec5 retary, for correcting all deficiencies. 

6 ‘‘(iii) WITHDRAWAL OF NOTICE OF

7 DEFAULT.—If an appeal submitted by the 

8 entity results in a UPCS inspection score 

9 of not less than 60, the Secretary may 

10 withdraw a Notice of Default issued under 

11 clause (ii)(II). 

12 ‘‘(iv) PENALTIES.—If, at the end of 

13 the timetable described in clause (ii)(II), 

14 the entity fails to fully correct all defi15 ciencies in the project, the Secretary 

16 may— 

17 ‘‘(I) require immediate replace18 ment of project management with a 

19 management agent approved by the 

20 Secretary; 

21 ‘‘(II) impose civil money pen22 alties, which shall be used solely for 

23 the purpose of supporting safe and 

24 sanitary conditions at the property, as 

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1 ority given to the tenants of the prop2 erty affected by the penalty; 

3 ‘‘(III) abate the housing assist4 ance payments contract under this 

5 section, including partial abatement, 

6 as determined by the Secretary, until 

7 all deficiencies have been corrected; 

8 ‘‘(IV) pursue transfer of the 

9 project to an owner, approved by the 

10 Secretary under established proce11 dures, which will be obligated to 

12 promptly make all required repairs 

13 and to accept renewal of the housing 

14 assistance payments contract as long 

15 as such renewal is offered; 

16 ‘‘(V) transfer the existing hous17 ing assistance payments contract 

18 under this section to another project 

19 or projects and owner or owners; 

20 ‘‘(VI) pursue exclusionary sanc21 tions, including suspensions or debar22 ments from Federal programs; 

23 ‘‘(VII) seek judicial appointment 

24 of a receiver to manage the property 

25 and cure all project deficiencies or 


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1 seek a judicial order of specific per2 formance requiring the owner to cure 

3 all project deficiencies; 

4 ‘‘(VIII) work with the owner, 

5 lender, or other related party to sta6 bilize the property in an attempt to 

7 preserve the property through compli8 ance, transfer of ownership, or an in9 fusion of capital provided by a third 

10 party that requires time to effectuate; 

11 or 

12 ‘‘(IX) take any other regulatory 

13 or contractual remedies available as 

14 deemed necessary and appropriate by 

15 the Secretary. 

16 ‘‘(D) CONTRACTS.— 

17 ‘‘(i) IN GENERAL.—The Secretary 

18 shall take appropriate steps to ensure that 

19 project-based contracts remain in effect, 

20 subject to the exercise of contractual 

21 abatement remedies to assist relocation of 

22 tenants for major threats to health and 

23 safety after written notice to and informed 

24 consent of the affected tenants and use of 

25 other remedies under this paragraph. 


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1 ‘‘(ii) OTHER ASSISTANCE.—To the ex2 tent the Secretary determines, in consulta3 tion with the tenants and the local govern4 ment, that a property is not feasible for 

5 continued rental assistance payments 

6 under this section or other housing pro7 grams, based on consideration of the costs 

8 of rehabilitating and operating the prop9 erty and all available Federal, State, and 

10 local resources, including rent adjustments 

11 under section 524 of the Multifamily As12 sisted Housing Reform and Affordability 

13 Act of 1997 (42 U.S.C. 1437f note) and 

14 environmental conditions that cannot be 

15 remedied in a cost-effective fashion, the 

16 Secretary may, in consultation with the 

17 tenants of the property, contract for 

18 project-based rental assistance payments 

19 with an owner or owners of other existing 

20 housing properties, or provide other rental 

21 assistance. 

22 ‘‘(E) REPORT.— 

23 ‘‘(i) IN GENERAL.—The Secretary 

24 shall, on a quarterly basis, issue a publicly 


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1 available report on all properties covered 

2 by this paragraph that— 

3 ‘‘(I) are assessed through the 

4 Real Estate Assessment Center; and 

5 ‘‘(II)(aa) have a UPCS inspec6 tion score of less than 60; or 

7 ‘‘(bb) received an unsatisfactory 

8 management and occupancy review 

9 during the 36-month period preceding 

10 the report. 

11 ‘‘(ii) CONTENTS.—Each report issued 

12 under clause (i) shall include— 

13 ‘‘(I) the enforcement actions 

14 being taken to address the physical 

15 conditions of the properties covered in 

16 the report, including imposition of 

17 civil money penalties and termination 

18 of subsidies, and identify properties 

19 that have those conditions multiple 

20 times; 

21 ‘‘(II) actions that the Depart22 ment of Housing and Urban Develop23 ment is taking to protect tenants of 

24 those properties; and 


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1 ‘‘(III) any administrative or leg2 islative recommendations to further 

3 improve the living conditions at each 

4 property covered under a housing as5 sistance payments contract. 

6 ‘‘(23) TENANT PROTECTION.— 

7 ‘‘(A) IN GENERAL.—The Secretary may 

8 provide tenant-based assistance for dwelling 

9 units covered under a project-based assistance 

10 subsidy contract if— 

11 ‘‘(i) the owner of the dwelling units 

12 has received a Notice of Default; and 

13 ‘‘(ii) the dwelling units pose an immi14 nent health and safety risk to the tenants 

15 of those dwelling units. 

16 ‘‘(B) REIMBURSEMENTS.—To the extent 

17 that the Secretary determines that dwelling 

18 units described in subparagraph (A) are not 

19 feasible for continued rental assistance pay20 ments or transfer of the project-based assist21 ance subsidy contract associated with those 

22 dwelling units to another project or projects 

23 and owner or owners, any remaining amounts 

24 associated with those dwelling units shall be re25 captured and used to reimburse amounts used 


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1 for tenant-based assistance under subparagraph 

2 (A).’’. 

3 SEC. 4. REPORTS ON REAL ESTATE ASSESSMENT CENTER 

4 INSPECTIONS. 

5 (a) HUD REPORT.—Not later than 90 days after the 

6 date of enactment of this Act, the Secretary of Housing 

7 and Urban Development shall issue a publicly available re8 port on the Web site of the Department of Housing and 

9 Urban Development (in this section referred to as the 

10 ‘‘Department’’) regarding Real Estate Assessment Center 

11 (in this section referred to as ‘‘REAC’’) inspections of all 

12 properties assisted, insured, or both, under a program of 

13 the Department, which shall include— 

14 (1) the percentage of all inspected properties 

15 that received a REAC-inspected score of less than 

16 65 within the 48-month period preceding the report; 

17 (2) the number of properties in which the most 

18 recent REAC-inspected score represented a decline 

19 relative to the previous REAC score; 

20 (3) a list of the 10 metropolitan statistical 

21 areas with the lowest average REAC-inspected 

22 scores for all inspected properties; and 

23 (4) a list of the 10 States with the lowest aver24 age REAC-inspected scores for all inspected prop25 erties. 


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1 (b) GAO REPORT.—The Comptroller General of the 

2 United States shall issue a publicly available report on the 

3 Web site of the Government Accountability Office regard4 ing areas in which REAC inspections of all properties as5 sisted, insured, or both, under a program of the Depart6 ment should be reformed and improved. 

Æ 


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