II 114th CONGRESS 2d Session S. 3398 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. Short title This Act may be cited as the HUD Inspection Process and Enforcement Reform Act of 2016 . 2. Reduction in grade or pay or removal for misconduct or performance of employees of the Department of Housing and Urban Development (a) In general Section 7(c) of the Department of Housing and Urban Development Act ( 42 U.S.C. 3535(c) ), is amended— (1) by striking The Secretary is authorized and inserting the following: “ Employment, compensation, authority, and duties of personnel .— (1) In general The Secretary is authorized ; and (2) by adding at the end the following: (2) Reduction in grade or pay or removal for misconduct or performance of employees (A) Definitions For purposes of this paragraph— (i) the term covered employee — (I) means an individual holding a position in the civil service in the Department; and (II) does not include any individual— (aa) holding in a position described under sections 5312 through 5316 of title 5, United States Code (relating to the Executive Schedule); (bb) holding a position as a limited term appointee, limited emergency appointee, or noncareer appointee in the Senior Executive Service, as defined under paragraphs (5), (6), and (7), respectively, of section 3132(a) of title 5, United States Code; or (cc) holding a position of a confidential or policy-determining character under schedule C of subpart C of part 213 of title 5, Code of Federal Regulations; (ii) the term grade means a level of classification under a position classification system; (iii) the term misconduct includes neglect of duty, malfeasance, or failure to accept a directed reassignment or to accompany a position in a transfer of function; and (iv) the term pay means the rate of basic pay fixed by law or administrative action for the position held by a covered employee. (B) Actions covered This paragraph— (i) applies to a reduction in grade or pay or removal; and (ii) does not apply to— (I) a reduction in grade or pay or removal under section 7512 of title 5, United States Code; (II) a reduction in grade or pay or removal under section 7521 of title 5, United States Code; (III) a removal under section 7532 of title 5, United States Code; or (IV) a removal under section 3592, 3595, or 7543 of title 5, United States Code. (C) Cause and procedure (i) In general Notwithstanding any other provision of law, under regulations prescribed by the Office of Personnel Management, the Secretary may, if the Secretary determines that the misconduct or performance of a covered employee warrants such action— (I) remove the covered employee from the civil service; (II) reduce the grade of the covered employee; or (III) reduce the pay of the covered employee. (ii) Reduction in grade A covered employee subject to a reduction in grade under clause (i)(II) shall, beginning on the date that the reduction takes effect, receive the annual rate of pay applicable to such grade. (iii) Appeal procedures (I) In general Subject to subclause (II) and clause (iv), any reduction in grade or pay or removal under this paragraph may be appealed to the Merit Systems Protection Board under section 7701 of title 5, United States Code. (II) Time for appeal An appeal under subclause (I) may only be made if such appeal is made not later than 7 days after the date of such reduction in grade or pay or removal. (iv) Review on appeal (I) In general Upon receipt of an appeal under clause (iii), the Merit Systems Protection Board shall refer the appeal to an administrative law judge pursuant to section 7701(b)(1) of title 5, United States Code. The administrative law judge shall expedite any such appeal under such section and, in any such case, shall issue a decision not later than 45 days after the date that the Board receives the appeal. (II) Information and assistance To the maximum extent practicable, the Secretary shall provide to the Merit Systems Protection Board, and to any administrative law judge to whom an appeal under this paragraph is referred, such information and assistance as may be necessary to ensure an appeal under this paragraph is expedited. (III) Finality Not­with­stand­ing any other provision of law, including section 7703 of title 5, United States Code, the decision of an administrative law judge under subclause (I) shall be final and shall not be subject to any further appeal. (IV) Delayed decision In any case in which the administrative law judge cannot issue a decision in accordance with the 45-day requirement under subclause (I), the reduction in grade or pay or removal is final. In such a case, the Merit Systems Protection Board shall, within 14 days after the date that such reduction in grade or pay or removal is final, submit to Congress a report that explains the reasons why a decision was not issued in accordance with such requirement. (V) No stays The Merit Systems Protection Board or administrative law judge may not stay any reduction in grade or pay or removal action under this paragraph. (VI) Effect of appeal of removal During the period beginning on the date on which a covered employee appeals a removal from the civil service under this paragraph and ending on the date that the administrative law judge issues a final decision on such appeal, the covered employee may not receive any pay, awards, bonuses, incentives, allowances, differentials, student loan repayments, special payments, or benefits. (v) Whistleblower protection In the case of a covered employee seeking corrective action (or on behalf of whom corrective action is sought) from the Office of Special Counsel based on an alleged prohibited personnel practice described in section 2302(b) of title 5, United States Code, the Secretary may not reduce the grade or pay or remove the covered employee under this paragraph without the approval of the Special Counsel under section 1214(f) of title 5, United States Code. . (b) Application The authority under paragraph (2) of section 7(c) of the Department of Housing and Urban Development Act, as added by subsection (a), shall apply to any covered employee (as defined in such paragraph) appointed before, on, or after the date of enactment of this Act. (c) Conforming amendments Title 5, United States Code, is amended— (1) in section 4303(f)— (A) in paragraph (2), by striking or at the end; (B) in paragraph (3), by striking the period at the end and inserting , or ; and (C) by adding at the end the following: (4) the reduction in grade or removal of an employee under section 7(c)(2) of the Department of Housing and Urban Development Act ( 42 U.S.C. 3535(c)(2) ). ; (2) in section 7512— (A) in subparagraph (E), by striking or at the end; (B) in subparagraph (F), by striking the period at the end and inserting , or ; and (C) by adding at the end the following: (G) a reduction in grade or pay or removal under section 7(c)(2) of the Department of Housing and Urban Development Act ( 42 U.S.C. 3535(c)(2) ). ; (3) in section 7521(b), in the matter following paragraph (5)— (A) in subparagraph (B), by striking or at the end; (B) in subparagraph (C), by striking the period at the end and inserting , or ; and (C) by adding at the end the following: (D) a reduction in grade or pay or removal under section 7(c)(2) of the Department of Housing and Urban Development Act ( 42 U.S.C. 3535(c)(2) ). ; and (4) in section 7542, by striking or to a removal under section 3592 or 3595 of this title and inserting to a removal under section 3592 or 3595 of this title, to an action under section 713 of title 38, or to a reduction in grade or pay or removal under section 7(c)(2) of the Department of Housing and Urban Development Act ( 42 U.S.C. 3535(c)(2) ) . 3. Enforcement of physical condition standards and tenant protection Section 8(o) of the United States Housing Act of 1937 ( 42 U.S.C. 1437f(o) ) is amended by adding at the end the following: (21) Maintenance of property Any entity receiving housing assistance payments with respect to dwelling units covered by a housing assistance payments contract shall— (A) maintain decent, safe, and sanitary conditions at those dwelling units, as determined by the Secretary; and (B) comply with any standards under applicable State or local laws, rules, ordinances, or regulations relating to the physical condition of those dwelling units. (22) Enforcement of physical condition standards (A) In general The Secretary shall take action under subparagraph (C) against an entity with a housing assistance payments contract for project-based assistance with respect to a multifamily housing project if— (i) the project receives a Uniform Physical Condition Standards (in this paragraph referred to as UPCS ) inspection score of not more than 30; (ii) the entity fails to certify in writing to the Secretary within 3 days of receiving the score under clause (i) that all exigent health and safety deficiencies identified by the inspector at the project have been corrected; or (iii) the project receives a UPCS inspection score of more than 30 and less than 59 and has received consecutive scores of less than 60 on UPCS inspections. (B) Applicability Subparagraph (A) shall— (i) apply with respect to insured and noninsured projects with dwelling units receiving assistance under this section other than under paragraph (13); and (ii) not apply to dwelling units receiving assistance with capital or operating funds under section 9. (C) Notification and enforcement (i) In general If an entity violates clause (i), (ii), or (iii) of subparagraph (A), the Secretary shall notify the entity and provide an opportunity for response not later than 15 days after the date on which the results of the UPCS inspection are issued. (ii) Plan and notice of default If violations remain at a project after the 15-day period described in clause (i), the Secretary shall— (I) develop a plan to bring the project into compliance not later than 30 days after the date on which the results of the UPCS inspection are issued; and (II) provide the owner, the tenants of the property, the local government, any mortgagees, and any contract administrator of the project with a Notice of Default with a specified timetable, determined by the Secretary, for correcting all deficiencies. (iii) Withdrawal of notice of default If an appeal submitted by the entity results in a UPCS inspection score of not less than 60, the Secretary may withdraw a Notice of Default issued under clause (ii)(II). (iv) Penalties If, at the end of the timetable described in clause (ii)(II), the entity fails to fully correct all deficiencies in the project, the Secretary may— (I) require immediate replacement of project management with a management agent approved by the Secretary; (II) impose civil money penalties, which shall be used solely for the purpose of supporting safe and sanitary conditions at the property, as designated by the Secretary, with priority given to the tenants of the property affected by the penalty; (III) abate the housing assistance payments contract under this section, including partial abatement, as determined by the Secretary, until all deficiencies have been corrected; (IV) pursue transfer of the project to an owner, approved by the Secretary under established procedures, which will be obligated to promptly make all required repairs and to accept renewal of the housing assistance payments contract as long as such renewal is offered; (V) transfer the existing housing assistance payments contract under this section to another project or projects and owner or owners; (VI) pursue exclusionary sanc­tions, including suspensions or de­bar­ments from Federal programs; (VII) seek judicial appointment of a receiver to manage the property and cure all project deficiencies or seek a judicial order of specific performance requiring the owner to cure all project deficiencies; (VIII) work with the owner, lender, or other related party to stabilize the property in an attempt to preserve the property through compliance, transfer of ownership, or an infusion of capital provided by a third party that requires time to effectuate; or (IX) take any other regulatory or contractual remedies available as deemed necessary and appropriate by the Secretary. (D) Contracts (i) In general The Secretary shall take appropriate steps to ensure that project-based contracts remain in effect, subject to the exercise of contractual abatement remedies to assist relocation of tenants for major threats to health and safety after written notice to and informed consent of the affected tenants and use of other remedies under this paragraph. (ii) Other assistance To the extent the Secretary determines, in consultation with the tenants and the local government, that a property is not feasible for continued rental assistance payments under this section or other housing programs, based on consideration of the costs of rehabilitating and operating the property and all available Federal, State, and local resources, including rent adjustments under section 524 of the Multifamily Assisted Housing Reform and Affordability Act of 1997 ( 42 U.S.C. 1437f note) and environmental conditions that cannot be remedied in a cost-effective fashion, the Secretary may, in consultation with the tenants of the property, contract for project-based rental assistance payments with an owner or owners of other existing housing properties, or provide other rental assistance. (E) Report (i) In general The Secretary shall, on a quarterly basis, issue a publicly available report on all properties covered by this paragraph that— (I) are assessed through the Real Estate Assessment Center; and (II) (aa) have a UPCS inspection score of less than 60; or (bb) received an unsatisfactory management and occupancy review during the 36-month period preceding the report. (ii) Contents Each report issued under clause (i) shall include— (I) the enforcement actions being taken to address the physical conditions of the properties covered in the report, including imposition of civil money penalties and termination of subsidies, and identify properties that have those conditions multiple times; (II) actions that the Department of Housing and Urban Development is taking to protect tenants of those properties; and (III) any administrative or legislative recommendations to further improve the living conditions at each property covered under a housing assistance payments contract. (23) Tenant protection (A) In general The Secretary may provide tenant-based assistance for dwelling units covered under a project-based assistance subsidy contract if— (i) the owner of the dwelling units has received a Notice of Default; and (ii) the dwelling units pose an imminent health and safety risk to the tenants of those dwelling units. (B) Reimbursements To the extent that the Secretary determines that dwelling units described in subparagraph (A) are not feasible for continued rental assistance payments or transfer of the project-based assistance subsidy contract associated with those dwelling units to another project or projects and owner or owners, any remaining amounts associated with those dwelling units shall be recaptured and used to reimburse amounts used for tenant-based assistance under subparagraph (A). . 4. Reports on Real Estate Assessment Center inspections (a) HUD report Not later than 90 days after the date of enactment of this Act, the Secretary of Housing and Urban Development shall issue a publicly available report on the Web site of the Department of Housing and Urban Development (in this section referred to as the Department ) regarding Real Estate Assessment Center (in this section referred to as REAC ) inspections of all properties assisted, insured, or both, under a program of the Department, which shall include— (1) the percentage of all inspected properties that received a REAC-inspected score of less than 65 within the 48-month period preceding the report; (2) the number of properties in which the most recent REAC-inspected score represented a decline relative to the previous REAC score; (3) a list of the 10 metropolitan statistical areas with the lowest average REAC-inspected scores for all inspected properties; and (4) a list of the 10 States with the lowest average REAC-inspected scores for all inspected properties. (b) GAO report The Comptroller General of the United States shall issue a publicly available report on the Web site of the Government Accountability Office regarding areas in which REAC inspections of all properties assisted, insured, or both, under a program of the Department should be reformed and improved.