HUD Updates Environmental Regulations to Lower Costs for Multifamily Housing Developers

The U.S. Department of Housing and Urban Development (HUD) on May 4 announced it was updating certain environmental review requirements, with the aim of lowering the “costs and complexity” for multifamily lenders and developers.

The updates relate to railroad vibration assessments, pressurized pipeline policy, standards for high voltage power lines and fall hazards, and outdoor noise sensitivity assessment of properties. The changes are being made to “streamline outdated and burdensome requirements for lenders and developers seeking [Federal Housing Administration]-insured financing,” HUD said in a statement.

HUD said the changes are designed to lower development costs and eliminate inefficiencies.

The latest updates, detailed in a May 4 Mortgagee Letter, revise the environmental requirements set in the 2020 Multifamily Accelerated Processing (MAP) Guide published by HUD in March 2021.

One of the issues covered in the MAP guide included the examining of existing properties for damage from railroad track vibrations when situated less than 100 feet from the tracks.

In the letter, HUD said that considering risks to buildings from railroad vibrations is an underwriting concern for the lender and removed the language from the MAP guide.

While railyards must still be considered as sources of loud impulsive sounds, “HUD will post separate guidance that includes a shorter screening distance and more precise measurements.”

Regarding high voltage power lines and fall hazards, the MAP guide said that free-standing structures, such as high voltage utility posts and towers, pose a risk to properties and their occupants in case of structural failure.

Lenders were required to submit an engineering report for properties located within the maximum fall distance of such structures.

HUD said in the recent letter that there is now no need for lenders to submit an engineering report on the issue if the residential building is located at a distance of at least 50 percent of the height of the free-standing structures.

The outdoor noise assessment relates to the outdoor parts of a property, such as swimming pools, car washes, undefined or open areas, and play areas. In the letter, HUD said that any such outdoor use, which is not noise sensitive, does not require noise assessment or mitigation efforts.

For instance, “HUD does not consider hot tubs to be a noise sensitive use. Sports courts for basketball, tennis, pickleball, bocce and similar activities where individual residents are not expected to spend more than 14 hours a week do not meet the threshold of a noise-sensitive use,” nor do “rooftop and other gathering spaces with grills.”

Regarding pressurized pipelines, the letter said that they are already regulated by the Pipeline and Hazardous Materials Safety Administration. As such, HUD decided to revert the language in the 2020 MAP guide to the previous 2011 MAP guide.

HUD Secretary Scott Turner said the changes are about “fixing policies that have made housing expensive and difficult to build.”

“We are cutting outdated requirements, reducing costs and delays, and putting FHA financing back to work to support housing production and improve home affordability for American families.”

In a May 4 post on X, Turner said that regulations make up almost 40 percent of the cost of new multifamily home construction.

Trump Order, Cost Relief

In the letter, HUD said that the changes were in line with a Jan. 20, 2025, executive order from President Donald Trump, “Delivering Emergency Price Relief for American Families and Defeating the Cost-of-Living Crisis.”

“Many Americans are unable to purchase homes due to historically high prices, in part due to regulatory requirements that alone account for 25 percent of the cost of constructing a new home,” the order said.

Trump asked the heads of all executive departments and agencies to deliver emergency price relief to Americans, including actions to lower the cost of housing and expand supply.

On April 28, HUD and the Department of Agriculture rescinded a policy that threatened to raise the cost of home construction by tens of thousands of dollars.

The policy related to the adoption of Minimum Energy Standards for newly built single and multifamily homes, applicable to air sealing, window lighting, insulation, lighting, and heating and cooling systems.

HUD said that enforcing the policy would raise home construction costs by $20,000 to $31,000, pushing most new homes out of reach for many first-time buyers, while also reducing the amount of supply.

Prior to rescinding the policy, the National Electrical Manufacturers Association had submitted comments to HUD in August, arguing against removing the standards.

“At a time when costs continue to rise for American taxpayers, energy efficiency is an effective way to put money back in consumers’ pockets. The agencies’ preliminary determination concluded that new homes built to the 2021 IECC would return $752 annually to homeowners,” the association said.

However, Oklahoma Home Builders Association argued against the standards, warning that the regulation can end up raising the cost of construction by thousands of dollars per unit.