HUD Rescinds Housing Policy, Shaving $20,000 Off Home Construction Costs

The Department of Housing and Urban Development (HUD) and the Department of Agriculture (USDA) rescinded a  policy from the last administration that threatened to raise home construction costs by at least $20,000, HUD said in an April 28 statement.

In April 2024, the two departments announced the adoption of Minimum Energy Standards for newly built single and multifamily homes, with the standards applying to air sealing, window lighting, insulation, lighting, and heating and cooling systems. At the time, the department said that adopting the standards would result in “significant cost savings for residents, reduce energy use and pollution, improve resident health and comfort, and increase resilience in extreme weather events of both single and multifamily homes.”

The standards were expected to cut down up to 6.35 million metric tons in carbon emissions over a 30-year period. In a notice, the departments also said the rules would save an estimated $15,071 for single-family homes and $5,886 for multifamily units over 30 years compared to houses built under then-existing requirements.

The prior administration had said that adoption of the new rules wouldn’t negatively affect housing availability or affordability.

In its recent statement, HUD said that the policy “rendered all new home construction ineligible for an FHA [Federal Housing Administration] or USDA-backed mortgage loan unless the home was built according to the burdensome and expensive 2021 International Energy Conservation Code (IECC)—a standard which has only been deployed in a few states.”

According to estimates, enforcing the policy would increase the cost of home construction by $20,000 to $31,000, pushing most new homes out of reach for many first-time homebuyers, the department said. The mandate would have resulted in a decline in home production, and extended permitting and inspection timelines.

Public Comments

The Trump administration delayed the compliance date for the regulation, with the latest extension setting the deadline at Dec. 31, 2026, HUD said in its statement. In July last year, HUD sought comments on the matter from stakeholders.

In a comment submitted to HUD on Aug. 5, the National Electrical Manufacturers Association (NEMA) supported instituting the energy 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,” NEMA said.

“As energy demand and costs continue to increase due to macroeconomic pressures, the rapid proliferation of AI data centers, and other factors, these energy savings become even more critical.”

In an Aug. 6 comment, the Oklahoma Home Builders Association raised “serious concerns” about the energy standards.

Instituting the standards can “increase construction costs by thousands of dollars per unit, often without a clear or immediate return on investment for homeowners,” the association said.

Following a review of the comments, HUD and the USDA decided to rescind the rule, HUD said in the recent statement.

FHA and USDA loan programs will continue to comply with energy efficiency standards that were already in effect prior to the regulation change brought by the last administration.

“By rescinding this mandate, we are removing a significant regulatory barrier that added tens of thousands of dollars to the cost of a new home,” HUD Secretary Scott Turner said.

“The Trump Administration’s focus is to facilitate new housing supply and ensure that every American family has a path to homeownership without being sidelined by bureaucratic red tape.”

Court Ruling

HUD said that its decision was in alignment with a recent ruling from the U.S. District Court for the Eastern District of Texas, which deemed the prior rule will decrease housing availability.

In the ruling, issued on March 5, the court observed that the departments had conducted a Regulatory Impact Analysis to examine the impacts of the new rules, finding that implementing the standards would “reduce the availability of new affordable-housing construction by 1.5 percent.”

The court vacated the previous administration’s rule.

In a March 6 statement, the National Association of Home Builders (NAHB), one of the plaintiffs in the case together with 15 states, called the court decision a win for its members and housing affordability.

“This ruling means that HUD and USDA cannot impose new energy code mandates that will raise construction costs and limit access to federal mortgage programs at a time when many American families are already struggling to afford a home,” NAHB Chairman Bill Owens said.

HUD and USDA’s decision to rescind the energy efficiency standards for new home construction comes as home prices were up by 1.7 percent in February 2026 compared with a year ago, according to an April 28 statement from the Federal Housing Finance Agency. On a monthly basis, prices remained unchanged in February compared with January.

“For the nine census divisions, seasonally adjusted monthly home price changes ranged from -1.1 percent in the Mountain division to +0.6 percent in the South Atlantic division,” the statement said.

“The 12-month changes ranged from -0.7 percent in the Mountain division to +4.2 percent in the Middle Atlantic division.”