Article | An NSPIREd Change? | Part 1 | NSPIRE Overview

Series Outline

“Will ENSPIRE replace UPCS for LIHTC properties when HUD implements the new physical condition standards?”

This was a great question posed by a Blog reader. The answer appears to be “yes” unless the IRS takes specific action to change this. Since NSPIRE is set to become effective 10/1/2023 at the latest, this is a matter of concern to LIHTC professionals. In this article first, we will examine why we conclude that the new HUD standard will probably apply to LIHTC properties. Then we will expand the discussion to cover what NSPIRE is in greater detail, discussing three "3s" as a memory aid. In the third installment,  a framework will be provided to assist in taking a deep dive into the many specific NSPIRE standards.

Why NSPIRE will apply to tax credit properties.

The rules relating to compliance inspections for the LIHTC program are found at Treasury Regulation 1.42-5. The physical standard is found at (d)(2), which says that LIHTC projects must meet “the uniform physical condition standards for public housing established by HUD (24 CFR 5.703).” The standard in this code reference was the HUD Uniform Physical Conditions Standards (UPCS). In 2023 the new National Standards for the Physical Inspection of Real Estate (NSPIRE) will replace UPCS in 24 CFR 5.703. Once this happens, NSPIRE will automatically apply to the LIHTC program. This just applies to the underlying protocol, not the REAC scoring. There is no indication that the REAC score will be applied to non-HUD properties, in accordance with how UPCS has historically been applied. See 8823 Guide 6-4 & 5.

What is NSPIRE?

NSPIRE is the new physical inspection model designed by HUD. The stated goal is for NSPIRE to promote the goal of reducing health and safety hazards in homes by prioritizing the condition of resident units. NSPIRE aligns multiple HUD programs to a single set of inspection standards. This promotes the same expectations of housing quality across HUD programs. It prioritizes health, safety, and functional defects over appearance.

HUD states that NSPIRE introduces a new approach for developing, updating, and adapting standards and scoring based on ongoing learning and improvement. In the process of developing NSPIRE, HUD is working with diverse stakeholders, including property owners/managers, PHAs, health and safety professionals, and resident groups. These players provide critical input to the standards, processes, and protocols. NSPIRE has been tested at volunteer properties throughout an NSPIRE Demonstration.

On the Public Housing front, HUD PIH received a congressional mandate to implement a single inspection protocol for public housing and the Housing Choice Voucher program units. NSPIRE was demonstrated for these programs, as well.

UPCS has been essentially unchanged for 20 years. However, under NSPIRE, HUD intends to leverage inspection data, lessons learned, and stakeholder feedback to update standards and scoring at least every three years.

With NSPIRE, HUD is attempting to make key improvements to inspections to increase their objectivity, accuracy, and consistency. Under NSPIRE, each inspection standard is supported by a rationale - a clear and concise explanation of the potential risk that a defect represents. By placing more emphasis on the condition of residents’ homes, HUD believes that the new inspection model will encourage property owners to perform year-round maintenance and address health and safety deficiencies in a timely fashion. Properties will not be expected to expend more resources, but rather shift their maintenance plans to prioritize residents’ health and safety.

What was the NSPIRE Demonstration?

HUD wanted to work collaboratively with public housing agencies and property owners/managers to evaluate NSPIRE’s effectiveness and refine the standards, scoring, and protocols. The NSPIRE Demonstration was a two-year test and evaluation period of NSPIRE standards and processes involving roughly 4,500 volunteer properties. By performing inspections under NSPIRE at these properties, HUD tested and evaluated the revised standards, new technology, the new scoring model, and new information exchange and support services. HUD began the NSPIRE Demonstration on August 21, 2019. Due to the COVID-19 pandemic and other factors, HUD extended the NSPIRE Demonstration beyond the original two years until April 30, 2023, to ensure that enough information can be collected to improve the model. REAC expanded services to support the prioritized backlog of inspections that occurred due to COVID-19-related reschedules.

NSPIRE Priorities

In summary, according to HUD's website, NSPIRE's priorities are:

For residents:

• Year-round maintenance with a unit-focused approach.
• Prioritization of residents' health and safety.
• Introducing resident surveys for better service.
• Safe and habitual homes.

Property Owners/Managers and Public Housing Authorities:

• Increased inspection consistency.
• Collaboration with HUD.
• Ability to contribute input to new standards.
• Access to inspection data.
• Reliable data and presentable reports for portfolio management and risk assessment.

Inspectors:

• Electronic-based inspections.
• Increased inspection accuracy.
• Clearly defined inspection standards and protocols.

HUD:

• Access to reliable, valid, and objective data.
• Alignment of multiple inspection standards.
• Adaption to industry change and modernization of health and safety standards.
• Better performance assessments for HUD-assisted housing. 

 Up next: NSPIRE Details 

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