HUD Drastically Cuts Advance Notice for REAC InspectionsYou are the property manager for a HUD-subsidized apartment development. One day, the owner of the development rushes into your office, visibly frantic. The owner says, “We just received a letter from HUD’s Real Estate Assessment Center (REAC) that REAC inspectors have scheduled the property for an inspection.” You respond, “Don’t worry — with extensions we have at least 120 days before the REAC inspectors arrive.” The owner replies, “No, the inspection is scheduled 14 days from today.”

On February 20, 2019, the U.S. Department of Housing and Urban Development (HUD) announced it is drastically reducing the advance notice it provides to public housing authorities (PHAs) and private owners of HUD-subsidized apartment developments. The new notice standard is 14 calendar days – a major reduction from the 120 days HUD used to give owners and developers.

As rationale for the change, HUD expressed concern that the 120-day lead time allowed certain public housing authorities and private property owners to undertake cosmetic “just-in-time” repairs to properties rather than continuous maintenance programs. HUD Secretary Ben Carson stated in the PIH Notice release that “[i]t’s become painfully clear to us that too many landlords whom we contract with were using the weeks before their inspection to make quick fixes, essentially gaming the system.”

Secretary Carson further explained, “[t]he action we take today is part of a broader review of our inspections so we can be true to the promise of providing housing that’s decent, safe and healthy for the millions of families we serve.” To that end, HUD also announced a nationwide listening tour to gather input from the public and HUD stakeholders that is focused on a forthcoming pilot program to test new approaches to inspecting HUD-assisted properties.

How can you learn more?

If you have additional question on this topic, please reach out to the authors of this blogpost at hwright@bradley.com, aholland@bradley.com, or cfriedman@bradley.com. Heather Wright and Austin Holland will also be attending the Tennessee Housing Conference in Nashville on March 6 and 7, 2019. They will be available to discuss HUD’s significant reduction in advance notice for REAC inspections or other questions regarding regulatory compliance in affordable housing.

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Photo of Heather Howell Wright Heather Howell Wright

Heather Wright helps financial institutions identify operational risks and determine business solutions to mitigate those risks. She provides regulatory and compliance advice and manages litigation for financial institutions regarding compliance with, and alleged violations of, security agreements and other contracts as well as…

Heather Wright helps financial institutions identify operational risks and determine business solutions to mitigate those risks. She provides regulatory and compliance advice and manages litigation for financial institutions regarding compliance with, and alleged violations of, security agreements and other contracts as well as lending and consumer finance statutes and regulations — particularly in matters involving property insurance and flood insurance.

Photo of Austin Holland Austin Holland

Austin Holland’s practice focuses on regulatory compliance matters, government enforcement actions, and financial services litigation. He has represented clients in a variety of matters, but his practice is particularly focused on issues with an emphasis on matters related to housing.

Prior to…

Austin Holland’s practice focuses on regulatory compliance matters, government enforcement actions, and financial services litigation. He has represented clients in a variety of matters, but his practice is particularly focused on issues with an emphasis on matters related to housing.

Prior to joining Bradley, Austin worked for the U.S. Department of Housing and Urban Development in the Office of Litigation, where he handled matters related to affordable housing, reverse mortgages, fair housing, bankruptcy, foreclosures, grant recaptures, rulemaking, religious discrimination, and the Appointments Clause of the U.S. Constitution.

Photo of Christopher K. Friedman Christopher K. Friedman

Chris Friedman is a regulatory compliance attorney and litigator who focuses on helping consumer finance companies and small business lenders, as well as banks, fintech companies, and other participants in the financial services industry, address the challenges of operating in a highly regulated…

Chris Friedman is a regulatory compliance attorney and litigator who focuses on helping consumer finance companies and small business lenders, as well as banks, fintech companies, and other participants in the financial services industry, address the challenges of operating in a highly regulated sector. Chris focuses on both small business lenders and alternative business finance products and has helped non-bank small business lenders, banks who make small business loans, commercial credit counselors, lead generators, and others in the industry. He helps clients launch new products, conduct due diligence, engage in compliance reviews, evaluate litigation risk, and solve some of the unique legal problems faced by companies who work with small businesses. In that vein, Chris has written extensively about the upcoming rulemaking related to Dodd-Frank 1071, which will require data collection and reporting by companies making loans to certain small businesses.