Real Estate Assessment Center: HUD Should Improve Physical Inspection Process and Oversight of Inspectors
Fast Facts
HUD provides financial assistance to ensure that affordable rental housing is available for more than 2 million low- and moderate-income households.
HUD’s Real Estate Assessment Center contracts with inspectors to ensure that the properties are clean, safe, and in good repair. However, there are concerns that the physical inspection process is not identifying troubled properties effectively. For example, the Center does not always meet its schedule for inspecting properties, which means problems could go unaddressed longer than they should.
We made 14 recommendations to improve the inspection process, among other things.
A sign outdoors that says U.S. Department of Housing and Urban Development
Highlights
What GAO Found
The Department of Housing and Urban Development's (HUD) Real Estate Assessment Center's (REAC) standardized process to identify physical deficiencies at HUD multifamily properties (including public housing) has some weaknesses. For example, REAC has not conducted a comprehensive review of its inspection process since 2001, even though new risks to its process have emerged, such as property owners misrepresenting the conditions of their properties. A comprehensive review could help REAC identify risks and ensure it is meeting the goal of producing inspections that are reliable, replicable, and reasonable. In addition, REAC does not track its progress toward meeting its inspection schedule for certain properties, which could hinder HUD's ability to take enforcement actions. Finally, in the wake of concerns that inspections were not always identifying troubled properties, REAC and other HUD units, including the Office of Multifamily Housing, made eight recommendations in January 2017 to enhance the inspection process, but HUD had only approved three of these recommendations and had not implemented any of them as of December 2018.
REAC uses contractors to inspect properties; these contract inspectors are trained and overseen by quality assurance inspectors hired directly by REAC. However, REAC's processes to select, train, and monitor both contract inspectors and quality assurance inspectors have weaknesses.
- Selection. REAC does not verify the qualifications of contract inspector candidates before they are selected to begin training to become certified inspectors. Formal processes to verify qualifications may help REAC identify unqualified candidates before they begin training and avoid expending resources on training these candidates.
- Training. REAC lacks formal mechanisms to assess the effectiveness of its training program for contract and quality assurance inspectors. In addition, unlike other professional inspection organizations, REAC does not have continuing education requirements. Formal mechanisms to assess the effectiveness of its training program could help REAC ensure that its program supports the development needs of inspectors. Further, requiring continuing education could help REAC ensure that inspectors are current on any changes in REAC's policies or industry standards.
- Monitoring. REAC has not met management targets for the number and timeliness of its inspection oversight reviews of contract inspectors. For example, REAC has not met its target of conducting three quality assurance reviews of poor-performing contractors per quarter. As a result, if deficiencies are not identified and recorded by contract inspectors, they may not be addressed in a timely manner. In addition, REAC's performance standards for its quality assurance inspectors have not been updated to reflect their broader job duties, such as conducting inspector oversight reviews and coaching and mentoring contract inspectors. Performance standards that are directly linked to these job duties would help ensure that inspectors are assessed on all of their key responsibilities.
Why GAO Did This Study
Over 2 million low- and moderate-income households live in HUD-assisted (subsidized) or -insured multifamily housing. HUD's REAC uses contractors to inspect the physical condition of these properties to determine that they are decent, safe, sanitary, and in good repair. The 2017 Consolidated Appropriations Act, Joint Explanatory Statement, included a provision for GAO to review REAC's policies and processes.
This report discusses, among other things, (1) REAC's process for identifying physical deficiencies and (2) REAC's selection, training, and monitoring of contract inspectors and its own quality assurance inspectors. GAO reviewed HUD documents and data related to REAC's physical inspection process, use of contract and quality assurance inspectors, and enforcement processes. GAO also interviewed HUD officials and housing industry stakeholder groups and conducted discussion groups with contract and quality assurance inspectors.
Recommendations
GAO makes 14 recommendations to HUD to improve REAC's physical inspection process and its selection, training, and monitoring of contract and quality assurance inspectors, among other things. HUD agreed with 11 recommendations, partially agreed with 2, and neither agreed nor disagreed with 1. GAO maintains that its recommendations should be fully addressed to improve the inspection process.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Housing and Urban Development |
Priority Rec.
The Deputy Assistant Secretary for the Real Estate Assessment Center should conduct a comprehensive review of the physical inspection process. (Recommendation 1) |
REAC agreed with this recommendation and since our March 2019 report, had undertaken several reviews of its physical inspection process that were too narrowly focused to be considered comprehensive. In February 2023, REAC officials said that it performed a comprehensive review of process areas that support inspection activities and that the analysis indicated that nearly every process supporting REAC's inspection activities require enhancement, but they were unable to provide documentation of this review sufficient to close this recommendation as implemented. In July 2023, REAC finalized a new physical inspection process and had begun to use it in properties receiving rental assistance. It is unclear whether this new inspection process will address the weaknesses we identified in our 2019 report. But, since the new inspection process was finalized, we would no longer recommend that REAC conduct a comprehensive review of a previous physical inspection process that no longer exists.
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| Department of Housing and Urban Development | The Deputy Assistant Secretary for the Real Estate Assessment Center should resume calculating the sampling error associated with the physical inspection score for each property, identify what changes may be needed for HUD to use sampling error results, and consider those results when determining whether more frequent inspections or enforcement actions are needed. (Recommendation 2) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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| Department of Housing and Urban Development | The Deputy Assistant Secretary for the Real Estate Assessment Center should develop comprehensive and organized documentation of REAC's sampling methodology and develop a process to ensure that documentation is maintained going forward. (Recommendation 3) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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| Department of Housing and Urban Development | The Deputy Assistant Secretary for the Real Estate Assessment Center should track on a routine basis whether REAC is conducting inspections of multifamily housing properties in accordance with federal guidelines for scheduling and coordinate with the Deputy Assistant Secretary for Multifamily Housing to minimize the number of properties that can cancel or reschedule their physical inspections. (Recommendation 4) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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| Department of Housing and Urban Development | The Deputy Assistant Secretary for the Real Estate Assessment Center should design and implement an evaluation plan to assess the effectiveness of the Indefinite Delivery/Indefinite Quantity pilot in ensuring timely and quality inspections for properties in hard-to-staff geographic areas. (Recommendation 5) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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| Department of Housing and Urban Development | The Deputy Assistant Secretary for Multifamily Housing and the Deputy Assistant Secretary for the Real Estate Assessment Center should expedite implementation of the recommendations from the Rapid Response and Resolution Team. (Recommendation 6) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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| Department of Housing and Urban Development | The Deputy Assistant Secretary for the Real Estate Assessment Center should follow through on REAC's plan to create a process to verify candidate qualifications for contract inspectors—for example, by calling references and requesting documentation from candidates that supports their completion of 250 residential or commercial inspections. The plan should also consider whether certain types of inspections—such as Federal Emergency Management Agency inspections and U.S. Army Office of Housing inspections—satisfy REAC's requirements. (Recommendation 7) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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| Department of Housing and Urban Development | The Deputy Assistant Secretary for the Real Estate Assessment Center should develop a process to evaluate the effectiveness of REAC's training program—for example, by reviewing the results of tests or soliciting participant feedback. (Recommendation 8) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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| Department of Housing and Urban Development | The Deputy Assistant Secretary for the Real Estate Assessment Center should revise training for quality assurance inspectors to better reflect their job duties. Revised training should be documented, include expanded subject matter training, and address skills that may not be included in training for contract inspectors—for example, instructing contract inspector candidate trainings and coaching and providing feedback. (Recommendation 9) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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| Department of Housing and Urban Development | The Deputy Assistant Secretary for the Real Estate Assessment Center should develop continuing education requirements for contract and quality assurance inspectors. (Recommendation 10) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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| Department of Housing and Urban Development | The Deputy Assistant Secretary for the Real Estate Assessment Center should develop and implement a plan for meeting REAC's management targets for the timeliness and frequency of collaborative quality assurance reviews and quality control inspections. The plan should include consideration of resources of and demands on quality assurance inspectors, including the effect of natural disasters and other special assignments. (Recommendation 11) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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| Department of Housing and Urban Development | The Deputy Assistant Secretary for the Real Estate Assessment Center should ensure that Quality Control's policies and procedures for overseeing quality assurance inspectors are implemented. (Recommendation 12) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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| Department of Housing and Urban Development | The Deputy Assistant Secretary for the Real Estate Assessment Center should review quality assurance inspector performance standards and revise them to better reflect the skills and supporting behaviors that quality assurance inspectors need to effectively contribute to REAC's mission. (Recommendation 13) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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| Department of Housing and Urban Development | The Deputy Assistant Secretary for Multifamily Housing should report to Congress on why the agency has not complied with the 2017 and 2018 Consolidated Appropriations Acts requirement to issue notices to properties when the REAC score is 60 or below, including seeking any statutory flexibilities or exceptions believed appropriate. (Recommendation 14) |
In a report to Congress for the quarter ending March 31, 2019, HUD included an explanation of why HUD has not complied with the 2017 and 2018 Consolidated Appropriations Acts requirement to issue notices to properties when the REAC score is 60 or below. HUD acknowledged that a section of these Consolidated Appropriations Acts requires notices to be issued to properties that score 60 or below. HUD conveyed that it interpreted that Congress's intent was for HUD to consider enforcement actions on projects that receive a score of 59 or below, consistent with how HUD said HUD has always done it, based on a different section of the Consolidated Appropriations Acts which describes that the HUD Secretary shall report quarterly on properties (covered by that section of the Act) which have physical inspection scores of less than 60. HUD included in the report to Congress a request that if HUD's interpretation is consistent with the intent of Congress, the Department would recommend that Congress change future appropriations bills to further reflect this intent.
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