New HUD Guidance on Climate Change Risk

HUD recently issued their Guidance on Considering Climate Change in Environmental Assessment Factors for Multifamily Projects.  According to the guidance document, after December 1, 2022, Multifamily Housing will require consideration of reasonably foreseeable climate impacts as part of a complete Environmental Assessment level review along with the other EA factors. The referenced guidance applies to all new construction projects and to substantial rehabilitation projects that require an EA level review. It does not apply to refinance or rehabilitation actions that are Categorically Excluded from NEPA. 

What is Required?

HUD notes “just as with the other EA factors, impacts from climate change will vary significantly based on project location.”  Current hazard risk is required to be analyzed by entering property addresses into FEMA’s National Risk Index (NRI). Using the NRI and other such hazard sources, applicants are to identify which hazards are “relatively high” or “very high” for their census tract and provide documentation of the NRI report results. The guidance states that applicants must consider future climate risk over the term of the mortgage as part of the suite of hazards to be considered. Explanation of why census tract hazards do not apply to a specific site, as well as information obtained from other natural hazard and climate risk tools (to refine the NRI findings) may be submitted. Based on the hazards identified, the HUD guidance requests a narrative description detailing how the hazards identified will be addressed through resilience measures or other actions. 

The HUD guidance indicates that if reasonably foreseeable climate risks are present, applicants must consider potential mitigation measures that would be prudent to implement at the construction stage. Hazards such as extreme heat can be mitigated through including air conditioning, window shading, cool roofs, or other enhancements. Flood risks can be mitigated through elevation during design and construction, temporary flood barriers, permeable pavement, and other measures. In addition, the HUD guidance requests consideration of evacuation and safety plans for storm, fire or flood risks.

More to Come: 

HUD states that it has made updating the environmental regulations at 24 CFR Part 50 and Part 58 to include strategies to mitigate climate related hazards and health impacts a priority under its Climate Action Plan, so future updates will likely be more comprehensive in scope than the Environmental Assessment Factors eGuide. Stay tuned for opportunities to provide feedback to HUD as part of this rulemaking.

AEI is collaborating with lenders, owners, investors and other consulting firms in the development of the ASTM standard for assessment of climate change risk. A common ASTM standard will bring greater consistency to the market in terms of how these hazards are evaluated, and we’re pleased to see that the HUD guidance above is consistent with the current process outlined in the draft ASTM standard for the Property Resilience Assessment. We look forward to keeping our clients informed as the assessment practices develop in light of this broader approach to comprehensive risk management that includes an evaluation of climate risk factors.