HappyCo

Little Time, Big Consequences:
A Multifamily Lens on Major
REAC Inspection Changes

Industry Insights

14 days. That’s all the warning HUD will now give affordable housing operators ahead of a REAC inspection. HappyCo dives into the update and the reasoning, offering a multifamily president’s insights on the stakes for operators.

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Gaming the system.” That’s the main fear revealed by HUD Secretary Ben Carson in a recent press release announcing significant changes to the warning windows for REAC inspections. Carson argues, “it’s become painfully clear to us that too many public housing authorities and private landlords whom we contract with were using the weeks before their inspection to make quick fixes, essentially gaming the system.”

Thus, HUD is significantly tightening the timeframe for warning affordable housing operators about an upcoming REAC inspection. Since March 20th, 2019, operators will now be notified just 14 calendar days before a visit by REAC inspectors. There’s no denying: the decision will have profound consequences for communities around the U.S. From a sheer numbers perspective, HUD reports that REAC-contracted inspectors are responsible for evaluating 23,000 privately owned apartment buildings offering HUD-subsidized housing.

Naturally, with a tougher window comes tougher consequences; HUD makes clear, “if an owner/agency declines, cancels or refuses entry for an inspection, a presumptive score of ‘0’ (zero) will be recorded. If the second attempt results in a successful inspection within seven calendar days, the resulting score will be recorded.”

How did this 14-day window become the best solution? Let’s look a little closer at the status quo, safety risks, and uphill battles in the affordable housing inspection space.

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HUD’s inspection puzzle? How to crush a few bad apples.

stone building



In HUD’s recent announcement about REAC changes, the organization makes clear what it seeks to unravel. In its view, “that many private owners of HUD-subsidized housing have grown accustomed to a 20-year-old inspection regime and, in some cases, more invested in passing the minimal requirements of a REAC inspection instead of satisfying their contractual obligation to provide housing that is decent, safe and sanitary year round.”

Still, the battle at hand appears to be simple: crushing a few bad apples — not denying the good-faith efforts of thousands of multifamily operators. In the same document, HUD reveals that even within its pre-March 20th system, among 1.2M total units, “96 percent of these properties receive passing scores.” It also admits an encouraging decline in failed inspections: “In 2017, the number of failed inspections was 649; as of October 1, 2018, the number of failed inspections was 563.”

How to explain HUD’s sudden shift in course, then? The organization points to Secretary Carson’s appointment, stating in a recent document: “Prior HUD secretaries have grappled with how to balance the need to preserve scarce affordable housing with the need to ensure the housing taxpayers do support is suitable.” Secretary Carson, on the other hand, “directed a whole reexamination of how the Department conducts REAC inspections.” Above all, the organization is pushing to make housing “decent, safe, and healthy for residents.”

In HUD’s view, the best way to achieve this is to “design a new simplified inspections system more focused on the physical conditions within housing units and to place a greater emphasis on lead-based paint hazards and mold.” REAC inspections force operators to be just as self-reflective: “When a property fails an inspection, HUD demands the owner correct any serious health or safety defects immediately and to develop a correct plan to address all reported poor housing conditions.”

Thus, it’s critical for affordable housing operators to know which key areas they should address in order to prioritize resident safety portfolio-wide. Fortunately, HUD offers a range of useful tips and recommendations.

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Prioritizing resident safety: key areas of concern pre-REAC.

inspector visit

Given that 96% of affordable housing communities receive passing scores on REAC inspections, it’s clear that most operators know about — and address — key areas of concern when it comes to resident safety. However, should there by any uncertainty in this arena, here are the main issues HUD points to in recently-published documents:

Areas of special concern include:

* Propane gas leaks
* Exposed wires
* Blocked fire scapes/exits
* Water leaks near electrical equipment
* Expired fire extinguishers
* Inoperative or missing smoke detectors

General health and safety areas include:

* Air quality (mildew present)
* Sewer system
* Water leaks
* Flammable materials
* Garbage and debris
* Sharp edges
* Tripping: sidewalk conditions
* Insects, rats, mice, vermin
* Doors: blocked egress, ladders
* Roofs: damage vents
* Windows: cracked panes

HUD’s prepared materials on the subject include useful definitions and areas where leniency is off the table. For example:

1) “All individual living areas/rooms in a unit and all common area rooms must have 2 independent and unimpeded means of egress (escape) if so designed. The only exception is windows above the 3rd floor that do not serve as a means of access to a designed escape route.”

2) Even when it comes to ongoing repairs, operators are not simply let off the hook for current construction sites. As HUD puts it, “If buildings or units are occupied and rehabilitation work is in progress during the inspection, the inspector must inspect the buildings or units. All deficiencies must be recorded, even defects associated with ongoing work in progress during the REAC inspection.”

3) Under industry standard repairs: “all repairs should be consistent with what a reasonable person would expect if a repair was done to an apartment they lived in or what they would expect to see when shopping for a new apartment.”

4) “If the Property Owner/Agent (POA) cannot or will not provide the inspector access to an inspectable item, the inspector must record that item as defective.”

Needless to say, affordable housing operators have a lot to keep in mind as they meet a higher bar than ever before to keep residents safe. In this changing climate, HappyCo sought an operator perspective: Larry Sisson, President of Tesco Properties, Inc., a multifamily company responsible for thousands of affordable units primarily across the Southeast.

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An affordable operator lens: from inspections to inspiration.

girls lunching



“This is a highly regulated industry. Conventional multifamily doesn’t have to do any of this. But because I’m in a family business, I’ve lived this my whole life, so I feel it’s normal!” Indeed, Larry is sympathetic to HUD’s recent change of heart: “it’s trying to do some important fact-finding — emphasizing unit interiors, where residents actually live.”

Still, he points to multiple downsides when it comes to a 14-day warning window: “Anytime you rush to do something, it costs more. I know the argument is that you have to be prepared all the time, but it’s unrealistic. As winter comes, your sidewalk will shift. That’s just one thing that takes a significant amount of time to work on before a REAC inspection.”

Sisson also points to the new 14-day warning window as limiting Tesco’s (or any operator’s) capacity to build on existing projects: “As far as I understand, there are no changes to the old point system. HUD has talked about prioritizing unit interiors for safety reasons but has yet to do so. Now, with just 14 days for operators, we have less time to prepare and still a broad range of non-essential items to check beforehand.”

•   •   •

girls lunching

Ultimately, the REAC inspection updates are just one of the many challenges affordable housing operators already face. “Security is a big concern, especially if the community is an area with criminal activity. We also have to certify everyone’s income every year, have to submit for payment to HUD, and have to send management reviews in for HUD to audit company policies.”

Still, despite all the hurdles, Sisson feels — and he believes the vast majority of operators do as well, that the societal benefits far outweigh the bureaucratic hurdles. For him, it’s been particularly inspiring to help elderly and youth populations. “I can still remember when I was in my early twenties, checking out a community as a property manager. I shared an elevator with an older gentleman, and he looked at me and had tears in his eyes and said the community was the best place he’d ever lived in.”

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Reliable data, real-time visibility: win the REAC race.

REAC inspections coming right around the corner? The switch from paper inspections to mobile software empowers operators with the real-time visibility and standardized data they need to keep residents safe and HUD happy. Learn more today:

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About the author

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Glennis Markison
Content & Webinar Producer

Glennis is a writer/producer from San Francisco. Taking the city’s trains and buses with riders of all ages and backgrounds inspired Glennis to go into journalism and share people’s stories for a living. After graduating from Johns Hopkins University in 2013, she worked at CBS San Francisco as a program coordinator, public affairs producer, and ultimately full-time news writer for the KPIX 5 Morning News. She’s excited to enter the bustling startup world and tell HappyCo’s stories across channels.

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