[Federal Register Volume 80, Number 87 (Wednesday, May 6, 2015)]
[Rules and Regulations]
[Pages 25901-25924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-10380]


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DEPARTMENT OF AGRICULTURE

7 CFR Chapter 0

RIN 0575-ZA00

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 91 and 93

[HUD FR-5647-N-02]
RIN 2501-ZA01


Final Affordability Determination--Energy Efficiency Standards

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

ACTION: Notice of Final Determination.

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SUMMARY: The U.S. Department of Housing and Urban Development (HUD) and 
the U.S. Department of Agriculture (USDA) have determined that adoption 
of the 2009 edition of the International Energy Conservation Code 
(IECC) for single family homes and the 2007 edition of the American 
Society of Heating, Refrigerating and Air-conditioning Engineers 
(ASHRAE) 90.1 for multifamily buildings will not negatively affect the 
affordability and availability of certain HUD- and USDA-assisted 
housing specified in section 481 of the Energy and Independence and 
Security Act of 2007 (EISA). This determination fulfills a statutory 
requirement established under EISA that HUD and USDA adopt revisions to 
the 2006 IECC and ASHRAE 90.1-2004 subject to: A determination that the 
revised codes do not negatively affect the availability or 
affordability of new construction of single family and multifamily 
housing covered by EISA; and a determination by the Secretary of Energy 
that the revised codes ``would improve energy efficiency.'' For the 
more recent IECC and ASHRAE codes that have been published since the 
publication of the 2009 IECC and ASHRAE 90.1-2007, HUD and USDA intend 
to follow this Notice of Final Determination with an advance notice 
that addresses the next steps the agencies plan to take on the 2015 
IECC and ASHRAE 90.1-2013 codes.

DATES: This notice of final determination will be effective according 
to the implementation schedule described herein that commences no 
earlier than June 5, 2015.

FOR FURTHER INFORMATION CONTACT: HUD: Rachel Isacoff, Office of 
Economic Resilience, Department of Housing and Urban Development, 451 
7th Street SW., Room 10180, Washington, DC 20410; telephone number 202-
402-3710 (this is not a toll-free number). Persons with hearing or 
speech impairments may access this number through TTY by calling the 
Federal Relay Service toll-free 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. Background
    A. Statutory Requirements
    B. HUD and USDA Preliminary Determination
    C. Public Comments on Preliminary Determination
    D. Adoption of Preliminary Determination as Final Determination
II. HUD-USDA Final Affordability Determination
    A. Discussion of Market Failures
    B. 2009 IECC Affordability Determination
    1. Current Adoption of the 2009 IECC
    2. 2009 IECC Affordability Analysis
    3. Cost Effectiveness Analysis and Results
    4. Limitations
    5. Distributional Impacts on Low-Income Consumers or Low Energy 
Users
    6. Conclusion
    C. ASHRAE 90.1-2007 Affordability Determination
    1. Current Adoption of ASHRAE 90.1-2007
    2. ASHRAE 90.1-2007 Affordability Analysis
    3. Energy Savings Analysis
    4. Cost Effectiveness Analysis and Results
    5. Conclusion
    D. Impact on Availability of Housing
    1. Impact of increases in housing prices and hedonic effects
    2. Impact of 2009 IECC on Housing Availability
    3. Impact of ASHRAE 90.1-2007 on Housing Availability
    4. Conclusion
    E. Implementation Schedule
    F. Alternative Compliance Paths
    G. Cost Benefit Analysis
    1. Energy Costs and Savings
    2. Social Benefits of Energy Standards
III. Findings and Certifications
    A. Environmental Review
List of Tables:
    1. Current Energy Standards and Incentives for HUD and USDA 
Programs (New Construction Only)
    2. Current Status of IECC Adoption by State
    3. Life-cycle Cost (LCC) Savings, Net Positive Cash Flow, and 
Simple Payback for the 2009 IECC
    4. Quintiles of Income Before Taxes and Shares of Average Annual 
Expenditures
    5. Current Status of ASHRAE Code Adoption by State
    6. Estimated Costs and Benefits per Dwelling Unit From Adoption 
of ASHRAE 90.1-2007
    7. Estimated Number of HUD- and USDA-Supported Units Potentially 
Impacted by Adoption of 2009 IECC
    8. Estimated Number of HUD-Assisted Units Potentially Impacted 
by Adoption of ASHRAE 90.1-2007
    9. Annualized Value of Reduction in CO2 Emissions
Appendices:
    1. Covered HUD and USDA Programs
    2. Estimated Energy and Cost Savings From Adoption of ASHRAE 
90.1-2007
    3. Total Development Cost (TDC) Adjustment Factors for States 
That Have Not Adopted ASHRAE 90.1-2007
    4. Estimated Total Costs and Energy Cost Savings From Adoption 
of 2009 IECC
    5. Estimated Total Costs and Energy Cost Savings From Adoption 
of ASHRAE 90.1-2007

I. Background

A. Statutory Requirements

    HUD and USDA have a statutory responsibility to adopt minimum 
energy standards for new construction of certain HUD- and USDA-assisted 
housing, following procedures established in EISA. Section 481 of EISA 
amended 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 certain 
HUD and USDA programs. The two standards referenced in EISA (the IECC 
and ASHRAE 90.1) apply to different building types: the IECC standard 
applies to single family homes and low-rise multifamily buildings (up 
to three stories), while ASHRAE 90.1 applies to multifamily mid- or 
high-rise residential buildings (four or more stories).\1\
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    \1\ 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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    The following HUD and USDA programs are specified in the statute:
    (A) New construction of public and assisted housing and single 
family and multifamily residential housing (other than manufactured 
homes) subject to

[[Page 25902]]

mortgages insured under the National Housing Act; \2\
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    \2\ This subsection of EISA refers to HUD programs only. 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 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 only. 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).
    In addition to these EISA-specified categories, sections 
215(a)(1)(F) and (b)(4) of Cranston-Gonzalez make new construction of 
rental housing and homeownership housing assisted under the HOME 
Investment Partnerships Program (HOME) subject to section 109 of 
Cranston-Gonzalez and, therefore, to section 481 of EISA. From the 
beginning of the HOME program, the regulation at 24 CFR 92.251 
implemented section 109. However, compliance with section 109 of 
Cranston-Gonzalez was omitted from the July 2013 HOME program final 
rule because HUD planned to update and implement energy efficiency 
standards through a separate proposed rule (see the discussion in the 
preamble to the HOME proposed rule published on December 16, 2011 (76 
FR 78344)). Although the energy standards at 24 CFR 92.251(a)(2)(ii) 
are reserved in the July 2013 HOME final program rule, the statutory 
requirements of section 109 continue to apply to all newly-constructed 
housing funded by the HOME program. Therefore, this notice is 
applicable to the HOME program when the regulations at 24 CFR 92.251 in 
the 2013 HOME final rule (78 FR 44627) become effective. The HOME 
program will issue Guidance for HOME Participating Jurisdictions (PJs) 
that provides notice that the new standard takes effect. A conforming 
amendment to the HOME regulation will be published at a later date.
    Section 109(a) of Cranston Gonzalez, as amended by EISA, required 
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 
applied to covered HUD and USDA programs, and the provision of section 
109(d) of Cranston-Gonzalez must be followed.
    This notice implements section 109(d) of Cranston-Gonzalez, as 
amended by EISA, which 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 
subsequent 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. HUD and USDA Preliminary Determination

    On April 15, 2014, at 79 FR 21259, HUD and USDA announced in the 
Federal Register their Preliminary Determination that the 2009 IECC and 
ASHRAE 90.1-2007 would not negatively affect the affordability and 
availability of housing covered by the Act. This Preliminary 
Determination followed the Department of Energy's (DOE) Determination 
that the 2009 IECC and ASHRAE 90.1-2007 standards would improve energy 
efficiency.\4\ The April 15, 2014, HUD-USDA notice solicited public 
comment on this Preliminary Determination for a period of 45 days, and 
the public comment period concluded on May 30, 2014. HUD and USDA 
convened a conference call for interested parties on May 15, 2014, at 
which the agencies summarized the key features of the notice and 
answered several questions from participants.
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    \4\ See HUD's April 15, 2014 Federal Register notice for 
additional information about DOE's determination. http://www.gpo.gov/fdsys/pkg/FR-2014-04-15/pdf/2014-08562.pdf.
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C. Public Comments on Preliminary Determination and HUD Responses

1. Overview of Comments
    HUD received 13 public comments, representing 28 organizations or 
individuals, on this notice. Comments were received from a wide range 
of stakeholders, including one state (Colorado), the two code bodies 
represented in this notice (the International Code Council and ASHRAE), 
as well as several national associations representing mortgage lenders, 
home builders, environmental and energy efficiency advocates, 
consumers, State energy offices, insulation and other building product 
trade associations, and other interested parties. All but two of the 
comments were from single organizations or individuals. Multiple 
organizations were represented in two comments, one submitted on behalf 
of another three organizations, and another on behalf of 16 additional 
national organizations.
    The overwhelming majority of the comments expressed support for 
HUD's and USDA's Preliminary Determination. Of these supportive 
comments, most expressed support for HUD's and USDA's methodology and 
conclusions, but in turn urged HUD and USDA to rapidly move to adopt 
the more recent IECC or ASHRAE 90.1 codes that have been promulgated 
since the publication of the 2009 edition of the IECC and the 2007 
edition of ASHRAE 90.1 that are addressed in this notice. In addition, 
several commenters suggested that HUD and USDA allow alternative 
compliance pathways for these standards through equivalent or higher 
state standards, or through one or more green building standards that 
have seen rapid growth in adoption rates in recent years.
    Three of the 13 comments expressed concerns or opposition to one or 
more features of the Preliminary Determination. The concerns raised 
were in three primary areas: the use of the Social Cost of Carbon (SCC) 
as an appropriate cost-benefit metric for this determination; the 
proposed timetable for implementing the proposed standards after a 
Final Determination is published; and the relatively longer payback 
periods of 10 or more years estimated by HUD and USDA for adoption of 
ASHRAE 90.1-2007 in some States.
    This discussion of the public comments received on the Preliminary 
Determination presents the significant issues and questions raised by 
the commenters.
2. Support for Preliminary Determination
    Comment: Support for Preliminary Determination. The large majority 
of comments supported the Preliminary Determination. These comments 
generally agreed with HUD's and USDA's methodology in arriving at the 
determination that the 2009 IECC and ASHRAE 90.1-2007 would not 
negatively impact the affordability and availability of the housing 
covered by the Determination.

[[Page 25903]]

    One commenter noted, for example, ``that it is well settled and no 
longer in dispute that the 2009 IECC, as well as the 2007 ASHRAE 90.1 . 
. . increase the energy efficiency of homes and buildings constructed 
to meet them.'' The commenter commended HUD and USDA for ``an 
exceptionally thorough and comprehensive review of both the available 
research and literature relating to the cost effectiveness of building 
homes and multifamily units to the IECC and/or ASHRAE 90.1,'' and 
pointed out that HUD and USDA had reached the same conclusion as 
experts and building code authorities in the majority of States: that 
building single family and multifamily homes to the 2009 IECC is cost-
effective, results in greater affordability, and lowers energy use and 
energy expenses.
    The commenter also stressed the importance of assessing 
affordability on the basis of operating costs as well as the first cost 
of the home: ``if the monthly utility bill is lowered by 10 or 20 
percent, as a result of energy efficient code requirements, the home is 
more affordable, even if the initial cost increases by several thousand 
dollars, since the increase in the monthly amortized mortgage cost will 
be less than the decrease in utility costs.''
    Another representative comment characterized the HUD and USDA 
determination as a ``comprehensive and robust evaluation of the reasons 
to adopt the current updated standards under consideration based on the 
Departments' statutory responsibilities under federal law to establish 
minimum energy standards.'' Another commenter stated that ``HUD and 
USDA's determination . . . is well supported by law and policy.''
    Another commenter indicated that recent experience with the 
adoption of the 2009 IECC and ASHRAE 90.1-2007 codes, as well as with 
``premium'' labels such as ENERGY STAR, offers clear and convincing 
evidence that the codes do not harm affordability and availability. The 
commenter noted that ``[i]f builders were unable or unwilling to build 
homes that meet the codes, or buyers were unable or unwilling to pay 
for them, there would not be new homes in states that have adopted the 
codes, or new homes with green labels.''
    The commenter also provided national data reflecting housing 
production in the 32 States and the District of Columbia that have 
adopted the 2009 IECC or a comparable statewide code as follows: 1.6 
million residential building permits were issued between when the 2009 
IECC went into effect and the end of 2013, with 538,000 permits issued 
in the 12 months after the 2009 IECC went into effect, compared to 
433,000 beforehand-an increase of 24 percent. For ASHRAE 90.1-2007, the 
commenter provided similar data: 650,000 units were built since the 
codes were implemented in 37 States and the District of Columbia, 
168,000 of them in the first 12 months after the codes were enacted, 
compared to 109,000 in the previous 12 months. The commenter concludes 
that ``codes do not seem to be harming construction in states that have 
implemented them,'' and also references the significant number of homes 
(81,000 in 2012 alone) that have been built voluntarily to a higher 
(ENERGY STAR) standard.
    HUD-USDA Response: HUD and USDA acknowledge the support expressed 
by these commenters for the Preliminary Determination. These comments 
indicate confidence in HUD and USDA's use of DOE's and the Pacific 
Northwest National Laboratory's (PNNL's) analysis of the subject codes, 
and in their overall conclusions regarding the lack of a negative 
impact that these codes would have on the affordability and 
availability of housing covered by EISA.
    Comment: HUD should proceed quickly to adoption of the more recent 
IECC/ASHRAE codes. Several commenters who were supportive of the 
Preliminary Determination also encouraged HUD and USDA to move quickly 
to adoption of the next or most recent IECC and ASHRAE codes. One 
commenter urged HUD and USDA to ``provide a consistent Federal 
Government approach'' by endorsing ASHRAE 90.1-2010, and to ``promptly 
update their regulations'' to ASHRAE 90.1-2013 upon a favorable DOE 
determination. The commenter noted that ``[a] single, consistent U.S. 
Standard will enable better enforcement and compliance and avoid 
marketplace confusion, ultimately moving the U.S. toward President 
Obama's goal of significant improvement in building energy 
efficiency.''
    Another commenter and 16 national consumer, environmental, energy 
efficiency, or building organizations urged HUD and USDA to finalize 
this determination and incorporate the codes into their loan processes 
as soon as possible, and to ``move quickly to complete a determination 
on the 2012 IECC and ASHRAE 90.1-2010, which have already been 
determined by DOE to save energy, and which have been shown to be very 
cost-effective.'' The commenter also urged HUD and USDA to ``help and 
encourage builders to comply with the new requirements'' through 
education and quality assurance efforts.
    HUD-USDA Response: HUD and USDA will address the affordability of 
the more recent IECC and ASHRAE 90.1 codes in an advance notice in the 
near future, according to the timetable prescribed in EISA. For 
adoption or consideration of these codes and future code revisions, HUD 
and USDA are committed to timely and expeditious compliance with the 
EISA statutory requirements. However, it is unlikely that HUD and USDA 
will be able to meet the statutory one-year compliance period 
prescribed under Cranston-Gonzalez section 109(c) as amended by EISA, 
because of the time required to do the following: publish a Preliminary 
Determination, allow for public comments on the Preliminary 
Determination, and publish a Final Determination along with the 
requisite clearances by HUD and USDA and the Office of Management and 
Budget (OMB).
    Accordingly, while HUD and USDA will continue to explore ways to 
comply with the one-year compliance period set forth in section 109(c), 
HUD and USDA intend to address the next code cycles under the 
requirements of section 109(d) of Cranston-Gonzalez. Section 109(d) 
requires that, after failure to comply with section 109(c), the two 
agencies will conduct an analysis of the impact that the new code will 
have on the ``affordability and availability'' of covered housing. As 
is the case for this Final Determination on the 2009 IECC and ASHRAE 
90.1-2007, for future code determinations HUD and USDA will rely on the 
following reports or notices from DOE and PNNL: (1) An efficiency 
determination required under Title III of the Energy Conservation and 
Production Act of 2005; and (2) a subsequent cost analysis by PNNL.
3. Objections To or Concerns With Preliminary Determination
    Comment: The payback periods shown for ASHRAE 90.1-2007 that exceed 
10 years are too long to require compliance with this standard. One 
commenter recommends that, while the 2009 IECC shows payback periods of 
less than 10 years, this is not the case for ASHRAE 90.1-2007. Appendix 
4 in the Preliminary Determination showed that six of the 11 states 
evaluated for ASHRAE 90.1-2007 have payback periods that exceed this 
period. The commenter also maintains that multifamily rental property 
investors expect to see annual rental receipts that are approximately 
11 percent of the value of the property. This implies a 100 percent 
increased first cost/11 percent increase in rental receipts or a 9-year 
simple payback on energy efficiency

[[Page 25904]]

requirements. If that rate of return is not achieved, then the 
likelihood of a project being built will be reduced. Paybacks of 
greater than 9 years may therefore reduce the future availability of 
multifamily rental properties. Given these ``two realities,'' the 
commenter does not support the HUD-USDA finding that compliance with 
ASHRAE 90.1-2007 will not negatively affect the affordability and 
availability of housing covered by EISA--at least in those six States 
with longer payback periods of more than 10 years.
    HUD-USDA Response: Note that ASHRAE 90.1-2007 only impacts HUD-
insured or -assisted properties; USDA multifamily properties are not 
covered by EISA. Of the 12 States that have not yet adopted this 
standard, Appendix 4 of the Preliminary Determination (amended as Table 
6 in this Final Determination) showed six States with paybacks of more 
than 10 years: Hawaii, Colorado, Minnesota, Missouri, Oklahoma, and 
Tennessee. With the exception of Hawaii, all of these States showed 
simple paybacks of less than 15 years:

                                      Preliminary Determination--Appendix 4
                Estimated Costs and Benefits per Dwelling Unit From Adoption of ASHRAE 90.1-2007
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                                                                                    Energy cost
                              State                                 Incremental    savings/unit   Simple payback/
                                                                  cost/unit  ($)     ($/year)*     unit  (years)
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AK..............................................................             489           57.68             8.5
AZ..............................................................             340           52.12             6.5
CO..............................................................             354           31.96            11.1
HI..............................................................             476            8.17            58.4
KS..............................................................             338           59.37             5.7
ME..............................................................             373           42.66             8.8
MN..............................................................             413           33.96            12.2
MO..............................................................             366           26.60            14.3
OK..............................................................             309           21.96            14.1
SD..............................................................             317           34.53             9.2
TN..............................................................             318           25.61            12.5
WY..............................................................             319           33.09             9.7
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    The estimated energy cost savings per unit and simple paybacks 
provided in this table in the Preliminary Determination used national 
average prices for natural gas of $1.2201 per therm, and $.0939 per kWh 
for electricity, using the methodology used by PNNL in their cost 
determination of ASHRAE 90.1-2007.\5\ In this Final Determination, HUD 
and USDA have updated the PNNL methodology by using individualized 
state-by-state fuel and electricity prices, in order to provide a more 
current and accurate estimate of cost savings. The updated and revised 
estimated cost savings and paybacks are now presented in Table 6 of the 
Final Determination as follows:
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    \5\ Pacific Northwest National Laboratory, Cost Effectiveness 
and Impact Analysis of Adoption of ASHRAE 90.1-2007 for New York 
State. (U.S. Department of Energy, PNNL-18552, June 2009). http://www.pnl.gov/main/publications/external/technical_reports/PNNL-18552.pdf.

                                          Final Determination--Table 6.
                Estimated Costs and Benefits per Dwelling Unit From Adoption of ASHRAE 90.1-2007
----------------------------------------------------------------------------------------------------------------
                                                                                    Energy cost
                              State                                 Incremental    savings/unit   Simple payback/
                                                                  cost/unit  ($)     ($/year)*     unit  (years)
----------------------------------------------------------------------------------------------------------------
AK..............................................................             489           68.95             7.1
AZ..............................................................             340           76.88             4.4
CO..............................................................             354           28.70            12.4
HI..............................................................             476           31.66            15.1
KS..............................................................             338           80.13             4.2
ME..............................................................             373           62.95             5.9
MN..............................................................             413           31.15            13.3
MO..............................................................             366           36.28            10.1
OK..............................................................             309           31.79             9.7
SD..............................................................             317           32.32             9.8
TN..............................................................             318           30.40            10.5
WY..............................................................             319           33.38             9.6
----------------------------------------------------------------------------------------------------------------

    Using individual state-by-state fuel and electricity prices, rather 
than a national average as used by PNNL, of the 12 States that have not 
yet adopted ASHRAE 90.1-2007, seven States show simple paybacks of less 
than 10 years (Alaska, Arizona, Kansas, Maine, Oklahoma, South Dakota, 
and Wyoming) and four States show paybacks of less than 15 years 
(Colorado, Minnesota, Missouri, Tennessee). One state (Hawaii) shows a 
payback of more than 15 years (15.1 years).
    With regard to the five States with paybacks of more than 10 years, 
while we agree that shorter paybacks are generally better when 
considering simple payback periods as a measure of cost-effectiveness 
or affordability, we believe that the 10-year simple payback limit 
proposed by the commenter is too limiting for the purpose of this 
analysis, for two reasons. First, the life of the

[[Page 25905]]

energy efficient equipment or materials installed as a result of 
complying with ASHRAE 90.1-2007 (e.g., windows, doors, insulation, 
boilers, etc.) is likely to be significantly longer than 10 years, in 
some cases for the life of the building; a cost-benefit analysis for 
these measures indicates a net-positive result over the much longer 
life of the equipment. Second, as noted in the Preliminary 
Determination, another important factor is the incremental cost 
involved; the per-unit costs shown above (in the $300-$400 range) are a 
small fraction of the Total Development Cost (TDC) per unit.
    In addition, the price-ratio measure referenced by the commenter 
may mix the expected return on an entire property with the expected 
return on a particular aspect of the property (the upgraded features). 
In order to cause a development not to be pursued, the new standard 
would have to violate the return threshold for the entire property. 
And, it ignores the possibility that efficiency measures, to some 
extent, would be internalized in rent receipts.
    To best understand the profitability of multifamily housing, it may 
be preferable to examine the capitalization rate (rental income less 
operating costs divided by the market value of the property) rather 
than the rent-to-price ratio, since the capitalization rate takes into 
account operating costs and therefore is more likely to reflect the 
building's energy efficiency than the rent-to-price ratio. According to 
the 2012 Rental Housing Finance Survey (RHFS), the median 
capitalization rate of rental buildings is 6 percent. For some states, 
the cost savings are close to 6 percent. However, as described in the 
notice, the return on investment (ROI) is almost always positive, which 
would increase affordability. Perhaps most important, at an estimated 
average cost per unit of $441, the cost of compliance is less than 1 
percent (0.24%) of the average TDC per unit of $185,000, and is more 
than offset by the benefits of this notice. Thus, the value of the 
construction project will not be adversely affected by the higher code 
adopted as a result of this notice.
    Comment: HUD should ease compliance with the code requirements for 
single family homes by updating and accepting Form HUD-92541 as 
evidence of compliance. One commenter indicated that, while it ``does 
not disagree with USDA and HUD's estimates about affordability,'' it is 
concerned about how mortgage lenders should demonstrate compliance for 
single-family new construction. The commenter noted that this is 
``particularly important when underwriting loans for new construction 
in unincorporated localities, where there may not be public inspectors 
and other third-party specialists, such as Home Energy Rating System 
(HERS) rating specialists within several hundred miles, such as in 
states like Colorado or South Dakota.'' The commenter recommends that 
HUD modify form HUD-92541 by changing box number four, ``International 
Energy Conservation Code (IECC) 2006,'' to read ``IECC 2009 or a higher 
standard,'' and that this form should be available when the Final 
Determination is issued. The commenter also recommends that the HUD 
handbook be updated to reflect the single family new construction 
requirement and that Form HUD-92541 be treated as an acceptable method 
of certifying the property's minimum energy efficient status.
    HUD-USDA Response: HUD agrees that Builder's Certification form 
HUD-92541 will be the primary tool for ensuring compliance of single 
family FHA-insured properties with the 2009 IECC and intends to update 
the form to reflect the code (the 2009 IECC) established by this 
notice. HUD cannot commit to this being completed simultaneously with 
the publication of the Final Determination, in light of Paperwork 
Reduction Act requirements; however, it is anticipated that the updated 
Builder's Certification form HUD-92451, as well as any handbook 
updates, will be completed during the 180-day implementation period, in 
order to ensure maximum compliance with the new code requirement.
4. Comments Regarding Data and Methodology
    Comment: The Social Cost of Carbon (SCC) should not be included in 
this notice. One commenter objected to the use of the Social Cost of 
Carbon in this notice, and proposed its deletion. The commenter 
maintained that the SCC is ``discordant with the best scientific 
literature on the equilibrium climate sensitivity and the fertilization 
effect of carbon dioxide--two critically important parameters for 
establishing the net externality of carbon dioxide emissions.'' The 
commenter also notes that the SCC [is] ``at odds with existing Office 
of Management and Budget (OMB) guidelines for preparing regulatory 
analyses, and founded upon the output of Integrated Assessment Models 
(IAMs) which encapsulate such large uncertainties as to provide no 
reliable guidance as to the sign, much less the magnitude of the social 
cost of carbon.'' The commenter also suggests that the IAMs, as run by 
the Interagency Working Group (IWG) produce ``illogical results'' that 
indicate a ``misleading disconnect between a climate change and the SCC 
value.'' Further, the commenter believes that sea-level rise 
projections (and thus SCC) of at least one of the IAMs (DICE 2010) 
cannot be supported by the mainstream climate science.
    Based on these objections to the SCC, the commenter proposes that 
the SCC should be ``barred from use in this and all other federal 
rulemaking. It is better not to include any value for the SCC in cost/
benefit analyses such as these, than to include a value which is 
knowingly improper, inaccurate and misleading.'' The commenter proposes 
``to remove any and all analyses in this Preliminary Determination that 
makes reference to, or incorporates a value of, the social cost of 
carbon as determined by the federal Interagency Working Group.'' 
Specifically, the commenter proposes that HUD-USDA remove Table 8 and 
related text from the notice.
    An alternative, supportive, view of the SCC was provided by another 
commenter. This commenter strongly argues for the use of the SCC as a 
measure of nonenergy benefits. This commenter notes that ``SCC 
calculations are important for evaluating the costs of activities that 
produce greenhouse gas emissions and contribute to climate change, such 
as burning fossil fuels to produce energy. The SCC is also important 
for evaluating the benefits of policies that would reduce the amount of 
those emissions going into the atmosphere. For example, in order to 
properly evaluate standards that reduce the use of carbon-intensive 
energy or that improve energy efficiency--like the proposed updated 
energy codes--it is important to understand the benefits they will 
provide, including the benefit of reducing carbon pollution and the 
harm it causes.''
    This commenter also defends the Interagency Working Group's (IWG) 
analysis as ``science-based, open, and transparent'' and believes that 
``the IWG correctly used a global SCC value.'' While conceding that the 
IWG can improve its SCC methodology, the commenter nevertheless argues 
that ``HUD and USDA should continue to use the current IWG estimate of 
the SCC.''
    HUD Response: HUD and USDA acknowledge the critique of the SCC from 
the commenter, but believe that the SCC is an important and established 
element of a regulatory impact analysis for energy-related governmental 
regulations. Lower energy consumption involving fossil fuels will by 
default result in lower carbon emissions; there are economic, health 
and safety costs

[[Page 25906]]

associated with these emissions, and, conversely, cost benefits when 
these emissions are reduced. While the commenter is correct that the 
SCC is not specifically required for the affordability or availability 
analysis specified under EISA (the primary analysis for that purpose 
involves energy and cost savings accruing directly to the property 
owner or resident) the SCC is relevant to the larger economic costs and 
benefits required for a regulatory impact analysis. The cost benefits 
of carbon saved as a result of adopting the higher standards specified 
in the notice can and should be incorporated in the regulatory impact 
analysis, and do not affect, or undermine, the underlying affordability 
or availability findings of the notice.
    Comment: Additional research shows similar results as DOE findings. 
One commenter cited a study by the National Association of Home 
Builders (NAHB) Research Center (now the Home Innovation Research Labs) 
(Research Center) that shows the national average simple payback for 
the 2009 IECC of 5.6 years compared to the DOE study cited in the 
Preliminary Determination of 5.1 years. The commenter notes that the 
slightly longer payback from the Research Center may be because the 
initial construction costs were assumed to be about 35 percent higher 
in the Research Center analysis than in the PNNL analysis for DOE, due 
to the Research Center's reference home being based on national 
averages with more wall area than assumed in the PNNL analysis (2,580 
vs. 2,380 sq. ft.) while having slightly less floor area (2,352 vs. 
2,400 sq. ft.). In addition, the commenter points out that construction 
costs used in the Research Center study generated by actual builders 
were higher than those used by PNNL, which were developed by commercial 
estimators.
    HUD-USDA Response: HUD and USDA relied on DOE and PNNL analysis of 
the 2009 IECC and ASHRAE 90.1-2007 in order to maximize alignment of 
our findings with those of other Federal agencies. We appreciate and 
recognize the additional independent findings on the 2009 IECC 
referenced by the commenter in the Research Center report. Despite the 
differences noted in the characteristics of the assumed reference 
house, the NAHB Research Center's results show very similar payback 
periods to those arrived at by DOE and PNNL (5.6 years vs. 5.1 years), 
thereby confirming and reinforcing HUD and USDA's findings on the cost 
effectiveness of the 2009 IECC.\6\ While the PNNL and Research Center 
paybacks are similar, the incremental costs for the 2009 IECC in the 
Research Center report are higher than those determined by PNNL.
---------------------------------------------------------------------------

    \6\ NAHB Research Center, 2009 IECC Cost Effectiveness Analysis, 
May 2012. http://www.homeinnovation.com/~/media/Files/Reports/
Percent%20Energy%20Savings%202009%20IECC%20Cost%20Effectiveness%20Ana
lysis.PDF.
---------------------------------------------------------------------------

    These incremental cost differences result from the differences in 
the reference homes used in each report. The PNNL methodology defines a 
residential prototype building to be representative of typical new 
residential construction using data from the U.S. Census Bureau, the 
American Housing Survey, and NAHB, and establishes typical construction 
and operating assumptions, whereas the Research Center uses national 
averages. The assumptions were subjected to a public review through a 
Request for Information (RFI) process.\7\ We believe that the PNNL 
methodology provides an objective prototype most suitable for a 
national sample.
---------------------------------------------------------------------------

    \7\ The PNNL methodology for the residential prototype is 
published online at http://www.energycodes.gov/development/residential/methodology.
---------------------------------------------------------------------------

    Comment: Updated information in local or statewide adoption of the 
subject codes. The Preliminary Determination identified 18 States that 
have not yet adopted the 2009 IECC and 12 States that have not yet 
adopted ASHRAE 90.1-2007. Two commenters provided updated information 
that at least five of these States (Colorado, Arizona, Kansas, Missouri 
and Maine) have seen significant local adoption of the 2009, or even 
the 2012, IECC. In Colorado, for example, jurisdictions that have 
adopted either of these standards represent 90 percent of the statewide 
population; in Arizona, it is estimated at 70 percent. It was also 
noted by one commenter that two States (Kentucky and Louisiana) have 
``already adopted'' the 2009 IECC or ``almost its equivalent,'' while 
two additional States are either in the final stages of adopting or are 
in the process of adopting the 2009 IECC (Minnesota and Arkansas, 
respectively).
    HUD-USDA Response: HUD and USDA recognize these updates on State or 
local adoption of the 2009 or 2012 IECC. Statewide adoption of energy 
codes is an evolving process, with new States (or home rule 
municipalities) adopting the more recent codes on an ongoing basis. The 
18 states that had not yet adopted the 2009 IECC or ASHRAE 90.1-2007 
cited in the Preliminary Determination reflected information posted by 
DOE's Building Energy Codes Program (BECP) at or near the time of 
publication of the Preliminary Determination. The updated data on two 
additional States provided by the commenters does not change the 
overall affordability and availability finding for the remaining States 
that have not yet adopted the 2009 IECC or ASHRAE 90.1-2007 (that the 
subject codes will not negatively impact the affordability and 
availability of covered housing); rather, these data have the effect of 
lowering the number of units estimated to be impacted by the adoption 
of the codes addressed in this notice. Similarly, to the extent that 
there are local jurisdictions that have adopted higher codes than those 
adopted by local jurisdictions within States that have not yet adopted 
the code statewide, this will have the effect of lowering the overall 
costs (and related benefits) associated with this notice. HUD and USDA 
have updated the estimated impacts in the Final Determination, in order 
to reflect the most recent code adoption status reported by the BECP at 
http://www.energycodes.gov/adoption/states (as of May 2014).
5. Alternative Green Standards or Equivalent State or Local Standards
    Comment: HUD and USDA should accept one or more green building 
standards as alternative compliance paths. One commenter proposed that 
the ICC 700 National Green Building Standard (NGBS) should be accepted 
as an alternative compliance certification, for the following reasons: 
NGBS certification requirements ensure that all certified buildings 
achieve a minimum energy efficiency performance 15 percent more 
efficient than the 2009 IECC, and many homes/buildings that achieve 
NGBS certification far exceed that baseline; the NGBS is designed to 
cover all residential construction, and can be applied to all housing 
types noted in the notice; and NGBS certification offers a quality 
assurance mechanism, in that all units are verified by an independent, 
third-party NGBS Green Verifier. Another commenter proposed similar 
adoption by HUD and USDA of LEED for Homes (Version 8) as a compliance 
path, and another commenter indicated that the codes referenced in the 
notice are already included as a minimum requirement in the Enterprise 
Green Communities standard.
    Comment: Equivalent energy performance. One commenter suggested 
that HUD and USDA recognize State and/or local jurisdictions that have 
established standards that have equal or

[[Page 25907]]

better energy savings. The commenter cites title IV, section 410, of 
the American Recovery and Reinvestment Act, that provided specific 
language that dealt with equivalency by considering any energy code 
that ``achieves equivalent or greater energy savings'' as an acceptable 
alternative code. This would benefit States such as California that 
already exceed the 2009 IECC with their independently developed Title 
24 energy efficiency standard. The commenter suggests that a reference 
to energy equivalency be included in the ``Implementation'' section of 
the notice.
    HUD-USDA Response: The 2009 IECC and ASHRAE 90.1-2007 codes 
addressed in this Determination establish a floor, not a ceiling, for 
HUD- and USDA-covered programs. HUD and USDA recognize that the green 
building certifications referenced by the commenters, such as the NGBS 
(Performance Path), LEED for Homes, and Enterprise Green Communities, 
have incorporated the 2009 IECC or ASHRAE 90.1-2007 as minimum required 
energy standards. Accordingly, HUD and USDA will accept these standards 
as evidence of compliance with the 2009 IECC or ASHRAE 90.1-2007. In 
addition to these standards, these may include LEED for New 
Construction, ENERGY STAR Certified New Homes or ENERGY STAR for 
Multifamily High Rise, Enterprise Green Communities, and other 
regionally or locally recognized green building standards, such as 
Earth Advantage, Earthcraft, and others.
    With regard to State standards that have equivalent or higher 
standards, there is documented evidence that Title 24 in California 
exceeds the standards specified in the HUD-USDA notice, so by 
definition any project in California complying with Title 24 will 
automatically comply with the 2009 IECC and/or ASHRAE 90.1-2007. If 
documented evidence is provided to HUD and USDA that a specific state 
standard equals or exceeds the standards specified in this notice, 
these State standards will also be accepted as a compliance path.
6. Suggested Changes and Alternatives to Preliminary Determination
    Comment: Hawaii should not be exempted from ASHRAE 90.1-2007. HUD 
and USDA solicited comments on whether Hawaii should be exempted from 
complying with ASHRAE 90.1-2007, as was proposed in the Preliminary 
Determination. Using average national electricity prices in the 
Preliminary Determination, Hawaii showed a 58-year payback for adoption 
of ASHRAE 90.1-2007; however, using Hawaii electricity prices, the 
payback dropped to 17 years. (As discussed below, this Final 
Determination uses more recent October 2014 electricity prices, and the 
resulting payback for Hawaii declines further to 15.1 years.)
    Two commenters disagreed with the Preliminary Determination's 
finding that exempted Hawaii from adopting ASHRAE 90.1-2007 and 
proposed instead that HUD and USDA require Hawaii compliance with 
ASHRAE 90.1-2007. The most detailed comment was provided by one 
commenter. This commenter notes that the Hawaii State Building Code 
Council has approved the 2009 IECC (roughly equivalent to ASHRAE 90.1-
2007) for adoption in its four counties, and one county has already 
adopted these requirements. The commenter argues that ``if Hawaii has 
already found the code to be sensible for all residential and 
commercial buildings in its unique climate zone, we do not see any 
reason to exclude it from the updated HUD/USDA energy efficiency 
standard.''
    The commenter also maintains that Hawaii's cooling needs are very 
different from New York's, on which HUD's and USDA's conclusion was 
based, and that ``a simple payback analysis is [not] a complete enough 
foundation from which to make a decision on cost-effectiveness.'' The 
Preliminary Determination found that when Hawaii's average electricity 
costs are applied to the HUD/USDA analysis (rather than a national 
average), mid-rise apartment buildings achieved simple payback in 17 
years. The commenter suggested that a 17-year payback should not 
automatically be deemed not cost-effective, considering the expected 
lifetime of a multifamily building (30 to 100 years). The commenter 
suggests that a closer consideration of Hawaii will demonstrate a much 
more rapid payback, but even if the payback period is 17 years, EISA 
does not set a specific simple payback period or even require a simple 
payback analysis. The commenter notes that the relevant inquiry is 
whether the home or dwelling unit is ``affordable,'' and by a life-
cycle analysis of 30 years, ``multifamily buildings in Hawaii should be 
required to meet ASHRAE 90.1-2007.''
    Another commenter reached a similar conclusion. The commenter noted 
Hawaii has exceptionally high energy prices, and Hawaii is in a 
different climate zone with different requirements and thus will have 
different costs than New York, on which the Preliminary Determination 
was based. In fact, the Hawaii Building Code Council adopted the 2009 
IECC (roughly equivalent for commercial buildings to ASHRAE 90.1-2007) 
with amendments, suggesting that the Hawaiians found the code 
reasonable for their State.
    HUD-USDA Response: In this Final Determination HUD and USDA are 
amending the proposed exemption in the Preliminary Determination of 
HUD-assisted or FHA-insured multifamily properties in Hawaii from 
compliance with ASHRAE 90.1-2007. HUD acknowledges that the Hawaii 
Building Code Council has already adopted the 2009 IECC (roughly 
equivalent to ASHRAE 90.1-2007), as well as the fact that current 
(October 2014) EIA data show the average cost per kilowatt hour in 
Hawaii as of October 2014 has risen to 36 cents per kilowatt hour--even 
higher than the 32 cents cited in the Preliminary Determination, 
thereby lowering the estimated payback period for Hawaii to 15.1 years. 
At 36 cents per kilowatt hour, the simple payback of 15.1 years for 
energy savings in Hawaii is consistent with the other four States shown 
in table 6 with paybacks that are longer than 10 years; i.e., Colorado, 
Minnesota, Missouri, and Tennessee, whose paybacks range from 10.1 
years to 13.3 years. Accordingly, HUD-assisted or FHA-insured 
multifamily properties in Hawaii are covered under this Final 
Determination.
    Comment: Extend implementation period for ASHRAE 90.1-2007 for 
multifamily buildings from 90 to 180 days. Two commenters requested 
that the implementation timetable for multifamily properties be 
extended to 180 days. The notice currently states that for FHA-insured 
multifamily programs, the new standard would apply to those properties 
for which mortgage insurance applications are received by HUD 90 days 
after the effective date of a final determination. One commenter 
maintains that multifamily loan applications must include ``almost 
full'' plans and specifications; the design of the project will 
therefore have been completed or nearly-completed at the time of the 
loan application within 90 days. A 90-day notice may therefore result 
in developers having to modify plans and specs, which could be costly 
so late in the design process. Similarly, another commenter expressed a 
concern that multifamily new construction or substantial rehabilitation 
transactions have a long lead time and, for locations where the new 
standard represents a change, a longer lead time would ensure that the 
standard would not affect financings already in the development or 
application stages.
    HUD Response: HUD proposes to retain the 90-day implementation 
period for multifamily properties but, to

[[Page 25908]]

address the concerns expressed by the commenters that this could impact 
projects already in the development or application stages, HUD will 
clarify that the 90 days refers to the preapplication; i.e., not the 
application for Firm Commitment. This 90-day period would commence 30 
days after the Final Determination is published, thereby effectively 
providing a 120-day implementation period.\8\ Multifamily properties 
have different compliance dates than single family properties, since 
the process is different for securing FHA single family mortgage 
insurance or USDA single family loan guarantees versus multifamily 
insurance. Multifamily developers submit preapplication proposals to 
FHA for insurance very early in the application process, whereas there 
is no such similar preapplication requirement for FHA single family. 
HUD does not want the implementation to impede or slow down projects in 
the pipeline, but is also aware that there have been two code cycles 
since ASHRAE 90.1-2007 and that it is important that this standard be 
implemented as expeditiously as possible.
---------------------------------------------------------------------------

    \8\ Note that the 90 days applies to preapplications for FHA 
multifamily insurance, whereas the 180 days applies to building 
permits for FHA single family insurance.
---------------------------------------------------------------------------

D. Adoption of Preliminary Determination as Final Determination

    After consideration of the public comments on the Preliminary 
Determination, HUD and USDA adopt the Preliminary Determination as 
their Final Determination. This Final Determination takes into 
consideration the public comments received in response to HUD and 
USDA's Preliminary Determination.
    After careful consideration of the issues raised by the comments, 
HUD and USDA have made five changes as follows:

    (1) Modified the implementation schedule for multifamily 
properties to clarify that the 90-day implementation period 
commences after the 30-day effective date of the Final 
Determination, and that the implementation period refers to 
preapplications received by HUD for multifamily insurance, not the 
application for Firm Commitment. The Final Determination also 
includes an implementation schedule for new HOME units covered by 
the statute;
    (2) Provided an alternative compliance path for properties 
meeting ENERGY STAR Certified Homes, ENERGY STAR for Multifamily 
High Rise and certain green building standards;
    (3) Provided additional detail on administrative and regulatory 
actions that HUD and USDA will take to implement the code 
requirements;
    (4) Updated the status of code adoption of certain States or 
localities to reflect the status reported in the comments as 
confirmed by DOE. These include Louisiana and Kentucky, both of 
which, as of November 2014, have adopted the 2009 IECC, and 
adjustments of the estimated number of impacted units in Colorado 
and Arizona to reflect home rule municipalities' adoption of these 
codes in the absence of statewide legislation; and,
    (5) Removed the exemption proposed in the Preliminary 
Determination of HUD-assisted or FHA-insured multifamily properties 
in Hawaii from compliance with ASHRAE 90.1-2007.

    This notice does not address the more recent IECC and ASHRAE codes 
for which DOE has published efficiency determinations:

     Final Determination for the 2010 edition of ASHRAE 90.1 
(published October 19, 2011);
     Final Determination for the 2012 edition of the IECC 
(published May 17, 2012);
     Final Determination for the 2013 edition of ASHRAE 90.1 
(published September 26, 2014); \9\
---------------------------------------------------------------------------

    \9\ U.S. Department of Energy, ``Determination Regarding Energy 
Efficiency Improvements in ANSI/ASHRAE/IES Standard 90.1-2013: 
Energy Standard for Buildings Except Low-Rise Residential 
Buildings,'' Federal Register Notice, 79-FR-57900, September 26, 
2014. https://federalregister.gov/a/2014-22882.
---------------------------------------------------------------------------

     Preliminary Determination for the 2015 edition of the 
IECC (published September 26, 2014).\10\
---------------------------------------------------------------------------

    \10\ Current status of determinations are listed by DOE at 
https://www.energycodes.gov/determinations.
---------------------------------------------------------------------------

    DOE has also completed a cost analysis of the 2012 IECC for 43 of 
the 50 States and the District of Columbia, a national cost analysis of 
ASHRAE 90.1-2010, and a cost analysis of the ASHRAE 90.1-2010 for 22 of 
the 50 States and the District of Columbia.\11\ DOE intends to publish 
a similar national cost-effectiveness analysis for ASHRAE 90.1-2013 in 
2015.
---------------------------------------------------------------------------

    \11\ ASHRAE 90.1 cost-effectiveness analyses are provided at 
https://www.energycodes.gov/development/commercial/cost_effectiveness.
---------------------------------------------------------------------------

    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 analysis, HUD and USDA will address the 
affordability of these codes in a subsequent notice in the near future. 
It is HUD's and USDA's intention that while adoption of future IECC and 
ASHRAE 90.1 standards can be implemented with a Determination such as 
this one, each program will subsequently update its handbooks, 
mortgagee letters, relevant forms, or other administrative procedures 
each time HUD and USDA determine that the new standard will not 
negatively impact the affordability or availability of housing under 
the covered programs.
    Although HUD and USDA are adopting the 2009 IECC and ASHRAE 90.1-
2007 energy codes, as noted in their April 15, 2014, Preliminary 
Determination, HUD and USDA, along with other Federal agencies, have 
also adopted the December 2011 energy alignment framework of the 
interagency Rental Policy Working Group. According to this framework, 
several HUD competitive grant programs already require or provide 
incentives to grantees to comply with energy efficiency standards that 
exceed the 2009 IECC and ASHRAE 90.1-2007 standards outlined in this 
notice.\12\ 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 prior to publication of this notice is shown in Table 1, 
below.
---------------------------------------------------------------------------

    \12\ Rental Policy Working Group, Federal Rental Alignment: 
Administration Proposals, December 31, 2011. www.huduser.org/portal/aff_rental_hsg/rpwg_conceptual_proposals_fall_2011.pdf.

    Table 1--Current Energy Standards and Incentives for HUD and USDA
                                Programs
                         [New construction only]
------------------------------------------------------------------------
                                                       Current energy
                                                         efficiency
            Program                    Type           requirements and
                                                         incentives
------------------------------------------------------------------------
HUD                             .................  .....................
    Choice Neighborhoods--      Competitive Grant  Single family and low-
     Implementation.                                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.

[[Page 25909]]

 
    Choice Neighborhoods--      Competitive Grant  Eligible for Stage 1
     Planning.                                      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  While no new grants
                                                    are being awarded,
                                                    the most recent
                                                    Notice of Funding
                                                    Availability
                                                    provided the
                                                    following rating
                                                    points: 3 points if
                                                    new units were
                                                    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
                                                    was certified to
                                                    ENERGY STAR for New
                                                    Homes standard; 1
                                                    point if only ENERGY
                                                    STAR-certified
                                                    products and
                                                    appliances were used
                                                    in new units.
    Section 202 Supportive      Competitive Grant  Single family and low-
     Housing for the Elderly.                       rise multifamily:
                                                    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     Competitive Grant  ENERGY STAR Certified
     with Disabilities Project                      New Homes for single
     Rental Assistance.                             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           Conversion of      Minimum 2006 IECC or
     Demonstration (RAD).        Existing Units.    ASHRAE 90.1-2004 for
                                                    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    Mortgage           2006 IECC or ASHRAE
     Insurance.                  Insurance.         90.1-2004
                                                    (Multifamily
                                                    Accelerated
                                                    Processing Guide at
                                                    http://portal.hud.gov/hudportal/documents/huddoc?id=4430GHSGG.pdf pdf).
    FHA Single Family Mortgage  Mortgage           2006 IECC (See
     Insurance.                  Insurance.         Builder's
                                                    Certification form
                                                    HUD-92541 at http://portal.hud.gov/hudportal/documents/huddoc?id=92541.pdf.
                                                    )
    HOME Investment             Formula Grant....  Cranston-Gonzalez
     Partnerships Program.                          sections 215(b)(4)
                                                    and section
                                                    215(a)(1)(F) require
                                                    HOME units to meet
                                                    minimum energy
                                                    efficiency standards
                                                    promulgated by the
                                                    Secretary in
                                                    accordance with
                                                    Cranston Gonzalez
                                                    section 109 (42
                                                    U.S.C. 12745). Final
                                                    HOME Rule published
                                                    July 24, 2013 at
                                                    www.onecpd.info/home/home-final-rule/reserves reserves the energy
                                                    standard for a
                                                    separate rulemaking
                                                    at 24 CFR 92.251.
    Public Housing Capital      Formula Grant....  2009 IECC and ASHRAE
     Fund.                                          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.
USDA
    Section 502 Guaranteed      Loan Guarantee...  2006 IECC at
     Housing Loans.                                 minimum.* Rural
                                                    Energy Plus program
                                                    requires compliance
                                                    with most recent
                                                    version of IECC,
                                                    which is currently
                                                    IECC 2012.
    Section 502 Rural Housing   Loan Guarantee...  2006 IECC at
     Direct Loans.                                  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    Loan Guarantee...  2006 IECC at
     for Section 523 Mutual                         minimum.* A pilot is
     Self-Help Loan program                         being created that
     homeowner participants.                        gives incentive
                                                    points for
                                                    participation in
                                                    ENERGY STAR
                                                    Certified New Homes,
                                                    Green Communities,
                                                    Challenge Home, NAHB
                                                    National Green
                                                    Building Standard,
                                                    and LEED for Homes
------------------------------------------------------------------------
* USDA programs updated annually per Administrative Notice.

II. HUD-USDA Final Affordability Determination

    The specific HUD and USDA programs covered by this notice are 
listed in Appendix I. While not specifically referenced in EISA, the 
Home Investment Partnerships Program (HOME) is covered, pursuant to a 
requirement in the HOME statute at section 215(b)(4) (42 U.S.C. 
12745(b)(4)) and section 215(a)(1)(F) (42 U.S.C. 12745(a)(1)(f)) of 
Cranston-Gonzalez, which set the minimum standard for new construction 
of HOME-funded units at the standard established through this 
determination under Cranston-Gonzalez section 109.
    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

[[Page 25910]]

has been discontinued. HUD's Housing Choice Voucher program, also known 
as Section 8 Tenant-Based Rental Assistance (TBRA), is excluded since 
the agency does not have the authority or ability to establish housing 
standards for properties before they are rented by tenant households 
under that program; i.e., when they are newly built. Indian housing 
programs are excluded because they do not constitute assisted housing 
and are not authorized under the National Housing Act (12 U.S.C. 1701 
et seq.) as specified in EISA. For instance, the Section 184 Loan 
Guarantee Program is authorized under section 184 of the Housing and 
Community Development Act of 1992 (42 U.S.C. 1715z-13a). Similarly, 
housing financed with Community Development Block Grant (CDBG) funds is 
not included, since CDBG, which is authorized by the Housing and 
Community Development Act of 1974 (42 U.S.C. 5301 et seq.), is neither 
an assisted housing program nor a National Housing Act mortgage 
insurance program. Finally, only single family USDA programs are 
covered by EISA, whereas both single family and multifamily HUD 
programs are covered.

A. Discussion of Market Failures

    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.\13\ More broadly, market 
failures involve externalities, market power, and inadequate or 
asymmetric information. 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).
---------------------------------------------------------------------------

    \13\ The existence of this gap has been documented in many 
cases. See Marilyn A. Brown, ``Market Failures and Barriers as a 
Basis for Clean Energy Policies,'' Energy Policy 29 (2001): 1197-
1207.
---------------------------------------------------------------------------

    Within this broader world of market failures and barriers, 
suboptimal energy efficient investment in housing imposes 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, 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.\14\ 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, 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.\15\ 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 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, the 
theoretical challenge is to explain why there is an undersupply.
---------------------------------------------------------------------------

    \14\ Hunt Allcott and Michael Greenstone, Is There An Energy 
Efficiency Gap? National Bureau of Economic Research, Working Paper 
No. 17766, January 2012. http://www.nber.org/papers/w17766.pdf.
    \15\ For a detailed example, see Allcott and Greenstone, Is 
There an Energy Efficiency Gap?
---------------------------------------------------------------------------

    Despite the economic argument for nonintervention, there are many 
compelling economic arguments for the existence of an energy efficiency 
gap. Thaler and Sunstein 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.\16\ Four justifications deserve special consideration: (1) 
Imperfect information concerning energy efficiency, (2) inattention to 
energy efficiency, (3) split incentives for energy efficient 
investments in the housing market, and (4) lack of financing for energy 
efficient retrofits.\17\
---------------------------------------------------------------------------

    \16\ Richard H. Thaler and Cass R. Sunstein, Nudge: Improving 
Decisions about Health, Wealth, and Happiness (New Haven: Yale 
University Press, 2008).
    \17\ Allcott and Greenstone, Is There an Energy Efficiency Gap?
---------------------------------------------------------------------------

    (1) Imperfect 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.\18\ Procrastination and self-control also 
may affect the

[[Page 25911]]

rationality of long-run decisions.\19\ 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.
---------------------------------------------------------------------------

    \18\ Ibid, 21.
    \19\ Dan Ariely, Predictably Irrational. Revised and Expanded 
Edition (New York: Harper Collins, 2009).
---------------------------------------------------------------------------

    (3) Split incentives. For owner-occupied homes, the prospect of 
ownership transfer may create a barrier to energy efficient 
investment.\20\ If owners, builders, or buyers do not believe that they 
will be able to recapture the value of the investment upon selling 
their home, they will be deterred from investing in energy efficiency. 
As indicated by McKinsey and Company in their landmark 2009 report, 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.
---------------------------------------------------------------------------

    \20\ McKinsey and Company, Unlocking Efficiency in the U.S. 
Economy (July 2009), p.24. http://www.mckinsey.com/client_service/electric_power_and_natural_gas/latest_thinking/unlocking_energy_efficiency_in_the_us_economy.
---------------------------------------------------------------------------

    For rental housing, split incentives exist that lead to sub-optimal 
housing.\21\ 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.\22\
---------------------------------------------------------------------------

    \21\ Kenneth Gillingham, Matthew Harding and David Rapson, 
``Split Incentives and Household Energy Consumption,'' Energy 
Journal 33:2 (2012): 37-62.
    \22\ 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. The response is to raise rent 
and lower quality.
---------------------------------------------------------------------------

    (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.\23\ 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.\24\ 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.\25\
---------------------------------------------------------------------------

    \23\ McKinsey and Company, Unlocking Efficiency.
    \24\ Alastair McFarlane, ``The Impact of Home Energy Retrofit 
Loan Insurance: A Pilot Program,'' Cityscape: A Journal of Policy 
Development and Research, Volume 13, Number 3. U.S. Department of 
Housing and Urban Development Office of Policy Development Research 
(2011): 237-249.
    \25\ With the exception of a few programs serving specific 
markets and a Federal Housing Administration (FHA) pilot program, 
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.
---------------------------------------------------------------------------

Nonenergy Benefits
    Even if there were no investment inefficiencies and individual 
consumers who were able to satisfy their need for energy efficiency, 
nonenergy consumption externalities could justify energy conservation 
policy. The primary nonenergy 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.\26\ Clinch and Healy discuss 
how to value the effect on mortality and morbidity in a cost-benefit 
analysis of energy efficiency.\27\
---------------------------------------------------------------------------

    \26\ William J. Fisk, ``How IEQ Affects Health, Productivity,'' 
ASHRAE Journal 57 (2002).
    \27\ Peter J. Clinch and John D. Healy, ``2001 Cost-benefit 
Analysis of Domestic Energy Efficiency,'' Energy Policy 29 (2001): 
113-124.
---------------------------------------------------------------------------

    In addition to the direct health benefits for 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, there may 
be a positive safety effect from reducing the probability of fires by 
eliminating the need for supplemental heating sources.\28\
---------------------------------------------------------------------------

    \28\ Martin Schweitzer 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, 
April 2002).
---------------------------------------------------------------------------

B. 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.\29\ 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.
---------------------------------------------------------------------------

    \29\ 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 two 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: 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.\30\ 
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.
---------------------------------------------------------------------------

    \30\ 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. This PNNL-developed map divided the 
United States into eight temperature-oriented climate zones. 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: \31\
---------------------------------------------------------------------------

    \31\ Pacific Northwest National Laboratory for the U.S. 
Department of Energy, Impacts of the 2009 IECC for Residential 
Buildings at State Level (September 2009). 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.

[[Page 25912]]

     50 percent of the lighting (bulbs, tubes, etc.) in a 
building has to be energy efficient. Compact fluorescent light bulbs 
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.
1. Current Adoption of the 2009 IECC
    As of November 2014, 34 States and the District of Columbia have 
voluntarily adopted the 2009 IECC, its equivalent, or a more recent 
energy code (Table 2).\32\ The remaining 16 States have not yet adopted 
the 2009 IECC.\33\ (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).34 35 HUD and USDA 
are primarily interested in those 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.
---------------------------------------------------------------------------

    \32\ 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 EISA, for any covered HUD and USDA 
program that operates in these localities.
    \33\ 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.
    \34\ Pacific Northwest National Laboratory, Impacts of the 2009 
IECC.
    \35\ 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.\36\
---------------------------------------------------------------------------

    \36\ American Recovery and Reinvestment Act, Pub L. 111-5, 
division A, section 410(a)(2).

         Table 2--Current Status of IECC Adoption by State \37\
                          [As of November 2014]
------------------------------------------------------------------------
  2009 IECC or  equivalent or higher  (34
              states and DC)                  Prior codes  (16 states)
------------------------------------------------------------------------
Alabama...................................   2006 IECC or Equivalent (6
                                                       States)
California (Exceeds 2012 IECC)............  Hawaii.
Connecticut...............................  Minnesota.
Delaware (2012 IECC)......................  Oklahoma.
District of Columbia (2012 IECC)..........  Tennessee.
Florida...................................  Utah.
Georgia...................................  Wisconsin.
Idaho                                       ............................
Illinois (2012 IECC)......................   2003 IECC or Equivalent (2
                                                       States)
Indiana...................................  Arkansas.
Iowa (2012 IECC)..........................  Colorado.
Kentucky..................................  ............................
Louisiana.................................  No Statewide Code (8 States)
Maryland (2012 IECC)......................  Alaska.
Massachusetts (2012 IECC).................  Arizona.
Michigan..................................  Kansas.
Montana...................................  Maine.
Nebraska..................................  Mississippi.
Nevada....................................  Missouri.
New Hampshire.............................  South Dakota.
New Jersey................................  Wyoming.
New Mexico
New York
North Carolina
North Dakota
Ohio
Oregon
Pennsylvania
Rhode Island (2012 IECC)
South Carolina
Texas
Vermont
Virginia (2012 IECC)
Washington (2012 IECC)
West Virginia
------------------------------------------------------------------------

2. 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 (LCC) savings test, the extent 
to which the additional, or incremental, investments required to 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.
---------------------------------------------------------------------------

    \37\ ``Status of State Energy Code Adoption,'' U.S. Department 
of Energy, http://www.energycodes.gov/adoption/states.
---------------------------------------------------------------------------

    In determining the impact that the 2009 IECC will have on HUD and 
USDA assisted, guaranteed or insured new homes, the agencies have 
relied on a cost-benefit analysis of the 2009 IECC completed by PNNL 
for DOE.\38\ 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 
EISA. The financing assumptions used in the LCC analysis prepared by 
PNNL for DOE contains several variables that may not fully represent 
the target population of FHA-insured and USDA-guaranteed borrowers 
relative to borrowers utilizing conventional

[[Page 25913]]

financing. For example, it assumes a higher down payment (20 percent) 
than FHA single family borrowers usually have, and it does not 
incorporate the Mortgage Insurance Premiums associated with FHA-insured 
single family mortgages.\39\ However, these variables do not change the 
overall affordability and/or availability findings in this 
Determination. While FHA average housing prices are lower than the 
national average, and the down payment requirements are lower for FHA 
than for conventional financing (3.5 percent vs. as high as 20 
percent), these differences do not impact the overall cost-benefit 
findings, given the very small incremental costs involved. For example, 
the lower 3.5 percent down payment allowed by FHA will make the 
``mortgage payback'' for the incremental cost of the higher energy code 
somewhat more attractive--in that the increase in the down payment to 
cover the added construction cost for the new energy code will be lower 
for FHA than conventional financing. The remaining amount will be 
amortized over 30 years for the FHA loan and will therefore actually 
improve cash flow to the consumer.
---------------------------------------------------------------------------

    \38\ 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 (April 2012). http://www 
.energycodes.gov/sites/default/files/documents/
NationalResidentialCostEffectiveness.pdf.
    \39\ Pacific Northwest National Laboratory for the U.S. 
Department of Energy, Methodology for Evaluating Cost-Effectiveness 
of Residential Energy Code Changes (April 2012), 3-11. http://www.energycodes.gov/sites/default/files/documents/residential_methodology.pdf.
---------------------------------------------------------------------------

    Note that there may be other benefits associated with energy 
efficient homes, in addition to positive cash flows. 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.\40\
---------------------------------------------------------------------------

    \40\ University of North Carolina, Home Energy Efficiency and 
Mortgage Risks (March 2013). http://www.imt.org/uploads/resources/files/IMT_UNC_HomeEEMortgageRisksfinal.pdf.
---------------------------------------------------------------------------

3. 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 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.'' \41\ In September 
2011, DOE solicited input via Federal Register notice on their proposed 
cost-benefit methodology \42\ and this input was incorporated into the 
final methodology posted on DOE's Web site in April 2012.\43\ A further 
Technical Support Document was published in April 2013.\44\
---------------------------------------------------------------------------

    \41\ U.S. Department of Energy, National Energy and Cost Savings 
for new Single- and Multifamily Homes.
    \42\ U.S. Department of Energy, Building Energy Codes Cost 
Analysis (Federal Register notice 76-FR-56413, September 13, 2011). 
https://federalregister.gov/a/2011-23236.
    \43\ Pacific Northwest National Laboratory for the Department of 
Energy Methodology for Evaluating Cost-Effectiveness of Residential 
Energy Code Changes.
    \44\ 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). 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 with six 
dwelling units per floor) with 1,200 square-foot per dwelling. 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.\45\
---------------------------------------------------------------------------

    \45\ U.S. Department of Energy, National Energy and Cost 
Savings, 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 16 States impacted by this notice, DOE 
provided disaggregated data for single family homes and low-rise 
multifamily housing to HUD and USDA. 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.\46\
---------------------------------------------------------------------------

    \46\ Disaggregated single family and low-rise multifamily 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 are posted at www.hud.gov/resilience.
---------------------------------------------------------------------------

    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 down 
payment 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 $2,174, 
with a simple payback of 7.2 years, and a net positive cash flow 
(mortgage payback) of 2 years. Mississippi 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 1 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 1 or 2 years, while the simple

[[Page 25914]]

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 16 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 unpublished underlying disaggregated data for 
single family housing, to more accurately reflect the housing type 
receiving FHA single family mortgage insurance or USDA loan guarantees. 
These disaggregated data for single family homes are available at 
www.hud.gov/resilience.

    Table 3--Life-Cycle Cost (LCC) Savings, Net Positive Cash Flow, and Simple Payback for the 2009 IECC \47\
----------------------------------------------------------------------------------------------------------------
                                     Weighted        Weighted
                                      average         average       Life-cycle     Net positive       Simple
             State *                incremental     energy cost     cost (LCC)       cash flow        payback
                                   cost  ($ per    savings  per   savings ($ per      (years)         (years)
                                       unit)         year ($)          unit)
----------------------------------------------------------------------------------------------------------------
Alaska..........................             940             357           6,187               1             2.6
Arizona.........................           1,364             242           3,411               1             5.6
Arkansas........................           1,090             173           2,320               2             6.3
Colorado........................             902             134           1,782               2             6.7
Hawaii..........................           1,950             393           5,861               1             5.0
Kansas..........................             550             176           2,934               1             3.1
Maine...........................             910             305           5,261               1             3.0
Minnesota.......................           1,275             176           2,174               2             7.2
Mississippi.....................             643             168           2,674               1             3.8
Missouri........................             967             151           2,077               2             6.4
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
    Avg. of U.S.................             980             203           3,069             1.4             5.1
    Avg. of 16 States...........           1,019             215           3,066             1.3             5.0
----------------------------------------------------------------------------------------------------------------
* Only the 16 States that have not yet adopted the 2009 IECC as of November 2014 are included in this table.

4. Limitations of Cost Benefit Analysis
    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 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.\48\ 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 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 some engineering simulation 
models have still not been fully calibrated to approximate actual 
returns. Another limitation may be the uncertainty as to the extent to 
which home rule municipalities have adopted higher energy codes in the 
absence of statewide adoption.
---------------------------------------------------------------------------

    \47\ 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). Data are posted at www.hud.gov/resilience.
    \48\ Allcott and Greenstone, Is There An Energy Efficiency Gap?, 
3-28.
---------------------------------------------------------------------------

    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.
5. 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 this regulatory action is to lower gross housing costs. 
For rental housing, the gross housing cost equals 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 2012 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 16 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 $1,019 per unit, with 
average annual savings of $215, for a 5.0 year simple payback, and a 
1.3 year net positive cash flow.\49\
---------------------------------------------------------------------------

    \49\ U.S. Department of Energy, National Energy and Cost 
Savings.
---------------------------------------------------------------------------

    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 consume significantly less energy 
than the average household could experience

[[Page 25915]]

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 are 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 preexisting 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 found a short-run income 
elasticity of demand of 0.23 (indicating that energy is a normal and 
necessary good).\50\ Given these caveats, the expectation is that the 
overwhelming majority of low-income households will gain from this 
regulatory action.
---------------------------------------------------------------------------

    \50\ Raphael E. Branch, ``Short Run Income Elasticity of Demand 
for Residential Electricity Using Consumer Expenditure Survey 
Data,'' Energy Journal 14:4 (1993): 111-121.

                                   Table 4--Quintiles of Income Before Taxes and Shares of Average Annual Expenditures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       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 services.............              9.8              9.1              8.3              7.0              5.4              7.1
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 services...................              1.3              1.3              1.2              1.0              0.8              1.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
* 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.
    Notwithstanding the LCC savings and rapid simple paybacks on the 
initial investment described in this notice, low-income households face 
severe capital constraints; as a result there may be a question as to 
whether low-income families could be adversely impacted by the front-
end incremental costs associated with adopting these codes. Based on 
the analysis provided in this Determination, the incremental costs are 
not sufficiently large to disadvantage low-income families in relation 
to the immediate benefits of that cost. Assuming a 3.5 percent down 
payment for an FHA-insured mortgage, low-income families will be 
required to pay an additional $35 at closing on the average incremental 
cost of approximately $1,000 required for the 2009 IECC. In addition, 
while HUD and USDA recognize the disproportionate burden that the 
incremental cost associated with higher code adoption has on low-income 
families, the benefits would also be shared disproportionately (this 
time positively), as a result of the much higher share of income low-
income families spend on utilities relative to other households.
6. Conclusion
    For the 34 States and the District of Columbia that have already 
adopted the 2009 IECC or a stricter code, there will be little or no 
impact on 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 16 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 LCC savings documented above.
    For the States that have not yet adopted the 2009 IECC, the 
evidence shows 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 1- 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.

C. 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 ASHRAE for 
commercial buildings, which, by definition, include 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

[[Page 25916]]

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.\51\ 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.\52\
---------------------------------------------------------------------------

    \51\ Pacific Northwest National Laboratory for the U.S. 
Department of Energy, Impacts of Standard 90.1-2007 for Commercial 
Buildings at State Level (September 2009). https://www.energycodes.gov/impacts-standard-901-2007-commercial-buildings-state-level.
    \52\ 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 addendums with positive impacts on energy efficiency 
include: increased requirement for building vestibules, removal of data 
processing centers from 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.
1. 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).\53\ 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.\54\
---------------------------------------------------------------------------

    \53\ 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.

      Table 5--Current Status of ASHRAE Code Adoption by State \54\
                          [as of November 2014]
------------------------------------------------------------------------
ASHRAE 90.1-2007 or higher  (38 states and   Prior or no statewide codes
           District of Columbia)                     (12 States)
------------------------------------------------------------------------
Alabama...................................       ASHRAE 90.1-2004 or
                                                Equivalent (4 States)
Arkansas..................................  Hawaii.
California................................  Minnesota.
Connecticut...............................  Oklahoma.
Delaware..................................  Tennessee.
District of Columbia
Florida...................................       ASHRAE 90.1-2001 or
                                                 Equivalent (1 State)
Georgia...................................  Colorado.
Idaho
Illinois..................................  No Statewide Code (7 States)
Indiana...................................  Alaska.
Iowa......................................  Arizona.
Kentucky..................................  Kansas.
Louisiana.................................  Maine.
Maryland..................................  Missouri.
Massachusetts.............................  South Dakota.
Michigan..................................  Wyoming.
Mississippi (Effective July 1, 2013)
Montana
Nebraska
Nevada
New Hampshire
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
------------------------------------------------------------------------

2. ASHRAE 90.1-2007 Affordability Analysis
---------------------------------------------------------------------------

    \54\ ``Status of State Energy Code Adoption.''
---------------------------------------------------------------------------

    Section 304(b) of Energy Conservation and Policy Act of 2005 (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.\55\ 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.\56\ 
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.
---------------------------------------------------------------------------

    \55\ 42 U.S.C. 6833(b)(2)(A). http://www.gpo.gov/fdsys/pkg/USCODE-2010-title42/pdf/USCODE-2010-title42-chap81-subchapII-sec6833.pdf.
    \56\ U.S. Department of Energy, Building Energy Standards 
Program: Determination Regarding Energy Efficiency Improvements in 
the Energy Standard for Buildings, Except Low-Rise Residential 
Buildings, ANSI/ASHRAE/IESNA Standard 90.1-2007 (Federal Register 
notice 76-FR-43287, July 20, 2011). https://www.federalregister.gov/articles/2011/07/20/2011-18251/building-energy-standards-program-determination-regarding-energy-efficiency-improvements-in-the.
---------------------------------------------------------------------------

3. 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.\57\ The 
energy cost index for this building type was also calculated to 
decrease by 3 percent.
---------------------------------------------------------------------------

    \57\ Pacific Northwest National Laboratory, Impacts of Standard 
90.1-2007 for Commercial Buildings at 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.\58\ 
This analysis included energy and cost savings over current commercial 
building codes by both State and climate zone, by comparing each 
State's base code at the time of the study to ASHRAE 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.\59\

[[Page 25917]]

ASHRAE 90.1-2007 was projected to generate both energy and cost savings 
in all States in all climate zones over existing codes.
---------------------------------------------------------------------------

    \58\ Ibid, 9ff. Individual state reports also available at 
https://www.energycodes.gov/impacts-standard-901-2007-commercial-buildings-state-level.
    \59\ 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.
---------------------------------------------------------------------------

    As shown in Appendix 2, 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.)
    As shown in Table 6, estimated front-end construction costs for the 
12 States that have not yet adopted ASHRAE Standard 90.1-2007 range 
from $309 (Oklahoma) to $489 (Alaska). On the savings side, the 
estimated cost savings per unit range from a low of $28.70/year/unit in 
Colorado, to a high of $80.13/year/unit in Kansas. Simple paybacks on 
the initial investment range from a low of 4.2 years (Kansas) to a high 
of 15.1 years (Hawaii).

         Table 6--Estimated Costs and Benefits Per Dwelling Unit From Adoption of ASHRAE 90.1-2007 \60\
----------------------------------------------------------------------------------------------------------------
                                                                                    Energy cost       Simple
                              State                                 Incremental    savings/unit    payback/unit
                                                                  cost/unit  ($)     ($/year)*        (years)
----------------------------------------------------------------------------------------------------------------
AK..............................................................             489           68.95             7.1
AZ..............................................................             340           76.88             4.4
CO..............................................................             354           28.70            12.4
HI..............................................................             476           31.66            15.1
KS..............................................................             338           80.13             4.2
ME..............................................................             373           62.95             5.9
MN..............................................................             413           31.15            13.3
MO..............................................................             366           36.28            10.1
OK..............................................................             309           31.79             9.7
SD..............................................................             317           32.32             9.8
TN..............................................................             318           30.40            10.5
WY..............................................................             319           33.38             9.6
----------------------------------------------------------------------------------------------------------------
* Note on Energy Cost Savings: This table uses EIA fuel prices by state.

4. Cost Effectiveness Analysis  and Results
---------------------------------------------------------------------------

    \60\ Sources: HUD estimate of incremental costs and cost savings 
associated with ASHRAE 90.1-2007; incremental costs/unit were 
estimated by adjusting the New York incremental cost of $441 per 
unit by Total Development Cost (TDC) adjustment factors in Appendix 
2B. Energy cost savings/unit were derived using EIA's Average Retail 
Price of Electricity in October 2014 (http://www.eia.gov/electricity/monthly/, Table 5.6 for October 2014 data from the 
December 2014 Electric Power Monthly) and October 2014 Natural Gas 
Prices (http://www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PRS_DMcf_m.htm).
---------------------------------------------------------------------------

    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, in 2009 PNNL completed an analysis for 
DOE of the incremental costs and associated cost benefits of complying 
with the new standard for the State of New York, and this analysis was 
used by HUD and USDA as the basis for determining the overall 
affordability impacts of the new standard.\61\ Note, however, a number 
of limitations exist in this analysis. For their cost analysis, PNNL 
compared ASHRAE 90.1-2007 to the prevailing code in New York at the 
time, the 2003 IECC (that references ASHRAE 90.1-2001) whereas the 
current minimum standard for HUD-assisted multifamily buildings is 
ASHRAE 90.1-2004. On the other hand, for their benefits analysis (i.e., 
energy savings) PNNL compared savings that would result from the 
adoption of ASHRAE 90.1-2007 to prevailing state codes at the time. For 
the 12 states that have not yet adopted ASHRAE 90.1-2007, the 
prevailing state codes used by PNNL were equivalent to the current HUD 
standard, ASHRAE 90.1-2004, in three States. For the remaining States, 
the prevailing State codes used by PNNL were ASHRAE 90.1-2001 in two 
States, a State-specific code in one State (Minnesota) and ASHRAE 90.1-
1999 in five States in the absence of a statewide code. Despite these 
limitations as to the baseline codes used by PNNL compared to current 
minimum HUD standards, the PNNL baseline analysis as used in this 
Determination is the best available analysis upon which to base a 
Determination on the costs and benefits associated with the adoption of 
ASHRAE 90.1-2007.
---------------------------------------------------------------------------

    \61\ Pacific Northwest National Laboratory, Cost Effectiveness 
and Impact Analysis of Adoption of ASHRAE 90.1-2007 for New York 
State.
---------------------------------------------------------------------------

    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 energy 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

[[Page 25918]]

several metropolitan areas in that State. Note that TDC costs include 
soft costs, site improvement costs, and management costs, and are 
derived by a standard adjustment factor applied to hard construction 
costs, referred to as Housing Construction Costs (HCC). HCC limits are 
determined by averaging R.S. Means ``average'' and Marshall and Swift 
``good'' cost indices. Section 6(b) of the United States Housing Act of 
1937 and regulations at 24 CFR 941.306 require HUD to establish TDC 
limits by multiplying the HCC construction cost guideline by 1.6 for 
elevator type structures and by 1.75 for non-elevator type structures. 
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.\62\ 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 for complying with ASHRAE 90.1-2007 in 
New York, to arrive at an incremental cost per unit for the 12 States 
that have not yet adopted ASHRAE 90.1-2007 (Table 6).
---------------------------------------------------------------------------

    \62\ ``2011 Unit Total Development Cost (TDC) Limits,'' U.S. 
Department of Housing and Urban Development, http://portal.hud.gov/huddoc/2011tdcreport.pdf.
---------------------------------------------------------------------------

    In developing this adjustment factor, HUD considered whether to use 
IECC location cost indices developed by PNNL \63\ or HCC costs (TDC 
minus soft and site improvement costs) rather than TDC costs. With 
regard to possible use of the IECC cost indices, since TDC cost indices 
were specifically developed for HUD-assisted properties, they are 
appropriately used here rather than the IECC cost indices. In addition, 
TDC (and HCC) costs apply to mid- and high-rise multifamily properties, 
while the IECC cost indices may or may not be transferable since they 
were developed for a different building type (single family or low-rise 
multifamily). With regard to using the HCC rather than the TDC, since 
the TDC is a standard function of the HCC, the adjustment factor will 
be the same for both the TDC (including soft costs) and the HCC 
(excluding soft costs).
---------------------------------------------------------------------------

    \63\ Pacific Northwest National Laboratory, Cost-Effectiveness 
Analysis of the 2009 and 2012 IECC Residential Provisions--Technical 
Support Document.
---------------------------------------------------------------------------

    In their April 15 Preliminary Determination HUD and USDA used 
national averages for electricity and fuel rates to estimate energy 
savings. In this Final Determination HUD and USDA use current State 
average electricity and natural gas rates (October 2014) published by 
the EIA, and apply those rates to an average of DOE's estimated energy 
savings across climate zones in each State to generate statewide energy 
savings estimates and to calculate simple payback periods for the 
ASHRAE 90.1-2007 investments.\64\ For example, as shown in Table 6 and 
Appendix 2, the average annual cost savings per unit resulting from 
adopting ASHRAE 90.1-2007 in Arizona is estimated to be 5.5 percent of 
baseline utility costs of $1,393 per unit per year, or $76.88 in per 
unit annual energy cost savings. For an estimated average incremental 
cost of $340 per unit, the simple payback derived from these costs 
savings in Arizona is 4.4 years.\65\ Note that the same baseline code 
used for the New York incremental cost analysis (the IECC 2003 or 
ASHRAE 90.1-2001) is assumed for these States; the actual baseline 
codes in these States may vary from the New York baseline (see Appendix 
2).
---------------------------------------------------------------------------

    \64\ U.S. Energy Information Administration, Independent 
Statistics and Analysis, October 2014, at http://www.eia.gov/electricity/monthly/, Table 5.6 for October 2014 data from the 
December 2014 Electric Power Monthly, and http://www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PRS_DMcf_m.htm.
    \65\ While the 12 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.
---------------------------------------------------------------------------

5. 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, 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 $490 per 
dwelling unit (Alaska), and the lowest cost at $310 per dwelling unit 
(Oklahoma). This estimate compares favorably to the cost of complying 
with the 2009 IECC for single family homes, which shows a somewhat 
higher average incremental cost of $1,019 per dwelling unit. With one 
exception (Hawaii), simple payback times using the most recent State 
average energy prices from EIA are 15 years or under.
    The estimated payback for Hawaii slightly exceeds 15 years (15.1 
years). While the Preliminary Determination had proposed to exempt 
Hawaii, as a result of this Final Determination, HUD will require 
Hawaii to comply with ASHRAE 90.1-2007 for HUD-assisted or FHA-insured 
multifamily properties specified in EISA. This is because the Hawaii 
Building Code Council has already adopted the 2009 IECC (roughly 
equivalent to ASHRAE 90.1-2007), as well as the fact that current 
(October 2014) EIA data show the average cost per kilowatt hour in that 
State as of February 2014 has risen to 36 cents per kilowatt hour, 
thereby lowering the payback period to 15.1 years. The payback of 15.1 
years is consistent with the other four States shown in Table 6 with 
paybacks that are longer than 10 years.
    Accordingly, given the low incremental cost of compliance with the 
new standard and the generally favorable simple payback times, HUD and 
USDA have determined that 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.

D. 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 relation to total 
units funded by HUD and USDA or total for-sale units. These issues are 
discussed below.
1. Impact of Increases in Housing Prices and Hedonic Effects
    Though both higher construction costs and hedonic increases in 
demand for more energy-efficient housing are expected to contribute to 
an increase in housing prices or contract rents, HUD and USDA do not 
project such higher prices to decrease the quantity of

[[Page 25919]]

affordable housing exchanged in the market. For reasons explained in 
the above discussion of market failures, improved standards are 
expected to reduce operating costs per square foot, which will motivate 
consumers to increase demand for more housing at each rent level, and 
for developers or builders to respond to such demand with increased 
supply. Therefore, regulatory action that leads to investments with 
positive net present value can be expected to maintain or increase the 
quantity of housing consumed.
    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.\66\ 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.\67\ 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.
---------------------------------------------------------------------------

    \66\ Joseph Laquatra et al, ``Housing Market Capitalization of 
Energy Efficiency Revisited,'' (paper presented at the 2002 ACEEE 
Summer Study on Energy Efficiency in Buildings, 2002). http://www.eceee.org/library/conference_proceedings/ACEEE_buildings/2002/Panel_8/p8_12/paper.
    \67\ P. Eichholz, N. Kok and J. Quigley, ``Doing Well by Doing 
Good? Green Office Buildings,'' American Economic Review 100:5 
(2010): 2492-2509.
---------------------------------------------------------------------------

2. Impact of 2009 IECC on Housing Availability
    For the 34 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 EISA as a result of HUD and USDA 
establishing the 2009 IECC as a minimum standard. For those 16 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 7, in FY 2011, a total of 
15,425 units of HUD- and USDA-assisted new single family homes were 
built in these States, including 11,533 that were FHA-insured new 
homes, 850 that received USDA Section 502 direct loans, and 2,864 that 
received Section 502 guaranteed loans. Overall, this represented 4.6 
percent of all new single family home sales in the United States, and 
0.3 percent of all U.S. single family home sales in FY 2011.\68\
---------------------------------------------------------------------------

    \68\ New single family home sales totaled 333,000 in 2011; all 
single family home sales totaled 5,236,000. ``FHA Single-Family 
Activity in the Home-Purchase Market Through November 2011,'' 
Federal Housing Administration, February 2012, 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 16 States 
that have not yet adopted this code is likely to be similar; i.e., 
approximately 4.6 percent of all new single family home sales in those 
16 States, and 0.3 percent of all single family home sales in those 16 
States.

                        Table 7--Estimated Number of HUD- and USDA-Supported Units Potentially Impacted by Adoption of 2009 IECC
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   USDA Sec. 502      USDA Sec. 502
             States not yet adopted 2009 IECC                     HOME        FHA Single family        direct           guaranteed           Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
AK.......................................................                 16                207                 25                 53                301
AR.......................................................                 10                672                127                412              1,221
AZ.......................................................                 14                866                 28                115              1,023
CO.......................................................                  5                195                  5                  8                212
HI.......................................................                 10                109                 35                165                319
KS.......................................................                  5                686                 28                 52                771
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................................................                178             11,533                850              2,864             15,425
--------------------------------------------------------------------------------------------------------------------------------------------------------

    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 $15 million nationwide, and an 
estimated annual benefit of $3.0 million in energy cost savings, for an 
estimated simple payback of 5 years, as shown in Appendix 5.
3. 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 8, in the 12 States 
that have not yet adopted this code, 5,256 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 8, only units 
for which HOME Investment Partnership Program (HOME) funds are 
committed on or after January 24, 2015, and future units under FHA-
insured

[[Page 25920]]

multifamily programs will be affected by this Notice of Final 
Determination. Using FY 2011 unit production as the baseline, HUD and 
USDA project this to be approximately 3,217 units annually. This total, 
as well as other totals in Table 8 below, reflect a discount factor for 
Arizona and Colorado to reflect current home rule adoption of higher 
codes in those States (70 percent and 90 percent, respectively).
    Although covered under EISA, HUD's Public Housing Capital Fund, the 
Sections 202 and 811 Supportive Housing and the 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 8--Estimated Number of HUD-Assisted 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             175  ..............              82             257
CO *....................................................  ..............               1              15  ..............             164             181
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             422           1,422             323           1,932           5,256
                                                         -----------------------------------------------------------------------------------------------
    Total Units Projected to be Covered Under this        ..............  ..............           1,422  ..............           1,932           3,217
     Notice.............................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
* AZ and CO statewide numbers adjusted by 70 percent and 90 percent respectively, to reflect estimated adoption rate of the code by home rule
  municipalities.

    Of the total, approximately 15 new multifamily projects with 1,932 
units were endorsed by FHA in 2011 in these States. The 1,932 
multifamily units endorsed by FHA in FY 2011 in States that have not 
yet adopted ASHRAE 90.1-2007 represented approximately 1 percent of a 
total of 180,367 units receiving FHA multifamily endorsements 
nationwide in FY 2011. The 15 projects with affected units represented 
a mortgage value of $187 million, or 1.6 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 approximately 1 percent of FHA multifamily endorsements will be 
impacted by ASHRAE 90.1-2007, and less than 2 percent of total loan 
volume.
    For both HOME and FHA-insured units shown in Table 8 (above) 
adoption of ASHRAE 90.1-2007 by the covered HUD programs represents an 
estimated one-time incremental cost increase for new multifamily 
residential units of $1 million nationwide, and an estimated annual 
benefit of $93,400 nationwide, resulting in an estimated simple payback 
time of less than 12 years, as shown in Appendix 5.
4. 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.

E. Implementation Schedule

    Section 109(d) of Cranston-Gonzalez automatically applies 2009 IECC 
and ASHRAE 90.1-2007 to all covered programs upon completion of this 
determination by HUD and USDA, and the previously published energy 
efficiency determinations by DOE. Accordingly, 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 pre-applications are received by HUD 90 days 
after the effective date of this Final Determination;
    (2) 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.
    (3) For the HOME program, the standards set forth by this notice 
are applicable to projects upon publication of guidance by HUD related 
to property standard requirements at 24 CFR 92.251.
    HUD and USDA will take such administrative actions as are necessary 
to ensure timely implementation of, and compliance with, the energy 
codes, to include mortgagee letters, notices, Builder's Certification 
form HUD-92541, and amendments to relevant handbooks. Conforming 
rulemaking will also be required for one HUD program to update previous 
regulatory standards: the Federal Housing Administration's (FHA) single 
family minimum property standards, for which the regulations are 
codified at 24 CFR 200.926d. In addition, USDA will update minimum 
energy requirements codified in USDA regulations at 7 CFR 1924.

[[Page 25921]]

F. Alternative Compliance Paths

    HUD and USDA will accept certifications for a range of energy and 
green building standards that require energy efficiency levels that 
meet or exceed the 2009 IECC or ASHRAE 90.1-2007 as evidence of 
compliance with the standards addressed in this notice. These include 
the ICC-700 National Green Building Standard (Performance Path), 
Enterprise Green Communities, ENERGY STAR Certified New Homes, ENERGY 
STAR Multifamily High Rise, LEED-NC, LEED-H, or LEED-H Midrise, and 
several regional or local green building standards, such as Earthcraft 
House, Earthcraft Multifamily, Earth Advantage New Homes, or GreenPoint 
Rated New Homes. These standards all require energy efficiency levels 
that meet or exceed the 2009 IECC and ASHRAE 90.1-2007. In addition, 
several States have adopted energy efficiency codes or standards that 
exceed the efficiency levels of the 2009 IECC and ASHRAE 90.1-2007, 
including, for example, the Title 24 California Energy Code in 
California, and Focus on Energy in Wisconsin. HUD and USDA will accept 
certifications of compliance with these State codes or standards as 
well as other State codes or standards for which credible third-party 
documentation exists that these exceed the 2009 IECC and ASHRAE 90.1-
2007.

G. Cost Benefit Analysis

1. Energy Costs and Savings
    For both single family units complying with the 2009 IECC and 
multifamily units complying with ASHRAE 90.1-2007, the combined cost of 
implementing the updated codes is estimated at $16.1 million, with an 
estimated annual energy cost savings of $3.1 million, yielding a simple 
payback of 5.2 years. Annualized costs for this initial investment over 
10 years are $1.8 million. Over 10 years, the present value of these 
cost savings, using a discount rate of 3 percent, is $27.0 million, for 
a net present value savings of $10.9 million over 10 years.
2. Social Benefits of Energy Standards
    In addition to energy savings (described above) that will result 
from adoption of the energy standards addressed in this Determination, 
additional benefits are realized (in the form of lower social costs) 
from the resulting reductions in emissions of pollutants (such as 
particulate matter) that cause health and property damage and 
greenhouse gases (such as carbon dioxide) (CO2) that cause 
global warming.
    The ``social cost of carbon'' (SCC) is an estimate used by EPA and 
other Federal agencies to describe the economic damages associated with 
a small increase in CO2 emissions, conventionally 1 metric 
ton, in a given year. This dollar figure also represents the value of 
damages avoided for a small emission reduction (i.e., the benefit of a 
CO2 reduction).\69\ The SCC is meant to be a comprehensive 
estimate of climate change damages and includes, but is not limited to, 
changes in net agricultural productivity, human health, and property 
damages from increased flood risk.\70\
---------------------------------------------------------------------------

    \69\ Definition of Social Cost of Carbon at http://www.epa.gov/climatechange/EPAactivities/economics/scc.html.
    \70\ Ibid. Given current modeling and data limitations, the SCC 
does not include all important damages. As noted by the 
Intergovernmental Panel on Climate Change Fourth Assessment Report, 
it is ``very likely that [SCC] underestimates'' the damages. The 
models used to develop SCC estimates, known as integrated assessment 
models, do not currently include all of the important physical, 
ecological, and economic impacts of climate change recognized in the 
climate change literature because of a lack of precise information 
on the nature of damages and because the science incorporated into 
these models naturally lags behind the most recent research. 
Nonetheless, the SCC is a useful measure to assess the benefits of 
CO2 reductions.
---------------------------------------------------------------------------

    The marginal social cost of carbon is taken from the Interagency 
Working Group on Social Cost of Carbon (2013) and adjusted by the Gross 
Domestic Product deflator to the 2012 price level. To calculate the 
social cost of carbon 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 (metric ton) of carbon dioxide emitted in a particular year.\71\ 
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 
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.
---------------------------------------------------------------------------

    \71\ 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 interagency group chose a global measure of 
the social cost of carbon because emissions of most greenhouse gases 
contribute to damages around the world.
---------------------------------------------------------------------------

    The emission rate of metric tons of CO2 for each British 
thermal unit (BTU) consumed varies by power or fuel source. The primary 
source for these data is emissions factors developed by the U.S. Energy 
Information Administration (EIA) and utilized by the EIA Voluntary 
Reporting of Greenhouse Gases Program, as well as other EIA 
sources.\72\
---------------------------------------------------------------------------

    \72\ The EIA Voluntary Reporting Greenhouse Gas Reporting 
Program was discontinued in 2011, but the emissions factors utilized 
by that program, posted at http://www.eia.gov/oiaf/1605/emission_factors.html, and utilized here by HUD and USDA, remain 
valid.
---------------------------------------------------------------------------

    HUD uses a range for its emission factor of 0.107 to 0.137 metric 
tons of CO2 per million BTUs. The lower figure of 0.107 
metric tons of CO2 per million BTUs was derived as follows: 
the most direct method of calculating the CO2 emission rate 
for the residential sector is to divide total reported CO2 
emissions from energy consumption in the energy sector (1,162 million 
metric tons) by the corresponding energy consumption (10,833 trillion 
BTUs) including coal, natural gas, petroleum, and retail electricity. 
The average emission factor would be 107 kg CO2 per million 
BTUs.
    The higher figure of 0.137 metric tons of CO2 per 
million BTUs was derived using a more detailed and comprehensive 
analysis for specific power or fuel sources: the emission rates for 
coal, natural gas, and petroleum \73\ are those for the residential and 
commercial sectors as provided the EIA. Carbon dioxide emission 
coefficients from the generation of electricity were calculated from 
the 2012 United States Electricity Profile 2012.\74\ HUD included both 
direct (sales) and indirect (energy losses) emissions using an emission 
factor of 169.8 metric tons of CO2 per million BTUs for 
both.\75\ HUD found that the weighted average CO2 emission 
factor is 137.7 metric tons CO2 per million BTUs by 
weighting the emission coefficient factors by the share of residential 
energy consumption from each power source except biomass.\76\
---------------------------------------------------------------------------

    \73\ Petroleum consumption includes distillate fuel oil, 
kerosene, and liquefied petroleum gases. The emission coefficient is 
the one for ``Home Heating and Diesel Fuel.''
    \74\ U.S. Energy Information Administration, ``State Electricity 
Profiles,'' 2012. http://www.eia.gov/electricity/state/unitedstates/.
    \75\ This estimate is very close to that of www.carbonfund.org, 
which estimates a CO2 emission factor of 173 using EPA 
eGRID data.
    \76\ Energy Information Administration, Annual Energy Review, 
2013, Table 2.1b.
---------------------------------------------------------------------------

    Given that both approaches are credible but arrive at a different 
estimate, HUD and USDA used a range for its emission factor of from 
0.107 to 0.137 metric tons of CO2 per million BTUs.
    Based on studies by DOE, HUD estimates energy savings of 1.79 
million BTUs per housing unit per year from the ASHRAE 90.1-2007 
standard and a reduction of 7.3 million BTUs per housing unit per year 
from the 2009 IECC. The expected aggregate energy

[[Page 25922]]

savings (technical efficiency) is approximately 118,300 million BTUs 
annually.\77\
---------------------------------------------------------------------------

    \77\ Aggregated energy savings are derived as follows: 1.79 
MMBTU x 3,217 multifamily units + 7.3 MMBTU x 15,425 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.\78\ 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 between 82,810 million and 106,470 million BTUs.
---------------------------------------------------------------------------

    \78\ Sorrel, Steven, The Rebound Effect: An Assessment of the 
Evidence for Economy-Wide Energy Savings from Improved Energy 
Efficiency, UK Energy Research Centre, October 2007.
---------------------------------------------------------------------------

    Table 9 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 life cycle, low rebound factor, and high emissions 
factor.
    Marginal Social Costs as used here are a measure of the non-energy 
economic costs associated with carbon emissions. Marginal Social Costs 
are defined by the Business Dictionary as the ``incremental cost of an 
activity as viewed by the society and expressed as the sum of marginal 
external cost and marginal private cost.'' As discussed in more detail 
above, the Marginal Social Cost of carbon is the social cost of each 
additional ton of CO2 resulting from energy consumption. As 
defined by the Technical Update of the Social Cost of Carbon for 
Regulatory Impact Analysis, ``(t)he SCC is an estimate of the monetized 
damages associated with an incremental increase in carbon emissions in 
a given year. It is intended to include (but is not limited to) changes 
in net agricultural productivity, human health, property damages from 
increased flood risk, and the value of ecosystem services due to 
climate change.\79\
---------------------------------------------------------------------------

    \79\ Under Executive Order 12866, Interagency Working Group on 
Social Cost of Carbon.

                                                 Table 9--Annualized Value of Reduction in CO2 Emissions
                                                                     [$2012 million]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Emission factor of 0.107                            Emission factor of 0.137
                                                 -------------------------------------------------------------------------------------------------------
                                                         Rebound 30%               Rebound 10%             Rebound of 30%            Rebound of 10%
                   Life cycle                    -------------------------------------------------------------------------------------------------------
                                                  Median  MSC               Median  MSC               Median  MSC               Median  MSC
                                                       *        High  MSC        *        High  MSC        *        High  MSC        *        High  MSC
--------------------------------------------------------------------------------------------------------------------------------------------------------
10 years........................................         0.39         1.14         0.49         1.45         0.49         1.45         0.64         1.86
15 years........................................         0.41         1.20         0.52         1.55         0.52         1.54         0.67         2.01
20 years........................................         0.43         1.26         0.55         1.62         0.55         1.62         0.70         2.11
25 years........................................         0.44         1.33         0.57         1.70         0.57         1.70         0.72         2.18
--------------------------------------------------------------------------------------------------------------------------------------------------------
* MSC = Marginal Social Cost.

    The annualized value of the social benefits of reducing carbon 
emissions, discounted at 3 percent, ranges from $390,000 (median MSC 
over 10 years) to $2.18 million (high MSC over 25 years).\80\ The 
corresponding present values range from $3.4 to $16.3 million over 10 
years and from $7.9 million to $39 million over 25 years.
---------------------------------------------------------------------------

    \80\ 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.
---------------------------------------------------------------------------

III. Findings and Certifications

Environmental Review

    A Finding of No Significant Impact with respect to the environment 
was made with respect to the preliminary affordability determination 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)), and remains applicable to this final affordability 
determination. That finding is posted at www.regulations.gov and 
www.hud.gov/resilience 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).

    Dated: April 23, 2015.
Juli[aacute]n Castro,
Secretary, U.S. Department of Housing and Urban Development.
    Dated: April 23, 2015.
Thomas J. Vilsack,
Secretary, U.S. Department of Agriculture.

Appendix 1. Covered HUD and USDA Programs

----------------------------------------------------------------------------------------------------------------
                                              Legal authority                         Regulations
----------------------------------------------------------------------------------------------------------------
HUD Programs:
    Public Housing Capital Fund......  Section 9(d) and section 30    24 CFR parts 905, 941, and 968.
                                        of the U.S. Housing Act of
                                        1937 (42 U.S.C. 1437g(d) and
                                        1437z-2).

[[Page 25923]]

 
    HOPE VI Revitalization of          Section 24 of the U.S.         24 CFR part 971.
     Severely Distressed Public         Housing Act of 1937 (42
     Housing.                           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 Planning      Section 24 of the U.S.         24 CFR part 971.
     Grants.                            Housing Act of 1937 (42
                                        U.S.C. 1437v).
    Section 202 Supportive Housing     Section 202 of the Housing     24 CFR part 891.
     For the Elderly.                   Act of 1959 (12 U.S.C.
                                        1701q), as amended.
    Section 811 Supportive Housing     Section 811 of the Housing     24 CFR part 891.
     for Persons with Disabilities.     Act of 1959 (12 U.S.C.
                                        1701q), as amended.
    HOME Investment Partnerships       Title II of the Cranston-      24 CFR part 92.
     (HOME).                            Gonzalez National Affordable
                                        Housing Act (42 U.S.C. 12742
                                        et seq.).
    FHA Single Family Mortgage         National Housing Act Sections  24 CFR parts 203, Subpart A; 203.18(i);
     Insurance Programs.                203(b) (12 U.S.C. 1709(b)),    203.43i; 203; 203.49; 203.43h.
                                        Section 251 (12 U.S.C. 1715z-
                                        16), Section 247 (12 U.S.C.
                                        1715z-12), Section 203(h)
                                        (12 U.S.C. 1709(h)), Housing
                                        and Economic Recovery Act of
                                        2008 (Pub. L. 110-289),
                                        Section 248 of the National
                                        Housing Act (12 U.S.C. 1715z-
                                        13).
    FHA Multifamily Mortgage           Sections 213, 220, 221, 231,   24 CFR parts 200, subpart A, 213; 231;
     Insurance Programs.                and 232 of the National        220;221, subparts C and D; and 232.
                                        Housing Act (12 U.S.C.1715e,
                                        12 U.S.C.1715v, 12
                                        U.S.C.1715k, 12 U.S.C.17151,
                                        12 U.S.C.1715w).
USDA Programs:
    Section 502 Guaranteed Housing     Section 502 of Housing Act     7 CFR part 1980.
     Loans.                             (42 U.S.C. 1472).
    Section 502 Rural Housing Direct   Section 502 of Housing Act     7 CFR part 3550.
     Loans.                             (42 U.S.C. 1472).
    Section 502 Mutual Self Help Loan  Section 502 of Housing Act     7 CFR part 3550.
     program, homeowner participants.   (42 U.S.C. 1472).
----------------------------------------------------------------------------------------------------------------

Appendix 2. Estimated Energy and Cost Savings from Adoption of ASHRAE 
90.1-2007 \81\
---------------------------------------------------------------------------

    \81\ Source: Pacific Northwest National Laboratory (PNNL), 
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. 
Available at http://www.energycod5.6es.gov/impacts-standard-901-2007-commercial-buildings-state-level. This table updates the energy 
cost savings presented in this report, by utilizing current 
individual State fuel and electricity prices (as of October 2014), 
whereas the PNNL report utilizes national average prices.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Baseline energy      Energy cost
               State                       Location           Climate zone      Energy savings    costs  ($/unit/   savings  ($/unit/     Energy cost
                                                                                     (%)               year)              year)           savings  (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
AK................................  Anchorage............                  7                6.5              2,202              70.40                3.3
                                    Fairbanks............                  8                4.7              2,428              67.50                2.8
                                    Average..............  .................                5.6              2,315              68.95                3.0
AZ................................  Phoenix..............                 2B                6.6              1,385              82.55                6.0
                                    Sierra Vista.........                 3B                6.1              1,342              76.29                5.7
                                    Prescott.............                 4B                8.7              1,407              92.76                6.6
                                    Flagstaff............                 5B                5.7              1,437              55.92                3.9
                                    Average..............  .................                6.8              1,393              76.88                5.5
CO................................  La Junta.............                 4B                7.4              1,300              45.28                3.5
                                    Boulder..............                 5B                7.5              1,304              46.13                3.5
                                    Eagle................                 6B                1.7              1,295               8.18                0.6
                                    Alamosa..............                 7B                2.7              1,306              15.20                1.2
                                    Average..............  .................                4.8              1,301              28.70                2.2
HI................................  Honolulu.............                 1A                0.8              3,930              31.66                0.8
                                    Average..............  .................                0.8              3,930              31.66                0.8
KS................................  Topeka...............                 4A               10.3              1,615             109.83                6.8
                                    Goodland.............                 5A                5.2              1,594              50.43                3.2
                                    Average..............  .................                7.8              1,605              80.13                5.0
ME................................  Portland.............                 6A                4.5              1,907              47.78                2.5
                                    Caribou..............                  7                5.4              2,104              78.12                3.7
                                    Average..............  .................                5.0              2,005              62.95                3.1
MN................................  St. Paul.............                 6A                2.2              1,462              12.04                0.8
                                    Duluth...............                  7                5.2              1,546              50.27                3.3
                                    Average..............  .................                3.7              1,504              31.15                2.1
MO................................  St. Louis............                 4A                3.5              1,370              36.05                2.6
                                    St. Joseph...........                 5A                3.6              1,383              36.51                2.6
                                    Average..............  .................                3.6              1,377              36.28                2.6
OK................................  Oklahoma City........                 3A                1.5              1,325              21.27                1.6

[[Page 25924]]

 
                                    Guymon...............                 4A                3.6              1,374              42.32                3.1
                                    Average..............  .................                2.6              1,349              31.79                2.4
SD................................  Yankton..............                 5A                4.1              1,409              32.49                2.3
                                    Pierre...............                 6A                4.2              1,411              32.14                2.3
                                    Average..............  .................                4.2              1,410              32.32                2.3
TN................................  Memphis..............                 3A                3.4              1,174              35.68                3.0
                                    Nashville............                 4A                3.2              1,221              25.12                2.1
                                    Average..............  .................                3.3              1,198              30.40                2.5
WY................................  Torrington...........                 5B                4.2              1,316              31.21                2.4
                                    Cheyenne.............                 6B                4.5              1,347              33.72                2.5
                                    Rock Springs.........                 7B                4.7              1,372              35.20                2.6
                                    Average..............  .................                4.5              1,345              33.38                2.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

Appendix 3. TDC Adjustment Factors For States That Have Not Adopted 
ASHRAE 90.1-2007

------------------------------------------------------------------------
                                                          TDC adjustment
                  State                   TDC Limit  ($)     factor *
------------------------------------------------------------------------
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
Avg.....................................         185,009  ..............
------------------------------------------------------------------------
* Uses New York TDC as baseline; assumes average 2-BR multifamily unit.

Appendix 4. Estimated Total Costs and Energy Cost Savings From Adoption 
of 2009 IECC

------------------------------------------------------------------------
                                               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 *....................................       1,394,963         247,493
CO *....................................         190,953          28,368
HI......................................         622,050         125,367
KS......................................         424,050         135,696
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...............................      15,016,943       2,982,639
------------------------------------------------------------------------
* AZ and CO statewide estimates were adjusted by 70 percent and 90
  percent, respectively, to reflect estimated adoption rate of code by
  home rule municipalities.

Appendix 5. Estimated  Total Costs and Energy Cost Savings From 
Adoption of ASHRAE 90.1-2007
---------------------------------------------------------------------------

    \82\ No units were produced under affected programs in Maine in 
FY 2011, the baseline year used for this analysis; therefore, no 
estimated costs or savings are shown for this State.

------------------------------------------------------------------------
                                               Total       Total energy
                                            incremental    cost savings/
                  State                     cost/state      state  ($/
                                                ($)            year)
------------------------------------------------------------------------
AK......................................          25,945           3,069
AZ *....................................          87,658          13,956
CO *....................................          63,873           5,762
KS......................................          11,860           2,074
ME \82\.................................               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...............................       1,092,624          93,416
------------------------------------------------------------------------
* AZ and CO statewide estimates adjusted by 70 percent and 90 percent,
  respectively, to reflect estimated adoption rate of code by home rule
  municipalities.

[FR Doc. 2015-10380 Filed 5-5-15; 8:45 am]
 BILLING CODE 4210-67-P