We highlight two areas of concern in the report.

HUD’s Office of Inspector General (OIG) recently issued its annual report summarizing what it considers the most serious management challenges facing the department. The report represents OIG’s independent perspective on the top management challenges facing HUD in fiscal year (FY) 2024 and beyond.

Compared to last year’s list, OIG created an expanded section, entitled “Promoting Health and Safety in HUD-Assisted Housing,” to include last year’s top management challenge on “Eliminating Hazards in HUD-Assisted Housing” and has added safety challenges related to protecting HUD’s beneficiaries from unsafe living conditions and sexual misconduct.

Another distinction for this cycle is the removal of “Sustaining Progress in Financial Management” as a top challenge for the department. According to the report, HUD has shown sustained progress in financial management over the last two years, obtaining clean opinions on audits of its financial statements and addressing longstanding financial reporting weaknesses.

OIG has identified the following as the nine top management challenges for this cycle:

• Promoting Health and Safety in HUD-Assisted Housing
• Increasing Access to Affordable Housing
• Mitigating Counterparty Risks
• Grants Management
• Enhancing Oversight of Disaster Recovery
• Managing Fraud Risk and Improper Payments
• Improving IT Modernization and Cybersecurity
• Managing Human Capital
• Increasing Effectiveness in Procurement

OIG says HUD has made notable progress over the past year in important areas. But we’ll highlight two areas of concern involving health and safety that are discussed in the report.

Lead Hazards

HUD is responsible for ensuring that its assisted properties are decent, safe, sanitary, and in good repair and that its programs and projects comply with environmental regulations. It has long been known that exposure to lead is dangerous, especially for children under the age of 6, to whom even low-level exposure can increase the likelihood of behavioral problems, learning disabilities, seizures, and in extreme cases, death.

This year, OIG included eight lead-related recommendations in its FY 2024 priority open recommendations. Among the recommendations are for HUD to determine the number of developments that contain lead-based paint and lead-based paint hazards in public housing, developing a nationwide inspection review protocol, addressing the number and frequency of PHAs’ self-inspections, considering information from CDC on whether to lower the elevated blood lead level (EBLL) threshold, and reviewing variances in HUD’s EBLL Tracker.

Identifying and Remedying Poor Living Conditions

In its report, OIG highlighted the role of inspections in improving poor living conditions. The physical conditions of HUD-assisted properties are an ongoing concern of Congress and the American public. And recent media attention has heightened awareness of the need for extensive capital repairs of HUD’s public housing portfolio and the inferior conditions of some multifamily projects that participate in HUD’s programs.

NSPIRE. In its prior Top Management Challenges reports, OIG discussed HUD’s efforts to modernize its physical housing inspection process by launching a two-year NSPIRE demonstration program. The goal of the program was to assess all aspects of HUD’s physical inspection process, including the evaluation of physical inspection data and a new scoring model, to ensure that housing is decent, safe, and sanitary.

HUD published the final rule on May 11, 2023. The new inspection standards prioritize the detection and elimination of in-unit health and safety hazards and were instituted to address stakeholders’ concerns that inspections hadn’t been measuring the right things to ensure that scores reflected unit conditions.

GAO report. The report also notes that the U.S. Government Accountability Office (GAO) in its most recent list of priority open recommendations has inspections as a focus. GAO said, “HUD’s inspections continue to find properties in poor physical condition and with life-threatening health and safety issues.”

Additionally, in a May 2023 report, OIG highlighted that the Real Estate Assessment Center (REAC) lacked adequate policies, procedures, and controls to ensure that public housing units were inspected in the required time frames and that HUD was delayed in inspecting properties it designated as high priority. OIG recommended that HUD prioritize those inspections and develop controls to prevent future inspections from being delayed. According to the report, both recommendations remain open.

Section 8 audit. OIG has also conducted an audit of HUD’s Office of Multifamily Housing Program’s Section 8 controlling participants to determine whether HUD accurately identified risks and properly flagged properties that received poor physical inspection scores. OIG concludes that HUD needs to improve its oversight of private landlords with histories of failing to make repairs to protect tenants from unsafe living conditions. OIG found 13 of 21 properties reviewed with consecutive REAC scores below 60 were missing the required flags in HUD’s Active Partners Performance System for unacceptable physical condition.

Additionally, in six of the 13 instances, the property had more than one missing flag for the below-60 REAC score infraction. This condition resulted in HUD’s relying on incomplete previous participation information to make decisions about future participation, which could potentially impact the health and safety of residents.