MARCH 21, 2000

I am Hal Rose, Director of the Housing Authority of Temple, Texas. We operate 949 rental apartments. Four hundred and sixty one of these are Low Rent Public Housing or project based Section 8 and are subject to the Public Housing Assessment System (PHAS). The Housing Authority has been classified as a high performer for the last six years by HUD. We have also been the developer for 165 affordable single family homes built in our City of 54,000 during the last 2 ˝ years. We have recently built apartments on the local college campus for low-income student families, and we are currently reconstructing a large building to provide quality child development for the Housing Authority's low-income residents, most of whom are now working or training for the workforce. This Housing Authority is highly respected in our City and throughout the State of Texas.

I have been Director of our Housing Authority for 15 years after a career in the military. During that time, HUD has constantly struggled with both its reputation and effectiveness in carrying out its many programs. Housing Authorities, which HUD characterizes as a partner, frequently suffer as a result of HUD's problems. But never has HUD initiated a program that caused as much pain and meaningless effort as PHAS.

The assessment system consists of four parts:
1) Management
2) Financial
3) Physical Inspection
4) Resident Survey

I certainly see some serious problems with the Financial and Resident Survey parts, but because time is short, I will confine my remarks for the present to the Physical Inspection, which is a disaster.

In a November 1998, PHAS advisory physical inspection, we scored 91.3, which is high performer. We scored 97.3 overall. We also later scored 92.5 on the Maintenance and Repair part of the HUD Resident Survey, which is part of PHAS. This gives you some idea of what the residents think of the condition of their property. Eleven months after scoring 91.3 on the physical evaluation, we scored 29 in October 1999 on a second physical inspection, which is miserable failure. These inspections were made by the same inspector on the same properties. These complexes are 99% occupied in a fairly soft market. Although most of them were built in the 50's through the 70's, they are in excellent condition in the view of our residents. After all, they scored us 92.5% on the Resident Survey, part of the PHAS. How did this happen? The second time the inspector had a lot more experience at identifying the possible deficiencies, and he did so very diligently. With the PHAS inspection protocol that exists, I believe an inspector that scores deficiencies diligently will always fail the property being inspected. HUD is saying everything is OK and a lot of Housing Authorities are passing. But everything is not OK, and the score you make has a lot more to do with the inspector than it does the condition of the property. The HUD contract inspector who inspected our properties has verbally verified this thought.

We have spoken with six other Housing Authority representatives in our area. They all failed the inspection by a significant margin. I know five of the six to have housing that is decent, safe and sanitary.

The fatal flaw in the HUD physical inspection has to do with the overall scoring system. The score does not represent a percentage of the property which is in good condition. Instead, it is an arbitrary creation by HUD. I quote from a PHADA detailed analysis: "…four of the five areas which are scored each have more than 2000 possible points which can be deducted. Yet HUD is calculating an area score by deducting points from the arbitrarily chosen and disproportionately low number of 100. If an authority has 41 points deducted in an area - less than 2 percent of the 2000 possible points which can be deducted - it is the equivalent of failing." Now let me be clear about what is happening here. Your daughter goes in to take her math class final exam. The teacher says: "There are five parts to this exam. Each part has about 2000 points that can be deducted, and I am going to deduct points when I catch any of the possible mistakes. The bad news is that I am going to deduct the points from 100 in each of the five parts. If there is any good news, it's that I will stop deducting when I get to zero."

Such a scoring system seems ridiculous, but it is on the brink of being officially enacted by HUD. I have said, and repeat now, an inspector that scores these deficiencies diligently will always fail the property being inspected.

Now to talk about the deficiencies that HUD has defined. This is the Dictionary of Deficiencies.

PHADA has addressed 50 of these as being totally unfair in their weight, criticality or severity. HUD has not responded. I can only mention a couple here. In inspecting the site, one deficiency is overgrown or penetrating vegetation. The definition is "plant life in contact with an unintended surface such as buildings, gutters, walkways, roads, fences/walls, roofs, HVAC units, etc." One of these deficiencies can count 34% of the equivalent amount needed to fail the site. We had several. Take Ms. Emma Jackson's duplex. I have a picture of her flowers that are up against a brick wall. We received a deficiency for this.

Another is within a category defined by HUD as Health and Safety. It is included in all of the areas. A really big deduction can result from a Health and Safety violation because it is multiplied by the highest weight in its area and is often considered severe. My example is "observed mold or mildew" in the apartment unit. We have two 100-unit high rise buildings for elderly. Mildew will frequently begin in ceilings over shower stalls or in the caulk around tubs in a very short period of time in our humid climate. We can only catch this on annual inspections. In our industry, cleaning of shower stalls is also basically a resident responsibility. If this is to be a deficiency, and I have serious doubts, it should be very minor and not a killer.

What I am saying is not new to HUD. Our industry representatives, PHADA and NAHRO, have pointed out these problems. Housing Authorities have commented in detail on both the interim rule and the final rule. These comments have been, in large part, summarily dismissed.

HUD, through its Real Estate Assessment Center (REAC), has made a very weak and misleading response to PHADA's analysis of the scoring system and its failures. However, the last sentence of their response "encourages PHADA and HUD's other industry partners to continue the dialogue." We need to do this, but HUD has to show some susceptibility to logic and common sense. After the Dictionary of Deficiencies and scoring system are brought within reason, a broad test of the system should be made, with an advisory period of a year, allowing each PHA to review the system in the context of its own actual inspection.