Physical Inspections- Overview
BACKGROUND OF REAC
Nearly 4 million American families live in rental housing that is owned, insured or subsidized by HUD. This housing includes properties that get some form of rental assistance, including Section 8 subsidies from HUD; properties whose mortgages are insured or held by HUD; and properties that are financed by HUD. HUD’s physical condition standards for multifamily properties are based on language in the United States Housing Act of 1937 (42 U.S.C. 1437 et seq.) that requires federally assisted housing for low-income individuals to be decent, safe, and sanitary. This act applies to Section 8 assisted housing and public housing. For HUD-insured multifamily housing, the mortgagors are required by contract to maintain the mortgaged premises in good repair and condition. HUD considers this requirement very similar if not identical to the standard for decent, safe, and sanitary housing.
To ensure that this housing remains in decent, safe, sanitary, and in good repair, HUD created The Real Estate Assessment Center (REAC) in 1997, to obtain consistent information on, among other things, the physical condition of its multifamily housing. In late 1998, REAC began to inspect these properties using a set of uniform standards that could be applied to all HUD housing, regardless of the source of subsidy or assistance. REAC conducts approximately 20,000 physical inspections on properties each year.
An overall numerical score is given as a value from zero to 100. Separate numerical scores are also given for each of five inspectable areas:
The five area scores range from zero to the maximum number of points possible for each area. The possible points for a given area are determined for a specific property based on the inspectable items actually present in each area. The sum of the area points identifies what the overall score would be if there were no health & safety (H&S) deficiencies. The overall numerical score is then calculated by subtracting the sum of deductions for H&S deficiencies from the sum of the individual "area points."
INTERPRETING YOUR SCORE
The REAC score consists of two or three parts. There is always a numerical and letter portion for each score. Sometimes there will also be an Asterisk “*”. Examples of overall scores are: 95c; 67b*; 84a*; 98b; 78a; and 43c*. A 100a is a perfect score.
The asterisk “*” is used to indicate that there were smoke detector deficiencies found at the property. This could include, missing, damaged, or any non-working smoke detectors. The REAC report will designate which units contain the problem smoke detectors with an upper case “SD” in parentheses in the observation column of the report. The lower-case letter indicates whether or not other kinds of Health & Safety deficiencies were observed, as follows:
The lower case letter "a" is given if no health and safety deficiencies were observed other than for smoke detectors.
The lower case letter "b" is given if one or more non-life threatening Health and Safety deficiencies were observed other than for smoke detectors. A closer review of the REAC inspection will show specifically which deficiency or deficiencies are considered non-life threatening Health & Safety deficiencies with a capital “NLT” in parentheses in the Observation column.
The lower case letter "c" is given if one or more exigent/fire safety (calling for immediate attention or remedy) Health & Safety deficiencies were observed. The Observation contains a “LT” in parentheses after each deficiency, which is considered to be exigent.
Although all Health & Safety deficiencies, except for smoke detector problems and "other" hazards, affect the scores with appropriate deductions, the letter grades are added to highlight the serious nature of Health and Safety deficiencies, all of which need to be addressed by the owner/agent.
How often will my project be inspected by REAC?
Depending upon the results of the inspection, each property will be assigned one of three designations—standard 1 performing, standard 2 performing, or standard 3 performing. The point cutoff (based upon 100 point system) and inspection cycle for properties within these designations are as follows:
• Standard 1 performing properties, score 90 points or higher. These properties are inspected every three years
• Standard 2 performing properties, score 80 to 89 points. These properties are inspected every two years.
• Standard 3 performing properties, score 79 or less and are inspected annually.
MAM is required to keep track of when REAC inspections occur and obtain a copy of the inspection. In addition, MAM is required to follow the guidance contained in the Revised Guidance for Oversight of Multifamily Housing Physical Inspections, which became effective in June of 2001.
The ultimate goal of our follow-up is to confirm that all deficiencies cited in the REAC inspection are mitigated and we receive signed certification of this from the project owner for our file. It is also necessary for us to report this information back to HUD monthly.
If the inspector noted any exigent health and safety (EH&S) deficiencies at the time of the inspection, you or your representative received a report listing those deficiencies. The EH&S deficiencies are the deficiencies that will cause you to receive a “c” or an “asterisk” in your score. The “c” is triggered by a life-threatening finding and the asterisk is from a problem with a smoke detector. HUD requires you to immediately correct or mitigate all such deficiencies and report your actions within three (3) business days of receipt of the report.
When all the EH&S deficiencies have been mitigated, the project owner must copy the Project Owner’s Certification That All Exigent Health Safety Items Have Been Corrected, form onto the owner’s letterhead, sign, and submit it to MAM by fax/email and mail. A copy of this certification form can be found at the end of the REAC Report or here. In addition, documentation must also be provided that shows what was done to correct each deficiency. Please note that the certification form must be signed by the project owner and not the management agent. According to discussions we have had with HUD about the Revised Guidance for Oversight of Multifamily Housing Physical Inspections, the owner is the only person that HUD wants to sign the certification form. The agent is permitted to sign only if they have a valid Power of Attorney document for the owner. A copy of the power of attorney will need to be submitted along with the certification.
If your property had any EH&S deficiencies, and you fail to correct all of these deficiencies within the required time frame, or falsely certify to repairs made, these noncompliance issues may adversely affect your eligibility for participation in HUD programs. MAM and/or HUD will follow-up on these deficiencies during your next Management and Occupancy Review.
If your property received a score of 60 or above, HUD requires that you note and correct all deficiencies as part of your ongoing maintenance program. If there are any special requirements for your property, the local Office of Housing or PBCA having jurisdiction will contact you. MAM or HUD will follow-up on a sample of deficiencies during your next Management and Occupancy Review.
All multifamily properties receiving a new Real Estate Assessment Center (REAC) physical inspection score below 30, will automatically referred to the Departmental Enforcement Center (DEC). Properties scoring between 31 and 59, inclusive, may be referred to the DEC by the local HUD office.
Additional information about the REAC inspection can be found on the HUD website.
REAC scheduling information can be obtained through this scheduler tool if you know your REMS Identification number.