How Some Property Owners are “Gaming” the HUD Inspection Process

Financial assistance from the Department of Housing and Urban Development (HUD) helps keep affordable housing within reach for more than 2 million American households. HUD wants to ensure that the housing it’s helping to provide is clean, safe, and in good repair—so it inspects properties and enforces federal standards.

But we’ve found that some property owners might be gaming the inspection process—taking actions that are technically allowed but that are not consistent with the intent of providing housing that is meeting the required physical condition standards. Today’s WatchBlog explores the issue.

The process

HUD’s Real Estate Assessment Center contracts with inspectors to inspect properties every 1-3 years. Properties with lower inspection scores get more frequent inspections than those with higher scores.

If housing doesn’t pass inspection, among other actions, properties can be referred to HUD’s Departmental Enforcement Center who can fine or suspend federal funds to the property owners, or refer more serious cases to the Inspector General or Department of Justice.

Does the inspection process work?

Some are concerned that the inspection process isn’t identifying troubled properties effectively. HUD continues to find properties that are in poor condition or have life-threatening health and safety issues. For example, inspectors found an electrical panel that had been “repaired” with asphalt.

Image

HUD doesn’t always meet its schedule for inspecting properties, which means problems could go unaddressed longer than they should. In some cases, properties did get inspected, but received scores that didn’t reflect their actual physical condition.

We found that guidance was not always clear about when HUD’s public housing staff should refer cases to the enforcement center. We also found that HUD could improve the way it assesses the outcomes of its enforcement activities. HUD said it plans to address these and other recommendations from our report on the enforcement process.

Gaming the inspection process

Property owners have found several ways to take advantage of the inspection process. For example:

• Exploiting the scoring system: The inspection scoring system deducts more points for problems with the whole site than for problems in individual units. So, some property owners have focused on repairs that allow them to pass inspection, potentially without addressing poor conditions in tenant units. Some property owners attempt to cover up, rather than address, problems—such as by using mulch outside of a building to hide erosion.
• Hiring private inspectors: HUD trains contract inspectors on its inspection protocol, which they follow when inspecting properties. Some property owners are privately hiring these trained inspectors to coach them on how to beat an inspection.
• Delaying inspections: By claiming to be in the process of making repairs, or making repairs just before an inspection, property owners can delay inspections or mask the condition the property was in for the entire year, resulting in a false positive report.

Repairing the process

HUD recognizes that its current inspection process is not working well. Officials have said they plan to revise the inspection process to help counteract this gaming of inspections, and to address the 14 recommendations from our report on the inspection process.

Comments on GAO’s WatchBlog? Contact blog@gao.gov.