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Physical Inspection Pilot Program

On July 27, 2011, the White House Domestic Policy Council, HUD, Treasury and USDA met with several state HFA representatives, the National Council of State Housing Agencies and other stakeholders to discuss the Administration?s efforts over the past year to reduce duplicative regulations by better aligning federally funded affordable rental housing programs. At the meeting, the Administration announced the launch of two pilot programs to test solutions for reducing regulatory burdens in the areas of physical inspections and subsidy layering reviews.

Several state Housing Finance Agencies (HFAs) are participating in the physical inspection pilot program which began on December 1, 2011 and will run until November 30, 2012.

HFAs from Michigan, Minnesota, Ohio, Oregon, Washington and Wisconsin are part of the physical inspection teams testing how to limit the number of federally sponsored physical inspections at each multifamily property financed with multiple federal funding sources.

How will this affect owners?

In order to accommodate the needs of the various agencies involved, the following three slight variations to the UPCS standard protocol will be applied by the inspectors when they conduct an inspection under this pilot program. If your property is receiving a REAC or tax credit inspection, these variations apply under the pilot. If RD is conducting the inspection, no change is anticipated:

  • When the property profile is being updated at the very beginning of the inspection, all subsidized buildings and units will be included. In the past you have been inspected only on your program specific subsidized units, but during this pilot period all units will be included so that the sample can be drawn from the entire subsidized universe at the property so that all agencies involved can utilize the inspection results.

  • Regardless of the current vacancy rate, vacant units will be inspected when selected as part of the sample. (Traditionally vacant units are not inspected when the vacancy rate is less than 15% under current HUD-REAC UPCS protocol. We have to modify the HUD-REAC UPCS protocol for the pilot to accommodate differences in federal regulations between the three agencies.) The current protocol of selecting an alternate unit in the sample due to reasons such as resident sickness, unit in litigation, no keys, etc. remains unchanged.

  • The inspector will add a note as follows: "HUD-IRS-RD Pilot Program" in the property inspection tab comment section, in addition to the vacancy rate and bed bug information like they already do.

Please note that only the inspections included in this pilot need to follow these three slight modifications to the protocol. For clarity, the inspections included in this pilot consist of those that meet all three of the following criteria:

  1. Property is located in Michigan, Minnesota, Ohio, Oregon, Washington or Wisconsin.
  2. Property receives any combination of funding from HUD/IRS/RD/HFA.
  3. Property is receiving an inspection during the timeframe of 12/01/11 - 11/30/12.

We appreciate your cooperation and flexibility working with us to ensure this pilot program is a success. If you have any questions or concerns regarding this program, please contact your local HUD, USDA or State HFA office.