On February 23 HUD’s Office of Public and Indian Housing (PIH) published an interim rule affecting the Public Housing Assessment System (PHAS). A proposed rule was issued on April 28, 2008, primarily to modify PHAS so that it would conform to public housing agencies’ (PHAs) obligation to convert to asset management (see Memo, 9/16/05).
PHAS was established by a final rule on September 1, 1998 (codified at 24 CFR part 902), expanding PHA evaluations beyond management to include the physical condition of properties, the PHA’s financial condition, and a residents’ service and satisfaction assessment (RASS). On the basis of these four indicators, a PHA receives an overall composite score resulting in a performance designation (e.g., “high”, “standard”, “substandard”, and “troubled”).
Asset management was implemented by regulations issued on September 19, 2005. PHAs with more than 250 units were required to shift from a PHA-wide management model to one that emphasized budgeting, management, and accounting on a project-by-project basis. The amount of funding provided to PHAs also shifted to a formula based on the number of projects.
One of the major shifts of the interim rule just published is to focus the assessment of a PHA’s performance on the sum of the performance of individual projects.
The August 21, 2008 proposed rule would continue to rely upon three of the four performance indicators: physical condition, financial condition, and management operations. However, the resident satisfaction indicator would no longer be the fourth factor. Instead, HUD proposes that it be integrated into the management operations indicator. Management of the Capital Fund program, previously in the management operations indicator, would be established as a stand-alone fourth factor.
The interim rule differs from current rule in several ways. First, the resident service and satisfaction indicator (RASS), as well as the resident survey, are removed for the period that the interim rule is in effect. In the preamble, HUD asserts that it is committed to exploring better means of measuring resident satisfaction, tenant participation, and self-sufficiency. HUD specifically requests ideas from the public so that resident indicators can be incorporated in the final rule.
Second, out of 100 points available for an overall PHA score, the points allotted to the four indicators have changed: the physical condition indicator is increased to 40 points from 30, the financial condition indicator is reduced to 25 points from 30, the management operations indicator is reduced to 25 points from 40, and the new Capital Fund indicator is set at 10 points. The points for the management operations indicator are reduced because only three items will now be measured: occupancy rate, accounts payable, and tenant accounts receivable. The Capital Fund indicator would award up to 5 points for timely obligation of Capital Funds, plus up to an additional 5 points based on the occupancy rate. To receive the full 5 points for occupancy rate, a PHA’s adjusted occupancy rate must be 96% or more.
Third, for PHAs with 250 units or more, a project that receives a physical inspection score of 90 or higher will only need to be inspected every three years, while a project with a score between 80 and 89 will be inspected every two years. All other projects will be inspected annually. For PHAs with fewer than 250 units, high performing PHAs will receive PHAS assessments every three years, instead of every other year.
Finally, the current PHAS rule has provided for an upward adjustment of the overall physical score for a property when negative conditions were beyond the control of the PHA, such as the poor physical condition of the property or the overall depressed condition of the surrounding neighborhood. The interim rule reduces the number of adjustment points from 3 to 2 points, 1 point for poor physical condition of the property and 1 point for the economic condition of the neighborhood. The interim rule applies the neighborhood adjustment factor to census tracts with at least a 40% poverty rate, down from 51%. In addition, the interim rule raises the required age of a project under consideration for the physical condition adjustment from 10 years to 28 years.
The interim rule goes into effect on March 25, and HUD will accept comments until April 25.
The interim rule is at http://edocket.access.gpo.gov/2011/pdf/2011-2659.pdf
Separate notices regarding changes to the scoring areas were also published:
Physical Condition Scoring, http://edocket.access.gpo.gov/2011/pdf/2011-2633.pdf
Capital Fund Scoring, http://edocket.access.gpo.gov/2011/pdf/2011-2657.pdf.
Financial Conditions Scoring, http://edocket.access.gpo.gov/2011/pdf/2011-2656.pdf
Management Operations Scoring, http://edocket.access.gpo.gov/2011/pdf/2011-2658.pdf