HUD Provides Guidance on HOTMA Voucher Initial Inspection Options

HUD’s Office of Public and Indian Housing (PIH) issued Notice PIH 2017-20 providing guidance to public housing agencies (PHAs) regarding two new options that could speed up access to homes for households seeking to use tenant-based vouchers or to occupy units that have project-based vouchers. The Housing Opportunity Through Modernization Act of 2016 (HOTMA) allows a PHA to approve a voucher-assisted tenancy and begin making housing assistance payments to an owner of a unit that fails an initial Housing Quality Standard (HQS) inspection provided the deficiencies are not life-threatening. The Notice provides greater detail than that of the Federal Register notice issued on January 18, 2017 implementing these and other HOTMA provisions (see Memo, 1/23).

The first option allows a PHA to approve a voucher-assisted tenancy and make housing assistance payments (HAPs) on a unit that fails to meet HQS, provided the unit only has non-life-threatening (NLT) deficiencies and provided that the owner corrects the NLT deficiencies within 30 days. The second option allows a PHA to approve assisted tenancy of a unit prior to HQS inspection if the property has passed an alternative inspection within the past 24 months; however, the PHA must still inspect the unit within 15 days of receiving a prospective resident’s Request for Tenancy Approval (RFTA). PHAs have the discretion to adopt one, both, or neither option. The Notice stresses PHAs must conduct an inspection before making a HAP.

Implementing the Non-Life Threatening (NLT) Option

The Federal Register notice issued on January 18 defined ten categories of life-threatening conditions, including: various gas leaks and electrical hazards, inoperable or missing smoke detectors or carbon monoxide detectors, lack of alternative means of exit in case of a fire, and deteriorated paint in a unit built before 1978 that is to be occupied by a household with a child under six years of age. Notice PIH 2017-20 has a table elaborating on each of the ten categories. The table lists, for example, 11 examples of life-threatening electrical hazards. A PHA may add NLT conditions in its Housing Choice Voucher (HCV) Administrative Plan before April 18, 2017 (the date the January 18 Federal Register notice provisions became effective). A PHA that chooses to adopt the NLT option must apply their list of life-threatening (LT) conditions to all HQS inspections, ongoing annual or interim HQS inspections, not just initial inspections.

The existing voucher regulations regarding life-threatening conditions remain in effect; LT conditions must still be corrected within 24 hours. One exception, however, pertains to lead hazards identified in a unit already occupied by an assisted household under a HAP contract as of the effective date of the PHA’s NLT provision, for example, during a regular or interim HQS inspection. In such a situation, lead hazard reduction does not need to be completed within 24 hours as is the case for all other LT conditions. Instead, PHAs and owners must follow the requirements in 24 CFR part 35, the lead hazard regulation.

If an initial inspection identifies non-life-threatening deficiencies, a PHA must provide a list of the deficiencies to the household and offer the household an opportunity to decline a lease without jeopardizing its voucher. The PHA must also notify the household that if the owner fails to correct the NLT deficiencies within the time period specified by the PHA, the PHA will terminate the HAP contract and the family will have to move to another unit. If the household declines the unit, the PHA must inform the household how much search time they have remaining to find another unit. In addition, the PHA must suspend (stop the clock) of the initial or any extended term of the voucher (to search for another unit) from the date the household submitted the request for PHA approval of the tenancy until the date the PHA notifies the household in writing whether the request has been approved or denied.

HOTMA requires a PHA to withhold assistance payments if NLT deficiencies are not corrected within 30 days of the PHA notifying the owner of a unit’s failure to comply with the HQS. A PHA may establish a maximum amount of time that it will withhold payments before terminating a HAP contract; a HAP contract may not continue more than 180 days, however. Once a unit is in compliance, a PHA may reimburse the owner for the period during which payments were withheld.

Implementing the Alternative Inspections Provision

HOTMA allows a unit to be occupied prior to completion of an inspection if the unit passed an alternative inspection method within the previous 24 months. A PHA must still inspect the unit within 15 days of receiving a Request for Tenancy Approval from a household with a voucher seeking to rent that unit. A PHA may not make a HAP payment to an owner until the PHA completes the initial HQS inspection. Once the unit passes the HQS, a PHA may make retroactive assistance payments. A PHA may rely on inspections of housing assisted under the HOME Investment Partnerships (HOME) program or Low Income Housing Tax Credits (LIHTC) program, as well as some other HUD-approved method a PHA proposes. Under the regular voucher program rules, PHAs with more than 1,250 units do not have to conduct an initial inspection within 15 days of receiving an RFTA, but if such a PHA chooses to implement the Alternative Inspections Provision, that PHA must conduct an initial HQS inspection within 15 days.

A key requirement of the Alternative Inspection Provision is that a PHA must execute a HAP contract with an owner before the assisted lease and tenancy begins. Since the household will have moved in before the PHA conducts the initial inspection, the executed HAP contract ensures that the owner is contractually responsible to make any repairs that are necessary to meet the HQS, and protects the household from being charged the full amount of the rent if the owner fails to make the necessary repairs. (Under the regular voucher rule, a PHA can execute a HAP contract up to 60 days after a lease begins.)

If a unit fails the HQS, the PHA must require that life-threatening deficiencies be corrected within 24 hours and non-life-threatening deficiencies be corrected within 30 days. HUD strongly encourages PHAs to notify households before accepting a tenancy that they may be obligated to stay if the unit does not pass the initial inspection (unless the PHA terminates the contract).