The Rules and Requirements for HUD Section 8 Inspections
The HUD Section 8 Program provides housing assistance to around 5 million households around the U.S., making it the largest housing assistance program in the nation. While Section 8 housing provides a vital supply of lower-cost housing for low-income Americans, it can also be a highly profitable business for landlords, as they are guaranteed full or partial monthly rental payments from the local public housing authority (PHA).
Despite its benefits for both landlords and tenants, the Section 8 program comes with a certain amount of bureaucracy, including ample amounts of paperwork and inspections. When it comes to inspections, passing is essential, otherwise, you could lose your Section 8 privileges and the guaranteed income that it provides.
In this article, we’ll review everything that landlords need to know about Section 8 inspections, including when they occur, who conducts them, how to prepare, and what happens if you fail a Section 8 inspection. We’ll also provide a comprehensive Section 8 inspection checklist to make sure you don’t miss anything when preparing for your next inspection.
How Often Does HUD Do Inspections?
HUD Section 8 inspections generally occur in one of four situations, including:
Initial Inspection/Move-In Inspection: All units must pass an initial inspection before a HUD voucher holder can be assigned a lease and housing assistance payments (HAPs) can begin to be sent to the landlord. Move-in inspections are generally the least stringent type of Section 8 inspection, though they are still vital. Before the inspection occurs, it’s important to ensure the unit is vacant and the power is on.
Annual Inspection: Annual inspections are conducted on a yearly basis and are typically the most thorough. They are typically set at a pre-arranged date, which gives the landlord ample time to prepare. However, some public housing authorities only conducted inspections every two years due to budgetary concerns.
Special Inspections: Surprise audits are typically conducted in response to a specific complaint, typically originating from a neighbor or building resident, or even the owner themselves. However, they can also be conducted simply to ensure a building is compliant without specific landlord preparation.
Lending-Related Inspections: Additional Section 8 inspections may be required if a building is getting financing directly related to the Section 8 program, such as in the case of HUD multifamily loans or certain Fannie Mae and Freddie Mac multifamily loan products, which we discuss later in this article.
Does Section 8 Do Random Inspections?
Generally, PHAs do not do random Section 8 inspections. A sudden inspection will typically only occur if a complaint has been lodged with the PHA.
Who Conducts a Section 8 Inspection?
Most commonly, the local public housing authority (PHA) will hire a third-party inspection firm to conduct the entire inspection process. However, sometimes, larger PHAs will have an in-house inspection team.
What are the HUD Housing Quality Standards and What Is A HUD REAC Inspection?
HUD Section 8 inspections are generally referred to as Housing Quality Standards (HQS) inspections, as they ensure that a property adheres to HUD’s Housing Quality Standards (HQS). They are also known as HUD REAC Inspections as their principles are guided by HUD’s Real Estate Assessment Center (REAC). According to HUD, there are 13 key aspects of housing quality covered by the HQS. These include:
Site and neighborhood
Space and security
Structure and materials
Thermal environment
Sanitary facilities
Water supply
Access
Sanitary condition
Food preparation and refuse
Disposal
Interior air quality
Illumination and electricity
Lead-based paint
Smoke detectors
Are There Local Differences For Section 8 Inspections?
While there are general HUD requirements for Section 8 inspections, inspection requirements can vary based on regulations issued by local PHAs. These typically involve more in-depth inspections of specific unit elements, such as windows, electrical, or plumbing, to name a few. Inspection intervals may also be shorter or longer in some areas. This is why it’s important for landlords to not only check HUD’s national standards, but also the standards provided by their local housing authority in order to effectively prepare for an inspection.
The Complete Section 8 Inspection Checklist For 2022
In addition to the basic 13 elements of the HQS mentioned earlier, HUD has an official Section 8 inspection checklist intended for tenant surveys. For easier reading, the Housing Authority of the County of Ventura (AHACV) created a question-based checklist for new Section 8 move-ins, which we have provided below. While the checklist is intended for new move-ins, all relevant components also apply to units with existing tenants.
Is the unit move-in ready?
Is the unit vacant?
Is the unit connected to an approved water or sewer system?
Does the unit have proper space and security?
Does the unit have a kitchen, bathroom, and living room?
Does the unit have satisfactory means of entering and exiting?
Are the windows operable, have working locks, and have no cracks or missing panes?
Do all exterior doors lock; single cylinder locks and deadbolt on the entry door?
Does the unit have a safe, working heating system that provides adequate heat for the unit size?
Is the heating system properly vented, safe, and adequate?
Does the unit have adequate lighting and two electrical outlets per room?
Is there at least one window that opens in each bedroom?
Do the kitchen and bathroom have a fixed, overhead (ceiling) light?
Does the unit appear to be structurally sound?
Are interior walls and ceilings free from cracks, holes, bulges, leaning, loose surface materials, or peeling paint?
Are the exterior walls free from leaks, buckling holes, and loose siding/stucco?
Are the roofs free from leaks, buckling, missing, or loose roof materials?
Are exterior porches, railings, and walkways in safe condition?
Do the exterior stairs and/or interior stairs have handrails?
Is the interior free from pollutants including, but not limited to carbon monoxide, sewer gas, fuel gas, dust, mildew, and pet odors?
Is there a working smoke detector and carbon monoxide detector as specified by local codes (one per living level of the unit, including basements, but excluding crawl spaces and unfinished attics)? NOTE: If the unit is occupied by a hearing-impaired person, smoke detectors must have an alarm system designed for hearing-impaired persons.
Are the utilities on (water, gas, electric)?
Is there a clean working stove/oven in the unit and all burners function as designed without the use of an incendiary device (matches, lighter, etc.)?
Is the stove/oven vented properly?
Is there a clean, working refrigerator in the unit?*
Is there hot and cold running water with adequate pressure?
Are all plumbing fixtures working as designed with no water leaks or stoppages?
Is the unit free from infestation of fleas, rodents, roaches, or vermin of any kind?
Are the electrical outlets working properly with crack-free cover plates and switch plates?
Is the unit free from electrical hazards of any kind including non-testing or non-functional Ground Fault Circuit Interrupter (GFCI), missing cover plates, improperly installed hanging fixtures, exposed wiring, etc.?
Are the dwelling and yard free of all garbage/trash/debris and hazardous conditions?
Does the water heater have a temperature-pressure relief valve and discharge pipe within 12” above the floor or ground OR extending to the exterior?
Is the water heater in proper working condition and properly vented?
Is the unit empty and are all rooms or attachments available for inspection?
Does the unit have adequate and sanitary storage space?
Does the bathroom offer privacy?
Does the bathroom have a shower or tub?
Does the bathroom have a sink with hot and cold running water?
Does the bathroom have toilet facilities?
Does the bathroom have an open-able window, an exhaust fan, or a gravity vent?
Does the kitchen have a sink?
Is there a sanitary area for preparing and serving food?
Does the kitchen have a stove/oven?
If the building has an elevator, is it working properly?
Are all crawl covers and vent screens intact to prevent the entry of rodents?
If the windows have security bars, are quick-release latches present for an emergency exit?
Are all code violations corrected?
Is the neighborhood free from noise, health, and safety hazards (i.e., gas leaks, crime,
gangs, graffiti, pollutants)?
Is the unit free from:
Flooding?
Poor drainage?
Sewage hazards?
Septic tank backups?
Mudslides?
Excessive vibrations?
Paint flaking? (especially if there are children in the unit)
Among the issues mentioned above, some of the most common problems include:
Asbestos issues
No window locks/screens
Lack of smoke detectors on every level
Lack of bathroom fan/ventilation
No locks and deadbolts on exterior doors
Broken carbon monoxide and/or smoke detectors
Tub caulking issues
Improper pressure release valves on hot water heaters and boilers
Lack of handrails on stairs, both interior, and exterior
No weathertight windows or doors
Section 8 Inspection Results: How are Inspections Graded?
HUD Section 8 inspections can be graded in one of three ways; a pass, a fail, or an inconclusive result. A pass means that the building does not need any further inspection for the time being and is approved for occupancy. If any one element of the building is out of compliance, the building will generally fail the inspection.
In contrast to passes or failure, an inconclusive result means that the inspector needs more information in order to make a conclusion. When the information has been gathered and processed, the inspector will decide whether the property has passed or failed.
What Happens If You Fail A Section 8 Inspection?
If you have failed a Section 8 inspection, your PHA will provide you with a re-inspection date, and you will have until then to fix the problem or problems that cause the failure. Sometimes, very serious problems may need to be fixed within 24 hours. If a tenant has not yet moved into a unit that failed its inspection, the issue will need to be fixed before move-in.
If you fail a Section 8 inspection twice, your rental subsidy payments will typically be stopped until the issue is fixed. In addition, failed inspections may sometimes lead a PHA to require that a landlord reduce their rent due to lower-than-expected unit quality. If you add better amenities or improve the quality of the unit or units in question, you may be able to raise the rent back to the previous level.
What Happens If You Pass A Section 8 Inspection?
If you pass a Section 8 inspection, you are generally good to go until the next inspection. If there are no complaints and no additional move-ins, you may not be inspected again for up to two years.
Finding Your Results on Your Section 8 Inspection Portal
All Public Housing Authorities (PHAs) offering Section 8 subsidies to landlords have online landlord portals, which, if you are a Section 8 landlord, you are probably already using. You can generally either use this portal or a specialized Section 8 inspection portal on your local PHA website in order to check the results of your Section 8 inspection. This is typically the fastest way for you to see the results of your inspection.
Section 8 Inspections and Multifamily Financing From HUD, Fannie Mae, and Freddie Mac
In addition to the benefit of guaranteed monthly income and lower marketing costs, property owners and developers incorporating Section 8 units into their properties can also take advantage of a wider array of multifamily financing options, including specialized HUD, Fannie Mae, and Freddie Mac multifamily loans.
During the loan qualification process, however, the subject property will need to have both passed its most recent Section 8 inspection, as well as go through additional lender inspections, such as generalized property inspections, property condition assessments (PCAs), capital needs assessments (CNAs), and Phase I Environmental Assessments (ESAs).
Investors looking to build, purchase, refinance or rehabilitate multifamily properties utilizing the Section 8 program can take advantage of better rates and terms for HUD multifamily loans. These include the HUD 221(d)(4) loan program for new construction and substantial rehabilitation and HUD 223(f) loan program for purchases and refinances.
The HUD 221(d)(4) program currently offers fixed-rate, fully amortizing, non-recourse loans of 40-years (plus a 3-year, interest-only construction period). For Section 8 properties, the program offers LTVs up to 90% and DSCR requirements as low as 1.11x, whereas market-rate properties are provided up to 85% LTV and DSCR requirements of 1.17x.
The HUD 223(f) program is similar in nature and offers loans for the purchase and refinancing of multifamily properties. HUD 223(f) financing is structured as a 35-year, non-recourse, fully amortizing loan, and offers the same LTV and DSCR requirements as the HUD 221(d)(4) loan program for Section 8 properties.
Freddie Mac Multifamily also offers excellent financing for options for Section 8 owners and operators, with the Freddie Mac Section 8 loan program offering LTVs up to 80% and DSCRs as low as 1.20x, with LTVs up to 90% and DSCRs as low as 1.15x for Section 8 properties utilizing Low Income Housing Tax Credits (LIHTCs).
Likewise, Fannie Mae Multifamily’s Affordable Housing Preservation Loans also offer highly attractive terms for Section 8 landlords, offering loans up to 80% LTV with DSCR requirements as low as 1.20x.
In Conclusion: Preparing for Section 8 Inspections is Essential
If you’re a landlord, a HUD Section 8 inspection on your property might not be thrilling, but, as long as you prepare well, you have a good chance of passing. If you have a good property management firm, or self-manage and regularly conduct adequate maintenance and repairs, then preparing for a Section 8 inspection shouldn’t be overly painful.
However, if you’ve let the property go and there are issues, you may need to hustle to clean and prepare for your inspection. As with all things in real estate investing and property management, preparation is key, and the more prepared you are, the more likely you are to pass your inspection with flying colors— and continue receiving your regular rental subsidy payments.