Changes to the Public Housing Assessment System (PHAS): Physical Condition Scoring Notice, 10055-10062 [2011-2633]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 76, Number 36 (Wednesday, February 23, 2011)]
[Notices]
[Pages 10055-10062]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-2633]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5094-N-03]


Changes to the Public Housing Assessment System (PHAS): Physical 
Condition Scoring Notice

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Notice.

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SUMMARY: This notice provides additional information to public housing 
agencies (PHAs) 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 amends the current 
Physical Condition Scoring Process notice that was published on June 
29, 2000, as corrected and updated by the Physical Condition Scoring 
Process notice that was published on November 26, 2001.

DATES: Effective Date: March 24, 2011.
    Comment Due Date: April 25, 2011.

ADDRESSES: Interested persons are invited to submit comments on this 
notice to the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 7th Street, SW., Room 
10276, Washington, DC 20410-0500. Communications must refer to the 
above docket number and title. There are two methods for submitting 
public comments. All submissions must refer to the above docket number 
and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street, SW., Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
https://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
https://www.regulations.gov website can be viewed by other commenters 
and interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
rule.

    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at 202-402-3055 (this is 
not a toll-free number). Individuals with speech or hearing impairments 
may access this number via TTY by calling the Federal Information Relay 
Service, toll-free, at 800-877-8339. Copies of all comments submitted 
are available for inspection and downloading at https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Claudia Yarus, Department of Housing 
and Urban Development, Office of Public and Indian Housing, Real Estate 
Assessment Center (REAC), 550 12th Street, SW., Suite 100, Washington, 
DC 20410 at 202-475-8830 (this is not a toll-free number). Persons with 
hearing or speech impairments may access this number through TTY by 
calling the toll-free Federal Information Relay Service at 800-877-
8339. Additional information is available from the REAC Internet site 
at https://www.hud.gov/offices/reac/.

SUPPLEMENTARY INFORMATION: 

I. Purpose of This Notice

    The purpose of this notice is to describe the PHAS physical 
condition scoring process and to prescribe the frequency of individual 
project inspections.

II. Purpose of the PHAS Physical Condition Assessment

    The purpose of the PHAS physical condition assessment is to ensure 
that public housing units are decent, safe, sanitary, and in good 
repair, as determined by an inspection conducted in accordance with 
HUD's Uniform Physical Condition Standards (UPCS) codified at 24 CFR 
part 5, subpart G. The physical condition assessment under the PHAS 
utilizes uniform physical inspection procedures to determine compliance 
with uniform standards and is an important indicator of performance for 
a project and a PHA. All projects will be assessed under the physical 
condition indicator, even if a PHA has not converted to asset 
management.
    The physical condition indicator score is based on a maximum of 40 
points. In order to receive a passing score under this indicator, a 
project must achieve at least 24 points or 60 percent of the points 
available under this indicator. Under the PHAS physical condition 
indicator, REAC will calculate a score for each project, as well as for 
the overall physical condition of a PHA. The physical condition score, 
based on a 40-point scale, is included in each PHA's aggregate PHAS 
score.

III. Transition to Asset Management and Frequency of Inspections

    The number of units in a PHA's Low-Rent program and the PHAS 
designation for small PHAs will determine the frequency of physical 
inspections during and after the transition to asset management. PHAs 
with less than 250 public housing units will receive a PHAS assessment, 
based on its PHAS designation, as follows:
    (1) A small PHA that is a high performer will receive a PHAS 
assessment every 3 years;
    (2) A small PHA that is a standard or substandard performer will 
receive a PHAS assessment every other year; and
    (3) All other small PHAs will receive a PHAS assessment every year, 
including a PHA that is designated as troubled or Capital Fund 
troubled, in accordance with Sec.  902.75.
    For PHAs with 250 or more units of any PHAS designation, the 
inspection score of each project (not the overall physical indicator 
score) will determine the frequency of inspections for that project. 
Projects that score 90 points or higher based on a possible 100-point 
project score will be inspected triennially. Projects that score less 
than 90 points and at least 80 points based on a possible 100-point 
project score will be inspected biennially. Projects that score less 
than 80 points based on a possible 100-point scale will be inspected 
annually. The performance incentive will change from PHA-based to 
project-based. Project inspections for PHAs with 250 or more units will 
be based on the project's prior year inspection score.
    Projects for any PHA designated as troubled will be inspected 
annually

[[Page 10056]]

regardless of any project's individual score. PHAs of 250 units or more 
with unit-weighted project scores from 2 or 3 different years will have 
all their prior year scores of 90 and above or 80 and above (and 
current year scores for each project that was inspected), multiplied by 
40 percent, totaled together, and rounded to produce an overall 
physical indicator score.
    In the baseline year, every PHA will receive an overall PHAS score 
and in all four of the PHAS indicators: Physical condition; financial 
condition; management operations; and Capital Fund program. This will 
allow a baseline for the physical condition inspections and the 3-2-1 
inspection schedule, as well as a baseline year for the small 
deregulated PHAs.

IV. Item Weights and Criticality Levels, and Dictionary of Deficiency 
Definitions

    The Item Weights and Criticality Levels tables and the Dictionary 
of Deficiency Definitions, currently in use, were published as 
Appendices 1 and 2 to the Public Housing Assessment System Physical 
Condition Scoring Process Interim Scoring, Corrections, and 
Republication notice (66 FR 59102), dated November 26, 2001. The 
Federal Register notice along with both appendices is available in 
HUD's REAC Physical Inspection Library Internet site at: https://www.hud.gov/offices/reac/library/documents/fr-notice20011126.pdf. A 
stand-alone, user friendly Dictionary of Deficiency Definitions is 
found at https://www.hud.gov/offices/reac/pdf/pass_dict2.3.pdf.

V. Validity and Reliability of the Physical Inspection Protocols

    The Conference Report (H.R. Conf. Rep. 106-988; October 18, 2000) 
accompanying HUD's FY 2001 Appropriations Act (Pub. L. 106-377, 
approved October 27, 2000) directed HUD to continue to assess the 
accuracy and effectiveness of the PHAS system, in particular the 
physical condition inspection protocol. HUD was also directed to 
perform a statistically valid test of PHAS, conduct a thorough analysis 
of the results, and have the methodology and results reviewed by an 
independent expert before taking any adverse action against a PHA based 
solely on its PHAS score. HUD retained the Louis Berger Group (the 
contractor) to conduct the review of the methodology and results of the 
statistically valid test.
    The findings of the contractor's study concluded that the physical 
condition inspection protocol is repeatable and reliable. A report 
addressing the issues raised in the Conference Report, entitled the 
Review and Assessment of the REAC Study of the Physical Assessment Sub-
System (PASS) Process, was provided to the House and Senate Committees 
on Appropriations on March 1, 2001.

VI. The Physical Inspection Scoring Process

    The PHAS physical inspection generates comprehensive results, 
including physical inspection scores reported at the project level; 
area level scores for each of the five physical inspection areas, as 
applicable; and observations of deficiencies recorded electronically by 
the inspector at the time of the inspection.

1. Definitions

    The following are the definitions of the terms used in the physical 
condition scoring process:
    Criticality means one of five levels that reflect the relative 
importance of the deficiencies for an inspectable item. Appendix 1 
lists all deficiencies with their designated criticality levels, which 
vary from 1 to 5, with 5 being the most critical. Based on the 
criticality level, each deficiency has an assigned value that is used 
in scoring. Those values are 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 as reflected by its 
criticality value, points are deducted from the project score. For 
example, a clogged drain in the kitchen is more critical than a damaged 
surface on a countertop. Therefore, more points will be deducted for a 
clogged drain than for a damaged surface.
    Deficiencies refer to specific problems that are recorded for 
inspectable items, such as a hole in a wall or a damaged refrigerator 
in the kitchen.
    Inspectable area means any of the five major components of the 
project: Site, building exteriors, building systems, common areas, and 
dwelling units.
    Inspectable items refer to walls, kitchens, bathrooms, and other 
features that are inspected in an inspectable area. The number of 
inspectable items varies for each inspectable area, from 8 to 17. 
Weights are assigned to each item to reflect their relative importance 
and are shown in the Item Weights and Criticality Levels tables. The 
tables refer to the weight of each item as the nominal item weight, 
which is also known as the amenity weight.
    Normalized area weight represents weights used with area scores to 
calculate project-level scores. The weights are adjusted to reflect the 
inspectable items actually present at the time of the inspection. These 
weights are proportional, as follows:
     For dwelling units, the area score is the weighted average 
of sub-area scores for each unit, weighted by the total of item weights 
present for inspection in each unit, which is referred to as the 
amenity weight.
     For common areas, the area score is the weighted average 
of sub-area common area scores weighted by the total weights for items 
available for inspection (or amenity weight) in each residential 
building common area or common building. Common buildings refer to any 
inspectable building that contains no dwelling units. All common 
buildings are inspected.
     For building exteriors or building systems, the area 
scores are weighted averages of sub-area scores.
     For sites, the area score is calculated as follows: (1) 
The amenity weights found on a site, (2) minus deductions for 
deficiencies, and (3) normalized to a 100-point scale.
    Normalized sub-area weight means the weight used with sub-area 
scores to compute an inspectable area score. These weights are 
proportional:
     For dwelling units, the item weight of amenities available 
in the unit at the time of inspection is the amenity weight.
     For common areas, the common area amenity weight is 
divided by a building's probability of being selected for inspection. 
All residential buildings with common areas may not be selected for 
inspection; however, all buildings with common areas are selected to 
determine the amenity weight.
     For building exterior and building systems, the building 
exterior or building system amenity weight is multiplied by the 
building's size (number of units) and then divided by its probability 
of being selected for inspection.
     For the site, there is no sub-area score. For each 
project, there is a single site.
    Note that dividing by a building's probability of being selected 
for inspection is the same as multiplying by the probability weight, 
since the probability weight is 1 divided by the probability of being 
selected for inspection.
    Project is used synonymously with the term ``property.''

[[Page 10057]]

    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
------------------------------------------------------------------------

    The Item Weights and Criticality Levels tables show the severity 
levels that are possible for each deficiency. Based on the severity of 
each deficiency, the score is reduced. Points deducted are calculated 
by multiplying the item weight by the values for criticality and 
severity, as described below. For specific definitions of each severity 
level, see the Dictionary of Deficiency Definitions.
    Score means a number between 0 and 100 that reflects the physical 
condition of a project, inspectable area, dwelling area, or sub-area. A 
property score includes both an alphabetical and a numerical component. 
The number represents an overall score for the basic physical condition 
of a property, including points deducted for health and safety 
deficiencies other than those associated with smoke detectors. The 
letter code specifically indicates whether health and safety 
deficiencies were detected, as shown in the chart below:

----------------------------------------------------------------------------------------------------------------
                                                                      Health and safety deficiencies
                                                         -------------------------------------------------------
                                              No health                     Life              Fire safety
  Physical inspection score alphanumeric     and safety     Non-Life     threatening ---------------------------
                   codes                    deficiencies   threatening  (LT)/exigent    No smoke        Smoke
                                                              (NLT)      health and     detector      detector
                                                                        safety (EHS)    problems      problems
----------------------------------------------------------------------------------------------------------------
a.........................................            X   ............  ............            X   ............
a*........................................            X   ............  ............  ............            X
b.........................................  ............            X   ............            X   ............
b*........................................  ............            X   ............  ............            X
c.........................................  ............  ............            X             X   ............
c*........................................  ............  ............            X   ............            X
----------------------------------------------------------------------------------------------------------------

    To record a health or safety problem, a letter is added to the 
project score (a, b, or c); and to note that one or more smoke 
detectors are inoperable or missing, an asterisk (*) is added to the 
project score.
    Sub-area means an area that will be inspected for all inspectable 
areas except the site. For example, the building exterior for building 
``2'' is a sub-area of the building exterior area. Likewise, unit ``5'' 
would be a sub-area of the dwelling units area. Each inspectable area 
for each building in a property is treated as a sub-area.

2. Scoring Protocol

    To generate accurate scores, the inspection protocol includes a 
determination of 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. For example, in the 
building exterior area, a blocked or damaged fire escape is more 
important than a cracked window, which is more important than a broken 
light fixture. The Item Weights and Criticality Levels tables provide 
the nominal weight of observable deficiencies by inspectable item for 
each area/sub-area. The Dictionary of Deficiency Definitions provides a 
definition for the severity of each deficiency in each area/sub-area.

3. Equity Principles

    In addition to determining the appropriate relative weights, 
consideration is also given to several issues concerning equity between 
properties so that scores fairly assess all types of properties:
    Proportionality. The scoring methodology includes an important 
control that 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 would be 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 project. The scoring methodology takes into 
account different numbers of units in buildings. To fairly score 
projects 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 and on the building's probability of 
being selected for inspection. In addition, the calculation for common 
areas includes the amenities existing in the residential common areas 
and common buildings at the time of inspection.
    Differences between projects. The scoring methodology also takes 
into account that projects have different features and amenities. To 
ensure that the overall score reflects only items that are present to 
be inspected, weights to calculate area and project scores are adjusted 
depending on how many items are actually there to be inspected.

4. Deficiency Definitions

    During a physical inspection of a project, the inspector looks for 
deficiencies for each inspectable item within the inspectable areas, 
such as the walls (the inspectable item) of a dwelling unit (the 
inspectable area). Based on the observed condition, the Dictionary of 
Deficiency Definitions defines up to the three levels of severity for 
each deficiency: Level 1 (minor), Level 2 (major), and Level 3 
(severe). The associated values were shown earlier in the first chart 
of Section VI. A specific criticality level, with associated values as 
shown in that chart, is also assigned to each deficiency. The 
criticality level reflects the importance of the deficiency relative to 
all other possible observable deficiencies for the inspectable area.

5. Health and Safety Deficiencies

    The UPCS physical inspection emphasizes health and safety (H&S) 
deficiencies because of their crucial impact on the well-being of 
residents. A subset of H&S deficiencies is exigent health and safety 
(EHS) deficiencies. These are life threatening (LT) and require 
immediate action or remedy. EHS deficiencies can substantially reduce 
the overall project score. As noted in the definition for the word 
``score'' in the Definitions section, all H&S deficiencies are 
highlighted by the addition of a letter to the numeric score.

[[Page 10058]]

The Item Weights and Criticality Levels tables list all H&S 
deficiencies with an LT designation for those that are EHS deficiencies 
and an NLT designation for those that are non-life threatening. The LT 
and NLT designations apply only to severity level 3 deficiencies.
    To ensure prompt correction of H&S deficiencies, the inspector 
gives the project representative a deficiency report identifying every 
observed EHS deficiency before the inspector leaves the site. The 
project representative acknowledges receipt of the deficiency report by 
signature. The inspector also transmits the deficiency report to HUD no 
later than the morning of the first business day after completing the 
inspection. HUD makes available to all PHAs an inspection report that 
includes information about all of the H&S deficiencies recorded by the 
inspector. The report shows:
     The number of H&S deficiencies (EHS and NLT) 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.
    Problems with smoke detectors do not currently affect the overall 
score. When there is an asterisk indicating that the project 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 based 
on the H&S deficiencies and smoke detector deficiencies observed: a, 
a*, b, b*, c, and c*. For example:
     A score of 90c* means that the project contains at least 
one EHS deficiency to be corrected, including at least one smoke 
detector deficiency, but is otherwise in excellent condition.
     A score of 40b* means the project is in poor condition, 
has at least one non-life threatening deficiency, and has at least one 
missing or inoperable smoke detector.
     A score of 55a means that the project is in poor 
condition, even though there are no H&S deficiencies.
     A project 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 each project: (1) Five inspectable areas (site, exterior, 
systems, common areas, and dwelling units); (2) inspectable items in 
each inspectable area; and (3) observed deficiencies. In broad terms, 
the score for a property is the weighted average of the five 
inspectable area scores, where area weights are adjusted to account for 
all of the inspectable items that are actually present to be inspected. 
In turn, area scores are calculated by using weighted averages of sub-
area scores (e.g., building area scores for a single building or unit 
scores for a single unit) for all sub-areas within an area.

7. Scoring Using Weighted Averages

    For all areas except the site, normalized sub-area weights are 
determined using the size of sub-areas, the items available for 
inspection, and the sub-area's probability of selection for inspection. 
Sub-area scores are determined by deducting points for deficiencies 
based on the importance (weight) of the item, the criticality of the 
deficiency, and the severity of the deficiency. The maximum deduction 
for a single deficiency will not calculate a score of less than zero. 
Points will be deducted only for one deficiency of the same kind within 
a sub-area. For example, if multiple deficiencies for broken windows 
are recorded, only the most severe deficiency observed (or one of the 
most severe, if there are multiple deficiencies with the same level of 
severity) will result in a point deduction.

8. Essential Weights and Levels

    The process of scoring a project's physical condition depends on 
the weights, levels, and associated values of the following quantities:
     Weights for the 5 inspectable areas (site, building 
exteriors, building systems, common areas, and dwelling units).
     Weights for inspectable items within inspectable areas (8 
to 17 per area).
     Criticality levels (critical, very important, important, 
contributes, and slight contribution) plus their associated values for 
deficiencies within areas inspected.
     Severity levels (3, 2, and 1) and their associated values 
for deficiencies.
     Health and safety deductions (exigent/fire safety and non-
life threatening for all inspectable areas).

9. Area Weights

    Area weights are used to obtain a weighted average of area scores. 
A project's overall physical condition score is a weighted average of 
all inspectable area scores. The approximate relative weights are:

------------------------------------------------------------------------
                        Inspectable area                          Weight
------------------------------------------------------------------------
Site...........................................................      15%
Building Exterior..............................................      15%
Building Systems...............................................      20%
Common Areas...................................................      15%
Dwelling Units.................................................      35%
------------------------------------------------------------------------

     These weights are assigned for all inspections when all 
inspectable items are present for each area and 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 that within that area they 
will add up to 100 percent. Area weights are recalculated when some 
inspectable items are missing in one or more area(s).
    Although rare, it is possible that an inspectable area could have 
no inspectable items available; for example, there could be no common 
areas in the inspected residential buildings and no common buildings. 
In this case, the weight of the ``common areas'' would be 0 percent and 
its original 15 percent weight would be equitably redistributed to the 
other inspectable areas, as shown in the example below:

----------------------------------------------------------------------------------------------------------------
                                                        Missing common                               Adjusted
           Inspectable area              Normal weight       areas             Adjustment             weight
----------------------------------------------------------------------------------------------------------------
Site..................................             15%             15%  .15/.85 =...............             18%
Building Exterior.....................             15%             15%  .15/.85 =...............             18%
Building Systems......................             20%             20%  .20/.85 =...............             23%
Common Areas..........................             15%              0%  ........................              0%
Dwelling Units........................             35%             35%  .35/.85 =...............             41%
                                       -------------------------------------------------------------------------
    Total.............................            100%             85%  ........................            100%
----------------------------------------------------------------------------------------------------------------


[[Page 10059]]

    The original 15 percent weight for the common areas is 
redistributed by totaling the weights of other inspectable areas (100 
percent-15 percent = 85 percent) and dividing the weights of each other 
area by that amount (0.85). The modified weights would then be 18 
percent for site, 18 percent for building exterior, 23 percent for 
building systems, 0 percent for common areas, 41 percent for dwelling 
units, and again be equal to (be normalized to) 100 percent.

10. Area and Sub-Area Scores

    For inspectable areas with sub-areas (all areas except sites), the 
inspectable area score is a weighted average of the sub-area scores 
within that area. The scoring protocol determines the amenity weight 
for the site and each sub-area as noted in Section VI.1 under the 
definition for normalized sub-area weight. For example, a property with 
no fencing or gates in the inspectable area of the site would have an 
amenity weight of 90 percent or 0.9 (100 percent minus 10 percent for 
lack of fencing and gates), and a single dwelling unit with all items 
available for inspection, except a call-for-aid would have an amenity 
weight of 0.98 or 98 percent (100 percent minus 2 percent for lack of 
call-for-aid). A call-for-aid is a system designed to provide elderly 
residents the opportunity to call for help in the event of an 
emergency.
    The amenity weight excludes all health and safety items. Each 
deficiency as weighted and normalized are subtracted from the sub-area 
or site-weighted amenity score. Sub-area and site area scores are 
further reduced for any observed health and safety deficiencies. These 
deductions are taken at the site, building, or unit level. At this 
point, a control is applied to prevent a negative site, building, or 
unit score. The control ensures that no single building or unit can 
affect an area score more than its weighted share.

11. Overall Project Score

    The overall project score is the weighted average of the five 
inspectable area scores, with the five areas weighted by their 
normalized weights. Normalized area weights reflect both the initial 
weights and the relative weights between areas of inspectable items 
actually present. For reporting purposes, the number of possible points 
is the normalized area weight adjusted by multiplying by 100 so that 
the possible points for the five areas add up to 100. In the Physical 
Inspection Report for each project that is sent to the PHA, 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 each inspectable area; and
     The overall project score.
    The Physical Inspection Report allows the PHA and the project 
manager to see the magnitude of the points lost by inspectable area and 
the impact on the score of the H&S deficiencies.

12. Examples of Physical Condition Score Calculations

    The physical inspection scoring is deficiency based. All projects 
start with 100 points. Each deficiency observed reduces the score by an 
amount dependent on the importance and severity of the deficiency, the 
number of buildings and units inspected, the inspectable items actually 
present to be inspected, and the relative weights between inspectable 
items and inspectable areas.
    The calculation of a physical condition score is illustrated in the 
examples below. The examples go through a number of interim stages in 
calculating the score, illustrating how sub-area scores are calculated 
for a single project, how the sub-area scores are rolled up into area 
scores, and how area scores are combined to calculate the overall 
project score. One particular deficiency is carried through the 
examples showing the end result.
    As will be seen, the deduction starts out as a percent of the sub-
area. Then the area score is considerably decreased in the final 
overall project score because the deduction is averaged across other 
sub-areas and then averaged across the five inspectable areas. Although 
interim results in the examples are rounded, only the final results are 
rounded for actual calculations.
    To illustrate how physical condition scores are calculated, three 
examples are provided below. Following this section, another example is 
given specifically for public housing projects to show how project 
scores are rolled up into the PHAS physical indicator score for the PHA 
as a whole.
    Example #1 illustrates how the score for a sub-area of building 
systems is calculated. Consider a 10-unit residential building in which 
the five inspectable areas are present. During the inspection, damaged 
vents in the roof are observed. This deficiency reflected a severity 
level of 1, which has a severity weight of 0.25; a criticality level of 
4, which has a criticality weight of 3; and an item weight of 16.0. The 
amount of the points deducted is the item weight, multiplied by the 
criticality weight multiplied by the severity value. This is 
illustrated in the table below.

Area: Building Exterior
Item: Roof
Deficiency: Damaged Vents
Criticality Level: 4, Severity Level: 1

------------------------------------------------------------------------
                     Element                          Associated value
------------------------------------------------------------------------
Item Weight......................................                    16
Criticality Weight...............................                   3.0
Severity Weight..................................                  0.25
Calculation of Points Deducted for Deficiency....    16 x 3 x 0.25 = 12
------------------------------------------------------------------------

    If this building exterior has all inspectable items except for a 
fire escape, the amenity weight for the first building exterior adds up 
to 84 percent (100 percent starting point minus 16 percent for the lack 
of a fire escape, excluding H&S items). If the damaged roof vents were 
the only deficiency observed, then the initial proportionate score for 
this sub-area (Building Exterior 1) would be the amenity score 
minus the deficiency points and then normalized to a 100-point basis, 
as shown below. 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, it would be set to zero.

------------------------------------------------------------------------
                    Element                         Associated value
------------------------------------------------------------------------
Amenity Score.................................                       84
Deficiency Points.............................                       12
Calculation for the Initial Proportionate                  84 - 12 = 72
 Score........................................
Normalizing Factor............................                      100
Calculation for the Initial Sub-Area Score         (72/84) x 100 = 85.7
 Building Exterior 1.................
------------------------------------------------------------------------


[[Page 10060]]

    Example #2 illustrates how the area score is calculated. Consider a 
property with two buildings with the following characteristics:
     Building 1 (from Example 1, above):
--10 units
--84 percent amenity weight for items that are present to be inspected 
in the building exterior
--Building exterior score is 85.7 points
     Building 2:
--20 units
--100 percent amenity weight for items that are present to be inspected 
in the building exterior
--Building exterior score is 69.1 points

    The building exterior score for the building exterior area is the 
weighted average of the individual scores for each building exterior. 
Each building exterior score is weighted by the number of units and the 
percent of the weight for items present to be inspected in the building 
exterior.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Sum of the             Initial             Building
            Building                Number of     x   Amenity weight   =    Unit weighted   /      building      x    proportionate   =   exterior  area
                                      units                                    average              weights               score                score
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.....................              10  ...            0.84  ...            08.4  ...            28.4  ...            85.7  ...            25.3
2.....................              20  ...            1.00  ...            20.0  ...            28.4  ...            69.1  ...            48.7
                                ------------------------------------------------------------------------------------------------------------------------
    Total......................              30  ...  ..............  ...            28.4  ...  ..............  ...  ..............  ...            74.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Example #3 illustrates how the overall weighted average for the 
building exterior area amenity weight is calculated. The separate 
amenity weights for buildings 1 and 2, above, are 
used in conjunction with the total units to calculate the building 
exterior area amenity weight. Each building amenity weight is 
multiplied by the number of units in that building and then divided by 
the total number of units for all buildings, as shown below. For 
purposes of the next example, the Overall Building Exterior Area 
Amenity Weight of 94.7 was rounded to 95.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                              Overall
                                                                                                                                             building
                                    Number of                               Unit weighted                             Normalized to        exterior area
       Building exterior              units       x   Amenity weight   =       average      /     Total units    x     a 100 point    =      weighted
                                                                                                                          basis               average
                                                                                                                                          amenity weight
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.....................              10  ...            0.84  ...            08.4  ...              30  ...             100  ...            28.0
2.....................              20  ...            1.00  ...            20.0  ...              30  ...             100  ...            66.7
                                ------------------------------------------------------------------------------------------------------------------------
    Total......................              30  ...  ..............  ...            28.4  ...  ..............  ...  ..............  ...            94.7
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Example #4 illustrates how the score for a property is calculated. 
Consider a property with the following characteristics:
     Site:
--Score: 90 points
--100 percent amenity weight
--Nominal weight: 15 percent
     Building Exteriors (from example 2 and 
3, above):
--Score: 74 points
--95 percent weighted average amenity weight
--Nominal weight: 15 percent
     Building Systems:
--Score: 70 points
--80 percent weighted average amenity weight
--Nominal weight: 20 percent
     Common Areas:
--Score: 60 points
--30 percent weighted average amenity weight
--Nominal weight: 15 percent
     Dwelling Units:
--Score: 80 points
--90 weighted average amenity weight
--Nominal weight: 35 percent

    To continue the scoring protocol, the adjusted area weights for all 
five inspectable areas are determined. For purposes of this example, 
the adjusted weights and maximum possible points for each of the five 
inspectable areas are shown in the table below. All of the values in 
this table, except for the values for building exteriors, are presumed. 
The values for building exteriors were calculated as part of this 
ongoing example.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Amenity                                Normalized to           Maximum
        Inspectable area           Area weight    x   Amenity weight   =      weighted      /   Total adjusted   x      100 point     =      possible
                                                                               average              weight                scale               points
--------------------------------------------------------------------------------------------------------------------------------------------------------
Site...........................              15  ...            1.00  ...            15.0  ...            81.2  ...             100  ...            18.5
Building Exterior..............              15  ...            0.95  ...            14.2  ...            81.2  ...             100  ...            17.5
Building Systems...............              20  ...            0.80  ...            16.0  ...            81.2  ...             100  ...            19.7
Common Areas...................              15  ...            0.30  ...            04.5  ...            81.2  ...             100  ...            05.5
Dwelling Units.................              35  ...            0.90  ...            31.5  ...            81.2  ...             100  ...            38.8
                                ------------------------------------------------------------------------------------------------------------------------
    Total......................  ..............  ...  ..............  ...            81.2  ...  ..............  ...  ..............  ...           100.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The nominal possible points for each inspectable area is multiplied 
by the amenity weight, divided by the total adjusted amenity weight, 
and normalized to a 100-point basis, in order to produce the possible 
points for the inspectable area. The property score is the sum of all 
weighted area scores for that property. The sample shown below reflects 
how the deficiency from example 1 in the building exterior 
area impacts the overall property score. The property score of 77.8 is 
rounded to 78 for the final example.

[[Page 10061]]



----------------------------------------------------------------------------------------------------------------
                                                                                                  Project 1 weighted
         Inspectable area            Area points    x     Area score     /     a 100 point    =     area scores
                                                                                  scale
----------------------------------------------------------------------------------------------------------------
Site.............................            18.5  ...              90  ...             100  ...            16.7
Building Exterior................            17.5  ...              74  ...             100  ...            13.0
Building Systems.................            19.7  ...              70  ...             100  ...            13.8
Common Areas.....................            05.5  ...              60  ...             100  ...            03.3
Dwelling Units...................            38.8  ...              80  ...             100  ...            31.0
                                  ------------------------------------------------------------------------------
    Total........................           100.0  ...  ..............  ...  ..............  ...            77.8
----------------------------------------------------------------------------------------------------------------

13. Computing the PHAS Physical Inspection Score

    The overall 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. For 
example, the project described in Example 1 from above has a 
score of 78 with 30 units. Using another project with a score of 92 and 
650 units with project from Example 1 would calculate to an 
overall physical inspection score of 91. Note the impact on the overall 
physical inspection of a single property with a large number of units.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 Weighted           Rescaling to                   Number of                                  Project
                   Project                        average      x    the 40-point      =     x    units in the    /      Total PHA     =    weighted area
                                              property score            basis                      property               units                score
--------------------------------------------------------------------------------------------------------------------------------------------------------
1..................................              78  ...              .4    31.2  ...              30  ...             680  ...             1.4
2..................................              92  ...              .4    36.8  ...             650  ...             680  ...            35.2
                                             -----------------------------------------------------------------------------------------------------------
    Total...................................             100  ...  ..............  ......  ...  ..............  ...  ..............  ...            36.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The physical subsystem indicator score for this PHA provided to 
HUD's centralized scoring system would be 36.6, rounded to a score of 
37. Weighted-average property scores are scaled to a 40-point basis by 
multiplying by 0.4. The total is then multiplied by the number of units 
within the property and divided by the total number of PHA units, to 
produce a unit-weighted average. All of the project's weighted area 
scores are totaled and rounded using a rounding policy of rounding up 
to the nearest whole number a score ending in 0.5 and above, and 
rounding down a score ending in 0.4 and below.

14. Examples of Sampling Weights for Buildings

    As shown above, buildings with the most dwelling units have the 
greatest impact on the project's overall physical score. Buildings with 
the most dwelling units also have the greatest likelihood of being 
selected for inspection. The determination of which buildings will be 
inspected is a two-phase process. In Phase 1 of the process, all 
buildings that contain dwelling units are sorted by size and then the 
units are randomly sorted within each building. A computer program 
selects a random sample of units to be inspected.
    All buildings in a project may not be selected in the building 
sample during Phase 1 sampling, because a building may have so few 
units, such as a sole scattered-site single-family unit. A Phase 2 
sampling is used to increase the size of the number of buildings 
selected. In Phase 2, the additional buildings that are included in the 
sample are selected with equal probability so that the residential 
building sample size is the lesser of either the dwelling unit sample 
size or the number of all residential buildings. All common buildings 
are selected for inspection. To illustrate the process for sampling 
buildings, 2 examples are provided below:
    Example #1. This first example uses a project with 2 buildings 
where both buildings are selected for inspection. Building A has 10 
dwelling units and building B has 20 dwelling units, for a total of 30 
dwelling units. The target dwelling unit sample size for a project with 
30 dwelling units is 15 units. The sampling ratio for this project is 
two and is calculated by dividing the 15 target units by the total 
number of units (30/15=2). In this illustration, every second dwelling 
unit will be selected from the random sort of the units within each 
building. Since both buildings have at least 2 dwelling units, both 
buildings are certain to be selected for inspection in Phase 1. Since 
all buildings were selected in Phase 1 of sampling, Phase 2 is not 
required. Both buildings in this example have a selection probability 
of 1.00 and a sampling weight of 1.00.
    Example #2. This example uses a project where only some of the 
buildings within the project are selected for inspection in Phase 1, so 
a Phase 2 sampling is required. For this example, a project is 
comprised of 22 residential buildings. Two buildings each have 10 
dwelling units and 20 buildings are scattered-site single-family 
dwelling units. The project has 40 total dwelling units (two buildings 
with 10 units each added to 20 single units (20+20)). The target sample 
size for a project with 40 dwelling units is 16 units, and the sampling 
ratio would be 2.5 (40 total dwelling units divided by 16 target 
dwelling units). Since the target sample size is the lesser of either 
the dwelling unit sample size (16) or the number of all residential 
buildings (22), 16 residential buildings would be inspected for this 
project.
    In Phase 1 of sampling, the 2 buildings with 10 dwelling units are 
selected with certainty since they both have more than 2.5 dwelling 
units. Each of the scattered-site single family buildings then have a 
40 percent probability of selection (100 percent or 1 divided by the 
2.5 sampling ratio equals 0.40). Assume that both large buildings and 8 
of the single-family buildings (10 buildings in all) were selected in 
Phase 1. This leaves 12 single-family buildings available for selection 
during Phase 2. Since 16 residential buildings need to be inspected, 
the sample of 10 buildings selected in Phase 1 falls 6 buildings short 
of a full sample. Therefore, the system will select 6 of the 12 
previously unselected buildings during Phase 2 sampling. The chance of 
any single building, of the 12 remaining buildings, being selected 
during Phase 2 is 0.50 or

[[Page 10062]]

50 percent (6 target buildings divided by 12 previously unselected 
buildings). The overall probability of any one of the 20 single-family 
units being selected during either Phase 1 or Phase 2 is calculated as 
follows:

------------------------------------------------------------------------
            Element                    Protocol            Calculation
------------------------------------------------------------------------
Phase 1 Single-family Unit      8 of 20 buildings.....  8/20 = .40.
 Building Selection.
Phase 2 Single-family Unit      6 of 12 buildings.....  6/12 = .50.
 Building Selection.
Overall Possibility of Single-  100% minus the 40%       (1.00 - .40) x
 family Unit Building            already selected        .50 = .30.
 Selection During Phase 2.       during Phase 1 and
                                 multiplied by the 50%
                                 chance of being
                                 selected during Phase
                                 2.
Overall Probability of a        Probability from Phase  .40 + .30 = .70.
 Single-family Unit Building     1 added to
 Selection.                      probability from
                                 Phase 2.
Verification--Overall Single-   14 of 20 buildings....  14/20 = .70.
 family Unit Building
 Selection.
Probability Weight* of          1 divided by the        1.00/.70 = 1.43.
 Selection for Single-family     overall probability
 Unit Building Selection.        of Single-family Unit
                                 Building Selection.
------------------------------------------------------------------------
See the note in the definitions section under ``VI. The Physical
  Inspection Scoring Process'' in this Appendix A for ``normalized sub-
  area weight.''

15. Accessibility Questions

    HUD reviews particular elements during the physical inspection to 
determine possible indications of noncompliance with the Fair Housing 
Act (42 U.S.C. 3601-3619) and section 504 of the Rehabilitation Act of 
1973 (29 U.S.C. 794). More specifically, during the physical 
inspection, the inspector will record 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 inches wide, measured between the door and the opposite 
door jamb; (3) there is an accessible route to all exterior common 
areas; and (4) for multi-story buildings that are inspected, the 
interior hallways to all inspected units and common areas are at least 
36 inches wide. These items are recorded, but do not affect the score.

    Dated: February 1, 2011.
Sandra B. Henriquez,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 2011-2633 Filed 2-18-11; 8:45 am]
BILLING CODE 4210-67-P