Section 8 properties are subject to audits and inspections known as Management & Occupancy Reviews (MORs). HUD has recently introduced a new risk-based management and occupancy review schedule. The new schedule is designed to streamline and reduce the number of MOR reviews. The final rule implementing this new schedule comes seven years after the proposed rule and goes into effect on September 26.
Based on HUD data, most sites have historically received “satisfactory,” “above average,” or “superior” MOR scores. Therefore, there is no need to review properties as frequently as in the past.
The new MOR schedule establishes a frequency for completion of MORs based on a site’s previous MOR score and the site’s rating or classification under a risk-based model.
The frequency of MORs described here will begin with the first MOR scheduled on or after September 26.
The final rule changes MOR scheduling for the following Section 8 Programs:
- New Construction;
- Substantial Rehabilitation;
- State Housing Agencies;
- New Construction financed under Section 515 of the Housing Act of 1949;
- Loan Management Set-Aside;
- HAP Program for the Disposition of HUD-Owned Projects; and
- Section 202/8 Program
The schedule does not apply to restructured Mark-Market properties.
The new MOR schedule establishes a frequency for the completion of MORs based on a site’s previous MOR score and its risk classification. The risk classifications are:
- Not Troubled;
- Potentially Troubled; or
The risk rating considers the site’s financial characteristics such as low debt service coverage ratio, recent defaults, excessive vacancies, low REAC scores, tenant input provided directly to HUD, and pending foreclosure or partial claim payments.
The New Schedule
Section 8 sites that are “Potentially Troubled” or “Troubled” will automatically be reviewed annually. The new scheduling changes apply only to sites with a risk classification of “Not Troubled.”
- If a site’s risk classification is “Not Troubled” and the MOR review conducted on September 26 or later is “Unsatisfactory” or “Below Average,” the next MOR will be conducted within 12 months.
- If a site’s risk classification is “Not Troubled” and the MOR review conducted on September 26 or later is “Satisfactory,” the next MOR will be conducted within 24 months.
- If a site’s risk classification is “Not Troubled” and the MOR review conducted on September 26 or later is “Above Average” or “Superior,” the next MOR will be conducted within 36 months.
Owners and managers will know the timeframe for the site’s next review at the first MOR following September 26.
In addition to the noted schedule change, the final rule states that a MOR must be conducted within six months of a management or ownership change regardless of the results of the previous MOR.
It should be noted that MORs are not the same as REAC physical inspections, which are not affected by the new rule.