Unit Quality and Rent Reasonableness

HUD requires Housing Assistance Corporation (HAC) to determine the quality of a unit as part of the Rent Reasonableness process. HAC’s inspectors, as part of the HUD Housing Quality Standards initial inspection of a unit, will conduct a subjective, unbiased evaluation of the unit and assign it a grade. This grade is used to determine the contract rent. Following is a generalized version of the grading criteria HAC uses to determine a unit’s quality. Not every unit fits every grading point. These are just some of the considerations each inspector weighs in determining the quality.

“A” UNIT:  Excellent Condition/New or Substantial Rehab

  • Excellent condition, typically new construction or substantial rehab.
  • Quality workmanship and materials; primarily new materials are used; repairs are often “invisible.”
  • For turnover, owner routinely repaints, shampoos carpets, cleans entire unit.
  • Appliances are new or in very good condition.
  • Common areas and exteriors are well maintained and attractive. Amenities may include disposal, dishwasher, extra bathroom, large rooms, washer/dryer hookup or washer/dryer in place, security devices, patio or deck, owner-supplied utilities, exceptional neighborhood qualities.
  • There is evidence of on-going preventive maintenance and quality repairs. Maintenance workers are trained to repair more than just what is cited on the inspection report.
  • Owner/agent practices good tenant screening and is responsive to tenant and maintenance problems before they become serious. Owner maintains a regular presence on the property.

“B” UNIT:  Well Maintained, Good Quality Older Unit

  • This unit might be an A except for the lack of amenities or quality of newness that makes the A unit more appealing. Evidence of recent renovation or good quality repairs – mix of new and used materials, repairs may still be “visible” (rough surface, holes not filled completely, uneven seams, etc.).
  • Exterior and common areas well maintained. At turnover this may be somewhat less well prepared than the A unit, “broom cleaned” but not always repainted, shampooed, washed.
  • Has at least one feature or amenity that adds to desirability but otherwise has less-than-ideal conditions.
  • Overall maintenance is above average but generally is reactive rather than preventive.
  • The B unit may be one in transition, in either direction. Newly acquired properties are often B units, and depending on commitment and resources of the new owner, may improve to B+ or better or deteriorate to a C unit.

“C” UNIT:  Average Condition Older Unit: May Be Deteriorating

  • This unit is in average condition, but with normal occupancy conditions typically results in a number of fail items during the year. Generally passes inspection only after a number of what should have been normal maintenance repairs have been cited.
  • Typically left-over, lower grade materials are used; possibly swapped from one unit to another as needed. Workers repair only what is specifically cited.
  • Repairs often “visible,” such as unsanded surfaces, unfinished work at seams, holes cut for placement of fixtures left as is, paint spills, imprecise painting on woodwork. Repairs often do not hold up for more than 6 to 8 months.
  • Move-in condition is mediocre – needs cleaning, shampoo, painting, removal of trash, etc.
  • Appliances and unit features are dated but functional, rooms and closets are of adequate size, but there is nothing special. There are no extras that might enhance desirability, such as a porch or deck, large and well-maintained yard, large or extra rooms.
  • Little on-going preventive maintenance. Owner typically responds only to problems reported by the tenant or inspector.

NOTE:  A C unit may be one that would otherwise be a C- except for filling a specific and difficult to meet need, such as handicapped accessibility. In such cases these units will be carefully monitored as marginal units to ensure that conditions are improved over time.

“C-“ UNIT:  Marginal Conditions

  • This unit cannot be rated a solid C but is not completely unsatisfactory. To pass inspection as a new lease-up, the owner must make sufficient improvements to qualify the unit/property as a C or better.
  • Little or no ongoing maintenance except in response to serious repair need; exterior and common areas typically neglected.
  • Unit interiors rarely repainted, little upgrading over time, minimal amenities/heat/electric/plumbing for family’s needs.
  • Repairs often of poor quality, and problems recur within a period of weeks or months. Sometimes a hazardous or marginal condition results from the repair and becomes a new “violation” upon reinspection.
  • Common use of old, faulty, mismatched materials.
  • Poor tenant selection. Owner overly tolerant of tenant problems. Little presence on the property, so emerging and chronic problems are not discovered.