[Federal Register Volume 79, Number 72 (Tuesday, April 15, 2014)]
[Notices]
[Pages 21259-21275]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-08562]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

DEPARTMENT OF AGRICULTURE

[HUD FR-5647-N-01; RIN 2501-ZA01; USDA RIN 0575-ZA00]


Preliminary Affordability Determination--Energy Efficiency 
Standards

AGENCIES: U.S. Department of Housing and Urban Development and U.S. 
Department of Agriculture.

ACTION: Notice of preliminary determination.

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SUMMARY: The Energy Independence and Security Act of 2007 (EISA) 
establishes procedures for the U.S. Department of Housing and Urban 
Development (HUD) and the U.S. Department of Agriculture (USDA) to 
adopt revisions to the 2006 International Energy Conservation Code 
(IECC) and to the 2004 energy codes of the American Society of Heating, 
Refrigerating, and Air-conditioning Engineers (ASHRAE), referred to as 
ASHRAE 90.1-2004, subject to: (1) A determination that the revised 
codes do not negatively affect the availability or affordability of new 
construction of single and multifamily housing covered by EISA, and (2) 
a determination by the Secretary of Energy that the revised codes 
``would improve energy efficiency.'' \1\ This Notice announces the 
preliminary determination of HUD and USDA, as required under section 
481(d) of EISA, that the 2009 IECC and (with the exception of the State 
of Hawaii) ASHRAE 90.1-2007 will not negatively affect the 
affordability and availability of housing covered by EISA. As of 
September 2013, 32 States plus the District of Columbia have already 
adopted the 2009 IECC, its equivalent, or a higher standard for single 
family homes. Thirty-eight States plus the District of Columbia have 
already adopted ASHRAE 90.1-2007, its equivalent, or a higher standard 
for multifamily buildings. For those States that have not yet adopted 
either of these standards, this Notice relies on several studies that 
show that these codes are cost effective, in that the incremental cost 
of the additional efficiency measures pays for itself with energy cost 
savings on a life-cycle basis.
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    \1\ Energy Independence and Security Act of 2007, Section 
481(d).

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DATES: Comment Due Date: May 30, 2014.

ADDRESSES: Interested persons are invited to submit comments regarding 
this Notice. There are two methods for submitting public comments. All 
submissions must refer to the above-referenced docket number (FR-5647- 
N-01) and title of this Notice.
    1. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD and USDA strongly encourage commenter to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt, and enables HUD and USDA to make them 
immediately available to the public. Comments submitted electronically 
through the Web site can be viewed by other commenter and interested 
members of the public. Commenters should follow the instructions 
provided on that site to submit comments electronically.
    Submission of Comments by Mail. HUD: 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. USDA: Comments may be submitted by mail to 
Rural Housing Service, Department of Agriculture, 1400 Independence 
Avenue SW., Room 5014-S, Washington, DC 20250.

    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 this 
Notice.

    No Facsimile Comments. Facsimile 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 appointment to review the public comments must be 
scheduled in advance by calling the Regulations Division at 202-708-
3055 (this is not a toll-free number). Individuals with speech or 
hearing impairments may access this number via TTY by calling the toll-
free Federal Relay Service at 800-877-8339. Copies of all comments 
submitted are available for inspection and downloading at 
www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: HUD: Michael Freedberg, Office of 
Sustainable Housing and Communities, Department of Housing and Urban 
Development, 451 7th Street SW., Room 10180, Washington, DC 20410; 
telephone number 202-402-4366 (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 Relay Service at 800-877-8339. USDA: 
Meghan Walsh, Rural Housing Service, Department of Agriculture, 1400 
Independence Avenue SW., Room 6900-S, Washington, DC 20250; telephone 
number 202-205-9590 (this is not a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Introduction

A. Statutory Requirements

    Section 481 of EISA (or the Act) amends section 109 of the 
Cranston-Gonzalez National Affordable Housing Act of 1990 (Cranston-
Gonzalez) (42 U.S.C. 12709), which establishes procedures for setting 
minimum energy standards for the following housing that is assisted by 
HUD and USDA:
    (A) New construction of public and assisted housing and single 
family and multifamily residential housing (other than manufactured 
homes) subject to mortgages insured under the National Housing Act; \2\
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    \2\ This subsection of EISA refers only to HUD programs. See 
Appendix 1 for specific HUD programs covered by the Act.
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    (B) New construction of single family housing (other than 
manufactured homes) subject to mortgages insured, guaranteed, or made 
by the Secretary of

[[Page 21260]]

Agriculture under title V of the Housing Act of 1949; \3\ and,
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    \3\ This subsection of EISA refers to USDA programs. See 
Appendix 1 for specific USDA programs covered by the Act.
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    (C) Rehabilitation and new construction of public and assisted 
housing funded by HOPE VI revitalization grants under section 24 of the 
United States Housing Act of 1937 (42 U.S.C. 1437v).
    EISA references two standards: the IECC and the ASHRAE Standard 
90.1. The IECC standard referenced in EISA applies to single family 
homes and multifamily low-rise buildings (up to 3 stories), while the 
ASHRAE 90.1 standard applies to multifamily high-rise residential 
buildings (4 or more stories).\4\
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    \4\ The IECC addresses both residential and commercial 
buildings. ASHRAE 90.1 covers commercial buildings only, including 
multifamily buildings four or more stories above grade. The IECC 
adopts, by reference, ASHRAE 90.1; that is, compliance with ASHRAE 
90.1 qualifies as compliance with the IECC for commercial buildings.
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    See Appendix 1 for the specific HUD and USDA programs covered by 
this Notice. Several exclusions are worth noting. EISA's application to 
the ``rehabilitation and new construction of public and assisted 
housing funded by HOPE VI revitalization grants'' is no longer 
applicable, since funding for HOPE VI has been discontinued. HUD's 
Housing Choice Voucher program (also known as Section 8 tenant-based 
assistance) is excluded since the agency does not have the authority to 
establish, a priori, housing standards for properties rented by tenant 
households under that program. Indian housing programs, including the 
Section 184 guaranteed loan program, are excluded because they are 
authorized under section 184 of the Housing and Community Development 
Act of 1992 (42 U.S.C. 1715z-13a), not the National Housing Act (12 
U.S.C. 1701 et seq.) as specified in EISA. Similarly, housing financed 
with Community Development Block Grant (CDBG) funds is not included, 
since CDBG is separately authorized by the Housing and Community 
Development Act of 1974 (42 U.S.C. 5301 et seq.). Finally, only single 
family USDA programs are covered by EISA, whereas for HUD programs both 
single family and multifamily programs are covered.
    Section 109(d) of Cranston-Gonzalez, as amended by EISA, 
establishes procedures for updating HUD and USDA energy standards 
following periodic revisions to the 2006 IECC and ASHRAE 90.1-2004 
codes. Specifically, section 109(d) provides that revisions to the IECC 
or ASHRAE codes will apply to HUD and/or USDA's programs if: (1) Either 
agency ``make(s) a determination that the revised codes do not 
negatively affect the availability or affordability'' of new 
construction housing covered by the Act, and (2) the Secretary of 
Energy has made a determination under section 304 of the Energy 
Conservation and Production Act (42 U.S.C. 6833) that the revised codes 
would improve energy efficiency (see 42 U.S.C. 12709(d)). Otherwise, 
the 2006 IECC and ASHRAE 90.1-2004 will continue to apply.

B. Adoption of These Standards

    Section 109(d) of Cranston-Gonzalez automatically applies to all 
covered programs upon completion of the specified affordability 
determinations by HUD and USDA, and the energy efficiency 
determinations by the U.S. Department of Energy (DOE). Accordingly, 
once a final affordability determination has been made by HUD and USDA 
under section 109(d), additional notice and comment rulemaking will not 
be required for the covered programs; the new codes, if found not to 
negatively affect the availability or affordability of covered housing, 
will automatically apply, subject to administrative actions such as 
mortgagee letters, notices, or amendments to handbooks. However, 
conforming rulemaking will be required for two HUD programs to update 
obsolete regulatory standards: The Federal Housing Administration's 
(FHA) single family minimum property standards, for which the HUD 
regulations are codified at 24 CFR 200.926d, and the energy standard of 
the HOME Investment Partnerships (HOME) program, for which the HUD 
regulations are codified at 24 CFR 92.251. In addition, USDA will 
update minimum energy requirements in the USDA regulations codified at 
7 CFR 1924.
    The adoption of the 2009 IECC or ASHRAE 90.1-2007 new construction 
standards described in this Notice will take effect as follows:
    (1) For FHA-insured multifamily programs, to those properties for 
which mortgage insurance applications are received by HUD 90 days after 
the effective date of a Final Determination;
    (2) For public housing competitive grant programs, to those 
properties for which grant applications are received by HUD 90 days 
after the effective date of a Final Determination;
    (3) For public housing formula grant programs, to properties for 
which building permits are issued 180 days after the effective date of 
a Final Determination.
    (4) For FHA-insured and USDA-guaranteed single family loan 
programs, to properties for which building permits are issued 180 days 
after the effective date of a Final Determination.

C. Current HUD-USDA Standards or Requirements

    Pursuant to the energy alignment framework adopted by the 
interagency Rental Policy Working Group in December 2011, when funds 
are awarded by competition some of the programs covered by EISA (as 
well as other programs not covered by EISA) already require or 
incentivize grantees to comply with energy efficiency standards that 
exceed the prevailing IECC and ASHRAE 90.1 standards.\5\ This standard 
is typically Energy Star Certified New Homes for single family 
properties or Energy Star for Multifamily High Rise for multifamily 
properties. Nothing in this Notice will preclude these competitive 
programs from maintaining these higher standards, or raising them 
further. A list of current program requirements or incentives is shown 
in Table 1, below.
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    \5\ Rental Policy Working Group, Federal Rental Alignment: 
Administration Proposals, December 31, 2011, Available at 
www.huduser.org/portal/aff_rental_hsg/rpwg_conceptual_proposals_fall_2011.pdf.

[[Page 21261]]



                   Table 1--Current Energy Standards and Incentives for HUD and USDA Programs
                                             [New construction only]
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                                                                         Current energy efficiency requirements
                 Program                              Type                           and incentives
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                                                       HUD
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Choice Neighborhoods--Implementation....  Competitive Grant..........  Single family and low-rise multifamily:
                                                                        Energy Star Certified New Homes.
                                                                        Multifamily high-rise (4 or more
                                                                        stories): Energy Star for Multifamily
                                                                        High Rise. Additional 2 rating points
                                                                        for achieving Certified LEED-ND or
                                                                        similar standard; or 1 point if project
                                                                        complies with goal of achieving LEED-ND
                                                                        or similar standard.
Choice Neighborhoods--Planning..........  Competitive Grant..........  Eligible for Stage 1 Conditional Approval
                                                                        of all or a portion of the neighborhood
                                                                        targeted in their Transformation Plan
                                                                        for LEED for Neighborhood Development
                                                                        from the U.S. Green Building Council.
HOPE VI.................................  Competitive Grant..........  3 points if new units are certified to
                                                                        one of several recognized green building
                                                                        programs, including Enterprise Green
                                                                        Communities, National Green Building
                                                                        Standard, LEED for Homes, LEED New
                                                                        Construction, or local or regional
                                                                        standards such as Earthcraft; 2 points
                                                                        if new construction is certified to
                                                                        Energy Star for New Homes standard; 1
                                                                        point if only Energy Star-certified
                                                                        products and appliances are used in new
                                                                        units.
Section 202 Supportive Housing for the    Competitive Grant..........  Single family and low-rise multifamily:
 Elderly.                                                               Energy Star Certified New Homes.
                                                                        Multifamily high rise (4 or more
                                                                        stories): Energy Star for Multifamily
                                                                        High Rise. Applicants earn additional
                                                                        points if they meet one of several
                                                                        recognized green building standards.
                                                                        http://archives.hud.gov/funding/2010/202elderly.pdf. (Note: capital advances
                                                                        for new construction last awarded in FY
                                                                        2010.)
Section 811 for Persons with              Competitive Grant..........  Energy Star Certified New Homes for
 Disabilities Project Rental Assistance.                                single family homes, or Energy Star for
                                                                        Multifamily High Rise for multifamily
                                                                        buildings. http://archives.hud.gov/funding/2012/sec811pranofa.pdf. (Note
                                                                        that HUD is no longer awarding Section
                                                                        811 grants for new units.)
Rental Assistance Demonstration (RAD)...  Conversion of Existing       Minimum 2006 IECC or ASHRAE 90.1-2004 for
                                           Units.                       new construction or any successor code
                                                                        adopted by HUD; applicants encouraged to
                                                                        build to Energy Star Certified New Homes
                                                                        or Energy Star for Multifamily High
                                                                        Rise. Minimum WaterSense and Energy Star
                                                                        appliances required and the most cost-
                                                                        effective measures identified in the
                                                                        Physical Condition Assessment (PCA).
                                                                        (Note that most RAD units will be
                                                                        conversions of existing units, not new
                                                                        construction.)
FHA Multifamily Mortgage Insurance......  Mortgage Insurance.........  2006 IECC or ASHRAE 90.1-2004
                                                                        (Multifamily Accelerated Processing
                                                                        Guide at http://portal.hud.gov/hudportal/documents/huddoc?id=4430GHSGG.pdf.)
FHA Single Family Mortgage Insurance....  Mortgage Insurance.........  2006 IECC (See Builder Certification Form
                                                                        at http://portal.hud.gov/hudportal/documents/huddoc?id=92541.pdf.)
HOME Investment Partnerships Program....  Formula Grant..............  ``(C)urrent edition of the Model Energy
                                                                        Code published by the Council of
                                                                        American Building Officials'' (24 CFR
                                                                        part 92, September 16, 1996). Final Rule
                                                                        at www.onecpd.info/home/home-final-rule/
                                                                        reserves the energy standard for a
                                                                        separate rulemaking at 24 CFR 92.251.
                                                                        (July 24, 2013.)
Public Housing Capital Fund.............  Formula Grant..............  2009 IECC and ASHRAE 90.1-2010, or
                                                                        successor standards, Capital Final Rule
                                                                        October 24, 2013, at http://www.gpo.gov/fdsys/pkg/FR-2013-10-24/pdf/2013-23230.pdf. Energy Star appliances are
                                                                        also required unless not cost effective.
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                                                      USDA
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Section 502 Guaranteed Housing Loans....  Loan Guarantee.............  2006 IECC at minimum.* Rural Energy Plus
                                                                        program requires compliance with most
                                                                        recent version of IECC, which is
                                                                        currently IECC 2012.
Section 502 Rural Housing Direct Loans..  Loan Guarantee.............  2006 IECC at minimum.* A pilot is being
                                                                        created that gives incentive points for
                                                                        participation in Energy Star Certified
                                                                        New Homes, Green Communities, Challenge
                                                                        Home, NAHB National Green Building
                                                                        Standard, and LEED for Homes.
Section 502 Direct Loans for Section 523  Loan Guarantee.............  2006 IECC at minimum.* A pilot is being
 Mutual Self Help Loan program homeowner                                created that gives incentive points for
 participants.                                                          participation in Energy Star Certified
                                                                        New Homes, Green Communities, Challenge
                                                                        Home, NAHB National Green Building
                                                                        Standard, and LEED for Homes.
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* USDA programs updated annually per Administrative Notice.

D. Additional Background

    Section 109(a) of Cranston Gonzalez, as amended by EISA, allowed 
for HUD and USDA to collaborate and develop their own energy efficiency 
building standards if they met or exceeded the 2006 IECC or ASHRAE 
90.1-2004, but if the two agencies did not act on this option, EISA 
specifies that the 2006 IECC and ASHRAE 90.1-2004 standards would 
apply.
    The two agencies did not develop independent energy efficiency 
building standards, and therefore, the 2006 IECC or ASHRAE 90.1-2004 
currently apply to covered HUD and USDA programs. HUD and USDA have not 
undertaken prior rulemaking to implement EISA because the statutory 
requirement to comply with the 2006 IECC and ASHRAE 90.1-2004 codes for 
covered HUD and USDA programs applied without rulemaking.\6\
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    \6\ HUD will undertake conforming rulemaking to conform its 
existing regulations to the requirements of EISA for single family 
Minimum Property Standards at 24 CFR 200.926d(e) and for the HOME 
Investment Partnership Act at 24 CFR 92.251. HUD has also modified 
Builder Certification Form HUD-92451 to reflect the minimum 2006 
IECC for FHA-insured single family housing. Similar conforming 
rulemaking will be required to update USDA's standard at 7 CFR 1924.

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[[Page 21262]]

    DOE reports that as of September 2013, 32 States plus the District 
of Columbia have already adopted codes that require equal or better 
energy efficiency than the 2009 IECC for residential buildings. Thirty-
eight States plus the District of Columbia have also adopted ASHRAE 
90.1-2007 or codes that require equal or better energy efficiency for 
commercial buildings. (See www.energycodes.gov/adoption/states). The 
International Code Council (ICC) also provides information, in the form 
of a chart, on States' adoption of building/energy efficient codes. The 
chart confirms that a significant number of States plus the District of 
Columbia have already adopted the more recent 2009 IECC, or its 
equivalent. (See www.iccsafe.org/gr/Documents/stateadoptions.pdf).
    As required by the Energy Conservation and Production Act, as 
amended (ECPA) (42 U.S.C. 6801 et seq.), DOE has published Final 
Determinations that the 2009 IECC and ASHRAE 90.1-2007 standards would 
improve energy efficiency.\7\ This Notice therefore announces the 
results of HUD and USDA's analysis of housing impacted by the 2009 IECC 
and ASHRAE 90.1-2007.
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    \7\ Since the publication of the 2006 IECC, the ICC has revised 
the IECC twice, in both 2009 and 2012. The ICC published the 2009 
IECC on January 28, 2009. (Available at http://shop.iccsafe.org/2009-international-energy-conservation-code.html). On July 19, 2011, 
DOE determined that the 2009 IECC would achieve greater energy 
efficiency in low-rise residential buildings than the 2006 IECC 
(Federal Register Notice 76 FR 42688). On May 17, 2012, DOE 
published a Final Determination that the 2012 IECC would achieve 
greater energy efficiency than the 2009 IECC. (Available at http://www.gpo.gov/fdsys/pkg/FR-2012-05-17/pdf/2012-12000.pdf.) For 
multifamily properties, ASHRAE published ASHRAE 90.1-2007 on January 
22, 2008. On July 20, 2011 (Federal Register Notice July 20,2011, 76 
FR 43287), DOE determined that ASHRAE 90.1-2007 would achieve 
greater energy efficiency in commercial buildings (including high-
rise residential buildings) than ASHRAE 90.1-2004. On October 19, 
2011, DOE published a similar determination for ASHRAE 90.1-2010 
(published October 27, 2010), FR 76 64904. (Available at http://www.gpo.gov/fdsys/pkg/FR-2011-10-19/pdf/2011-27057.pdf). ASHRAE 
90.1-2013 was published on October 9, 2013; DOE has not yet 
determined the efficiency or published a cost-benefit analysis of 
this code.
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    Note that this Notice does not address the more recent IECC and 
ASHRAE codes for which DOE has published efficiency determinations: 
i.e., the 2012 IECC and ASHRAE 90.1-2010. DOE has published Final 
Determinations of energy efficiency for both of these codes and, more 
recently (October 2012), completed a cost analysis of the 2012 IECC for 
43 of the 50 States and the District of Columbia.\8\ The impact of 
these more recent codes on the affordability and availability of HUD- 
and USDA-funded new construction is currently being assessed by the two 
agencies. Since HUD and USDA's affordability determination relies on 
DOE's affordability analysis, HUD and USDA will address the 
affordability of the 2012 IECC code and ASHRAE 90.1-2010 in a 
subsequent notice in the near future. It is HUD's and USDA's intention 
that adoption of future IECC and ASHRAE 90.1 standards can be 
implemented with a Preliminary Notice such as this one, followed by a 
Final Notice for all the covered programs. However, every program will 
need to update its handbooks, mortgagee letters, relevant forms, or 
other administrative documents each time HUD determines that the new 
standard will not negatively impact the affordability or availability 
of housing under the covered programs.
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    \8\ See http://www.energycodes.gov/development/residential/iecc_analysis.
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E. Market Failures in the Residential Energy Sector

    Before focusing on the specific costs and benefits associated with 
adoption of the IECC and ASHRAE codes addressed in this Notice, the 
extent to which market failures or barriers exist in the residential 
sector that may prompt the need for these higher codes is discussed 
below. There is a wide body of literature on a range of market failures 
that have resulted in an ``energy efficiency gap'' between the actual 
level of investment in energy efficiency and the higher level of 
investment that would be cost-beneficial from the consumer's (i.e., the 
individual's or firm's) point of view.\9\ Brown (2001) cites a range of 
market failures and barriers including, for example, the fact that 
energy is typically a small part of owning and operating a building 
and, as a result, the public places a low priority on energy issues and 
energy efficiency opportunities. More broadly, market failures include 
misplaced incentives or unpriced public goods. Market barriers include 
capital market barriers and incomplete markets for energy efficiency; 
i.e., the fact that energy efficiency is generally purchased as an 
attribute of another product (in this case shelter or a building).
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    \9\ The existence of this gap has been documented in many cases 
(Brown, 2001).
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    Within this broader world of market disincentives, barriers to 
energy efficient investment in housing impose two primary costs: 
Increased energy expenditures for households and an increase in the 
negative externalities associated with energy consumption. In addition 
to complying with the EISA statute, HUD and USDA have two primary 
motivations in the promulgation of this Notice: (1) To reduce the total 
cost of operating and thereby increasing the affordability of housing 
by promoting the adoption of cost-effective energy technologies, and 
(2) to reduce the social costs (negative externalities) imposed by 
residential energy consumption.
    The first justification (lowering housing costs) requires that 
there exist significant market failures or other barriers that deter 
builders from supplying the energy efficiency demanded by consumers of 
housing. Alternatively, there may be market barriers that limit 
consumer demand for energy efficiency, which builders might readily 
supply if such demand existed. While the gains from cost-effective 
investments in energy efficiency are potentially very large, the 
argument that the market will not provide energy efficient housing 
demanded by households is somewhat complex.
    The second justification (reducing social costs) requires that the 
consumption of energy imposes external costs that are not internalized 
by the market. There is near universal agreement among scientists and 
economists that energy consumption leads to indirect costs. The 
challenge is to measure those costs.
Under Investment in Energy-Saving Technologies
    The production of energy efficient housing may be substantial, but 
if there are market failures or barriers that are not reflected in the 
return on the investment, then the market penetration of energy 
efficient investments in housing will be less than optimal.
    When analyzing energy efficiency standards, the generation of 
savings is typically the greatest of the different categories of 
benefits. Using potential private benefits to justify costly energy 
efficiency standards is often criticized (Allcott and Greenstone, 
2012). A skeptic of this approach of measuring the benefits discussed 
in this Notice would indicate that if, indeed, there were net private 
benefits to energy efficient housing, then consumers would place a 
premium on that characteristic and builders would respond to market 
incentives and provide energy-efficient homes. The noninterventionist 
might argue that the analyst who finds net benefits of implementing a 
standard did not measure the benefits and costs correctly (for a 
detailed example see Allcott and Greenstone, 2012). The existence of 
unobserved costs (either upfront or periodic) is a potential 
explanation for low levels of investment in energy-saving technology. 
Finally, a proponent

[[Page 21263]]

of the market approach could argue that the very existence of energy 
efficient homes is ample proof that the market functions well. If 
developers build energy efficient housing, then the theoretical 
challenge is to explain why there is an undersupply.
    Despite the economic argument for nonintervention, there are many 
compelling economic arguments for the existence of an energy efficiency 
gap. Thaler and Sunstein (2008) attribute the energy efficiency gap to 
incentive problems that are exaggerated because upfront costs are borne 
by the builder, whereas the benefits are enjoyed over the long term by 
tenants. Four justifications deserve special consideration: (1) 
Imperfect information concerning energy efficiency, (2) inattention to 
energy efficiency, (3) disincentives to energy efficient investments in 
the housing market, and (4) lack of financing for energy efficient 
retrofits (Allcott and Greenstone, 2012).
    (1) Lack of adequate information. Assuming information concerning 
energy efficiency affects investment, one can imagine two scenarios in 
which imperfect information would lead to an underinvestment in energy 
efficiency. First, consumers may be unaware of the potential gains from 
energy efficiency or even of the existence of a particular energy-
saving investment. Second, imperfect information may inhibit energy 
efficient investments. A consumer may be perfectly capable of 
evaluating energy efficiency and making rational economic decisions but 
researching the options is costly. Establishing standards reduces 
search costs: Consumers will know that newer housing possesses a 
minimal level of efficiency. Similarly, because it may be costly for 
consumers to identify energy efficient housing, the real estate 
industry may hesitate to invest in energy efficiency.
    (2) Consumer inattention to energy efficiency. Consumers may be 
inattentive to long-run operating costs (energy bills) when purchasing 
durable energy-using goods (p. 21, Allcott and Greenstone, 2012). 
Procrastination and self-control also may affect the rationality of 
long-run decisions (Ariely, 2009). These behavioral phenomena may deter 
energy efficiency choices. Establishing minimal standards that do not 
impose excessive costs but generate economic gains will benefit 
consumers who, when making housing choices, concentrate on other 
characteristics of the property.
    (3) Market disincentives. For owner-occupied homes, the prospect of 
ownership transfer may create a barrier to energy efficient investment 
(McKinsey, 2009). If owners, builders, or buyers do not believe that 
they will be able to recapture the value of the investment upon selling 
their home, then they will be deterred from investing in energy 
efficiency. As indicated by McKinsey (2009), the length of the payback 
period and lifetime of the stream of benefits is longer than a large 
proportion of households' tenure. This concern may lead to the 
exclusive pursuit of investments for which there is an immediate 
payback.
    For rental housing, split incentives exist that lead to sub-optimal 
housing (Gillingham et al, 2011). There is an agency problem when the 
landlord pays the energy bill and cannot observe tenant behavior or 
when the tenant pays the energy bill and cannot observe the landlord's 
investment behavior.\10\
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    \10\ Such agency problems are not unique to energy. A landlord 
does not know in advance of extending a lease to what extent a 
tenant will inflict damage, make an effort to take care of the 
property, or report urgent problems (Henderson and Ioannides, 1983). 
The response is to raise rent and lower quality.
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    (4) Lack of financing. Energy efficient investment may require a 
significant investment that cannot be equity financed. Capital 
constraints are a formidable barrier to energy efficiency for low-
income households (McKinsey, 2009). While there is a wide variety of 
financing alternatives for home purchases, there are not many financing 
alternatives specifically for undertaking energy retrofits of for-sale 
housing (McFarlane, 2011). Building energy efficiency into housing at 
the time of construction allows homeowners and landlords to finance the 
energy-saving improvement with a lower mortgage interest rate, as 
opposed to a less affordable home improvement loan specifically for 
energy retrofits.\11\
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    \11\ With the exception of a few small programs serving specific 
markets and a Federal Housing Administration (FHA) pilot program 
(PowerSaver), affordable financing for home energy improvements that 
reflects sound lending principles is limited. Unsecured consumer 
loans or credit card products for home improvements typically charge 
high interest rates. Home equity lines of credit require owners to 
be willing to borrow against the value of their homes during a 
period when home values are flat or declining in many markets. 
Utility ``on bill'' financing (in which a home energy retrofit loan 
is amortized through an incremental change on a utility bill) serves 
only a handful of markets on a small scale. Property Assessed Clean 
Energy (PACE) financing programs have encountered resistance because 
of their general requirement to have priority over existing liens on 
a property.
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Non-Energy Benefits
    Even if there were no investment inefficiencies and individual 
consumers who were able to satisfy their need for energy efficiency, 
non-energy consumption externalities could justify energy conservation 
policy. The primary non-energy co-benefits of reducing energy 
consumption are the reduction of emissions and health benefits. The 
emission of pollutants (such as particulate matter) cause health and 
property damage. Greenhouse gases (such as carbon dioxide) cause global 
warming, which imposes a cost on health, agriculture, and other 
sectors. Greater energy efficiency allows households to afford energy 
for heating during severe cold or cooling during intense heat, which 
could have positive health effects for vulnerable populations. For 
example, studies have found a strong link between health outcomes and 
indoor environmental quality, of which temperature, lighting, and 
ventilation are important determinants (Fisk, 2002). Clinch and Healy 
(2001) discuss how to value the effect on mortality and morbidity in a 
benefit-cost analysis of energy efficiency. In addition to the direct 
health benefits of residents of energy efficient housing, there will be 
indirect public health benefits. First, the local population will gain 
from reducing emissions of particulate matter that have harmful health 
effects. Second, Schweitzer (2002) indicates there may be a positive 
safety effect from reducing the probability of fires by eliminating the 
need for supplemental heating sources.

II. 2009 IECC Affordability Determination

    The IECC is a model energy code developed by the ICC through a 
public hearing process involving national experts for single family 
residential and commercial buildings.\12\ The code contains minimum 
energy efficiency provisions for residential buildings, defined as 
single family homes and low-rise residential buildings up to three 
stories, offering both prescriptive- and performance-based approaches. 
Key elements of the code are building envelope requirements for thermal 
performance and air leakage control.
---------------------------------------------------------------------------

    \12\ The IECC also covers commercial buildings. States may 
choose to adopt the IECC for residential buildings only, or may 
extend the code to commercial buildings (which include multifamily 
residential buildings of four or more stories).
---------------------------------------------------------------------------

    The IECC is typically published every 3 years, though there are 
some exceptions. In the last 2 decades, full editions of its 
predecessor, the Model Energy Code, came out in 1989, 1992, 1993, and 
1995, and full editions of the IECC came out in 1998, 2000, 2003, 2006, 
2009, and 2012. Though there were changes in each edition of the IECC 
from the previous one, the IECC can be categorized into two general 
eras:

[[Page 21264]]

2003 and before, and 2004 and after. The residential portion of the 
IECC was heavily revised in 2004. The climate zones were completely 
revised (reduced from 17 zones to 8 primary zones) and the building 
envelope requirements were restructured into a different format.\13\ 
The post-2004 code became much more concise and simpler to use, but 
these changes complicate comparisons of State codes based on pre-2004 
versions of the IECC to the 2009 IECC.
---------------------------------------------------------------------------

    \13\ In the early 2000s, researchers at the U.S. Department of 
Energy's Pacific Northwest National Laboratory prepared a simplified 
map of U.S. climate zones. The map was based on analysis of the 
4,775 U.S. weather sites identified by the National Oceanic and 
Atmospheric Administration, as well as widely accepted 
classifications of world climates that have been applied in a 
variety of different disciplines. This PNNL-developed map divided 
the United States into eight temperature-oriented climate zones. See 
http://apps1.eere.energy.gov/buildings/publications/pdfs/building_america/4_3a_ba_innov_buildingscienceclimatemaps_011713.pdf.
---------------------------------------------------------------------------

    The 2009 IECC substantially revised the 2006 code as follows: \14\
---------------------------------------------------------------------------

    \14\ Pacific Northwest National Laboratory for the U.S. 
Department of Energy, Impacts of the 2009 IECC for Residential 
Buildings at State Level, September 2009. Available at https://www.energycodes.gov/impacts-2009-iecc-residential-buildings-state-level-0.
---------------------------------------------------------------------------

     The duct system has to be tested and the air leakage out 
of ducts must be kept to an acceptable maximum level. Testing is not 
required if all ducts are inside the building envelope (for example in 
heated basements), though the ducts still have to be sealed.
     50 percent of the lighting (bulbs, tubes, etc.) in a 
building has to be energy efficient. Compact fluorescents qualify; 
standard incandescent bulbs do not.
     Trade-off credit can no longer be obtained for high-
efficiency heating, ventilation, and air conditioning (HVAC) equipment. 
For example, if a high-efficiency furnace is used, no reduction in wall 
insulation is allowed.
     Vertical fenestration U-factor requirements are reduced 
from 0.75 to 0.65 in Climate Zone 2, 0.65 to 0.5 in Climate Zone 3, and 
0.4 to 0.35 in Climate Zone 4.
     The maximum allowable solar heat gain coefficient for 
glazed fenestration (windows) is reduced from 0.40 to 0.30 in Climate 
Zones 1, 2, and 3.
     R-20 walls in climate zones 5 and 6 (increased from R-19).
     Modest basement wall and floor insulation improvements.
     R-3 pipe insulation on hydronic distribution systems 
(increased from R-2).
     Limitation on opaque door exemption both size and style 
(side hinged).
     Improved air-sealing language.
     Controls for driveway/sidewalk snow melting systems.
     Pool covers are required for heated pools.

Current Adoption of the 2009 IECC

    As of September 2013, 32 States and the District of Columbia have 
voluntarily adopted the 2009 IECC, its equivalent, or a more recent 
energy code (Table 2).\15\ The remaining 18 States have not yet adopted 
the 2009 IECC.\16\ (In certain cases, cities or counties within a State 
have a different code from the rest of the State. For example, the 
cities of Austin and Houston, Texas, have adopted energy codes that 
exceed the minimum Texas statewide code).17 18 HUD and USDA 
are primarily interested in the States that have not yet adopted the 
2009 IECC, since it is in these States that any affordability impacts 
will be felt relative to the cost of housing built to current State 
codes. As noted, in instances where a local entity has a more stringent 
standard, the affordability impacts within a State will differ.
---------------------------------------------------------------------------

    \15\ Not shown in Table 2 are the U.S. Territories. The status 
of IECC code adoption in these jurisdictions is as follows: Guam, 
Puerto Rico, and the U.S. Virgin Islands have adopted the 2009 IECC 
for residential buildings. The Northern Mariana Islands have adopted 
the Tropical Model Energy Code, which is equivalent to the 2003 
IECC. American Samoa does not have a building energy code. These 
territories are all covered by the Act, for any covered HUD and USDA 
program that operates in these localities.
    \16\ In addition, there are two territories that have not yet 
adopted the 2009 IECC: the Northern Mariana Islands and American 
Samoa. Accordingly, they will be covered by the affordability and 
availability determinations of this Notice.
    \17\ Pacific Northwest National Laboratory for the U.S. 
Department of Energy, Impacts of the 2009 IECC for Residential 
Buildings at State Level, September 2009. Available at https://www.energycodes.gov/impacts-2009-iecc-residential-buildings-state-level-0.
    \18\ HUD and USDA do not currently maintain a list of local 
communities that may have adopted a different code than their state 
code. There are cities and counties that have adopted the 2009 or 
even the 2012 IECC in states that have not adopted the 2009 IECC or 
equivalent/better. For example, most major cities or counties in 
Arizona have adopted the 2009 IECC or better. And Maine has adopted 
the 2009 IECC but allows towns under 4,000 people to be exempt. The 
code requirements can also vary; Kentucky, for example, adopted the 
2009 IECC for all homes except those that have a basement. The 
following Web site notes locations that have adopted the 2012 (but 
not the 2009) IECC: http://energycodesocean.org/2012-iecc-and-igcc-local-adoptions.
---------------------------------------------------------------------------

    An increasing number of States have in recent years adopted, or 
plan to adopt, the 2009 IECC, in part due to section 410 of the 
American Recovery and Reinvestment Act of 2009 (ARRA) (Pub. L. 111-5, 
approved February 17, 2009), which established as a condition of 
receiving State energy grants the adoption of an energy code that meets 
or exceeds the 2009 IECC (and ASHRAE 90.1-2007), and achievement of 90 
percent compliance by 2017. All 50 State governors subsequently 
submitted letters notifying DOE that the provisions of section 410 
would be met.\19\
---------------------------------------------------------------------------

    \19\ American Recovery and Reinvestment Act, P.L. 111-5, 
Division A, Section 410(a)(2).

        Table 2--Current Status of IECC Adoption by the States 20
                         [As of September 2013]
------------------------------------------------------------------------
 2009 IECC or equivalent or higher
         (32 States and DC)                Prior Codes (18 States)
------------------------------------------------------------------------
Alabama                               2006 IECC or Equivalent (8 States)
California (2012 IECC)               Hawaii
Connecticut                          Kentucky
Delaware                             Louisiana
District of Columbia                 Minnesota
Florida                              Oklahoma
Georgia                              Tennessee
Idaho                                Utah
Illinois (2012 IECC)                 Wisconsin
Indiana                               2003 IECC or Equivalent (2 States)
Iowa                                 Arkansas
Maryland (2012 IECC)                 Colorado
Massachusetts (2012 IECC)            No Statewide Code (8 States)
Michigan                             Alaska
Montana                              Arizona
Nebraska                             Kansas
Nevada                               Maine
New Hampshire                        Mississippi
New Jersey                           Missouri
New Mexico                           South Dakota
New York                             Wyoming
North Carolina
North Dakota
Ohio
Oregon
Pennsylvania
Rhode Island (2012 IECC)
South Carolina
TexasVermont
Virginia
Washington (2012 IECC)
West Virginia
------------------------------------------------------------------------

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

    \20\ Department of Energy, Office of Efficiency and Renewable 
Energy, Building Energy Codes Program, Status of Codes. May 2013. 
Available at: http://www.energycodes.gov/adoption/states.
---------------------------------------------------------------------------

2009 IECC Affordability Analysis

    In this Notice, HUD and USDA address two aspects of housing 
affordability in assessing the impact that the revised code will have 
on housing affordability. As described further below, the primary 
affordability test is a life-cycle cost savings (LCC) test, the extent 
to which the additional, or incremental, investments required to

[[Page 21265]]

comply with the revised code are cost effective; i.e., the additional 
measures pay for themselves with energy cost savings over a typical 30-
year mortgage period. A second test is whether the incremental cost of 
complying with the code as a share of total construction costs--
regardless of the energy savings associated with the investment--is 
affordable to the borrower or renter of the home.
    In determining the impact that the 2009 IECC will have on HUD- and 
USDA-assisted or insured new homes, the agencies have relied on a cost-
benefit analysis of the 2009 IECC completed by the Pacific Northwest 
National Laboratory (PNNL) for DOE.\21\ This study provides an 
assessment of both the initial costs and the long-term estimated 
savings and cost-benefits associated with complying with the 2009 IECC. 
It offers evidence that the 2009 IECC may not negatively impact the 
affordability of housing covered by the Act.
---------------------------------------------------------------------------

    \21\ Department of Energy, National Energy and Cost Savings for 
new Single- and Multifamily Homes: A Comparison of the 2006, 2009 
and 2012 Editions of the IECC. April 2012. Available at: http://www.energycodes.gov/sites/default/files/documents/NationalResidentialCostEffectiveness.pdf.
---------------------------------------------------------------------------

    Note that there may be other benefits associated with energy 
efficient homes. A March 2013 study by the University of North Carolina 
(UNC) Center for Community Capital and the Institute for Market 
Transformation (IMT) shows a correlation between greater energy 
efficiency and lower mortgage default risk for new homes. The UNC study 
surveyed 71,000 Energy Star-rated homes and found that mortgage default 
risks are 32 percent lower for these more energy efficient homes than 
homes without Energy Star ratings.\22\
---------------------------------------------------------------------------

    \22\ Available at: http://www.imt.org/uploads/resources/files/IMT_UNC_HomeEEMortgageRisksfinal.pdf.
---------------------------------------------------------------------------

Cost Effectiveness Analysis and Results

    The DOE study, National Energy and Cost Savings for New Single and 
Multifamily Homes: A Comparison of the 2006, 2009, and 2012 Editions of 
the IECC, published in April 2012 (2012 DOE study), shows positive 
results for the cost effectiveness of the 2009 IECC for new homes. This 
national study projects energy and cost savings, as well as life-cycle 
cost (LCC) savings that assume that the initial costs are mortgaged 
over 30 years. The LCC method is a ``robust cost-benefit metric that 
sums the costs and benefits of a code change over a specified time 
frame. LCC is a well-known approach to assessing cost-effectiveness.'' 
\23\ In September 2011, DOE solicited input via Federal Register Notice 
on their proposed cost benefit methodology \24\ and this input was 
incorporated into the final methodology posted on DOE's Web site in 
April 2012.\25\ A further Technical Support Document was published in 
April 2013.\26\
---------------------------------------------------------------------------

    \23\ Department of Energy, National Energy and Cost Savings for 
new Single- and Multifamily Homes: A Comparison of the 2006, 2009 
and 2012 Editions of the IECC. April 2012. p. A-1 Available at: 
http://www.energycodes.gov/sites/default/files/documents/NationalResidentialCostEffectiveness.pdf.
    \24\ Federal Register Notice September 13, 2011, 76 FR 56413.
    \25\ Pacific Northwest National Laboratory for the Department of 
Energy (Z. Taylor, R. Lucas, N. Fernandez) Methodology for 
Evaluating Cost-Effectiveness of Residential Energy Code Changes. 
April 2012. Available at: http://www.energycodes.gov/methodology-evaluating-cost-effectiveness-residential-energy-code-changes.
    \26\ Pacific Northwest National Laboratory for the Department of 
Energy (V. Mendon, R. Lucas, S. Goel), Cost-Effectiveness Analysis 
of the 2009 and 2012 IECC Residential Provisions--Technical Support 
Document. April 2013, Available at http://www.energycodes.gov/sites/default/files/documents/State_CostEffectiveness_TSD_Final.pdf.
---------------------------------------------------------------------------

    In summary, DOE calculates energy use for new homes using 
EnergyPlusTM energy modeling software, Version 5.0. Two 
buildings are simulated: a 2,400 square foot single family home and an 
apartment building (a three-story multifamily prototype having six 
dwelling units per floor) with 1,200 square foot dwelling units. DOE 
combines the results into a composite average dwelling unit based on 
2010 Census building permit data for each State and eight climate 
zones. Single family home construction is more common than low-rise 
multifamily construction; the results are weighted accordingly to 
reflect this. Census data also is used to determine climate zone and 
national averages weighted for construction activity.
    Four heating systems are considered: Natural gas furnaces, oil 
furnaces, electric heat pumps, and electric resistance furnaces. The 
market share of heating system types are obtained from the U.S. 
Department of Energy Residential Energy Consumption Survey (2009). 
Domestic water heating systems are assumed to use the same fuel as the 
space heating system.
    For all 50 States, DOE estimates that the 2009 IECC saves 10.8 
percent of energy costs for heating, cooling, water heating, and 
lighting over the 2006 IECC. LCC savings over a 30-year period are 
significant in all climate zones: Average consumer savings range from 
$1,944 in Climate Zone 3, to $9,147 in Climate Zone 8 when comparing 
the 2009 IECC to the 2006 IECC.\27\
---------------------------------------------------------------------------

    \27\ Department of Energy, National Energy and Cost Savings for 
new Single- and Multifamily Homes: A Comparison of the 2006, 2009 
and 2012 Editions of the IECC. April 2012, p. 3.
---------------------------------------------------------------------------

    The published cost and savings data for all 50 States provides 
weighted average costs and savings for both single family and low-rise 
multifamily buildings. For the 18 States impacted by this Notice, 
disaggregated data for single family homes only was provided to HUD and 
USDA by DOE. These disaggregated data are shown in Table 3. Front-end 
construction costs range from $550 (Kansas) to $1,950 (Hawaii) for the 
2009 IECC over the 2006 IECC. On the savings side, average LCC savings 
over a 30-year period of ownership range from $1,633 in Utah to $6,187 
in Alaska when comparing the 2009 IECC to the 2006 IECC.\28\
---------------------------------------------------------------------------

    \28\ Disaggregated single family data provided by DOE to HUD and 
USDA. Data shows LCC savings disaggregated for single family homes 
only (subset of LCC savings for both single family and low-rise 
multifamily shown in an April 2012 DOE study. Data available at 
www.hud.gov/sustainability.
---------------------------------------------------------------------------

    In addition to LCC savings, the 2012 DOE study also provides simple 
paybacks and ``net positive cash flows'' for these investments. These 
are additional measures of cost effectiveness. Simple payback is a 
measure, expressed in years, of how long it will take for the owner to 
repay the initial investment with the estimated annual savings 
associated with that investment. Positive cash flow assumes that the 
measure will be financed with a 30-year mortgage, and reflects the 
break-even point--equivalent to the number of months or years after 
loan closing--at which the cost savings from the incremental energy 
investment exceeds the combined cost of: (1) The additional downpayment 
requirement and (2) the additional monthly debt service resulting from 
the added investment.
    For example, the average LCC for Minnesota's adoption of the 2009 
IECC over its current standard (the 2006 IECC) is estimated at $3,904, 
with a simple payback of 4.3 years, and a net positive cash flow 
(mortgage payback) of just one year. Missouri homeowners will save 
$2,674 over 30 years under the 2009 IECC, with a simple payback of 3.8 
years, and a positive cash flow of one year on the initial investment. 
As shown in Table 3, below, similar results were obtained for the 
remaining States analyzed, with simple paybacks ranging from a high of 
8.3 years (Louisiana) to a low of 2.6 years (Alaska). The positive cash 
flow for all 18 impacted States is always one or 2 years, while the 
simple

[[Page 21266]]

payback averages 5.1 years, and is always less than 10 years (the 
longest payback is 8.3 years in Louisiana).
    As noted, the costs and savings estimates for the 18 States 
presented here do not use the composite single family/low-rise 
multifamily data presented in the 2012 DOE study. Rather, DOE provided 
HUD and USDA with the underlying disaggregated data for single family 
housing only, to more accurately reflect the housing type receiving FHA 
single family insurance or USDA loan guarantees. These disaggregated 
data for single family homes are available at www.hud.gov/sustainability.

    Table 3--Life-Cycle Cost (LCC) Savings, Net Positive Cash Flow, and Simple Payback for the 2009 IECC \29\
----------------------------------------------------------------------------------------------------------------
                                     Weighted
                                      average        Weighted       Life-cycle     Net positive
              State                 incremental    average cost     cost (LCC)       cash flow    Simple payback
                                    cost ($ per     savings per   savings ($ per      (years)         (years)
                                       unit)           year            unit)
----------------------------------------------------------------------------------------------------------------
Alaska..........................            $940            $357          $6,187               1             2.6
Arizona.........................           1,090             173           3,411               1             5.6
Arkansas........................           1,364             242           2,320               2             6.3
Colorado........................             902             902           1,782               2             6.7
Hawaii..........................           1,950             393           5,861               1             5.0
Kansas..........................             550             176           2,934               1             3.1
Kentucky........................             584             163           2,629               1             3.6
Louisiana.......................           1,291             155           1,733               2             8.3
Maine...........................             910             305           5,261               1             3.0
Mississippi.....................           1,043             245           2,174               2             7.2
Minnesota.......................             643             168           3,904               1             4.3
Missouri........................           1,275             176           2,674               1             3.8
Oklahoma........................           1,293             202           2,680               2             6.4
South Dakota....................             869             196           3,070               1             4.4
Tennessee.......................             643             143           2,158               1             4.5
Utah............................             925             128           1,633               2             7.2
Wisconsin.......................           1,027             239           3,788               1             4.3
Wyoming.........................             885             155           2,215               1             5.7
Avge of U.S.....................             980             203           3,069             1.4             5.1
Avge of 18 States...............           1,010             208           3,134             1.3             5.1
----------------------------------------------------------------------------------------------------------------
Note that only the 18 States that have not yet adopted the 2009 IECC are included in this table.

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

    \29\ Data provided by DOE to HUD and USDA showing disaggregated 
LCC savings for single family homes only (subset of LCC savings for 
both single family and low-rise multifamily published in April 2012 
DOE study).
---------------------------------------------------------------------------

Limitations

    HUD and USDA are aware of studies that discuss limitations 
associated with cost-savings models such as these developed by PNNL for 
DOE. For example, Alcott and Greenstone (2012) suggest that ``it is 
difficult to take at face value the quantitative conclusions of the 
engineering analyses'' associated with these models, as they suffer 
from several empirical problems. They cite two problems in particular. 
First, engineering costs typically incorporate upfront capital costs 
only and omit opportunity costs or other unobserved factors. For 
example, one study found that nearly half of the investments that 
engineering assessments showed in energy audits for medium-size 
businesses would have short payback periods were not adopted due to 
unaccounted physical costs, risks, or opportunity costs. Second, 
engineering estimates of energy savings can overstate true field 
returns, sometimes by a large amount, and that some engineering 
simulation models have still not been fully calibrated to approximate 
actual returns.\30\ HUD and USDA nevertheless believe that the PNNL-DOE 
model used to estimate the savings shown in this Notice represents the 
current state-of-the art for such modeling, is the product of 
significant public comment and input, and is now the standard for all 
of DOE's energy code simulations and models.
---------------------------------------------------------------------------

    \30\ Hunt Alcott and Michael Greenstone, ``Is there an energy 
efficiency gap?'' Journal of Economic Perspectives, Volume 26, 
Number 1, Winter 2012, pp. 3-28.
---------------------------------------------------------------------------

Distributional Impacts on Low-Income Consumers or Low Energy Users

    For reasons discussed below, HUD and USDA project that 
affordability will not decrease for many low-income consumers of HUD- 
or USDA-funded units as a result of the determination in this Notice. 
The purpose of the regulatory action is to lower gross housing costs. 
For rental housing, the gross housing cost equals the contract rent 
plus utilities (unless the contract rent includes utilities, in which 
case gross housing costs equal the contract rent). For homeowners, 
housing cost equals mortgage payments, property taxes, insurance, 
utilities, and other maintenance expenditures. Reducing periodic 
utility payments is achieved through an upfront investment in energy 
efficiency. The cost of building energy efficient housing will be 
passed on to residents (either renters or homeowners) through the price 
of the unit (either rent or sales price). Households will gain so long 
as the net present value of energy savings to the consumer is greater 
than the cost to the builder of providing energy efficiency. The DOE 
study cited in this Notice provides compelling evidence that this is 
the case for the energy standards in question; i.e., that they would 
have a positive impact on affordability. In the 18 States impacted by 
the 2009 IECC, one of two codes addressed in the Notice, the average 
incremental cost of going to the higher standard is just $1,010 per 
unit, with average annual savings of $208, for a 5.1 year simple 
payback, and a 1.3 year net positive cash flow (Department of Energy 
2012).
    Households that would gain the most from this regulatory action 
would be those that consume energy the most intensively. However, it is 
possible, although unlikely, that a minority of households could 
experience a net increase in housing costs as a result of the 
regulatory action. Households that

[[Page 21267]]

consume significantly less energy than the average household could 
experience a net gain in housing costs if their energy expenditures do 
not justify paying the cost of providing energy efficient housing.
    There are a few reasons why a significant number of these 
households is not expected to be inconvenienced. First, in the rare 
case that a household does not value the benefits of energy efficient 
housing, much of the pre-existing housing stock is available at a lower 
standard. Those that would lose from the capitalization of energy 
savings in more efficient housing could choose alternative housing from 
the large stock of existing and less energy efficient housing.
    Second, to the extent that the majority of users of HUD/USDA 
programs are likely to be lower-income households, these households may 
suffer more from the ``energy efficiency gap'' than higher income 
households. Low-income households pay a larger portion of their income 
on utilities and so are not likely to be adversely affected by 
requiring energy efficiency rules. According to data from the 2012 
Consumer Expenditure Survey, utilities represent almost 10 percent of 
total expenditures for the lowest-income households, as opposed to just 
5 percent for the highest income. A declining expenditure share 
indicates that utilities are a necessary good. One study of earlier 
data from the Consumer Expenditure Survey (Branch, 1993) found a short-
run income elasticity of demand of 0.23 (indicating that energy is a 
normal and necessary good). Given these caveats, the expectation is 
that the overwhelming majority of low-income households will gain from 
this regulatory action.

               Table 4--Quintiles of Income Before Taxes and Shares of Average Annual Expenditures
                                          [Figures represent percent.]
----------------------------------------------------------------------------------------------------------------
                                Lowest 20     Second 20     Third 20      Fourth 20    Highest 20   All consumer
            Item                 percent       percent       percent       percent       percent        units
----------------------------------------------------------------------------------------------------------------
Total Housing *.............          40            38            34            31            30            33
Shelter.....................          25            22            20            18            18            19
Utilities, fuels, and public           9.8           9.1           8.3           7.0           5.4           7.1
 services...................
Natural gas.................           0.9           0.8           0.8           0.7           0.6           0.7
Electricity.................           4.3           3.7           3.2           2.5           1.9           2.7
Fuel oil and other fuels....           0.3           0.3           0.3           0.2           0.2           0.3
Telephone services..........           3.0           3.0           2.9           2.5           1.8           2.4
Water and other public                 1.3           1.3           1.2           1.0           0.8           1.0
 services...................
----------------------------------------------------------------------------------------------------------------
* Housing expenditures are composed of shelter, utilities, household operations, housekeeping expenses,
  furniture, and appliances.
Source: Consumer Expenditure Survey, 2012, shares calculated by HUD.

    Third, as noted above, the standards under consideration in this 
Notice are not overly restrictive and are expected to yield a high 
benefit-cost return.

Conclusion

    For the 32 States and the District of Columbia that have already 
adopted the 2009 IECC or a stricter code, there will be little or no 
impact of HUD and USDA's adoption of this standard for the programs 
covered under EISA, since all housing in these States is already 
required to meet this standard as a result of State legislation. For 
the remaining 18 States that have not yet adopted the 2009 IECC, HUD 
and USDA expect no negative affordability impacts from adoption of the 
code as a result of the low incremental first costs, the rapid simple 
payback times, and the life-cycle cost savings documented above.
    For the States that have not yet adopted the 2009 IECC the evidence 
shows, however, that the 2009 IECC is cost effective in all climate 
zones and on a national basis. Cost effectiveness is based on LCC cost 
savings estimated by DOE for energy-savings equipment financed over a 
30-year period. In addition, simple paybacks on these investments are 
typically less than 10 years, and positive cash flows are in the one- 
to 2-year range. HUD and USDA therefore determine that the adoption of 
the 2009 IECC code for HUD- and USDA-assisted and insured new single 
family home construction does not negatively impact the affordability 
of those homes.

III. ASHRAE 90.1-2007 Affordability Determination

    EISA requires HUD to consider the adoption of ASHRAE 90.1 for HUD-
assisted multifamily programs (USDA multifamily programs are not 
covered). ASHRAE 90.1 is an energy code published by the American 
Society of Heating, Refrigerating, and Air-conditioning Engineers for 
commercial buildings, which, by definition, includes multifamily 
residential buildings of more than three stories. The standard provides 
minimum requirements for the energy efficient design of commercial 
buildings, including high-rise residential buildings (four or more 
stories). By design of the standard revision process, ASHRAE 90.1 sets 
requirements for the cost-effective use of energy in commercial 
buildings.
    Beginning with ASHRAE 90.1-2001, the standard moved to a 3-year 
publication cycle. Substantial revisions to the standard have occurred 
since 1989. Significant requirements in ASHRAE 90.1-2007 over the 
previous (2004) code included stronger building insulation, simplified 
fenestration requirements, demand control ventilation requirements for 
higher density occupancy, and separate simple and complex mechanical 
requirements.
    ASHRAE 90.1-2007 included 44 changes, or addenda, to ASHRAE 90.1-
2004.\31\ In an analysis of the code, DOE preliminarily determined that 
30 of the 44 would have a neutral impact on overall building 
efficiency; these included editorial changes, changes to reference 
standards, changes to alternative compliance paths, and other changes 
to the text of the standard that may improve the usability of the 
standard, but do not generally improve or degrade the energy efficiency 
of the building. Eleven changes were determined to have a positive 
impact on energy efficiency and two changes to have a negative 
impact.\32\
---------------------------------------------------------------------------

    \31\ Department of Energy, Impacts of Standard 90.1-2007 for 
Commercial Buildings at State Level, September 2009. Available at 
https://www.energycodes.gov/impacts-standard-901-2007-commercial-buildings-state-level.
    \32\ The two negative impacts on energy efficiency are: (1) 
Expanded lighting power exceptions for use with the visually 
impaired, and (2) allowance for louvered overhangs.
---------------------------------------------------------------------------

    The 11 addenda with positive impacts on energy efficiency include: 
Increased requirement for building vestibules, removal of data 
processing centers from

[[Page 21268]]

exceptions to HVAC requirements, removal of hotel room exceptions to 
HVAC requirements, modification of demand-controlled ventilation 
requirements, modification of fan power limitations, modification of 
retail display lighting requirements, modification of cooling tower 
testing requirements, modification of commercial boiler requirements, 
modification of part load fan requirements, modification of opaque 
envelope requirements, and modification of fenestration envelope 
requirements.

Current Adoption of ASHRAE 90.1-2007

    Thirty-eight States and the District of Columbia have adopted 
ASHRAE 90.1-2007, its equivalent, or a stronger commercial energy 
standard (Table 5).\33\ In many cases, that standard is adopted by 
reference through adoption of the commercial buildings section of the 
2009 IECC, while in other cases ASHRAE 90.1 is adopted separately. 
Twelve States either have previous ASHRAE codes in place or no 
statewide codes. ASHRAE 90.1-2007 was also the baseline energy standard 
established under ARRA for commercial buildings (including multifamily 
properties), to be adopted by all 50 States and for achieving a 90 
percent compliance rate by 2017.
---------------------------------------------------------------------------

    \33\ Not shown in Table 5 are the U.S. Territories. Guam, Puerto 
Rico, and the U.S. Virgin Islands have adopted ASHRAE 90.1-2007 for 
multifamily buildings. The Northern Mariana Islands have adopted the 
Tropical Model Energy Code, equivalent to ASHRAE 90.1-2001. American 
Samoa does not have a building energy code
    \34\ Department of Energy, Office of Efficiency and Renewable 
Energy, Building Energy Codes Program, Status of Codes. August, 
2012. Available at: https://www.energycodes.gov/adoption/states.

      Table 5--Current Status of ASHRAE Code Adoption by State \34\
                           [as of August 2012]
------------------------------------------------------------------------
  ASHRAE 90.1-2007  or higher  (38    Prior or no  statewide codes  (12
 states and  District of Columbia)                 states)
------------------------------------------------------------------------
Alabama                                 ASHRAE 90.1-2004 or Equivalent
Arkansas                             (4 States)
California
Connecticut                          Hawaii
Delaware                             Minnesota
District of Columbia                 Oklahoma
Florida                              Tennessee
Georgia
Idaho                                   ASHRAE 90.1-2001 or Equivalent
Indiana                              (1 State)
Illinois                             Colorado
Iowa
Kentucky
Louisiana
Maryland                                 No Statewide Code (7 States)
Massachusetts
Michigan                             Alaska
Mississippi (Effective July 1,       Arizona
 2013)                               Kansas
Montana                              Maine
Nebraska                             Missouri
Nevada                               South Dakota
New Hampshire                        Wyoming
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oregon
Pennsylvania
Rhode Island
South Carolina
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
------------------------------------------------------------------------

ASHRAE 90.1-2007 Affordability Analysis

    Section 304(b) of ECPA requires the Secretary of DOE to determine 
whether a revision to the most recent ASHRAE standard for energy 
efficiency in commercial buildings will improve energy efficiency in 
those buildings.\35\ In its determination of improved energy efficiency 
for commercial buildings, DOE developed both a ``qualitative'' analysis 
and a ``quantitative'' analysis to assess increased efficiency of 
ASHRAE Standard 90.1.\36\ The qualitative analysis evaluates the 
changes from one version of Standard 90.1 to the next and assesses if 
each individual change saves energy overall. The quantitative analysis 
estimates the energy savings associated with the change, and is 
developed from whole building simulations of a standard set of 
buildings built to the standard over a range of U.S. climates.
---------------------------------------------------------------------------

    \35\ 42 U.S.C. 6833(b)(2)(A).
    \36\ 76 FR 43287, July 20, 2011.
---------------------------------------------------------------------------

Energy Savings Analysis

    DOE's quantitative analysis for ASHRAE 90.1-2007 concluded that on 
average for mid-rise apartment buildings nationwide, electric energy 
use intensity would decrease by 2.1 percent and natural gas energy use 
intensity would decrease by 11.5 percent, for a total site decrease in 
energy use intensity of 4.3 percent under ASHRAE 90.1-2007.\37\ The 
energy cost index for this building type was also calculated to 
decrease by 3 percent.
---------------------------------------------------------------------------

    \37\ Pacific Northwest National Laboratory for Department of 
Energy, Impacts of Standard 90.1-2007 for Commercial Buildings at 
State Level, September 2009. Available at http://www.energycodes.gov/impacts-standard-901-2007-commercial-buildings-state-level.
---------------------------------------------------------------------------

    DOE also completed a state-by-state assessment of the impacts of 
ASHRAE 90.1-2007 on residential (mid-rise apartments), nonresidential, 
and semi-heated buildings subject to commercial building codes.\38\ 
This analysis included energy and cost savings over current commercial 
building codes by State and climate zone, by comparing each State's 
base code at the time of the study to Standard 90.1-2007. Results of 
this savings analysis for the 12 States that have not yet adopted 
Standard 90.1-2007 can be found in Appendix 2. Results are shown for 
the percent reduction estimated by DOE in both overall site energy use 
and energy cost resulting from adoption of Standard 90.1-2007 over the 
base case.\39\ ASHRAE 90.1-2007 was projected to generate both energy 
and cost savings in all States in all climate zones over existing 
codes.
---------------------------------------------------------------------------

    \38\ Id.
    \39\ Energy cost savings were estimated using national average 
energy costs of $0.0939 per kWh for electricity and $1.2201 per 
therm for natural gas.
---------------------------------------------------------------------------

    The highest energy and cost savings projected by DOE for 
residential buildings, for example, was in Topeka, Kansas (Climate Zone 
4A), where adoption of ASHRAE 90.1-2007 would provide 10.3 percent 
energy savings and 6.8 percent cost savings over the current energy 
code of the State of Kansas. The lowest energy and cost savings 
estimated by DOE for residential buildings were in Honolulu, Hawaii 
(Climate Zone 1A), at 0.8 percent in reduced electricity consumption 
and costs. (Differentials between energy savings and cost savings 
reflect price differences and varying shares of the total for different 
fuel sources.)

Cost Effectiveness Analysis and Results

    As discussed above, while DOE has completed an analysis of 
projected savings that will result from ASHRAE 90.1-2007, an equivalent 
to the cost studies conducted by DOE of the 2009 IECC does not exist 
for ASHRAE 90.1-2007. However, PNNL completed an analysis for DOE of 
the incremental costs and associated cost benefits of complying with 
the new standard for

[[Page 21269]]

the State of New York, and this analysis was used as the basis for 
determining the overall affordability impacts of the new standard.\40\ 
Note that PNNL compared ASHRAE 90.1-2007 to the prevailing code in New 
York at the time, the 2003 IECC, whereas the current standard for HUD-
assisted multifamily buildings is ASHRAE 90.1-2007 or the 2006 IECC.
---------------------------------------------------------------------------

    \40\ Krishan Gowri et al, Cost Effectiveness and Impact Analysis 
of Adoption of ASHRAE 90.1-2007 for New York State, June 2009. 
Available at http://www.pnl.gov/main/publications/external/technical_reports/PNNL-16770.pdf.
---------------------------------------------------------------------------

    In its New York analysis, PNNL found that adoption of ASHRAE 90.1-
2007 would be cost effective for all commercial building types, 
including multifamily buildings, in all climate zones in the State. The 
incremental first cost of adopting the revised standard for a 
hypothetical 31-unit mid-rise residential prototype building in New 
York was projected to be $21,083, $10,423, and $9,525 per building for 
each of three climate zones in New York (climate zones 4A, 5A, and 6A, 
respectively), for an average across all climate zones of $13,677 per 
building, or $441 per dwelling unit. (Costs in climate zone 4A were 
high because the sample location chosen for construction costs was New 
York City.)
    Annual cost savings in New York were projected to be $2,050, 
$1,234, and $1,185 for climate zones 4A, 5A, and 6A per building, 
respectively, for an average building, yielding cost savings of $1,489 
per building for all climate zones, and average savings of $45 per 
unit. The average simple payback period for this investment in New York 
is 9.8 years, with a range of approximately 8 to 10 years.
    Using New York as a baseline, HUD and USDA used Total Development 
Cost (TDC) adjustment factors developed by HUD in order to determine an 
estimate of the incremental costs associated with ASHRAE 90.1-2007 in 
the 12 States that have not yet adopted this code. HUD develops annual 
TDC limits for multifamily units for major metropolitan areas in each 
State. The average TDC for each State was derived by averaging TDCs for 
walkup- and elevator-style building types in each of several 
metropolitan areas in that State. (Note that since TDC costs include 
soft costs, site improvement costs, and management costs, the TDC 
differentials may not always correspond directly with ASHRAE-related 
cost differentials.) For the State of New York, TDCs were averaged for 
all of the State's metro areas, and arrived at an average New York TDC 
of $221,607 per unit.\41\ HUD and USDA then developed a TDC adjustment 
factor, which consists of the ratio of the average New York TDC of 
$221,607 for a two-bedroom unit against the average TDC for a similar 
unit in other States (Appendix 3). This TDC adjustment factor was then 
applied to the average cost per unit of $441.19 for complying with 
ASHRAE 90.1-2007 in New York, to arrive at an incremental cost per unit 
for the remaining 12 States that have not yet adopted ASHRAE 90.1-2007 
(Appendix 4).
---------------------------------------------------------------------------

    \41\ Department of Housing and Urban Development, 2011 Unit 
Total Development Cost (TDC) Limits, 2011. Available at http://portal.hud.gov/huddoc/2011tdcreport.pdf.
---------------------------------------------------------------------------

    HUD and USDA then averaged DOE's estimated energy savings across 
climate zones in each State to generate statewide energy savings 
estimates and for calculating simple payback periods for the ASHRAE 
90.1-2007 investments. For example, as shown in Appendices 2 and 4, the 
average cost savings resulting from adopting ASHRAE 90.1-2007 in the 
State of Arizona was estimated by DOE to be 4.9 percent of $1,107 per 
unit per year, or $54.22. For an estimated average incremental cost of 
$341 per unit, the simple payback in Arizona was determined to be 6.3 
years.\42\ Note that the same baseline code used for the New York 
analysis (the IECC 2003) is assumed for these States; the actual codes 
in these States may vary from the New York baseline.
---------------------------------------------------------------------------

    \42\ While the 13 States that have not yet adopted ASHRAE 90.1-
2007 have a variety of different energy codes, for the purposes of 
these estimates, the current codes in those States are assumed to be 
roughly equivalent to those in New York (ASHRAE 90.1-2004) at the 
time of the DOE study. States that have pre-2004 codes in place are 
likely to yield greater savings.
---------------------------------------------------------------------------

Conclusion

    USDA's multifamily programs are not covered by EISA, and therefore 
will not be impacted by ASHRAE 90.1. For impacted HUD programs, in the 
38 States and the District of Columbia that have adopted ASHRAE 90.1-
2007 or a higher standard, there will, by default, be no adverse 
affordability impacts of adopting this standard. For the remaining 12 
States that have not yet adopted ASHRAE 90.1-2007, in all cases, HUD 
and USDA estimate the incremental cost of ASHRAE 90.1-2007 compliance 
at under $500 per dwelling unit, with the highest incremental cost at 
$489.52 per dwelling unit (Alaska), and the lowest cost at $309.64 per 
dwelling unit (Oklahoma). This estimate compares favorably to the cost 
of complying with the 2009 IECC for single family homes, which showed 
an average incremental cost of $840 per dwelling unit. These 
incremental costs are a very small percent of initial construction 
costs--less than 0.2 percent of the average TDC of $221,000 for the 
State of New York, for example. With one exception (Hawaii), simple 
payback times are well under 15 years.
    Given the low incremental cost of compliance with the new standard 
and the generally favorable simple payback times, HUD and USDA have 
determined that, with one exception, adoption of ASHRAE 90.1-2007 by 
the covered HUD programs will not negatively impact the affordability 
of multifamily buildings built to the revised standard in the 12 States 
that have not yet adopted this standard.\43\ The exception is Hawaii. 
Since energy and cost savings are estimated by PNNL for Hawaii at less 
than one percent (.08%), and PNNL estimates the payback on the initial 
investment at 58.8 years, HUD and USDA determine that adoption of 
ASHRAE 90.1-2007 in Hawaii may negatively impact the affordability of 
housing in that State. Note that PNNL uses a national average kWh cost 
of .0939/kWh to estimate energy savings; using the current Hawaii 
energy price of .3204/kWh, the simple payback improves dramatically, to 
17 years, but not sufficiently to justify adoption of the ASHRAE 90.1-
2007 standard.
---------------------------------------------------------------------------

    \43\ Alaska, Arizona, Colorado, Kansas, Maine, Minnesota, 
Missouri, North Dakota, Oklahoma, South Dakota, Tennessee, and 
Wyoming.
---------------------------------------------------------------------------

    Given the differential between the payback at the average national 
electricity price compared to the payback at the current State energy 
price, this Notice specifically seeks comment on whether this exclusion 
of Hawaii is appropriate based on the available data.

IV. Impact on Availability of Housing

    EISA requires that HUD and USDA assess both the affordability and 
availability of housing covered by the Act. This section of this Notice 
addresses the impact that the EISA requirements would have on the 
``availability'' of housing covered by the Act. ``Affordability'' is 
assumed to be a measure of whether a home built to the updated energy 
code is affordable to potential homebuyers or renters, while 
``availability'' of housing is a measure associated with whether 
builders will make such housing available to consumers at the higher 
code level; i.e., whether the higher cost per unit as a result of 
complying with the revised code will impact whether that unit is likely 
to be built or not. A key aspect of determining the impact on 
availability is the proportion of affected units in

[[Page 21270]]

relation to total units funded by HUD and USDA or total for sale units. 
These issues are discussed below.

Impact of Increases in Housing Prices and Hedonic Effects

    At the margins, HUD and USDA do not project that the projected 
increase in housing prices, as a result of higher construction costs 
and hedonic effects, would decrease the quantity of housing. More 
efficient energy standards are expected to reduce operating costs for 
reasons explained in the above discussion of market failures. Thus, 
while there will theoretically be a negative impact on the supply of 
housing as a result of an increase in construction cost, there will 
also be a positive increase in demand for housing if it is more energy 
efficient. The capitalization of energy efficiency into housing prices 
may be hindered by difficulties in identifying and assessing energy 
efficiency. However, so long as the regulatory action leads to 
investments with positive net present value, the quantity of housing 
will increase.
    Measuring the hedonic value (demand effect) of energy efficiency 
improvements is fraught with difficulty and there is little consensus 
in the empirical literature concerning the degree of capitalization 
(Laquatra et al, 2002). However, whatever their methodology, studies do 
suggest a significant and positive influence of energy efficiency on 
real estate values. One of the most complete studies on the hedonic 
effects of energy efficiency is on commercial buildings (Eicholtz et 
al, 2010). The results indicate that a commercial building with an 
Energy Star certification will rent for about 3 percent more per square 
foot, increase effective rents by 7 percent, and sell for as much as 16 
percent more. The authors skillfully disentangle the energy savings 
required to obtain a label from the unobserved effects of the label 
itself. Energy savings are important: A 10 percent decrease in energy 
consumption leads to an increase in value of about 1 percent, over and 
above the rent and value premium for a labeled building. According to 
the authors of the study, the ``intangible effects of the label 
itself'' seem to play a role in determining the value of green 
buildings.

Impact of 2009 IECC on Housing Availability

    For the 32 States and the District of Columbia that have already 
adopted the 2009 IECC, there will be few negative effects on the 
availability of housing covered by the Act as a result of HUD and USDA 
establishing the 2009 IECC as a minimum standard.
    For those 18 States that have not yet adopted the revised codes, 
HUD and USDA have estimated the number of new construction units built 
under the affected programs in FY 2011. As detailed in Table 6, in FY 
2011 a total of 23,262 units of HUD- and USDA-assisted new single 
family homes were built in these States, including 17,098 that were 
FHA-insured new homes, 1,170 that received USDA Section 502 direct 
loans, and 4,563 that received Section 502 guaranteed loans. Overall, 
this represented 7.0 percent of all new single family home sales in the 
United States, and 0.4 percent of all U.S. single family home sales in 
FY 2011.\44\
---------------------------------------------------------------------------

    \44\ New single family home sales totaled 333,000 in 2011; all 
single family home sales totaled 5,236,000. Federal Housing 
Administration, FHA Single Family Activity in the Home-Purchase 
Market Through November 2011, February 2012. Available at http://portal.hud.gov/hudportal/documents/huddoc?id=fhamkt1111.pdf.
---------------------------------------------------------------------------

    Assuming similar levels of production as in 2011, the share of 
units estimated as likely to be impacted by the IECC in the 18 States 
that have not yet adopted this code is likely to be similar; i.e., 
approximately 7.0 percent of all new single family home sales in those 
18 States, and 0.4 percent of all single family home sales in those 18 
States.

      Table 6--FY 2011 Estimated Number of HUD- and USDA-Supported Units Impacted by Adoption of 2009 IECC
----------------------------------------------------------------------------------------------------------------
                                                    FHA Single     USDA  Sec 502   USDA  Sec 502
States not yet adopted 2009 IECC       HOME           family          direct        guaranteed         Total
----------------------------------------------------------------------------------------------------------------
AK..............................              16             207              25              53             301
AR..............................              10             672             127             412           1,221
AZ..............................              46           2,885              94             384           3,409
CO..............................              46           1,946              46              79           2,117
HI..............................              10             109              35             165             319
KS..............................               5             686              28              52             771
KY..............................              86             888             110             254           1,338
LA..............................              93             906             103           1,105           2,207
ME..............................               0             175              50              95             320
MN..............................              14           1,659              20              72           1,765
MO..............................              13           1,456              48             284           1,801
MS..............................              10             506             114             361             991
OK..............................              15           1,074             100             275           1,464
SD..............................               6             182              30              80             298
TN..............................              28           1,609              57             349           2,043
UT..............................              14           1,224             156             314           1,708
WI..............................              19             743              15              66             843
WY..............................               0             171              12             163             346
                                 -------------------------------------------------------------------------------
    Total.......................             431          17,098           1,170           4,563          23,262
----------------------------------------------------------------------------------------------------------------

    Adoption of the 2009 IECC for affected HUD and USDA programs 
represents an estimated one-time incremental cost increase for new 
construction single family units of $23.6 million nationwide, and an 
estimated annual benefit of $4.4 million, for an estimated simple 
payback of 5.4 years, as shown in Appendix 5.

[[Page 21271]]

Impact of ASHRAE 90.1-2007 on Housing Availability

    ASHRAE 90.1-2007 has been adopted by 38 States and the District of 
Columbia; the availability of HUD-assisted housing will therefore not 
be negatively impacted in these States with the adoption of this 
standard by the two agencies. As shown in Table 7, in the 12 States 
that have not yet adopted this code, 7,489 new multifamily units were 
funded or insured through HUD programs in FY 2011. HUD and USDA project 
that of the units produced in the programs shown in Table 7, only 
future units under the HOME Investment Partnerships (HOME) program and 
FHA multifamily units will be affected by this Notice. Using FY 2011 
unit production as the baseline, HUD and USDA project this to be 
approximately 5,438 units annually. Although covered under EISA, HUD's 
Public Housing Capital Fund, the Sections 202 and 811 Supportive 
Housing, and HOPE VI programs are not projected to be covered by the 
codes addressed in this Notice, due to the fact that the Public Housing 
Capital Fund currently already requires a more recent building energy 
code for new construction (ASHRAE 90.1-2010); the Sections 202 and 811 
Supportive Housing programs no longer fund new construction and in any 
case have established higher standards for new construction in recent 
notices of funding availability (NOFAs) (Energy Star Certified New 
Homes and Energy Star Certified Multifamily High Rise buildings), and 
HOPE VI is no longer active.

                             Table 7--FY 2011 Estimated Number of Units Potentially Impacted by Adoption of ASHRAE 90.1-2007
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Public housing   Section  202/                                       FHA-
        States not yet adopted  ASHRAE 90.1-2007           capital fund         811            HOME           HOPE VI       Multifamily        Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
AK......................................................  ..............              16              53  ..............               0              69
AZ......................................................  ..............               0             584  ..............             274             858
CO......................................................  ..............              14             146  ..............           1,654           1,814
HI......................................................  ..............               0           [138]  ..............               0           [138]
KS......................................................  ..............              24              35  ..............               0              59
ME......................................................  ..............               0               0  ..............               0               0
MN......................................................  ..............             204              80  ..............             180             464
MO......................................................  ..............             134             532  ..............             144             810
OK......................................................  ..............              10             215  ..............           1,086           1,311
SD......................................................  ..............               0              79  ..............              60             139
TN......................................................  ..............              33              91  ..............             144             268
WY......................................................  ..............               0               9  ..............              72              81
Unallocated.............................................           1,155  ..............  ..............             323  ..............  ..............
                                                         -----------------------------------------------------------------------------------------------
    Total Units Produced in FY2011......................           1,155             435           1,962             323           3,614           7,489
                                                         -----------------------------------------------------------------------------------------------
    Total Units Projected to be Covered Under this        ..............  ..............           1,824  ..............           3,614      \45\ 5,438
     Notice.............................................
--------------------------------------------------------------------------------------------------------------------------------------------------------

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

    \45\ Although 138 HOME units would be projected to be affected 
in Hawaii, Hawaii has been excluded from coverage under ASHRAE 90.1-
2007 due to insufficient cost savings and relatively long paybacks, 
projected from the adoption of ASHRAE 90.1-2007. These units are 
therefore excluded from the affected unit count.
---------------------------------------------------------------------------

    Twenty-four projects with 3,614 new multifamily units were endorsed 
by FHA in 2011. Two States, Colorado and Oklahoma, accounted for nearly 
half of this total, with five States accounting for less than 200 units 
each. The 3,614 multifamily units endorsed by FHA in FY 2011 in States 
that have not yet adopted ASHRAE 90.1-2007 represented 2 percent of a 
total of 180,367 units receiving FHA multifamily endorsements in FY 
2011. The 24 projects with affected units represented a mortgage value 
of $396 million, or 3.4 percent of a total FHA-insured mortgage amount 
of $11.68 billion in FY 2011. Assuming a similar share of impacted 
units as in FY 2011 in future years, HUD and USDA assume that less than 
2 percent of FHA multifamily endorsements will be impacted by ASHRAE 
90.1-2007, and approximately 3 percent of total loan volume.
    Adoption of ASHRAE 90.1-2007 by the covered HUD and USDA programs 
represents an estimated one-time incremental cost increase for new 
multifamily residential units of $1.87 million nationwide, and an 
estimated annual benefit of $177,800 nationwide, resulting in an 
estimated simple payback time of under 11 years, as shown in Appendix 
6.

Combined Energy Costs and Savings

    For both the single family units complying with the 2009 IECC and 
the multifamily units complying with ASHRAE 90.1-2007, the combined 
cost of implementing the updated date is estimated at $25.5 million, 
with an estimated annual energy cost savings of $4.6 million. 
Annualized costs for this initial investment over 10 years are $2.9 
million. Over 10 years, the present value of these cost savings, using 
a discount rate of 3 percent, is $40.1 million, for a net present value 
savings of $14.4 million over 10 years.

Social Benefits of Energy Standards: Reducing CO2 Emissions

    In addition to energy savings, additional cost benefits will be 
achieved from the resulting reductions in carbon emissions. The effect 
of a decline on energy consumption is to reduce emissions of pollutants 
(such as particulate matter) that cause health and property damage and 
greenhouse gases (such as carbon dioxide) that cause global warming. To 
calculate the social cost of carbon dioxide in any given year, the 
Interagency Working Group on Social Cost of Carbon estimated the future 
damages to agriculture, human health, and other market and nonmarket 
sectors from an additional unit of carbon dioxide emitted in a 
particular year in terms of reduced consumption due to the impacts of 
elevated temperatures.\46\ The interagency group provides estimates of 
the damage for every year of the analysis from a future value of $39 in 
2013 to $96 in 2027 (a

[[Page 21272]]

25-year stream of benefits). A worst-case scenario was presented by the 
Interagency Working Group with costs starting at $110 in 2013 and 
rising to $196 by 2037.
---------------------------------------------------------------------------

    \46\ Interagency Working Group on Social Cost of Carbon, 
Technical Support Document: Social Cost of Carbon for Regulatory 
Impact Analysis Under Executive Order 12866, United States 
Government, 2010.
---------------------------------------------------------------------------

    The emission rate of metric tons of carbon dioxide (CO2) 
per British thermal unit (BTU) consumed varies by power source. The 
primary source for these data is the U.S. Energy Information 
Administration's Voluntary Reporting of Greenhouse Gases Program. HUD 
uses a range for its emission factor of 0.107 to 0.137 metric tons of 
CO2 per million BTUs. Based on studies by DOE, HUD estimates 
energy savings of 2.06 million BTUs per housing unit per year from the 
ASHRAE 90.1-2007 standard and a reduction of 7.06 million BTUs per 
housing unit per year from the 2009 IECC. The expected aggregate energy 
savings (technical efficiency) is approximately 175,000 million BTUs 
annually.\47\
---------------------------------------------------------------------------

    \47\ 2.06 MMBTU x 5,438 multifamily units + 7.06 MMBTU x 23,262 
single family units.
---------------------------------------------------------------------------

    Whatever the predicted energy savings (technical efficiencies) of 
an energy efficiency upgrade, the actual energy savings by a household 
are likely to be smaller due to a behavioral response known as the 
``rebound effect.'' A rebound effect has been observed when an energy 
efficient investment effectively lowers the price of the outputs of 
energy (heat, cooling, and lighting), which may lead to both income and 
substitution effects by raising the demand for energy. Increasing 
energy efficiency reduces the expense of physical comfort and may thus 
increase the demand for comfort. To account for the wide range of 
estimates for the scale of the rebound effect and the uncertainty 
surrounding these estimates, HUD assumes a range of between 10 and 30 
percent (Sorrel 2007). The size of the rebound effect does not reduce 
the benefit to a consumer of energy efficiency but indicates how those 
benefits are allocated between reduced energy costs and increased 
comfort. Taking account of the rebound effect, the technical 
efficiencies provided by the energy standards discussed in this Notice 
produce an estimated energy savings of from 122,500 million to 157,500 
million BTUs.
    The table below summarizes the aggregate social benefits realized 
from reducing carbon emissions for different marginal social cost 
scenarios (average and worst case), lifecycles, and scenario 
assumptions. The highest benefits will be for a high marginal social 
cost of carbon, long lifecycle, low rebound factor, and high emissions 
factor.

                   Table 8--Annualized Value of Reduction in CO2 Emissions Over 305,000 Units
                                                [$2,012 million]
----------------------------------------------------------------------------------------------------------------
                                               Emission factor of 0.107            Emission factor of 0.137
                                         -----------------------------------------------------------------------
                                             Rebound 30%       Rebound 10%     Rebound of 30%    Rebound of 10%
                Lifecycle                -----------------------------------------------------------------------
                                           Median    High    Median    High    Median    High    Median    High
                                           MSC *     MSC      MSC      MSC      MSC      MSC      MSC      MSC
----------------------------------------------------------------------------------------------------------------
10 years................................     0.58     1.68     0.73     2.15     0.73     2.14     0.94     2.75
15 years................................     0.60     1.77     0.77     2.29     0.77     2.28     0.99     2.97
20 years................................     0.63     1.87     0.81     2.40     0.81     2.39     1.03     3.12
25 years................................     0.65     1.97     0.84     2.52     0.85     2.51     1.07     3.22
----------------------------------------------------------------------------------------------------------------
* MSC = marginal social cost.

    The annualized value of the social benefits of reducing carbon 
emissions, discounted at 3 percent, ranges from $580,000 to $3.22 
million.\48\ The corresponding present values range from $5 million to 
$24.2 million over 10 years, to $58 million over 25 years.
---------------------------------------------------------------------------

    \48\ Because the Interagency Group used a 3 percent rate to 
calculate the present value of damage, HUD uses the same rate in 
order to be consistent with the federally approved estimates of 
damage.
---------------------------------------------------------------------------

Conclusion

    Given the extremely low incremental costs associated with adopting 
both the 2009 IECC and ASHRAE 90.1-2007 described above, and that the 
estimated number of new construction units built under the affected 
programs in FY 2011 in States that have not yet adopted the revised 
codes is a small percentage of the total number of new construction 
units in those programs nationwide, HUD and USDA have determined that 
adoption of the codes will not adversely impact the availability of the 
affected units.

V. Impact on HUD and USDA Programs

Implementation

    Based on DOE findings on improvements in energy efficiency and 
energy savings, and HUD and USDA determinations on housing 
affordability and availability outlined in this Notice, HUD and USDA 
programs specified under EISA will implement procedures to ensure that 
recipients of HUD funding, assistance, or insurance comply with the 
2009 IECC and (except in Hawaii) ASHRAE 90.1-2007 code requirements, 
commencing no later than 30 days after the date of publication of a 
Notice of Final Determination.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR part 50, 
which implement section 102(2)(C) of the National Environmental Policy 
Act of 1969 (42 U.S.C. 4332(2)(C)). That finding is posted at 
www.regulations.gov and www.hud.gov/sustainability and is available for 
public inspection between the hours of 8 a.m. and 5 p.m. weekdays in 
the Regulations Division, Office of General Counsel, Department of 
Housing and Urban Development, 451 7th Street SW., Room 10276, 
Washington, DC 20410-0500. Due to security measures at the HUD 
Headquarters building, please schedule an appointment to review the 
finding by calling the Regulations Division at 202-402-3055 (this is 
not a toll-free number).

References

Ariely, Dan, 2009, Predictably Irrational, Revised and Expanded 
Edition, Harper Collins, New York, New York.
Allcott, Hunt and Michael Greenstone, 2012, ``Is there an Energy 
efficiency Gap?'' National Bureau of Economic Research, Working 
Paper 17766.
Branch, E. Raphael, ``Short Run Income Elasticity of Demand for 
Residential Electricity Using Consumer Expenditure

[[Page 21273]]

Survey Data, '' Energy Journal, 1993: 14:4, pp. 111-21.
Bourland, Dana L., 2009, Incremental Cost, Measurable Savings 
Enterprise Green Communities Criteria, Enterprise Green Communities, 
Inc., Columbia, Maryland.
Brown, Marilyn A, 2001, ``Market failures and barriers as a basis 
for clean energy policies,'' Energy Policy 29: pp. 1197-1207.
Clinch, J. Peter and John D. Healy, ``2001 Cost-benefit analysis of 
domestic energy efficiency,'' Energy Policy 29: pp. 113-124.
Eichholz, P., N. Kok, and J. Quigley. Doing Well by Doing Good? 
Green Office Buildings. American Economic Review, 100:5, pp. 2492-
2509.
Fisk, William J. ``How IEQ Affects Health, Productivity.'' 2002 
ASHRAE Journal: 57, pp.
Gillingham, Kenneth, Matthew Harding, and David Rapson. 2012. 
``Split Incentives and Household Energy Consumption.'' Energy 
Journal 33 (2): pp. 37-62.
Laquatra, Joseph, David J. Dacquisto, Paul Emrath, and John A. 
Laitner, 2002, Housing Market Capitalization of Energy Efficiency 
Revisited, paper prepared for 2002 ACEEE Summer Study on Energy 
Efficiency in Buildings; see www.eceee.org/conference_proceedings/ACEEE_buildings/2002/Panel_8/p8_12/paper.
McKinsey and Company, (2009), ``Unlocking Efficiency in the U.S. 
Economy,'' Granada, Hannah Choi et al, July 2009.
McFarlane, Alastair, 2011, ``The Impact of Home Energy Retrofit Loan 
Insurance: A Pilot Program,'' Cityscape: A Journal of Policy 
Development and Research, Volume 13, Number 3: 237-249, U.S. 
Department of Housing and Urban Development, Office of Policy 
Development and Research.
Schweitzer, Martin, and Bruce Tonn, ``Nonenergy Benefits from the 
Weatherization Assistance Program: A Summary of Findings from the 
Recent Literature,'' ORNL/CON-484, Oak Ridge National Laboratory, 
Oak Ridge, April 2002.
Thaler, Richard H., and Cass R. Sunstein, 2008, Nudge: Improving 
Decisions about Health, Wealth, and Happiness, New Haven, CT, Yale 
University Press.
U.S. Department of Energy, National Energy and Cost Savings for New 
Single and Multifamily Homes: A Comparison of the 2006, 2009, and 
2012 Editions of the IECC, 2012.

    Dated: April 9, 2014.
Shaun Donovan,
Secretary, U.S. Department of Housing and Urban Development.

Thomas J. Vilsack,
Secretary, U.S. Department of Agriculture.

                Appendix 1--Covered HUD and USDA Programs
------------------------------------------------------------------------
                                    Legal Authority        Regulations
------------------------------------------------------------------------
HUD Programs:
    Public Housing Capital      Section 9(d) and        24 CFR parts
     Fund.                       Section 30 of the       905, 941, and
                                 U.S. Housing Act of     968.
                                 1937 (42 U.S.C.
                                 1437g(d) and 1437z-2).
    HOPE VI Revitalization of   Section 24 of the U.S.  24 CFR part 971.
     Severely Distressed         Housing Act of 1937
     Public Housing.             (42 U.S.C. 1437v).
    Choice Neighborhoods        Section 24 of the U.S.  24 CFR part 971.
     Implementation Grants.      Housing Act of 1937
                                 (42 U.S.C. 1437v).
    Choice Neighborhoods        Section 24 of the U.S.  24 CFR part 971.
     Planning Grants.            Housing Act of 1937
                                 (42 U.S.C. 1437v).
    Section 202 Supportive      Section 202 of the      24 CFR part 891.
     Housing for the Elderly.    Housing Act of 1959
                                 (12 U.S.C. 1701q), as
                                 amended.
    Section 811 Supportive      Section 811 of the      24 CFR part 891.
     Housing for Persons with    Housing Act of 1959
     Disabilities.               (12 U.S.C. 1701q), as
                                 amended..
    HOME Investment             Title II of the         24 CFR part 92.
     Partnerships (HOME).        Cranston-Gonzalez
                                 National Affordable
                                 Housing Act (42
                                 U.S.C. 12701 et seq.).
    FHA Single Family Mortgage  National Housing Act    24 CFR parts
     Insurance Programs.         Sections 203(b) (12     203, Subpart A;
                                 U.S.C. 1709(b)),        203.18(i);
                                 Section 251 (12         203.43i; 203;
                                 U.S.C. 1715z-16),       203.49;
                                 Section 247 (12         203.43h.
                                 U.S.C. 1715z-12),
                                 Section 203(h) (12
                                 U.S.C. 1709(h)),
                                 Housing and Economic
                                 Recovery Act of 2008
                                 (Public Law 110-289),
                                 Section 248 of the
                                 National Housing Act
                                 (12 U.S.C. 1715z-13).
    FHA Multifamily Mortgage    Sections 213, 220,      24 CFR parts
     Insurance Programs.         221, 231, and 232 of    200, subpart A,
                                 the National Housing    213; 231; 220;
                                 Act (12 U.S.C. 1715e,   221, subparts C
                                 12 U.S.C. 1715v, 12     and D; and 232.
                                 U.S.C. 1715k, 12
                                 U.S.C. 17151, 12
                                 U.S.C. 1715w)..
USDA Programs:
    Section 502 Guaranteed      Section 502 of Housing  7 CFR part 1980.
     Housing Loans.              Act (42 U.S.C. 1472).
    Section 502 Rural Housing   Section 502 of Housing  7 CFR part 3550.
     Direct Loans.               Act (42 U.S.C. 1472).
    Section 502 Mutual Self     Section 502 of Housing  7 CFR part 3550.
     Help Loan program,          Act (42 U.S.C. 1472).
     homeowner participants.
------------------------------------------------------------------------


              Appendix 2--Estimated Energy and Cost Savings From Adoption of ASHRAE 90.1-2007 \49\
----------------------------------------------------------------------------------------------------------------
                                                                             Baseline energy
    State             Location           Climate zone      Energy savings     cost ($/unit/     Cost savings (%)
                                                                (%)               year)
----------------------------------------------------------------------------------------------------------------
AK...........  Anchorage............                  7                6.5              1,281                4.7
               Fairbanks............                  8                4.7              1,475                3.7
               Average..............  .................                5.6              1,378                4.2
AZ...........  Phoenix..............                 2B                6.6              1,070                5.8
               Sierra Vista.........                 3B                6.1              1,037                5.4
               Prescott.............                 4B                8.7                 1,                5.6
               Flagstaff............                 5B                5.7              1,059                3.0

[[Page 21274]]

 
               Average..............  .................                6.8              1,106                4.9
CO...........  La Junta.............                 4B                7.4              1,092                4.5
               Boulder..............                 5B                7.5              1,101                4.6
               Eagle................                 6B                1.7              1,102                0.9
               Alamosa..............                 7B                2.7              1,118                1.6
               Average..............  .................                4.8              1,103                2.9
HI...........  Honolulu.............                 1A                0.8              1,013                0.8
               Average..............  .................                0.8              1,013                0.8
KS...........  Topeka...............                 4A               10.3              1,192                6.8
               Goodland.............                 5A                5.2              1,177                3.2
               Average..............  .................                7.8              1,185                5.0
ME...........  Portland.............                 6A                4.5              1,175                2.8
               Caribou..............                  7                5.4              1,311                4.0
               Average..............  .................                5.0              1,243                3.4
MN...........  St. Paul.............                 6A                2.2              1,245                1.3
               Duluth...............                  7                5.2              1,342                3.9
               Average..............  .................                3.7              1,294                2.6
MO...........  St. Louis............                 4A                3.5              1,147                2.2
               St. Joseph...........                 5A                3.6              1,161                2.3
               Average..............  .................                3.6              1,154                2.3
OK...........  Oklahoma City........                 3A                1.5              1,074                1.7
               Guymon...............                 4A                3.6              1,098                2.2
               Average..............  .................                2.6              1,086                2.0
SD...........  Yankton..............                 5A                4.1              1,264                2.7
               Pierre...............                 6A                4.2              1,258                2.8
               Average..............  .................                4.2              1,261                2.8
TN...........  Memphis..............                 3A                3.4              1,047                3.0
               Nashville............                 4A                3.2              1,083                1.9
               Average..............  .................                3.3              1,065                2.4
WY...........  Torrington...........                 5B                4.2              1,145                2.6
               Cheyenne.............                 6B                4.5              1,179                2.8
               Rock Springs.........                 7B                4.7              1,205                3.0
               Average..............  .................                4.5              1,176                2.8
----------------------------------------------------------------------------------------------------------------

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

    \49\ Source: Pacific Northwest National Laboratory, Department 
of Energy, Impacts of Standard 90.1-2007 for Commercial Buildings at 
State Level, September 2009. States for which figures are provided 
are states that have not yet adopted ASHRAE 90.1-2007. Those States 
for which cost and savings are shown as zero percent had adopted 
ASHRAE 90.1-2007 as of August 2012. Available at http://www.energycodes.gov/impacts-standard-901-2007-commercial-buildings-state-level.
    \50\ Sources: HUD Estimate of Incremental Costs and Dollar 
Savings associated with ASHRAE 90.1-2007. Incremental Cost/Unit was 
estimated by adjusting the New York incremental cost of $441.19 by 
Total Development Cost (TDC) adjustment factors in Appendix 2B. 
Energy Cost Savings/Unit is derived from PNNL estimates of energy 
saved, using national average of .0939/kWh for electricity and 
$1.2201/therm. Simple Payback/Unit is derived by dividing 
Incremental Cost/Unit by Energy Cost Savings/Unit.

 Appendix 3--Average 2011 Two-Bedroom Total Development Cost Limits for
   13 States That Have Not Adopted ASHRAE 90.1-2007 and TDC Adjustment
                                 Factors
------------------------------------------------------------------------
                                                                 TDC
                     State                       TDC Limit    Adjustment
                                                    ($)         Factor
------------------------------------------------------------------------
NY............................................      221,607         1.00
AK............................................      245,882         1.11
AZ............................................      171,058         0.77
CO............................................      178,241         0.80
HI............................................      239,412         1.08
KS............................................      170,213         0.77
ME............................................      187,802         0.85
MN............................................      207,475         0.94
MO............................................      184,221         0.83
OK............................................      155,578         0.70
SD............................................      159,576         0.72
TN............................................      160,222         0.72
WY............................................      160,431         0.72
------------------------------------------------------------------------


        Appendix 4--Estimated Costs and Benefits Per Dwelling Unit From Adoption of ASHRAE 90.1-2007 \50\
----------------------------------------------------------------------------------------------------------------
                                                                                    Energy cost
                              State                                 Incremental    savings/unit   simple payback/
                                                                  Cost/Unit  ($)    ($/year) *     unit (years)
----------------------------------------------------------------------------------------------------------------
AK..............................................................             489           57.90             8.5
AZ..............................................................             340           54.22             6.3

[[Page 21275]]

 
CO..............................................................             354           32.01            11.1
HI..............................................................             476            8.11            58.8
KS..............................................................             338           59.26             5.7
ME..............................................................             373           42.27             8.8
MN..............................................................             413           33.65            12.3
MO..............................................................             366           26.55            13.8
NY..............................................................             441           45.07             9.8
OK..............................................................             309           21.73            14.3
SD..............................................................             317           35.32             9.0
TN..............................................................             318           25.57            12.5
WY..............................................................             319           32.95             9.7
----------------------------------------------------------------------------------------------------------------
* Note on Energy Cost Savings: This table uses PNNL methodology of national average cost of electricity of .0939/
  kWh and $1.2201/therm for natural gas.


  Appendix 5--Estimated Total Costs and Benefits From Adoption of 2009
                      IECC Over Existing State Code
------------------------------------------------------------------------
                                               Total       Total energy
                                            incremental    cost savings
                  State                   cost per state   per state ($
                                                ($)          per year)
------------------------------------------------------------------------
AK......................................         282,940         107,457
AR......................................       1,330,890         211,233
AZ......................................       4,649,876         824,978
CO......................................       1,909,534         283,678
HI......................................         622,050         125,367
KS......................................         424,050         135,696
KY......................................         781,392         218,094
LA......................................       2,849,237         342,085
ME......................................         291,200          97,600
MN......................................       1,840,895         432,425
MO......................................       1,158,043         302,568
MS......................................       1,263,525         174,416
OK......................................       1,892,952         295,728
SD......................................         258,962          58,408
TN......................................       1,313,649         292,149
UT......................................       1,579,900         218,624
WI......................................         865,761         201,477
WY......................................         306,210          53,630
                                         -------------------------------
  Total.................................      23,621,066       4,375,613
------------------------------------------------------------------------


 Appendix 6--Estimated Total Costs and Benefits From Adoption of ASHRAE
                                90.1-2007
------------------------------------------------------------------------
                                               Total       Total energy
                  State                     incremental    cost savings/
                                          cost/state ($)  state ($/year)
------------------------------------------------------------------------
AK......................................          25,945           3,069
AZ......................................         292,192          46,521
CO......................................         638,730          57,618
HI \51\.................................               0               0
KS......................................          11,860           2,074
ME \52\.................................               0               0
MN......................................         107,396           8,749
MO......................................         247,930          17,948
OK......................................         402,972          28,271
SD......................................          44,159           4,909
TN......................................          74,960           6,009
WY......................................          25,871           2,669
                                         -------------------------------
  Total.................................       1,872,015         177,837
------------------------------------------------------------------------

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

    \51\ Hawaii has been excluded from this notice due to 
insufficient cost savings and a resulting long simple payback 
projected from the adoption of ASHRAE 90.1-2007. These costs and 
savings are therefore excluded from this table.
    \52\ No units were produced under affected programs in Maine in 
FY 2011: therefore, no costs or savings are shown.
---------------------------------------------------------------------------

[FR Doc. 2014-08562 Filed 4-14-14; 8:45 am]
BILLING CODE 4210-67-P