00-16153. Public Housing Assessment System Physical Condition Scoring Process

AGENCY:

Office of the Director of the Real Estate Assessment Center, HUD.

ACTION:

Notice.

SUMMARY:

This notice provides additional information to public housing agencies and members of the public about HUD's process for issuing scores under the Physical Condition Indicator of the Public Housing Assessment System (PHAS). This notice is an update of the Physical Condition Scoring Process notice that was published on June 23, 1999. This notice takes into consideration public comment received on June 23, 1999 notice and reflects the changes made to the PHAS regulations published on January 11, 2000, with certain corrections published on June 6, 2000. The changes made to this notice are discussed in the Supplementary Information section of this notice.

FOR FURTHER INFORMATION CONTACT:

For further information contact Wanda Funk, Real Estate Assessment Center, Department of Housing and Urban Development, 1280 Maryland Avenue, SW, Suite 800, Washington, DC 20024; telephone Technical Assistance Center at 1-888-245-4860 (this is a toll-free number). Persons with hearing or speech impairments may access that number via TTY by calling the Federal Information Relay Service at [phone]. Additional information is available from the REAC Internet Site, http://www.hud.gov/​reac.

SUPPLEMENTARY INFORMATION:

Purpose of This Notice

The purpose of this notice is to provide additional information about the scoring process for PHAS Indicator #1, Physical Condition. The purpose of the Physical Condition assessment is to ensure that public housing units are decent, safe, sanitary and in good repair, using HUD's uniform physical condition standards for the assessment. The physical condition assessment under the PHAS utilizes uniform physical inspection procedures to determine compliance with the uniform standards and is an important indicator of a PHA's performance.

Of the total 100 points available for a PHAS score, a PHA may receive up to 30 points under PHAS Indicator #1. The physical condition score is included in the aggregate PHAS score.

The information provided in this notice was originally published on May 13, 1999 (64 FR 26166) and republished on June 23, 1999 (64 FR 33650). HUD solicited public comment on both the May 13, 1999, and June 23, 1999, notices. This Physical Condition Scoring Process notice, published in this edition of the Federal Register, has been revised from the June 23, 1999, notice, to reflect the public comments received on the previous notices and to reflect the changes made to the PHAS regulations by final rule published on January 11, 2000 (65 FR 1712).

This notice is different from the June 23, 1999 notice in the following respects: some items and their associated item weights in Appendix 1 (Item Weights and Criticality levels) have been modified and terminology has been changed for severity levels from “Minor, Major and Severe” to “Level 1, Level 2 and Level 3” respectively. Additionally, the Dictionary of Deficiency Definitions, which was published as Appendix 2 to the previous notices, is undergoing further revision and will be published subsequently in the Federal Register. Appendix 3 to the June 23, 1999 notice, which provided a sample physical inspection summary report, is not a part of this updated notice, and was not intended to be permanent part of the Physical Condition Scoring Notice.

The PHAS/REAC Physical Inspection and the HQS Inspection

The PHAS physical inspection is performed by HUD's Real Estate Assessment Center (REAC), and is also referred to as the REAC physical inspection. The REAC physical inspection encompasses virtually everything covered by the Housing Quality Standards (HQS) inspection. The REAC physical inspection, however, is more objective and more defined in identifying and classifying deficiencies. While the HQS inspection generates a reasonably subjective “pass/fail” designation, the REAC inspection generates much more comprehensive results, such as:

• Physical inspection scores reported at the property level;
• Area level scores for each of the five REAC physical inspection areas; and
• Observations of deficiencies recorded by the inspector electronically at the time of the inspection.

The Physical Inspection Scoring Process

1. Definitions

The following are the important definitions of terms used in the physical condition scoring process:

Score means a number between 0 and 100 that reflects the physical condition of a property, inspectable area, or sub-area:

• To record a health or safety problem, a letter is added to the property score (a, b, or c); and
• To note that smoke detectors are inoperable or missing, an asterisk (*) is added to the property score.

Inspectable area means any of the five major components of the property, which are:

• Site
• Building exteriors o Building systems
• Common areas
• Dwelling units

Sub-area means an inspectable area for one building. For example, if a property has more than one building, each inspectable area for each building in the property is treated as a sub-area.

Inspectable items refer to walls, kitchens, bathrooms, and other things to be inspected in an inspectable area. The number of inspectable items may vary from 8 to 17 items for each area. Weights are assigned to each item as shown in Appendix 1 (Item Weights and Criticality Levels).

Deficiencies refer to specific problems, comparable to HQS, that can be recorded for the inspectable items, such as a hole in a wall or a damaged refrigerator in the kitchen.

Criticality means one of five levels that reflect the relative importance of the deficiencies for an inspectable item. Appendix 1 also lists all deficiencies with their designated levels, which vary from 1 to 5, with 5 as the most critical. The deficiencies also have assigned values used in scoring as follows:

Criticality	Level	Value
Critical	5	5.00
Very important	4	3.00
Important	3	2.25
Contributes	2	1.25
Slight contribution	1	0.50

Based on the importance of the deficiency, reflected in its criticality value, points are deducted from the property score. For example, a clogged drain in the kitchen is more critical than a damaged surface on a counter top. Therefore, more points will be deducted for a clogged drain than for a damaged surface.

Severity means one of three levels that reflect the extent of damage associated with each deficiency, with values assigned as follows:

Severity level	Value
3	1.00
2	0.50
1	0.25

Appendix 1 shows the severity levels that are possible for each deficiency. Based on the severity of each deficiency, the score is reduced. Points deducted are calculated as the product of the item weight and the values for criticality and severity, as described below. For specific definitions of each severity level, see the REAC's “Dictionary of Deficiency Definitions,” which is available from REAC's Internet Site at http://www.hud.gov/​reac. Again, the udpated version of the dictionary will soon be posted on this website and published subsequently in the Federal Register as a separate notice.

Normalized area weights mean weights used with area scores to create property level scores. The weights are adjusted to reflect the inspectable items that are present.

2. Scoring Process Input

To generate accurate scores, it is crucial to determine the appropriate relative weights of the various components of the inspection; that is, which components are the most important, the next most important, and so on. To develop the scoring methodology for the PHAS physical inspection, HUD utilized information provided by several knowledgeable parties, including:

• Professionals experienced in assessing the physical condition of properties;
• Representatives from the housing and public housing industries; and
• HUD professionals.

In an extensive series of meetings, these parties gave HUD valuable advice and comments on the relative weights and values for inspectable areas, items, criticality of deficiencies, and severity levels of deficiencies.

3. Equity Principles

In addition to determining the appropriate relative weights, HUD also took into consideration several issues concerning equity between properties:

Proportionality. The scoring methodology includes an important control, which does not allow any sub-area scores to be negative. If a sub-area, such as the building exterior for a given building, has so many deficiencies that the sub-area score is negative, the score is set to zero. This control mechanism ensures that no single building or dwelling unit can affect the overall score more than its proportionate share of the whole.

Configuration of property. The scoring methodology takes into account that properties have different numbers of units in buildings. To fairly score properties with different numbers of units in buildings, the area scores are calculated for building exteriors and systems by using weighted averages of the sub-area scores, where the weights are based on the number of units in each building.

Differences between properties. The scoring methodology also takes into account that properties have different features and amenities. To ensure that the overall score reflects only items are present to be inspected, weights to calculate area and property scores are adjusted depending on how many items are there to be inspected.

4. Deficiency Definitions

During a physical inspection of a property, the inspector looks for deficiencies for each inspectable item within the inspectable areas, such as the walls (item) of a dwelling unit (area). A specific criticality level is assigned to each deficiency. The criticality level reflects the importance of the deficiency relative to all deficiencies for the item. One of three severity levels is also assigned based on the observed condition.

The REAC's updated version of the “Dictionary of Deficiency Definitions,” soon to be published, specifically defines the three levels of severity: level 1 (minor), level 2 (major) and level 3 (severe).

5. Health and Safety Deficiencies

The REAC physical inspection emphasizes health and safety (H&S) deficiencies because of their crucial importance to the well-being of residents. H&S deficiencies can substantially reduce the overall property score. As noted earlier, the H&S deficiencies are highlighted by adding a letter to the numeric score. Letters to the numeric score are added as follows:

• If there are no H&S deficiencies, add a;
• If there are H&S deficiencies that are not life-threatening (NLT), add b; and
• If there are exigent H&S deficiencies that are life threatening (LT), i.e., calling for immediate attention or remedy—or fire safety H&S deficiencies, add c.

Appendix 1 lists all H&S deficiencies with an “LT” designation for exigent/fire safety and “NLT” for non-life threatening deficiencies.

To ensure prompt correction of H&S deficiencies, the inspector gives the property representative the list of every observed exigent/fire safety H&S deficiency before leaving the site. The property representative acknowledges receipt of the deficiency report by signature. The inspector also transmits the deficiency report to HUD not later than the morning after completing the inspection. HUD sends to all PHAs an inspection report on the H&S deficiencies recorded by the inspector. These reports clearly show:

• The number of H&S deficiencies (exigent/fire safety and non-life threatening) that the inspector observed;
• All observed smoke detector deficiencies; and
• A projection of the total number of H&S problems that the inspector potentially would see in an inspection of all buildings and all units.

If there are smoke detector deficiencies, the physical condition score will include an asterisk. However, problems with smoke detectors do not currently affect the overall score. When there is an asterisk indicating the property has at least one smoke detector deficiency, that part of the score may be identified as “risk.” For example, “93a, risk” for 93a* and “71c, risk” for 71c*.

There are six distinct letter grade combinations: a, a*, b, b*, c and c*. For example:

• A score of 90c* means that the property contains at least one exigent/fire safety H&S deficiency to be corrected, including at least one smoke detector deficiency, but is otherwise in excellent condition;
• A score of 55a means that the property is in poor condition, even though there are no H&S deficiencies; and
• A property in excellent physical condition with no H&S deficiencies would have a score of 90a to 100a.

6. Scoring Process Elements

The physical condition scoring process is based on three elements within a property:

• Inspectable areas;
• Inspectable items; and
• Observed deficiencies.

7. Scoring as Weighted Averages

The score for a property is the weighted average of area scores, with the area weights adjusted to take into account how many of an area's inspectable items are actually present to be inspected.

The area scores are calculated by deriving weighted averages of sub-area scores over buildings or dwelling units as appropriate.

The sub-area scores are calculated by deducting points for deficiencies, based on criticality and severity levels. (Sub-area scores may not be less than zero.) Points are also deducted for H&S deficiencies.

8. Essential Weights and Levels

The process of scoring a property's physical condition depends on the weights, levels, and associated values of several quantities:

• Weights for inspectable areas (5 areas);
• Weights for inspectable items within areas (8 to 17 per area);
• Criticality levels and their associated values for the possible deficiencies within items inspected;
• Severity levels and their associated values for deficiencies; and
• Health and safety deductions (exigent/fire safety and non-life threatening) for site, buildings, and dwelling units.

9. Normalized Area Weights

A property's overall physical condition score is a weighted average of area scores. Approximate relative weights appeared in the preamble to the PHAS final rule, published on September 1, 1998 (see 63 FR 46596, pages 46598-46599):

Area	Weight (in percent)
Site	15
Building exterior	15
Building systems	20
Common areas	15
Dwelling units	35

These weights are assigned if all inspectable items are present for each area for each building and unit. All of the inspectable items may not be present in every inspectable area. When items are missing in an area, the area weights are modified to reflect the missing items so they once again add up to 100%. This is illustrated in Example 3 below where some inspectable items are missing in several inspectable areas.

Although rare, it is possible that all of the inspectable items are missing in one inspectable area—the “common areas.” In this case, the weight of the “common areas” would be 0% and its original 15% weight needs to be redistributed to the other inspectable areas. The 15% is redistributed by totaling the weights of other inspectable areas (85%) and dividing each weight by that amount (0.85). The modified weights of 17.6%, 17.6%, 23.5%, 0%, and 41.2% for site, building exterior, building systems, common areas, and units, respectively add up to 100%.

10. Site, Unit and Sub-Area Scores

These are the steps to arrive at site, unit and sub-area scores for a site, building, or unit:

Step 1: Calculate an “initial proportionate score”—the difference between the possible points for the site, a building sub-area, or a unit and the deductions associated with the deficiencies recorded. The number of possible points is the total of the inspectable item weights, ignoring the H&S item, for the site, or a building sub-area, or unit.

Step 2: Calculate the deduction for an observed deficiency by multiplying the relevant item weight by the criticality value and by the severity value.

Step 3: In a similar manner, reduce the scores for any health and safety (H&S) deficiencies observed, including those in the H&S item and those in other non-H&S items. (The item weight for deficiencies included in the H&S item is equal to the largest weight among the items present.) At this point, the control to prevent negative scores is applied. Thus, no one building or unit may affect an area score more than its proportionate share would justify.

Step 4: Normalize the resulting proportionate scores to scores based on 100 points by dividing by the total of weights of items present to be inspected, other than the H&S item.

11. Area Scores

Within each area involving either multiple buildings or units, the area score is a weighted average of the building sub-area scores or unit scores. To calculate these weighted averages, follow these guidelines:

Dwelling units: The area score is the weighted average of sub-area scores for each unit, weighted by the total of item weights present to be inspected in each unit.

Common areas: Like the dwelling unit score, the area score for common areas is the weighted average of sub-area common area scores weighted by the total weights for items inspected in the common areas for each building. When computing area scores for common areas, there may be special considerations when there are common buildings. (The term common building refers to any inspectable building that contains no dwelling units.) All common buildings are inspected. In those cases where a sample is taken of buildings with units, the effect of common buildings on the common area score should be reduced. This reduction is accomplished by multiplying the weights for common buildings by the number of units in inspected buildings, divided by the total number of units in the property.

Building exteriors or building systems: The area scores for building exteriors and building systems are weighted averages of sub-area scores. The weights are the product of the total weights for items, ignoring the H&S item, inspected for each building exterior or systems times the total number of units for each building. (Note: the total number of units is all units, not just units inspected.) When computing area scores for building exterior or building systems, a number of adjustments are made for common buildings without units. In a manner identical to that for common areas, if buildings with units are sampled, the weights of common building scores are reduced. Also for weighting purposes, a common building is assigned the average number of units in all buildings, including all common buildings and all buildings with units, whether inspected or not. Finally, to adjust for differences in size between common buildings, a common building's weight is multiplied by the total weight of items present to be inspected for the building's common areas.

12. Overall Property Score

To calculate the overall property score, the normalized area weights are applied to the area scores.

13. Possible Points

Normalized area weights reflect both the initial weights and the relative weights between areas of inspectable items actually present. For reporting purposes, normalized weights are presented as the maximum point contributions for each of the five inspectable areas. In the Physical Inspection Report, sent to all PHAs, the following items are listed:

• Normalized weights as the “possible points” by area;
• The area scores, taking into account the points deducted for observed deficiencies;
• The deductions for H&S for site, buildings and units, where H&S deductions for buildings are combined for exteriors, systems and common areas; and
• The overall property score.

The Physical Inspection Report allows the PHA to see the magnitude of the points lost by inspectable area, and the impact on the score of the H&S deficiencies.

14. Examples of Physical Condition Score Calculations

To illustrate how physical condition scores are calculated, three examples are provided below.

Example #1: Example #1 illustrates how the score for a building exterior sub-area is calculated based on the following features:

#1a. Ignoring the H&S item, the other seven items have a total weight of 100%, as shown in Appendix 1. If the building had no fire escapes, an item with a nominal weight of 16.0%, then the total item weight for the remaining non-H&S items would be 84%, which is then the base (84.0 points) from which deductions are made to create the “initial proportionate score” as described, above, under Sub-Area Scores.

#1b. Assume damaged vents were found in the roof. The criticality level for this deficiency is provided in Appendix 1 as a 4, which has a value of 3.00 as given, above, under Definitions. If, based on the Dictionary of Deficiency Definitions (Appendix 2 to the previous notice), it is determined that the damaged vents seen are level 1 deficiencies, then the amount of points deducted is the item weight (16.0) times the criticality value (3.00), times the severity value (0.25), which equals 12.0 points.

#1c. If this is the only deficiency observed, then the initial proportionate score for this sub-area would be 84.0−12.0 or 72.0 points.

#1d. Additional deficiencies or H&S deficiencies (calculated in the same manner) would further decrease the sub-area score and if the score dropped below zero, then it would be changed to zero.

#1e. The initial proportionate sub-area score is then normalized to a 100 point basis by dividing by the total of the non-H&S item weights (0.84), which would create the final score of (72.0)/(0.84)=85.7

Example #2: Example #2 illustrates how the score for an area is calculated based on the following features:

#2a. Consider a property with 2 buildings with the following characteristics:

• Building #1 (from Example #1, above):

—10 units

—84.0% of the weight for the items that were present in building exterior

—Building exterior score is 85.7 points

• Building #2:

—20 units

—100% of the weight for the items that were present in building exterior

—Building exterior score is 69.1 points

#2b. The building exterior score for the building exterior area is the weighted average of the individual scores. Each building exterior score is weighted by the number of units and the percent of the weight for items present in the building exterior.

#2c. The scores for buildings #1 and #2, above, are calculated using the following formula: Building Exterior Score=sum of [(Building score) times (Building weight divided by the sum of Building weights)]

• Building #1 weight: [(10 units)x(84.0% weight)]=8.4
• Building #2 weight: [(20 units)x(100% weight)]=20
• Total weight=8.4 + 20, or 28.4
• Building exterior score=

(85.7 points)x(8.4/28.4)

+(69.1 points)x(20/28.4)

=25.3+48.7

=74.0

Example #3: Example #3 illustrates how the score for a property is calculated based on the following:

#3a. Consider a property with the following characteristics:

• Site:

—Score: 90 points

—100% of weight of items present

—Nominal weight: 15%

• Building Exteriors (from example #2, above):

—Score: 74 points

—92% of weight of items present

—Nominal weight: 15%

• Building Systems:

—Score: 70 points

—80% of weight of items present

—Nominal weight: 20%

• Common Areas:

—Score: 60 points

—30% of weight of items present

—Nominal weight: 15%

• Dwelling Units:

—Score: 80 points

—80% of weight of items present

—Nominal weight: 35%

#3b. First, adjust the area weights for each area. Multiply the weight of items present by the nominal weight for each area and add the total:

• Site: 15x100%=15
• Building Exteriors: 15x92%=13.8
• Building Systems: 20x80%=16.0
• Common Areas: 15x30%=4.5
• Dwelling Units: 35x80%=28.0
• Total:=77.3

#3c. Adjust the area weights to “normalize” so that they add to 100. Divide each adjusted area weight by the total and multiply by 100 (this also results in the maximum possible points reported for each area):

• Site: (15/77.3)x100=19.4
• Building Exteriors: (13.8/77.3)x100=17.9
• Building Systems: (16/77.3)x100=20.7
• Common Areas: (4.5/77.3)x100=5.8
• Dwelling Units: (28/77.3)x100=36.2

#3d. Multiply the new “normalized” weights by the area scores, above, divide by 100, and add the results:

• Site: 19.4x90/100=17.5 points
• Building Exteriors: 17.9x74/100=13.2 points
• Building Systems: 20.7x70/100=14.5 points
• Common Areas: 5.8x60/100=3.5 points
• Dwelling Units: 36.2x80/100=29.0 points
• Total Property Score:=77.6 points

15. Computing the PHAS Overall Physical Inspection Score

The physical inspection score for the PHAS for a PHA is the weighted average of the PHA's individual project physical inspection scores, where the weights are the number of units in each project divided by the total number of units in all projects for the PHA.

Example:

Project 1 has a score of 60 and has 100 units

Project 2 has a score of 80 and has 900 units.

The overall PHAS score is computed as follows:

Score

=[60×100/(100+900)] + [80×900/(100+900)]

=6+72

=78

16. Accessibility Questions

For public housing developments for which accessibility requirements are applicable, the physical inspection will include determining if: (1) There is a wheelchair accessible route to and from the main ground floor entrance of the buildings inspected; (2) the main entrance for every building inspected is at least 32″ wide, measured between the door and the opposite door jamb; (3) there is an accessible route to all exterior common areas; and (4) for multistory buildings that are inspected, the interior hallways to all inspected units and common areas are at least 36″ wide. This item is not scored.

Dated: June 20, 2000.

Donald J. LaVoy,

Director, Real Estate Assessment Center.