Federal Register, Volume 88 Issue 96 (Thursday, May 18, 2023)

[Federal Register Volume 88, Number 96 (Thursday, May 18, 2023)]
[Notices]
[Pages 31773-31805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10596]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

DEPARTMENT OF AGRICULTURE

[Docket No. FR-6271-N-01]
RIN 2506-AC55

Adoption of Energy Efficiency Standards for New Construction of
HUD- and USDA-Financed Housing: Preliminary Determination and
Solicitation of Comment

AGENCY: Department of Housing and Urban Development, Department of
Agriculture.

ACTION: Notice of preliminary determination.

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

SUMMARY: The Energy Independence and Security Act of 2007 (EISA)
establishes procedures for the U.S. Department of Housing and Urban
Development (HUD) and the U.S. Department of Agriculture (USDA) to
adopt periodic revisions to the International Energy Conservation Code
(IECC) and to ANSI/ASHRAE/IES Standard 90.1: Energy Standard for
Buildings, Except Low-Rise Residential Buildings (ASHRAE 90.1), subject
to a determination by HUD and USDA that the revised codes do not
negatively affect the availability or affordability of new construction
of single and multifamily housing covered by EISA, and a determination
by the Secretary of Energy that the revised codes ``would improve
energy efficiency.'' This Notice announces the preliminary
determination of HUD and USDA, as required under section 481(d)(1) of
EISA, that the 2021 IECC and ASHRAE 90.1-2019 will not negatively
affect the affordability and availability of housing covered by EISA.
In making this preliminary determination, the first step to ultimately
requiring compliance with these standards in HUD and USDA housing
covered by EISA, this Notice relies on several studies that show that
these codes are cost effective in that the incremental cost of the
additional efficiency measures pays for themselves with energy cost
savings on a life-cycle basis.

DATES: Comment Due Date: July 17, 2023.

ADDRESSES: Interested persons are invited to submit comments regarding
this Notice. There are two methods for submitting public comments,
listed below. All submissions must refer to the above-referenced docket
number (FR-6271-N-01) and title of this Notice.
Electronic Submission of Comments. Interested persons may submit
comments electronically through the Federal eRulemaking Portal at
www.regulations.gov. HUD and USDA strongly encourage commenters to
submit comments electronically. Electronic submission of comments
allows the commenter maximum time to prepare and submit a comment,
ensures timely receipt, and enables HUD and USDA to make them
immediately available to the public. Comments submitted electronically
through the www.regulations.gov website can be viewed by other
commenters and interested members of the public. Commenters should
follow the instructions provided on that site to submit comments
electronically.
Submission of Comments by Mail. Comments may be submitted by mail
to the Regulations Division, Office of General Counsel, Department of
Housing and Urban Development, 451 7th Street SW, Room 10276,
Washington, DC 20410-0500.

Note: To receive consideration as public comments, comments must
be submitted

[[Page 31774]]

through one of the two methods specified above. Again, all
submissions must refer to the docket number and title of this
Notice.

No Facsimile Comments. Facsimile comments are not acceptable.
Public Inspection of Public Comments. All properly submitted
comments and communications submitted to HUD will be available for
public inspection and copying between 8 a.m. and 5 p.m., weekdays, at
the above address. Due to security measures at the HUD Headquarters
building, an appointment to review the public comments must be
scheduled in advance by calling the Regulations Division at 202-708-
3055 (this is not a toll-free number). HUD welcomes and is prepared to
receive calls from individuals who are deaf or hard of hearing, as well
as individuals with speech or communication disabilities. To learn more
about how to make an accessible telephone call, please visit
www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

FOR FURTHER INFORMATION CONTACT: HUD: Michael Freedberg, Office of
Environment and Energy, Department of Housing and Urban Development,
451 7th Street SW, Room 7282, Washington, DC 20410; telephone number
202-402-4366 (this is not a toll-free number). USDA: Meghan Walsh,
Rural Housing Service, Department of Agriculture, 1400 Independence
Avenue SW, Washington, DC 20250; telephone number (202) 573-3692 (this
is not a toll-free number). HUD welcomes and is prepared to receive
calls from individuals who are deaf or hard of hearing, as well as
individuals with speech or communication disabilities. To learn more
about how to make an accessible telephone call, please visit
www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

SUPPLEMENTARY INFORMATION:
I. Introduction
Statutory Requirements
Covered HUD and USDA Programs
Current Above-Code Standards or Incentives
II. 2021 IECC Affordability Determination
A. Overview
Current HUD-USDA Standard and Subsequent Revisions
2021 IECC Overview
Current State Adoption of the 2021 IECC
Estimated Impacts
B. 2021 IECC Affordability Analysis
Cost Benefit Analysis and Results
Limitations of Cost Saving Models
Estimated Costs and Savings
Incremental or Added Costs
Annual Cost Savings
Simple Payback
Total Life Cycle Cost Savings
Consumer Cash Flows
Low-Rise Multifamily Buildings
State-level Results
Total Costs and Benefits
C. Preliminary Affordability Determination--2021 IECC
III. ASHRAE 90.1-2019 Affordability Determination
A. Overview
Current HUD-USDA Standard and Subsequent Revisions
ASHRAE 90.1-2019 Overview
Current State Adoption of ASHRAE 90.1-2019
Impacted Multifamily Housing
B. ASHRAE 90.1-2019 Affordability Analysis
Cost Benefit Analysis
Building Prototypes
ASHRAE 90.1-2019 Incremental Costs
State-Level Results
Total Life Cycle Cost Savings
C. Preliminary Affordability Determination--ASHRAE 90.1-2019
IV. Impact on Availability of Housing
2021 IECC--Single Family
ASHRAE 90.1-2019 Rental Housing
V. Implementation
VI. Request for Public Comment
VII. Environmental Impact

List of Tables

Table 1. Covered HUD and USDA Programs
Table 2. Current Energy Standards and Incentives for HUD and USDA
Programs (New Construction Only)
Table 3. Current Adoption of the IECC (September 2022)
Table 4. Number of Units Impacted Annually by 2021 IECC
Table 5A. National Costs and Benefits--2021 vs. 2009 IECC (Single
Family)
Table 5B. National Cost and Benefits--2021 vs. 2009 IECC (Low-Rise
Multifamily)
Table 5C. Incremental Costs and Energy Savings of 2021 IECC vs. 2018
IECC
Table 6. State by State Costs and Benefits (Single-family)
Table 7. Aggregate Estimated Cost and Savings for 2021 IECC (Single-
family and Low-Rise Multifamily)
Table 8. Incremental ASHRAE 90.1.-2019 Construction Costs ($/sf and
%/sf)
Table 9. Incremental ASHRAE 90.1-2019 Construction Costs ($/
building)
Table 10. Current Adoption of ASHRAE 90.1 (September 2022),
Multifamily Mid- and High-Rise Buildings
Table 11. High-Rise Multifamily Units Potentially Impacted by ASHRAE
90.1-2019
Table 12. Mid-Rise Apartment Building Prototype Characteristics
Table 13. ASHRAE 90.1-2019 Added Costs and Savings--National
Table 14. ASHRAE 90.1-2019 Added Costs and Savings--States
Table 15. Total Life Cycle Savings--States ($)
Table 16. Type of Financing for New Single-Family Homes
Table 17. FHA-Insured Single Family Forward Loans, 2021.

List of Figures

Figure 1: IECC Adoption Map (Residential)--Status as of September
2022
Figure 2. Climate Zone Map
Figure 3. Economic Parameters for Consumer Cash Flows
Figure 4: ASHRAE 90.1 Adoption Map (Multifamily)--Status as of
September 2022

I. Introduction

Statutory Requirements

Section 481 of the Energy Independence and Security Act of 2007
(``EISA,'' Pub. L. 110-140) 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 the following three categories of housing financed
or assisted by HUD and USDA:
(A) New construction of public and assisted housing and single-
family and multifamily residential housing (other than manufactured
homes) subject to mortgages insured under the National Housing Act; \1\
---------------------------------------------------------------------------

\1\ This subsection of EISA refers to HUD programs. See Table 1
for specific HUD programs covered by the Act.
---------------------------------------------------------------------------

(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; \2\ and,
---------------------------------------------------------------------------

\2\ This subsection of EISA refers to USDA programs. See Table 1
for specific USDA programs covered by the Act.
---------------------------------------------------------------------------

(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, other HUD programs
apply EISA to new construction projects through their program statutes
and regulations, including the HOME Investment Partnerships Program
(HOME) and the Housing Trust Fund. Sections 215(a)(1)(F) and (b)(4) of
Cranston-Gonzalez (42 U.S.C. 12745(a)(1)(F) and (b)(4)) make new
construction of rental housing and homeownership housing assisted under
the HOME program subject to section 109 of Cranston-Gonzalez (42 U.S.C.
12709) and, therefore, to section 481 of EISA. From the beginning of
the HOME program, the regulation at 24 CFR 92.251 implemented section
109 of Cranston-Gonzalez (42 U.S.C. 12709). However, compliance with
section 109 of Cranston-Gonzalez (42 U.S.C. 12709) 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

[[Page 31775]]

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 of Cranston-Gonzalez (42
U.S.C. 12709) continue to apply to all newly-constructed housing funded
by the HOME program.
With regard to the Housing Trust Fund, program regulations at 24
CFR 93.301(a)(2)(ii) Property Standards, require compliance with the
minimum standards required under Cranston Gonzalez section 109 (42
U.S.C. 12709).
EISA references two standards: the International Energy
Conservation Code (IECC) and ANSI/ASHRAE/IES Standard 90.1.\3\ The IECC
standard applies to single-family homes and multifamily low-rise
buildings (up to 3 stories), while the ASHRAE 90.1 standard applies to
multifamily residential buildings with 4 or more stories.\4\ For both
agencies, applicability is limited to newly constructed housing and
does not include the purchase or repair of existing housing.\5\
---------------------------------------------------------------------------

\3\ ANSI--American national Standards Institute; ASHRAE--
American Society of Heating, Refrigerating, and Air-Conditioning
Engineers; IES--Illuminating Electrical Society.
\4\ Note the IECC addresses both residential and commercial
buildings. ASHRAE 90.1 covers commercial buildings only, including
multifamily buildings four or more stories above grade. IECC Section
C 401.2 adopts, by reference, ASHRAE 90.1; that is, compliance with
ASHRAE 90.1 qualifies as compliance with the IECC for commercial
buildings.
\5\ The statute covers rehabilitation as well as new
construction of housing assisted by HOPE VI revitalization grants;
however, as noted below, the HOPE VI program is no longer funded.
---------------------------------------------------------------------------

Sections 109(c) and (d) of Cranston-Gonzalez, as amended by EISA,
establish procedures for updating HUD and USDA energy standards
following periodic revisions to the IECC and ASHRAE 90.1 codes,
typically every three years. Specifically, section 109(d) of Cranston-
Gonzalez (42 U.S.C. 12709) provides that revisions to the IECC or
ASHRAE codes will apply to the three categories of housing financed or
assisted by HUD or USDA described above if: (1) either agency ``make(s)
a determination that the revised codes do not negatively affect the
availability or affordability'' of such housing, 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 (42 U.S.C. 12709(d)). The Department of
Energy (DOE) has published Final Determinations that the 2021 IECC and
ASHRAE 90.1-2019 standards would improve energy efficiency (86 FR
40529; July 28, 2021, and 86 FR 40543; July 28, 2021).
Note that DOE issued a separate final rule under EISA section 413
that establishes energy conservation standards for manufactured housing
(42 U.S.C. 17071).\6\ Those standards are based on the 2021 version of
the International Energy Conservation Code (``IECC'') and feedback
received during interagency consultation with HUD.
---------------------------------------------------------------------------

\6\ 87 FR 32728 (May 31, 2022); 10 CFR part 460.
---------------------------------------------------------------------------

Energy Codes Overview

There are two primary benefits of adopting energy-saving building
codes: a private benefit for residents--either homeowners or renters--
in the form of lower energy costs, and the external social value of
reducing the emission of greenhouse gases (GHGs). Additional benefits
may include improved health and resilience against extreme hot or cold
weather events. As discussed in more detail below, states or localities
typically adopt the IECC and ASHRAE standards on a voluntary basis one
or more years after their publication. DOE has determined that the 2021
IECC represents an approximately 40 percent improvement in energy
efficiency for residential and commercial buildings compared to the
2006 edition. The 2021 IECC also for the first time includes a Zero
Energy Appendix. The Appendix is an optional add-on to the 2021 IECC
that--if adopted by a state or local jurisdiction--will result in
residential buildings having net zero energy consumption over the
course of a year. The current state adoption of the IECC and ASHRAE
standards is as follows:

Distribution of State Adoption of IECC and ASHRAE 90.1 Standards
----------------------------------------------------------------------------------------------------------------
IECC * single family and low-rise multifamily ASHRAE 90.1 * mid-rise and high-rise multifamily
----------------------------------------------------------------------------------------------------------------
Number of Number of
Year states Year states
----------------------------------------------------------------------------------------------------------------
IECC 2021.................................... 3 ASHRAE 90.1-2019................ 6
IECC 2018.................................... 9 ASHRAE 90.1-2016................ 2
IECC 2015.................................... 2 ASHRAE 90.1-2013................ 19
IECC 2012.................................... 0 ASHRAE 90.1-2010................ 6
IECC 2009.................................... 26 ASHRAE 90.1-2007................ 8
Less stringent than IECC 2009, No Statewide 11 Less stringent than ASHRAE 90.1- 10
Code or Home Rule. 2007, No Statewide Code or Home
Rule.
----------------------------------------------------------------------------------------------------------------
* As of September 2022.

Covered HUD and USDA Programs

Table 1 lists the specific HUD and USDA programs covered by EISA,
with certain exclusions noted, as discussed below. Apart from the HOPE
VI program, where rehabilitation is referenced, only new construction
of housing financed or assisted under these programs is covered by
EISA.

Table 1--Covered HUD and USDA Programs
------------------------------------------------------------------------
Regulations or
HUD programs Legal authority notices
------------------------------------------------------------------------
Public Housing Capital Fund... Section 9(d) and 24 CFR parts
Section 30 of the 905.
U.S. Housing Act of
1937 (42 U.S.C.
1437g(d) and 1437z-2).
Capital Fund Financing Program Section 9(d) and 24 CFR part 905
Section 30 of the subpart E.
U.S. Housing Act of
1937 (42 U.S.C.
1437g(d) and 1437z-2).

[[Page 31776]]

* HOPE VI Revitalization of Section 24 of the U.S. FR-5415-N-07.
Severely Distressed Public Housing Act of 1937
Housing. (42 U.S.C. 1437v).
Choice Neighborhoods Section 24 of the U.S. FR-5800-N-11.
Implementation Grants. Housing Act of 1937
(42 U.S.C. 1437v).
Section 202 Supportive Housing Section 202 of the 24 CFR part 891.
for the Elderly. Housing Act of 1959
(12 U.S.C. 1701q), as
amended.
Section 811 Supportive Housing Section 811 of the 24 CFR part 891.
for Persons with Disabilities. Cranston-Gonzalez
National Affordable
Housing Act (42
U.S.C. 8013) as
amended.
Rental Assistance Consolidated and RAD Notice
Demonstration (RAD). Further Continuing Revision 4 (H
Appropriations Act of 2019-09 PIH
2012 (Pub. L. 112- 2019-23).
55), as amended by
Consolidated
Appropriations Act,
2014 (Pub. L. 113-76)
and subsequent
Consolidated
Appropriations Acts.
FHA Single-family Mortgage National Housing Act, 24 CFR part 203,
Insurance Programs. Sections 203(b) (12 subpart A;
U.S.C. 1709(b)), 203.18(i);
Section 251 (12 203.43i;
U.S.C. 1715z-16), 203.49;
Section 247 (12 203.43h.
U.S.C. 1715z-12),
Section 203(h) (12
U.S.C. 1709(h)),
Housing and Economic
Recovery Act of 2008
(Pub. L. 110-289),
Section 248 of the
National Housing Act
(12 U.S.C. 1715z-13).
FHA Multifamily Mortgage Sections 213, 220, 24 CFR parts
Insurance Programs. 221, 231, and 232 of 200, subpart A,
the National Housing 213; 220; 221,
Act (12 U.S.C.1715e, subparts C and
12 U.S.C.1715v, 12 D; 231; and
U.S.C.1715k, 12 232.
U.S.C.17151, 12
U.S.C.1715w).
HOME Investment Partnerships Cranston-Gonzalez Final HOME Rule
(HOME). sections 215(b)(4) at
and 215(a)(1)(F) (42 www.onecpd.info/
U.S.C. 12745(b)(4) home/home-final-
and 42 U.S.C. rule/ reserves
12745(a)(1)(F)) the energy
require HOME units to standard for a
meet minimum energy separate
efficiency standards rulemaking at
promulgated by the 24 CFR 92.251.
Secretary in
accordance with
Cranston Gonzalez
section 109 (42
U.S.C. 12745).
Housing Trust Fund [By Title I of the Housing 24 CFR
regulation]. and Economic Recovery 93.301(a)(2)(ii
Act of 2008, Section ) Property
1131 (Pub. L. 110- Standards,
289, 12 U.S.C. 4568.). requires
compliance with
Cranston
Gonzalez
section 109 (42
U.S.C. 12709).
------------------------------------------------------------------------
USDA Programs
------------------------------------------------------------------------
Section 502 Guaranteed Housing Section 502 of Housing 7 CFR part 3550.
Loans. Act (42 U.S.C. 1472).
------------------------------------------------------------------------
Section 502 Rural Housing Section 502 of Housing 7 CFR part 3550.
Direct Loans. Act (42 U.S.C. 1472).
Section 523 Mutual Self Help Section 523 of Housing 7 CFR part 1944
Technical Assistance Grants , Act (42 U.S.C. 1472). subpart-I.
homeowner participants.
------------------------------------------------------------------------
* Program no longer funded or no longer funds new construction.

Several exclusions are worth noting. These include the following
programs which, while classified as public or assisted housing, or may
be specified in the statute, are no longer funded, or do not fund new
construction:
(1) HOPE VI. While EISA references the ``rehabilitation and new
construction of public and assisted housing funded by HOPE VI
revitalization grants,'' funding for HOPE VI revitalization grants has
been discontinued, so the program is therefore not covered by this
Notice.
(2) Project-Based Rental Assistance (PBRA). HUD is no longer
authorized to provide funding for new construction of units assisted
under the Section 8 PBRA program, except under the Rental Assistance
Demonstration (RAD). Apart from RAD, current authorization and funding
that Congress provides for the PBRA program is for the limited purpose
of renewing expiring Section 8 rental-assistance contracts.
Accordingly, this Notice does not apply to the Section 8 PBRA program
except through RAD, as referenced in Table 1.
Other HUD programs that provide financing for new construction are
not covered because they do not constitute assisted housing as
specified in EISA and/or are authorized under statutes not specifically
referenced in EISA:
(1) Indian Housing. 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 example, the Section 184 guaranteed loan program is authorized
under Section 184 of the Housing and Community Development Act of 1992
(42 U.S.C. 1715z-13a).
(2) Community Development Block Grants. Housing financed with
Community Development Block Grant (CDBG) funds is excluded 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.

Current Above-Code Standards or Incentives

Some HUD and USDA competitive grant programs covered by EISA (as
well as other programs) already require grantees to comply with energy
efficiency standards or green building requirements with energy
performance requirements that exceed state or locally-adopted IECC and
ASHRAE 90.1 standards, while other programs provide incentives to do
so. A list of current programs that require or incentivize a green
building standard is shown in Table 2. This standard is typically
Energy Star Certified New Homes for single-family properties, Energy
Star for Multifamily New Construction, or a green building standard
recognized by HUD that includes a minimum energy

[[Page 31777]]

efficiency requirement. Nothing in this Notice will preclude HUD or
USDA competitive programs from maintaining these higher standards or
raising them further, or for HUD or USDA programs to provide incentives
for above-code energy requirements.
Table 2 includes a listing of current HUD and USDA programs with
requirements or incentives for funding recipients to build to standards
above the current 2009 IECC and/or ASHRAE 90.1 standards (see ``Already
Exceeds Current Energy Standard'' column). Contingent on the energy
efficiency or green building standard selected, and the minimum energy
efficiency requirements established for each standard, projects built
to these above-code standards may also exceed the proposed 2021 IECC
and ASHRAE 90.1-2019 standards discussed in this Notice (see ``Meets or
Exceeds Proposed Energy Standard'' column). HUD and USDA are requesting
comments in this Notice on the current energy efficiency requirements
included in the green building standards incentivized or required by
these programs. (See Section V. Implementation, Alternate Compliance
Pathways, and Section VI, Request for Public Comment, Question 8).
These green building or energy performance typically have multiple
certification levels with varying energy baselines and these baselines
change over time at varying points after publication of newer editions
of the energy codes. HUD and USDA will seek certifications from the
standard-setting bodies that each of these programs meet the
requirements of this Notice.

Table 2--Current Energy Standards and Incentives for HUD and USDA Programs
[New construction] \7\
----------------------------------------------------------------------------------------------------------------
Already meets
Current energy efficiency Exceeds current or exceeds
Program Type requirements and incentives energy proposed energy
standards standards
----------------------------------------------------------------------------------------------------------------
Programs Covered by EISA
----------------------------------------------------------------------------------------------------------------
HUD:
Choice Neighborhoods Competitive Required: Requirements of Exceeds 2009 May meet or
Implementation. Grant. Energy Star Single Family New IECC/ASHRAE exceed
Homes or Multifamily New 90.1-2007. proposed 2021
Construction. Plus IECC/ASHRAE
certification by recognized 90.1-2019
green rating such as Energy standard.
Star Indoor Air Plus,
Enterprise Green Communities,
National Green Building
Standard, LEED-H, LEED-NC, or
regional standards such as
Earthcraft or Built Green.
Use Energy Star products.
Choice Neighborhoods-- Competitive Required: Eligible for Stage 1 Exceeds 2009 May meet or
Planning. Grant. Conditional Approval LEED for IECC/ASHRAE exceed
Neighborhood Development 90.1-2007. proposed 2021
(LEED-ND) or equivalent. Plus IECC/ASHRAE
certification by recognized 90.1-2019
green rating program. standard.
Section 202 Supportive Competitive Required: 2021 IECC and ASHRAE Exceeds 2009 Meets and may
Housing for the Elderly. Grant. 90.1-2019. IECC/ASHRAE exceed
Incentive: Additional 90.1-2007. proposed 2021
competitive rating points for IECC/ASHRAE
developments that meet a 90.1-2019
green building or energy standard.
performance standard that
includes a Zero Energy Ready
or Net Zero Energy
requirement..
Section 811 for Persons Competitive Energy Star Certified New Exceeds 2009
with Disabilities. Grant. Construction. IECC/ASHRAE
90.1-2007.
Rental Assistance Conversion of 2009 IECC or ASHRAE 90.1-2007
Demonstration (RAD). Existing Units. or any successor code adopted
by HUD; applicants encouraged
to build to Energy Star
Certified New Construction.
Minimum WaterSense and Energy
Star appliances required and
the most cost-effective
measures identified in the
Physical Condition Assessment.
FHA Multifamily Mortgage Mortgage Incentive: Discounted Mortgage Incentives May meet or
Insurance. Insurance. Insurance Premium (MIP) for a exceed 2009 exceed
recognized Green Building IECC/ASHRAE proposed 2021
Standard. Energy Star Score 90.1-2007. IECC/ASHRAE
of at least 75 in EPA 90.1-2019
Portfolio Manager. standard.
FHA Single Family Mortgage 2009 IECC.....................
Mortgage Insurance. Insurance.
HOME Investment Formula Grant.. 2009 IECC/ASHRAE 90.1-2007....
Partnerships Program.
Housing Trust Fund....... Formula Grant.. 2009 IECC/ASHRAE 90.1-2007....
Public Housing Capital Formula Grant.. 2009 IECC/ASHRAE 90.1-2010 or
Fund. successor standards.
Energy Star appliances also
required unless not cost
effective..
USDA:
Section 502 Guaranteed Loan Guarantee. 2009 IECC at minimum. Stretch
Housing Loans. ratio of 2 percent on
mortgage qualifications for
complying with above-code
standards.

[[Page 31778]]

Section 502 Rural Housing Direct Loan.... 2009 IECC at minimum. Stretch
Direct Loans. ratio of 2 percent on
mortgage qualifications for
complying with above-code
standards.
Section 523 Mutual Self Grant Program.. 2009 IECC at minimum. State
Help. adopted versions of more
recent codes vary.
----------------------------------------------------------------------------------------------------------------
Programs Not Covered by EISA
----------------------------------------------------------------------------------------------------------------
HUD CDBG-DR, CDBG-MIT.... Grants to For new construction of Exceeds 2009 May meet or
states or substantially damaged IECC/ASHRAE exceed
localities. buildings, meet a minimum 90.1-2007 proposed 2021
energy standard and green requirements. IECC/ASHRAE
building standard recognized 90.1-2019
by HUD. standard.
USDA Multifamily Sec. 515 Direct Loans, Meet minimum state or local Incentives May meet or
New Construction, Sec Guaranteed energy codes. exceed 2009 exceed
514/516 Farmworker Loans and Incentive for Secs 514/515/ IECC/ASHRAE proposed 2021
Housing, Sec 538 Grants. 516: Energy Star Certified 90.1-2007. IECC/ASHRAE
Guaranteed Loans. New Homes, Enterprise Green 90.1-2019
Communities, NGBS, DOE Zero standard.
Energy Ready, LEED, Passive
House, Living Building
Challenge..
----------------------------------------------------------------------------------------------------------------

II. 2021 IECC Affordability Determination
---------------------------------------------------------------------------

\7\ Table 2 includes HUD and USDA programs supporting new
construction with energy code requirements. Does not include other
HUD or USDA programs that may have appliance or product standards or
requirements only.
---------------------------------------------------------------------------

A. Overview

The IECC is a model energy code developed by the International Code
Council (ICC) through a public hearing process involving national
experts for single-family and low-rise residential buildings as well as
commercial buildings.\8\ The code contains minimum energy efficiency
provisions for residential buildings, defined as single-family homes
and low-rise multifamily buildings (up to three stories). The code
offers both prescriptive and performance-based approaches. The
efficiency standards associated with the IECC set benchmarks for a
structure's walls, floors, ceilings, lighting, windows, doors, duct
leakage, and air leakage
---------------------------------------------------------------------------

\8\ The IECC covers both residential and commercial buildings.
States that adopt the IECC (or portions thereof) 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). Chapter 4 of the IECC Commercial
Code allows compliance with ASHRAE 90.1 as an optional compliance
path.
---------------------------------------------------------------------------

Revised editions of the IECC are typically published every three
years. Full editions of its predecessor, the Model Energy Code, were
first published in 1989, and new editions of the IECC were published
every three years beginning in 1998. The residential portion of the
IECC was heavily revised in 2004: the Climate Zones were completely
revised (reduced from 17 Zones to the current eight primary Zones) and
the building envelope requirements were restructured into a different
format.\9\ 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 more recent editions.
---------------------------------------------------------------------------

\9\ In the early 2000s, researchers at the U.S. Department of
Energy's Pacific Northwest National Laboratory prepared a simplified
map of U.S. climate zones. The map was based on analysis of the
4,775 U.S. weather sites identified by the National Oceanic and
Atmospheric Administration, as well as widely accepted
classifications of world climates that have been applied in a
variety of different disciplines. This PNNL-developed map divided
the United States into eight temperature-oriented climate zones. See
https://www1.eere.energy.gov/buildings/publications/pdfs/building_america/4_3a_ba_innov_buildingscienceclimatemaps_011713.pdf.
---------------------------------------------------------------------------

For single family housing, the IECC is one component of the larger
International Residential Code (IRC). Each version of the IRC,
beginning with the 2015 edition, has the corresponding version of the
IECC embedded directly into that code (Chapter 11). A majority of
states have adopted some version of the IRC. For other building types,
including multifamily housing, the equivalent building code is the
International Building Code (IBC), which also refers to other codes
such as the International Plumbing Code, the International Electrical
Code or, in this case, the IECC. Those codes also then embody or refer
to other codes in the industry, such as ASHRAE 90.1. In this hub and
spoke model, there is even more differentiation between states
regarding which versions of which codes are adopted as a suite of codes
at any given point in time. Even with the adoption of the IRC, the all-
in-one code that is focused on single-family housing, states and local
areas sometimes make adjustments to the code, removing and in some
cases adding requirements for some building elements.
Current HUD-USDA Standard and Subsequent Revisions
In May 2015, HUD and USDA published a Final Determination that
established the 2009 IECC as the minimum standard for both new single-
family housing built with HUD and USDA assistance and new HUD-assisted
or FHA-insured low-rise multifamily housing.\10\ HUD and USDA estimated
that 3,200 multifamily units and 15,000 single family units per year
could potentially be impacted in the 16 states that had not yet adopted
either of these codes. The average incremental cost of

[[Page 31779]]

the higher standard was estimated to be $1,019 per unit, with
---------------------------------------------------------------------------

\10\ Federal Register Notice 80 FR 25901, May 6, 2015.
---------------------------------------------------------------------------

average annual savings of $215, for a 5-year payback and a 1.3-year
net positive cash flow. HUD and USDA determined that adoption of the
2009 IECC would not negatively impact the affordability and
availability of the covered housing. The 2009 IECC represented a
significant increase in energy efficiency of 7.9 percent and a 10.8
percent cost savings over the previous (2006) code.
Since HUD and USDA's adoption of the 2009 IECC, there have been
four revisions to the IECC.\11\ No action was taken by the prior
Administration to comply with the statutory requirements to consider or
adopt these updated codes.
---------------------------------------------------------------------------

\11\ IECC 2012, 2015, 2018, and 2021.
---------------------------------------------------------------------------

The figure below shows the average national energy cost savings
estimated with each version of the IECC. The greatest incremental
savings come from the 2012 IECC (23.9%), followed by the 2009 IECC
(10.8% over the 2006 IECC), followed by the 2021 IECC (8.7%). The
Department of Energy's Pacific Northwest National Laboratory (PNNL)
provided HUD with cost and benefit estimates for adopting the 2021 IECC
from a baseline of the 2009 IECC and has made publicly available
estimates for adopting the 2021 IECC from a 2018 IECC baseline. For
states that have adopted standards equivalent to the 2012 or 2015 IECC,
HUD and USDA use the estimates for the adoption from the 2018 to the
2021 IECC, as the 2012 and 2015 IECC both are closer to the 2018 IECC
than the 2009 IECC.
---------------------------------------------------------------------------

\12\ Sources: DOE, 2012: https://www.pnnl.gov/main/publications/external/technical_reports/PNNL-22068.pdf; 2015: https://www.energycodes.gov/sites/default/files/2021-07/2015_IECC_FinalDeterminationAnalysis.pdf; 2018: https://www.energycodes.gov/sites/default/files/2021-07/EERE-2018-BT-DET-0014-0008.pdf, 2021: https://www.regulations.gov/document/EERE-2021-BT-DET-0010-0006.

Incremental Energy Savings Associated With Each IECC Version
[2006 to 2021] \12\
------------------------------------------------------------------------
National
Comparison weighted
Year of code year energy cost
savings (%)
------------------------------------------------------------------------
2009.......................................... 2006 10.8
2012.......................................... 2009 23.9
2015.......................................... 2012 0.7
2018.......................................... 2015 2.0
2021.......................................... 2018 8.7
------------------------------------------------------------------------

Each successor edition since the 2009 IECC has increased energy
efficiency and offered cost savings to consumers in varying degrees:
(1) The 2012 IECC was published in May 2011, representing a
significant increase of 23.9 percent in energy cost savings over the
2009 IECC.^{13 14} Key changes in the 2012 edition included:
increased stringency for opaque thermal envelope components;
clarification that sun rooms enclosing conditioned spaces must meet the
thermal envelope provisions; requirements for a blower door test to
determine the air leakage rate and limits for the number of prescribed
air changes per hour (ACH) per climate zone; insulation to at least R-3
for hot water piping; and an increase in the minimum number of high-
efficacy electrical lighting sources from 50 percent to 75 percent of
permanent fixtures or lamps in permanent fixtures.^{15 16} This
translated into an estimated $500 or 32.1 percent annual cost savings
per unit over the 2006 IECC.\17\
---------------------------------------------------------------------------

\13\ U.S. Department of Energy, ``Updating State Residential
Building Energy Efficiency Codes: Notice of Final Determination.''
Federal Register Notice 77FR 29322, May 17, 2012. http://www.gpo.gov/fdsys/pkg/FR-2012-05-17/pdf/2012-12000.pdf.
\14\ Pacific Northwest National Laboratory, Cost-Effectiveness
Analysis of the 2009 and 2012 IECC Residential Provisions--Technical
Support Document, U.S. Department of Energy, PNNL-22068, April 2013.
https://www.pnnl.gov/main/publications/external/technical_reports/PNNL-22068.pdf.
\15\ Pacific Northwest National Laboratory, Guide to the Changes
between the 2009 and 2012 International Energy Conservation Code,
U.S. Department of Energy, PNNL-21435, May 2012. http://www.pnnl.gov/main/publications/external/technical_reports/PNNL-21435.pdf.
\16\ Pacific Northwest National Laboratory, Energy savings for a
Typical New Residential Dwelling Unit Based on the 2009 and 2012
IECC as Compared to the 2006 IECC, Letter Report, PNNL-88603, April
2013, Table 1.
\17\ Pacific Northwest National Laboratory, Cost-Effectiveness
Analysis of the 2009 and 2012 IECC Residential Provisions--Technical
Support Document, U.S. Department of Energy, PNNL-22068, Tables 8.1
and 8.4, April 2013.
---------------------------------------------------------------------------

(2) The 2015 IECC was substantially the same as the 2012 edition,
with a modest increase in energy efficiency of just 0.87 percent over
the 2012 IECC.\18\ Revisions in this edition included: revised
provisions for existing buildings; removal of exemption for historic
buildings; revised requirements for building envelope and duct leakage
testing and hot water distribution efficiency. The most notable
innovation was the introduction of a new Energy Rating Index (ERI)
performance path that utilizes the Home Energy Rating System (HERS)
Index.
---------------------------------------------------------------------------

\18\ U.S. Department of Energy, Determination Regarding Energy
Efficiency Improvements in the 2015 International Energy
Conservation Code, EERE-2014-BT-DET-0030-0007, June 2015. 80 FR
33250, June 11, 2015. http://www.regulations.gov/#!documentDetail;D=EERE-2014-BT-DET-0030-0007.
---------------------------------------------------------------------------

(3) The 2018 IECC also saw limited changes to the prior edition. In
its efficiency determination for the 2018 IECC, DOE found site energy
savings over the prior code of just 1.68 percent; 1.91 percent source
energy savings; and 1.97 percent annual energy cost savings.\19\ Of the
47 changes in this edition, most were expected to have a neutral impact
on energy efficiency, with two changes making up most of the energy
savings associated with the updated code: (1) lower fenestration U-
factors in Climate Zones 3 through 8, and (2) an increase in high-
efficacy lighting from 75 percent to 90 percent of permanently
installed fixtures in all climate zones.
---------------------------------------------------------------------------

\19\ DOE, ``Final Determination Regarding energy efficiency
Improvements in the 2018 International Energy Conservation Code,''
Federal Register Notice, 84 FR 67435 (December 10, 2019). https://www.federalregister.gov/documents/2019/12/10/2019-26550/final-determination-regarding-energy-efficiency-improvements-in-the-2018-international-energy; also PNNL for DOE, Energy Savings Analysis:
2018 IECC for Residential Buildings, November 2019, https://www.energycodes.gov/sites/default/files/2021-07/EERE-2018-BT-DET-0014-0008.pdf.
---------------------------------------------------------------------------

2021 IECC--Overview
As required by statute, this Notice addresses the most recent
edition of the IECC, the 2021 IECC.\20\ In its efficiency determination
for this standard, DOE determined that this edition would result in
significant savings relative to the 2018 IECC: 9.4 percent savings in
annual site energy use intensity (EUI); 8.8 percent in annual source
EUI; 8.7 percent in annual energy cost savings; and 8.7 percent
reduction in carbon emissions.\21\ The 2021 standard will yield a
national weighted energy cost savings of 34.4 percent over the current
USDA-HUD baseline 2009 standard.
---------------------------------------------------------------------------

\20\ International Code Council, 2021 International Energy
Conservation Code, January 29, 2021. https://codes.iccsafe.org/content/IECC2021P1.
\21\ 86 FR 40529 (July 28, 2021), Analysis Regarding Energy
Efficiency Improvements in the 2021 International Energy
Conservation Code (IECC) https://www.federalregister.gov/documents/2021/07/28/2021-15969/analysis-regarding-energy-efficiency-improvements-in-the-2021-international-energy-conservation-code;
also PNNL, Preliminary Energy Savings Analysis: 2021 IECC for
Residential Buildings, April 2021, https://www.energycodes.gov/sites/default/files/2021-07/2021_IECC_PreliminaryDetermination_TSD.pdf.
---------------------------------------------------------------------------

In their qualitative assessment of the code, PNNL identified a
total of 114 approved code changes or addenda in this edition of the
code over the prior edition, of which 35 will have a direct impact on
energy use in residential buildings. Of these, 29 are expected to

[[Page 31780]]

reduce energy use, while six are expected to increase energy use.\22\
---------------------------------------------------------------------------

\22\ 79 additional changes were determined to be administrative
or impact non-energy portions of the code.
---------------------------------------------------------------------------

The following are the primary technical changes in the 2021 IECC
over the previous edition:
Building Envelope. Building envelope revisions include
increased insulation requirements; more efficient U factors and Solar
Heat Gain Coefficients (SHGCs) for windows and fenestration; maximum
air leakage rate of 5 Air Changes per Hour (ACH) at 50 pascals for all
compliance paths, with 3 ACH for Climate Zones 3-8 following the
prescriptive path. Testing alternatives are provided for smaller homes
and attached single-family and multifamily buildings.\23\
---------------------------------------------------------------------------

\23\ AMCA International, International Energy Conservation Code:
2021 Changes, Getting Involved in the 2024 Process, May 5, 2021,
https://www.amca.org/assets/resources/public/assets/uploads/FINAL-_ICC_Webinar-_presentation_May_5__2021.pdf.
---------------------------------------------------------------------------

Heating, Ventilation and Air Condition (HVAC). Mechanical
ventilation in Climate Zones 7 and 8 provided by a Heat Recovery
Ventilator (HRV) or Energy Recovery Ventilator (ERV) is required for
the prescriptive compliance path.\24\
---------------------------------------------------------------------------

\24\ Northeast Energy Efficiency Partnerships, Key Changes in
the 2021 IECC for the Northeast and Mid-Atlantic, https://neep.org/sites/default/files/media-files/2021_iecc_one-pager_.pdf.
---------------------------------------------------------------------------

Additional Efficiency Options. Additional efficiency
options in the 2021 IECC include an enhanced envelope performance
option--a 5 percent improvement in proposed home UA value (R408.2.1); a
more efficient HVAC equipment option (highlighted above); a reduced
energy use in service water heating option 0.82 EF for fossil fuel, 2.0
EF for electric fuels or 0.4 solar fraction water heater (R405.2.3); a
more efficient duct thermal distribution system option--100 percent of
ducts in conditioned space or ductless systems (R405.2.4); and an
improved air sealing and efficient ventilation option--air leakage at
3.0 ACH50 with ERV or HRV with 75 percent Sensible Recovery Efficiency
(SRE) (R405.2.5).
Lighting Changes. The efficacy value of high-efficacy
lamps increases to 70 lumens/watt (100 percent of lighting), a 10
percent increase over the 2018 standard.
Renewables. The 2021 IECC revises the definition for ``on-
site renewables'' for consistency with other national standards; adds a
definition for biogas and biomass; requires that Renewable Energy
Certificates (RECS) be retired with the homeowner when using the ERI
compliance approach.\25\
---------------------------------------------------------------------------

\25\ New Buildings Institute, 2021 IECC National Model Energy
Code (Base Codes). https://newbuildings.org/code_policy/2021-iecc-base-codes/.
---------------------------------------------------------------------------

Zero Energy Appendix. In addition to these technical
changes, the 2021 IECC for the first time includes a Zero Energy
Appendix that requires compliance with an ERI score without considering
renewables and then achieving a score of ``0'' with renewables. This
provides jurisdictions with an opportunity to adopt a base or stretch
code that achieves zero energy in homes and low-rise multifamily
buildings.\26\
---------------------------------------------------------------------------

\26\ Ibid.
---------------------------------------------------------------------------

Building Electrification. While the 2021 IECC did not
include building electrification provisions in the final version of the
code, provisions are available for adoption by states as amendments to
the 2021 IECC: RE147-19, Electrification-Ready; RE126-19. Energy
Efficient Water Heating, RE107-19, Eliminate Continuous Burning Pilot
Light.
Compliance Pathways. There are three compliance pathways
in the 2021 IECC: Prescriptive, Performance, and Energy Rating Index or
ERI, which reverted to IECC 2015 levels. The prescriptive paths can
follow the R-value minimum table, the U-Factor equivalent table, or the
UA equivalent alternative. All compliance pathways now have required
Additional Efficiency Options (AEOs) to achieve five percent greater
energy efficiency than base levels. The 2021 IECC lowers the
performance path ERI scores compared to the 2018 IECC.
Current State Adoption of the 2021 IECC
There is typically a lag time between the publication of a new
edition of the IECC and state adoption of the code: Table 3 and Figure
1 show that, as of September 2022, while all but eight states have
adopted a version of the IECC, only three states (California,
Washington, and Vermont) have adopted the 2021 IECC or its
equivalent.\27\
---------------------------------------------------------------------------

\27\ California's Title 24 2019 Building Energy Efficiency
standard, Washington's 2018 State Energy Code, and Vermont's
amendments to the 2018 IECC were determined to meet or exceed the
2021 IECC.
---------------------------------------------------------------------------

Overall, thirty-nine states plus the District of Columbia have
adopted a version of the code that is equivalent to or higher than the
current HUD-USDA standard of the 2009 IECC. Of these, only 11 states
plus the District of Columbia have adopted a code above the 2009 IECC
(the 2018 IECC, the 2015 IECC or equivalent to the 2021 IECC),\28\
while 26 states have set their codes at the equivalent of the 2009
IECC. The remaining 11states have either adopted standards that pre-
date the 2009 IECC (3 states) or have no state-wide codes (8 states).
---------------------------------------------------------------------------

\28\ PNNL, State Level Residential Codes Energy Use Index, FY
2023Q2, Excel File at https://www.energycodes.gov/state-portal. Note
that as of March 2023, two additional states have adopted the 2021
IECC.
---------------------------------------------------------------------------

Based on historical experience, and the fact that an additional six
states are currently considering the adoption of the 2021 IECC for
adoption in 2023, it is anticipated that over time additional states
are likely to adopt the 2021 IECC, either as published by the ICC or
with amendments.

Table 3--Current Adoption of the IECC
[As of September 2022]
------------------------------------------------------------------------

------------------------------------------------------------------------
Above Current HUD-USDA Standard (14 states + DC)
------------------------------------------------------------------------
2021 IECC or Equivalent (3)
------------------------------------------------------------------------
California Vermont.
Washington.............................
------------------------------------------------------------------------
2018 IECC or Equivalent (8 states + DC)
------------------------------------------------------------------------
Oregon Nebraska.
Maryland Delaware.
Massachusetts New York.
District of Columbia New Hampshire.

[[Page 31781]]

Pennsylvania...........................
------------------------------------------------------------------------
2015 IECC (3)
------------------------------------------------------------------------
Maine Hawaii.*
Texas..................................
------------------------------------------------------------------------
Current HUD-USDA Standard 2009 IECC or Equivalent (25)
------------------------------------------------------------------------
Alabama Oklahoma.
Connecticut Nevada.
Florida New Jersey.
Georgia New Mexico.
Idaho North Carolina.
Illinois Ohio.
Indiana Rhode Island.
Iowa South Carolina.
Kentucky Virginia.
Louisiana West Virginia.
Michigan Wisconsin.
Minnesota Utah.
Montana................................
------------------------------------------------------------------------
Older than 2009 IECC Or No Statewide Codes (11)
------------------------------------------------------------------------
Less Than 2009 IECC (3)
------------------------------------------------------------------------
Arkansas Tennessee.
Arizona *..............................
------------------------------------------------------------------------
Home Rule/No statewide code (8)
------------------------------------------------------------------------
Alaska Colorado.
Missouri Kansas.
Wyoming North Dakota.
South Dakota Mississippi.
------------------------------------------------------------------------
U.S. Territories
------------------------------------------------------------------------
American Samoa--No Code N. Mariana Islands (2003 IECC
equivalent).
Guam--2009 IECC Puerto Rico (2011 PR Building
Standard).
U.S. Virgin Islands--2009 IECC
------------------------------------------------------------------------
* A review of the codes in place across the state indicates that 86
percent (Hawaii) and 82 percent (Arizona) of the population is covered
by codes at this level.

This tabulation is drawn from DOE's tracking of state adoptions of
the IECC, available at DOE's state portal at https://www.energycodes.gov/state-portal. For the purpose of this Notice, HUD
and USDA rely on the status map maintained by DOE at this site. Figure
1 displays the state IECC adoption status shown in Table 3.

[[Page 31782]]

[GRAPHIC] [TIFF OMITTED] TN18MY23.002

Note that states often adopt amendments to the code as published by
the ICC. In some cases, these amendments will sufficiently alter the
IECC code as published, such that the energy performance of buildings
meeting the amended code provisions may be equivalent to that of a
prior code. The DOE code adoption map, and the adopted codes listed in
Table 3, reflect DOE/PNNL's analysis of state codes as amended and DOE/
PNNL's assessment of their equivalent code. Accordingly, 22 states have
adopted the 2012, 2015 or 2018 IECC with amendments and were determined
by PNNL to be equivalent to the 2009 IECC. These are therefore shown in
Table 3 and Figure 1 as at the 2009 IECC level.\29\ Ohio, for example,
adopted the 2018 IECC with amendments to basement and crawl space wall
R-values, air leakage rates and the allowance to utilize framing
cavities as return ducts.\30\ DOE/PNNL determined that the Ohio code as
adopted with amendments is equivalent to the 2009 IECC.\31\ New Mexico
adopted the New Mexico Energy Conservation Code, based on the 2018
IECC, with state-specific amendments which were determined by DOE/PNNL
to yield a performance standard equivalent to the 2009 IECC. On the
other hand, if the new code is less than one percent more efficient
than the prior code then DOE counts the newer code as equivalent to the
previous code--hence Texas is credited here with the 2018 standard
rather than the code they adopted (2015 IECC). California has adopted
its own standard, Title 24, which DOE has determined meets or exceeds
the 2021 IECC.
---------------------------------------------------------------------------

\29\ The 21 states deemed equivalent to the 2009 IECC are: CT,
FL, GA, IA, ID, IL, IN, MI, MN, MT, NC, NH, NJ, NM, NV, OH, PA, RI,
UT, VA. See Table for a listing of these code equivalents at https://www.energycodes.gov/state-portal and ``Residential State Level
Results'' Excel file at ``Available Data'' for detailed DOE/PNNL
analysis.
\30\ ACEEE, State Scorecard Ranking, https://database.aceee.org/state/ohio.
\31\ See ``Residential State Level Results'' at https://www.energycodes.gov/state-portal.
---------------------------------------------------------------------------

In certain cases, home rule cities or counties within a State may
adopt a different code from the rest of the State. For example, Austin,
Texas has adopted the 2021 IECC energy code, thereby exceeding the
minimum Texas statewide code of the 2015 IECC, equivalent to the 2018
IECC.\32\ In instances where a local entity has a more stringent
standard, the affordability impacts within a State will differ.\33\
---------------------------------------------------------------------------

\32\ City of Austin, Building Technical Codes. https://www.austintexas.gov/department/building-technical-codes.
\33\ HUD and USDA do not maintain a list of local communities
that may have adopted a different code than their state code. See
ACEEE, State and Local Policy Database for codes adopted by
individual cities. https://database.aceee.org/city/energy-code-stringency.
---------------------------------------------------------------------------

Estimated Impacts
Table 4 provides an estimate of the average number of units that
may be impacted annually by adoption of the 2021 IECC. HUD and USDA
used prior-year production for these programs in order to estimate
future annual production for these programs.\34\ Based on average
annual production for the past three years (2019-21), the agencies
estimate that a total of approximately 161,700 units of HUD- and USDA-
financed or insured housing may be impacted by the 2021 IECC, of which
151,300 are in the 47 states plus DC and U.S. territories that have not
yet adopted this standard.
---------------------------------------------------------------------------

\34\ Three-year averages were used (2019-21) for all programs,
except for public housing which used 2016-2020 averages since
limited data were available for the three-year period. Prior-year
production data provided by program offices using internal tracking
or reporting systems.

[[Page 31783]]

Table 4--Estimated Number of Units Impacted Annually by 2021 IECC
--------------------------------------------------------------------------------------------------------------------------------------------------------
USDA USDA FHA
FHA guaranteed direct single Public Housing Low-rise
State or territory single loan loan family-- housing HOME trust RAD multi- Total
family program program condos fund * family
--------------------------------------------------------------------------------------------------------------------------------------------------------
AK............................................... 42 27 19 3 0 35 19 25 0 170
AL............................................... 1,975 611 27 0 52 60 0 0 321 3,046
AR............................................... 1,024 453 52 0 0 145 12 16 164 1,866
AZ............................................... 4,595 391 90 54 0 97 0 38 432 5,697
CA (2021)........................................ 5,629 136 339 803 12 880 0 12 166 7,977
CO............................................... 2,701 151 42 65 13 199 1 10 682 3,864
CT............................................... 70 9 0 7 23 42 0 0 125 276
DC............................................... 17 0 0 8 12 0 0 0 137 174
DE............................................... 584 179 25 20 0 5 0 48 0 860.5
FL............................................... 19,178 1,119 189 24 146 366 87 21 1,477 22,607
GA............................................... 7,977 731 45 17 32 139 0 0 795 9,736
HI............................................... 77 61 39 40 3 33 0 0 0 253
IA............................................... 224 44 5 0 0 16 5 0 0 294
ID............................................... 812 134 13 0 0 56 29 73 11 1,128
IL............................................... 750 10 2 4 35 96 0 0 404 1,301
IN............................................... 1,890 205 137 1 0 121 0 0 49 2,403
KS............................................... 161 29 1 0 0 39 30 0 55 315
KY............................................... 798 277 66 13 0 71 0 2 188 1,415
LA............................................... 2,181 1,036 42 0 12 189 2 3 124 3,589
MA............................................... 174 7 7 11 0 20 0 35 491 745
MD............................................... 2,073 171 5 150 0 143 0 0 849 3,391
ME............................................... 116 48 16 0 0 40 30 24 15 288.5
MI............................................... 227 73 32 234 16 93 0 0 102 777
MN............................................... 542 99 16 1 3 120 0 5 607 1,393
MO............................................... 896 306 6 2 0 236 2 0 444 1,892
MS............................................... 1,048 304 43 2 1 0 0 0 0 1,398
MT............................................... 120 50 22 0 0 35 3 21 68 318.5
NC............................................... 4,977 1,211 165 2 7 724 25 0 1,321 8,432
ND............................................... 112 14 1 0 0 27 13 0 0 167
NE............................................... 177 9 1 0 0 17 0 0 297 501
NH............................................... 69 5 1 2 0 50 6 46 106 285
NJ............................................... 477 8 3 43 42 151 0 0 50 774
NM............................................... 751 21 26 0 0 11 15 12 115 950.5
NV............................................... 1,642 52 6 101 4 408 3 1 92 2,309
NY............................................... 233 5 6 3 15 262 0 27 1,445 1,996
OH............................................... 1,339 51 17 25 10 229 0 0 105 1,776
OK............................................... 1,464 288 41 0 0 34 13 10 81 1,931
OR............................................... 703 127 31 22 0 142 12 30 38 1,105
PA............................................... 697 78 13 4 43 90 0 0 85 1,010
RI............................................... 64 0 3 1 0 3 23 2 35 130.5
SC............................................... 4,169 992 87 3 0 44 0 0 236 5,531
SD............................................... 148 49 16 1 0 124 75 37 12 461.5
TN............................................... 3,355 644 55 9 2 39 30 103 751 4,988
TX............................................... 32,070 1,670 98 325 83 243 57 0 6,684 41,230
UT............................................... 1,679 417 127 103 0 7 0 17 476 2,826
VA............................................... 2,119 416 71 178 12 85 45 0 924 3,850
VT (2021)........................................ 10 4 2 0 0 59 24 0 9 108
WA (2021)........................................ 1,529 128 81 45 15 107 6 31 413 2,355
WI............................................... 168 24 7 0 5 85 0 0 173 462
WV............................................... 298 221 3 0 0 12 10 5 71 620
WY............................................... 55 32 3 0 0 16 1 0 18 125
Territories:
Guam......................................... ........ ........... 8 ........ ........ 18 ........ ........ ........ 26
Mariana Isl.................................. ........ ........... 9 ........ ........ 3 ........ ........ ........ 12
Puerto Rico.................................. 186 284 53 ........ 53 5 ........ ........ ........ 581
------------------------------------------------------------------------------------------------------
Total.................................... 114,372 13,411 2,214 2,326 651 6,271 578 645 21,243 161,711
47 states........................................ 107,204 13,143 1,792 1,478 624 5,225 548 603 20,655 151,272
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 4 includes both single-family and low-rise multifamily
housing. Of the total, in the 47 states and the U.S. territories that
have not yet adopted the 2021 IECC, approximately 107,200 units are
estimated to be FHA-insured new single-family homes; approximately
13,100 units are USDA Section 502 direct loans, and 1,800 units are
Section 502 guaranteed loans. The remaining single-family units are
financed through the HOME program (5,200 units), HUD's Public and
Indian Housing (PIH) programs (approximately 600 units through the
Choice Neighborhoods and Capital Fund Financing Programs, and 500 units
through the Housing Trust Fund program). Also included in Table 4 are
some 20,600 FHA-insured multifamily housing units financed with FHA
multifamily insurance that are

[[Page 31784]]

estimated to be low-rise multifamily and therefore covered under the
2021 IECC.\35\ When adjusted to exclude units in states that have
already adopted codes equivalent to the 2021 IECC (California, Vermont,
Washington), the total potential number of estimated units potentially
impacted decreases to around 151,000 units.
---------------------------------------------------------------------------

\35\ In order to derive the number of low-rise multifamily
units, the following assumptions were made: for FHA units, 50
percent of all multifamily units are assumed to be low-rise; for
public housing units, all units coded as ``multifamily/walkup
apartments'' are assumed to be low-rise; and for HOME units, all
units in multifamily developments with less than 100 units are
assumed to be low-rise, as well as 50 percent of all units in
developments with more than 100 units.
---------------------------------------------------------------------------

Note that the volume of estimated production is not evenly
distributed across the states but reflects historic demand for FHA and
USDA financing for one or more of the agencies' programs: two states,
Texas (24 percent) and Florida (14 percent), account for almost 40
percent of potentially impacted units based on prior-year production.
Along with Georgia (6 percent), North Carolina (6 percent) and
California (5 percent), five states account for more than half of all
potentially impacted units (56 percent). Note that historical
production is used as a guide to future production; actual state by
state unit counts in the future may vary from these estimates, based on
actual supply and demand.

B. 2021 IECC Affordability Analysis

In this Notice, HUD and USDA address two aspects of housing
affordability in assessing the impact that the revised code will have
on housing affordability. As described further below, the primary
affordability test is a life-cycle cost savings (LCC) test, i.e., the
extent to which the additional, or incremental, investments required to
comply with the revised code are cost effective inasmuch as 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.
Note that there may be other benefits associated with energy
efficient homes in addition to energy cost savings. A 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.\36\ In
addition, studies show that added energy efficiency may also yield
improved health outcomes.\37\
---------------------------------------------------------------------------

\36\ UNC Center for Community Capital, Institute for Market
Transformation, ``Home Energy Efficiency and Mortgage Risks,'' March
2013, Available at: http://www.imt.org/uploads/resources/files/IMT_UNC_HomeEEMortgageRisksfinal.pdf.
\37\ See, for example, DOE, Jonathan Wilson et al, Home Rx: The
Health Benefits of Home Performance, December 2016; HUD, BRIGHT
Study Finds Improved Health at Boston Housing Authority's Old Colony
Homes, https://www.huduser.gov/portal/casestudies/study-05042017.html.
---------------------------------------------------------------------------

Cost Benefit Analysis and Results
The core analysis used for this Determination is the PNNL study
prepared for DOE, National Cost Effectiveness of the Residential
Provisions of the 2021 IECC, published in June 2021. This analysis
estimates annual energy and cost savings as well as life-cycle cost
(LCC) savings that assume initial costs are mortgaged over 30
years.\38\ The study provides an assessment of both the initial costs
as well as the long-term estimated savings and cost-benefits associated
with complying with the 2009 IECC.
---------------------------------------------------------------------------

\38\ PNNL, Salcido et al, National Cost Effectiveness of the
Residential Provisions of the 2021 IECC, June 2021. https://www.energycodes.gov/sites/default/files/2021-07/2021IECC_CostEffectiveness_Final_Residential.pdf.
---------------------------------------------------------------------------

The LCC method used by DOE 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''
\39\ and reflects extensive prior public comment and input. In
September 2011, DOE solicited input on their proposed cost-benefit
methodology \40\ and this input was incorporated into the final
methodology posted on DOE's website in April 2012 and further updated
in August 2015.^{41 42}
---------------------------------------------------------------------------

\39\ Department of Energy, National Energy and Cost Savings for
new Single- and Multifamily Homes: A Comparison of the 2006, 2009
and 2012 Editions of the IECC. April 2012. p. A-1 Available at:
https://www.energycodes.gov/sites/default/files/2020-06/NationalResidentialCostEffectiveness_2009_2012.pdf.
\40\ 76 FR 56413 (September 13, 2011).
\41\ Pacific Northwest National Laboratory for the Department of
Energy (Z. Taylor, R. Lucas, N. Fernandez) Methodology for
Evaluating Cost-Effectiveness of Residential Energy Code Changes.
April 2012. Available at: http://www.energy.sc.gov/files/view/Taylor%202012.pdf.
\42\ Pacific Northwest National Laboratory for the Department of
Energy (V. Mendon, R. Lucas, S. Goel), Cost-Effectiveness Analysis
of the 2009 and 2012 IECC Residential Provisions--Technical Support
Document. April 2013, Available at https://www.pnnl.gov/main/publications/external/technical_reports/PNNL-22068.pdf.
---------------------------------------------------------------------------

For this analysis, DOE calculates energy use for new homes using
EnergyPlus^TM energy modeling software, Version 9.4.\43\ Two
buildings are simulated: (1) a two-story single-family home, with 2,376
square feet of conditioned floor area, excluding the conditioned
basement (if any), and a window area equal to 15 percent of the
conditioned floor area; and (2) a low-rise apartment building (a three-
story multifamily prototype with six 1,200 square-foot dwelling units
per floor) with a window area of approximately 23 percent of the
exterior wall area. DOE combines the results into a composite average
dwelling unit based on Census building permit data for each State and
for eight Climate Zones. Single-family home construction is more common
than low-rise multifamily construction; the results are weighted
accordingly to reflect this for each Climate Zone as well as each
state.
---------------------------------------------------------------------------

\43\ Pacific Northwest National Laboratory for the Department of
Energy (Z. Taylor, V. Mendon, N. Fernandez), Methodology for
Evaluating Cost-Effectiveness of Residential Energy Code Changes.
August 2015, Available at https://www.energycodes.gov/sites/default/files/2021-07/residential_methodology_2015.pdf.
---------------------------------------------------------------------------

Four heating systems are considered for modeling the energy savings
in these building prototypes: natural gas furnaces, oil furnaces,
electric heat pumps, and electric resistance furnaces. The market share
of heating system types is obtained from the U.S. Department of Energy
Residential Energy Consumption Survey (2015). Domestic water heating
systems are assumed to use the same fuel as the space heating system.
Limitations of Cost Savings Models
HUD and USDA are aware of studies that discuss limitations
associated with cost-savings models such as those developed by PNNL for
DOE. For example, Allcott 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. The authors cite two problems in particular. First,
engineering costs typically incorporate upfront capital costs only and
omit opportunity costs or other unobserved factors. For example, one
study found that nearly half of the investments that engineering
assessments showed in energy audits for medium-size businesses that
would have short payback periods were not adopted due to unaccounted
physical costs, risks, or opportunity costs. Second, engineering

[[Page 31785]]

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.\44\ 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, is now the standard for all of DOE's energy code simulations and
models, and presents a reliable and validated methodology for
estimating energy code costs and benefits.
---------------------------------------------------------------------------

\44\ Hunt Allcott and Michael Greenstone, ``Is there an energy
efficiency gap?'' Journal of Economic Perspectives, Volume 26,
Number 1,Winter 2012, pp. 3-28.
---------------------------------------------------------------------------

Estimated Costs and Savings
For all 50 states and the District of Columbia, DOE estimates that
for a weighted average of both single-family and low-rise multifamily
housing, the 2021 IECC saves 9.38 percent of energy costs for heating,
cooling, water heating, and lighting over the 2018 IECC.\45\ For the
purposes of this Notice, DOE provided HUD and USDA with a special
tabulation that disaggregates this analysis into each building type
(single family and low-rise multifamily). The disaggregated data are
shown in Tables 5A (single family) and 5B (low-rise multifamily) for
the following data points: LCC savings, incremental cost, annual
mortgage increase, down-payment and other up-front costs, net first
year annual cash flow, years to positive cash flow and simple payback
for the 2021 IECC in relation to the current HUD-USDA baseline of the
2009 IECC. Tables 5A and 5B provide both national average costs and
benefits, as well as for each climate zone.
---------------------------------------------------------------------------

\45\ PNNL, Salcido et al., 2021
---------------------------------------------------------------------------

Figure 2 provides a map of the Climate Zones. There are eight
Climate Zones, further subdivided to represent moist, dry or marine
climates, that are listed here with representative cities: 1A Very hot
humid; 2A Hot Humid; 2B Hot Dry; 3A Warm Humid; 3B Warm Dry; 3C Warm
Marine; 4A Mixed Humid, 4B Mixed Dry; 4C Mixed Marine; 5A Cool Humid;
5B Cool Dry; 6A Cold Humid; 6B Cold Dry; 7 Very Cold; and 8 Subarctic/
Arctic. Zone 1 includes Hawaii, Guam, Puerto Rico and the Virgin
Islands. Almost all of Alaska is in Zone 7.
[GRAPHIC] [TIFF OMITTED] TN18MY23.003

Tables 5A and 5B show the economics of adopting the 2021 IECC
nationally and in each Climate Zone, relative to the 2009 IECC
baseline. Table 5C shows costs and savings against the 2018 IECC
baseline. Data points provided include, incremental or first costs,
annual energy savings, increased debt service on a thirty-year
mortgage, estimated down payment and closing costs, net annual cash
flow in the first year, and simple payback on the initial
investment.\46\
---------------------------------------------------------------------------

\46\ The 2009 standard is used as the primary baseline for this
analysis since, as shown in Table 3, 36 states are still at the 2009
baseline, which is also the most recent baseline established by HUD
and USDA, while only eight states have adopted the 2018 standard.
(Note that Table 6 below shows 2018 baseline data for individual
states, per data provided by DOE/PNNL).
---------------------------------------------------------------------------

Incremental or Added Costs
Tables 5A shows the average per-unit incremental cost of adopting
the 2021 IECC over the current HUD-USDA 2009 IECC baseline for single
family homes, both nationally and for each Climate Zone: a national
average of an estimated $5,554 per unit for single family housing,\47\
ranging from a low of $2,813 in Climate Zone 1, to a high of almost
$6,800 in Climate Zones 7 and 8. Cost data sources used to derive these
costs include: Building Component Cost Community (BC3) data repository;
construction cost data collected by Faithful+Gould under contract with
PNNL; RS Means Residential Cost Data; National Residential Efficiency
Measures Database; and price data from

[[Page 31786]]

nationally recognized home supply stores.\48\
---------------------------------------------------------------------------

\47\ Source: Data provided by DOE to HUD and USDA showing
disaggregated LCC Savings, Incremental Cost, and Annual Energy
Savings for single-family and low-rise multifamily homes.
\48\ See for example, PNNL, Alaska Cost Effectiveness Analysis,
https://www.energycodes.gov/sites/default/files/2021-06/AlaskaResidentialCostEffectiveness_2018.pdf.

Table 5A--National Costs and Benefits--2021 IECC vs. 2009 IECC (Single Family)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual Annual Down payment Years to
LCC Incremental energy mortgage and other up- Net annual positive Simple
savings cost ($) savings increase front costs cashflow for cashflow payback
($) ($) ($) ($) year one ($) (years) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
National.................................. 14,536.42 5,554.63 751.78 247.30 715.44 422.76 2 7.6
Climate Zone 1............................ 9,080.84 2,813.49 474.75 125.26 362.38 308.10 2 6.1
Climate Zone 2............................ 7,536.81 4,176.67 474.92 185.95 537.96 227.52 3 9.1
Climate Zone 3............................ 13,753.10 6,175.22 750.85 274.93 795.37 385.08 3 8.5
Climate Zone 4............................ 19,730.66 6,617.71 956.49 294.63 852.36 564.50 2 7.1
Climate Zone 5............................ 17,368.88 5,954.78 851.84 265.12 766.98 499.12 2 7.2
Climate Zone 6............................ 27,560.65 5,290.90 1,179.24 235.56 681.47 865.84 1 4.6
Climate Zone 7............................ 35,673.62 6,794.41 1,544.15 302.50 875.12 1,141.69 1 4.5
Climate Zone 8............................ 46,836.58 6,796.21 1,926.36 302.58 875.35 1,523.79 1 3.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

Annual Cost Savings
Table 5A summarizes the first-year annual energy cost savings per
single family dwelling unit for the 2021 IECC compared to the 2009
IECC, aggregated over 16 single family residential prototype buildings
modeled by DOE/PNNL.\49\ Modeled energy savings are converted to cost
savings using the most recent residential fuel prices from DOE's Energy
Information Administration (EIA).\50\ Cost savings stated are time zero
dollars not adjusted for inflation or fuel price escalation. The per-
unit annual energy cost savings for single-family homes is estimated to
be $752 per unit, ranging from $474/unit in Climate Zones 1 and 2, to a
high of $1,926 in Climate Zone 8.
---------------------------------------------------------------------------

\49\ For residential buildings, PNNL uses two base prototypes to
simulate (1) a single-family detached house and (2) a multifamily
low-rise apartment building. These prototypes are modified to
accommodate four different heating system types and four foundation
types typically found in residential new construction. The result is
an expended set of 32 models (16 for each building type) which is
then simulated across 18 climate locations for each edition of the
IECC. This results in a set of 3,552 energy models in EnergyPlus
Version 9.5).
\50\ U.S. Energy Information Administration, Washington, DC
Natural Gas Prices, https://www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PRS_DMcf_m.htm. Electric Power Monthly, https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_06_b.
Petroleum and Other Liquids. https://www.eia.gov/dnav/pet/PET_PRI_WFR_A_EPD2F_PRS_DPGAL_W.htm.
---------------------------------------------------------------------------

Simple Payback
Simple payback is a commonly used measure of cost effectiveness,
defined as the number of years required for the sum of the annual
returns on an investment to equal the original investment. The simple
payback for adoption of the 2021 IECC code is an estimated 7.6 years
for single-family homes, ranging from 3.6 years in Climate Zone 8 to
9.1 years in Climate Zone 2.
Total Life Cycle Cost Savings
LCC analysis computes overall cost savings per dwelling unit
resulting from implementing efficiency improvements. LCC savings are
based on the net change in overall cash flows (energy savings minus
additional costs) resulting from implementing the new code. LCC savings
are a sum over an analysis period of 30 years: future cash flows vary
from year to year and are discounted to present values using a discount
rate that accounts for the changing value of money over time. LCC is
the primary metric used by DOE to determine the cost effectiveness of
the code or specific code changes. The economic analysis assumes that
initial costs are mortgaged, that homeowners take advantage of the
mortgage interest deduction, that short-lived efficiency measures are
replaced at the end of the useful life of the equipment, and that all
efficiency measures with useful life remaining at the end of the 30-
year period of analysis retain a residual value at that point.\51\
---------------------------------------------------------------------------

\51\ PNNL, Salcido et al., 2021.
---------------------------------------------------------------------------

Life cycle cost savings shown in Table 5A averages $14,536 per
housing unit for adoption of the latest 2021 IECC. LCC savings vary
considerably by climate zone, from as low as $7,536 in Climate Zone 2,
to a high of $46,836 in Climate Zone 8.
Consumer Cash Flows
Converting first costs and annual savings to Consumer Cash Flows is
an important component of the affordability analysis. Consumer Cash
Flow results are derived from the year-by-year calculations that
underlie LCC savings and provide an assessment of how annual cost
outlays are compensated by annual energy savings and the time required
for cumulative energy savings to exceed cumulative costs, including
both increased mortgage payments and down payment and other up-front
costs.
The financial and economic parameters used by DOE/PNNL in
calculating LCC savings and annual cash flow are based on the latest
DOE cost-effectiveness methodology; these are shown in Figure 3 below.

Figure 3--Economic Parameters for Consumer Cash Flows
------------------------------------------------------------------------

------------------------------------------------------------------------
Mortgage interest rate (fixed rate)....... 5.0%.
Loan fees................................. 1% of mortgage amount.
Loan term................................. 30 years.
Down payment.............................. 12% of home value.
Nominal discount rate (equal to mortgage 3.0%.
rate).
Inflation rate............................ 1.4%.
Marginal Federal income tax............... 12%.
Marginal State income tax................. % varies by State.
Property tax.............................. % varies by State.
------------------------------------------------------------------------
Source: PNNL, Salcido et al., 2021.

Annual cash flow is defined as the net difference between annual
energy savings and annual cash outlays (mortgage payments, etc.),
including all tax effects but excluding up-front costs (mortgage down
payment, loan fees, etc.). Only first year net cash flow is reported:
subsequent years' cash flow will differ due to the effects of inflation
and fuel price escalation, changing income tax effects as the mortgage

[[Page 31787]]

interest payments decline, etc. Assuming a five percent, 30-year fixed
mortgage, and a 10 percent down payment, increased annual debt service
is shown in Table 5A to be an average of $247/unit, or $20.58/month,
with annual energy savings three times that amount: $751, or $62.50/
month. This translates into an annual positive cash flow in Year One of
$422 or $35.10/month. Years to Positive Cash Flow, i.e., the number of
years needed to recoup the cost of the initial down payment and first-
year debt service with annual savings, is just two years on average.
Low-Rise Multifamily Buildings
Table 5B shows costs and savings for low-rise multifamily housing
similar to those shown in Table 5A for single family homes. The costs
and savings shown are aggregated over 16 low-rise multifamily
residential prototype buildings modeled by DOE/PNNL.\52\ The
incremental costs for this housing type, as well as associated savings,
are generally lower than for single family homes, as a result of both
differences in unit size and building type. Incremental costs average
$2,306/unit nationally, approximately half of the $5,556 per unit cost
for single family housing only. LCC savings of $5,265 for low-rise
multifamily housing are also projected to be significantly lower than
for single-family housing only ($14,536/unit).
---------------------------------------------------------------------------

\52\ See Footnote 47 for methodology for prototype buildings.
---------------------------------------------------------------------------

First year increased debt service for low-rise multifamily housing
is estimated to be $102/unit, while savings are three times that
amount: $314/year, for a net annual cash flow of $178/year. While costs
and savings differ, Years to Positive Cash Flow are similar to that of
single-family homes (2 years), and the national Simple Payback average
of 7.5 years is also comparable. Simple paybacks range from a low of
5.1 years in Climate Zone 8 to a high of 8.1 years in Climate Zones 2
and 3. LCC savings vary considerably from $4,064 in Climate Zone 2 to a
high of $15,452 in Climate Zone 8. Higher incremental or added costs
typically translate into higher annual savings, with annual positive
cash flows ranging from $145 to $525.

Table 5B--National Cost and Benefits--2021 vs. 2009 IECC (Low-Rise Multifamily)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Down
LCC Annual Annual payment Net annual Years to Simple
savings Incremental energy mortgage and other cashflow for positive payback
($) cost ($) savings increase up-front year one ($) cashflow (years)
($) ($) costs ($) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
National.................................. 5,265.55 2,306.50 314.77 102.69 297.08 178.15 2 7.5
Climate Zone 1............................ 4,798.90 1,685.89 280.05 75.06 217.14 180.19 2 6.2
Climate Zone 2............................ 4,064.66 2,138.91 271.97 95.23 275.49 145.27 2 8.1
Climate Zone 3............................ 4,983.81 2,472.83 312.80 110.09 318.50 166.32 2 8.1
Climate Zone 4............................ 5,994.21 2,372.29 339.34 105.62 305.55 198.82 2 7.2
Climate Zone 5............................ 5,156.91 2,309.78 307.22 102.83 297.50 170.41 2 7.7
Climate Zone 6............................ 8,231.86 2,147.46 407.58 95.61 276.59 280.38 1 5.4
Climate Zone 7............................ 11,082.93 3,647.16 592.12 162.38 469.75 376.09 2 6.3
Climate Zone 8............................ 15,452.48 3,646.44 741.63 162.34 469.66 525.64 1 5.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 5C shows the energy savings and incremental costs of
construction for the average housing unit (average of single family and
multifamily). First costs average $2,372 per unit, well below the
average first cost of $5,550 against the 2009 baseline. As would be
expected, annual savings are similarly lower, and the resulting average
payback is higher than the 2009 IECC--at 10.5 years vs. 7.6 years
against the 2009 IECC. Simple paybacks vary considerably across Climate
Zones, from 4.7 years in Climate Zone 1 to 16.5 years in Climate Zone
5.
---------------------------------------------------------------------------

\53\ HUD does not have PNNL estimates of energy savings
disaggregated by single-family and multifamily for the 2021 IECC
relative to the 2018 standard. HUD computed a weighted average of
the incremental cost of construction. The weights used by PNNL in
their analysis are 66 percent for single-family units and 34 percent
for low-rise multifamily units.

Table 5C--Incremental Costs and Energy Savings of IECC 2018 to IECC 2021 \53\
----------------------------------------------------------------------------------------------------------------
First year
Upfront cost Upfront cost Upfront cost energy Simple
Area for single- for condo for average savings for payback for
family ($) ($) unit ($) average unit average unit
($) (years)
----------------------------------------------------------------------------------------------------------------
National Average................ 2,372 1,316 2,013 191 10.5
Climate Zone 1: Very Hot........ 936 933 935 200 4.7
Climate Zone 2: Hot............. 1,530 1,146 1,400 192 7.3
Climate Zone 3: Warm............ 1,859 1,192 1,632 200 8.2
Climate Zone 4: Mixed........... 3,687 1,533 2,956 205 14.4
Climate Zone 5: Cool............ 3,569 1,487 2,862 173 16.5
Climate Zone 6: Cold............ 1,477 1,102 1,350 123 11.0
Climate Zone 7: Very Cold....... 2,980 2,603 2,852 306 9.3
Climate Zone 8: Subarctic/Arctic 2,982 2,603 2,853 411 6.9
----------------------------------------------------------------------------------------------------------------
Notes: Single Family cost and condo cost and average energy savings from PNNL. Upfront cost derived by HUD and
simple payback calculated by HUD. HUD does not have disaggregated estimates for single family and multifamily
units for the update from 2018, only the average across single family and low-rise multifamily.

[[Page 31788]]

State-Level Results
Table 6 provides a state-by-state breakout of estimated costs and
savings, for single family homes only. This Table provides a more
granular breakout of estimated costs and savings than the national and
Climate Zone averages shown in Table 5A above, using the HUD-USDA 2009
IECC baseline for those states that have not yet adopted this standard
or its equivalent as well as a 2018 IECC baseline for the 12 states
plus the District of Columbia that have adopted the 2018 IECC or its
equivalent.^{54 55}
---------------------------------------------------------------------------

\54\ Cost benefit data are not available for three states
(California, Washington and Oregon). According to DOE, these codes
``deviate significantly from the model codes'' and as a result DOE
has historically not analyzed those states.
\55\ The 2018 data shown in Table 6 are aggregated single family
and low-rise multifamily data adjusted for the weighted averages
used by PNNL for the 2009 IECC.

Table 6--State by State Costs and Benefits (Single Family) 2021 IECC vs. 2009 or 2018 IECC
--------------------------------------------------------------------------------------------------------------------------------------------------------
Incremental Increase down Annual Annual energy LCC savings Payback
State Baseline code cost ($) payment ($) mortgage ($) savings ($) ($) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
AK.......................... No Code................... 8,854 1,140 394 2,225 53,213 4.1
AL.......................... 2009...................... 4,865 627 217 727 15,778 6.9
AR.......................... <2009..................... 5,358 690 239 775 16,713 7.1
AZ.......................... <2009..................... 4,163 536 185 499 9,125 8.6
CA.......................... 2021...................... .............. .............. .............. .............. .............. ..............
CO.......................... No Code................... 5,788 746 258 549 9,699 10.9
CT.......................... 2009...................... 6,616 852 295 1,028 21,114 6.6
DC.......................... 2018...................... 397 13 138 397 6,864 8.0
DE.......................... 2018...................... 424 16 146 298 4,636 11.4
FL.......................... 2009...................... 3,369 434 150 440 7,818 7.9
GA.......................... 2009...................... 5,228 673 233 756 15,657 7.1
HI.......................... 2015...................... 2,340 301 104 1,057 27,120 2.3
IA.......................... 2009...................... 5,694 733 253 998 22,037 5.9
ID.......................... 2009...................... 5,291 682 236 493 8,485 11.1
IL.......................... 2009...................... 6,487 836 289 679 11,067 9.8
IN.......................... 2009...................... 6,207 800 276 696 13,176 9.2
KS.......................... No Code................... 5,842 753 260 925 19,859 6.5
KY.......................... 2009...................... 6,373 821 284 959 20,899 6.8
LA.......................... 2009...................... 3,955 509 176 448 8,397 9.1
MA.......................... 2018...................... 6,680 860 297 1,142 25,281 6.0
MD.......................... 2018...................... 395 30 136 324 5,224 9.7
ME.......................... 2009...................... 4,933 635 220 1,155 27,551 4.4
MI.......................... 2009...................... 5,807 748 259 936 19,542 6.4
MN.......................... 2009...................... 5,826 750 259 1,141 26,059 5.3
MO.......................... No Code................... 6,701 863 298 827 16,518 8.4
MS.......................... No Code................... 4,865 627 217 669 13,865 7.5
MT.......................... 2009...................... 4,935 636 220 562 10,617 9.0
NC.......................... 2009...................... 5,188 668 231 749 15,680 7.1
ND.......................... No Code................... 5,123 660 228 976 21,463 5.4
NE.......................... 2018...................... 427 61 148 211 1,040 16.2
NH.......................... 2009...................... 5,542 714 247 995 21,242 5.7
NJ.......................... 2009...................... 7,473 963 333 989 18,531 7.8
NM.......................... 2009...................... 5,888 758 262 549 9,746 11.1
NV.......................... 2009...................... 6,685 861 298 608 9,778 11.3
NY.......................... 2018...................... 473 49 164 386 5,369 9.8
OH.......................... 2009...................... 5,973 769 266 699 12,845 8.8
OK.......................... 2009...................... 5,368 691 239 826 17,831 6.7
OR.......................... 2018...................... .............. .............. .............. .............. .............. ..............
PA.......................... 2018...................... 4,144 539 187 426 2,535 10.1
PR.......................... .......................... .............. .............. .............. .............. .............. ..............
RI.......................... 2009...................... 6,372 821 284 1,090 23,668 6.0
SC.......................... 2009...................... 4,885 629 217 732 15,816 6.9
SD.......................... No Code................... 4,492 579 200 971 22,501 4.8
TN.......................... <2009..................... 5,561 716 248 748 15,424 7.7
TX.......................... 2015...................... 195 32 68 216 3,311 7.2
UT.......................... 2009...................... 5,238 675 233 519 9,414 10.4
VA.......................... 2009...................... 5,897 759 263 904 19,799 6.7
VT.......................... 2021...................... .............. .............. .............. .............. .............. ..............
WA.......................... 2021...................... .............. .............. .............. .............. .............. ..............
WI.......................... 2006...................... 5,823 750 259 862 17,198 7.0
WV.......................... 2009...................... 6,423 827 286 943 20,790 7.0
WY.......................... None...................... 4,913 633 219 712 15,193 7.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

Incremental costs for adoption of the 2021 IECC in those states
currently at the 2009 IECC or its equivalent range from a low of $2,340
(Hawaii) to a high of $8,854 (Alaska), with most states typically in
the $5,000 range. Annual

[[Page 31789]]

energy savings exceed added debt service in all states.
Both incremental costs and savings for the 2021 IECC in the 11
states plus the District of Columbia that have adopted the 2018 IECC
are typically lower than for those at the 2009 IECC baseline.
Incremental first costs are less than $500 first cost/unit against the
2018 baseline in these states. New York, for example, shows an added
cost of $473/unit for adoption of the 2021 IECC relative to its current
2018 baseline, $386 in annual estimated savings, yielding LCC savings
of $5,369. Delaware shows an added cost of $424/unit, an annual savings
of $298, and a LCC savings of $4,636.
Total Costs and Benefits
Table 7 provides estimated up-front costs, annual energy cost
savings and life cycle cost savings for the 2021 IECC for all 50 states
and the District of Columbia, weighted by the estimated share of
single-family and low-rise multifamily units potentially impacted by
the adoption of the 2021 IECC. As previously shown in Table 4, an
estimated 140,000 single-family and low-rise multifamily units would be
impacted annually by this code if adopted today. By multiplying the
incremental cost/unit per state by the number of units estimated likely
to be impacted, the total cost of implementing the 2021 IECC is
preliminarily estimated at $420.5 million, yielding an estimated annual
savings of $64 million and a life-cycle cost savings of $1.14 billion.

Table 7--Aggregate Estimated Cost and Savings for 2021 IECC (Single Family and Low-Rise Multifamily)
----------------------------------------------------------------------------------------------------------------
Total Total energy
incremental cost savings Life-cycle Simple
State Baseline code cost per state per state ($ cost (LCC) payback
(S) per year) savings ($) (years)
----------------------------------------------------------------------------------------------------------------
AK..................... NC................... 1,127,393 283,309 6,775,768 4.0
AL..................... 2009................. 18,057,816 2,704,469 55,917,230 6.7
AR..................... <2009................ 8,288,783 1,202,143 23,974,946 6.9
AZ..................... <2009................ 19,883,153 2,386,661 39,378,344 8.3
CA..................... 2021................. 0 0 0 0.0
CO..................... NC................... 16,940,650 1,608,095 24,607,251 10.5
CT..................... 2009................. 979,129 149,471 3,309,762 6.6
DC..................... 2018................. 95,717 96,264 845,064 1.0
DE..................... 2018................. 727,164 509,989 7,590,775 1.4
FL..................... 2009................. 59,952,314 7,876,622 125,801,672 7.6
GA..................... 2009................. 41,644,334 6,039,069 109,876,655 6.9
HI..................... 2015................. 492,777 217,851 4,856,670 2.3
IA..................... 2009................. 2,201,675 383,939 7,431,325 5.7
ID..................... 2009................. 4,962,175 461,960 6,750,699 10.7
IL..................... 2009................. 7,824,969 819,313 10,407,259 9.6
IN..................... 2009................. 11,586,682 1,299,580 21,741,652 8.9
KS..................... NC................... 3,009,893 476,735 7,966,904 6.3
KY..................... 2009................. 11,142,041 1,678,812 28,628,785 6.6
LA..................... 2009................. 9,255,670 1,054,429 20,336,338 8.8
MA..................... 2018................. 2,678,880 450,003 8,594,306 6.0
MD..................... 2018................. 1,077,820 888,574 13,922,015 1.2
ME..................... 2009................. 1,060,695 247,256 5,297,721 4.3
MI..................... 2009................. 3,963,075 631,850 14,160,179 6.3
MN..................... 2009................. 5,459,528 1,018,941 27,561,549 5.4
MO..................... NC................... 8,703,440 1,078,725 19,861,036 8.1
MS..................... NC................... 6,258,788 860,339 16,896,275 7.3
MT..................... 2009................. 1,195,888 136,034 2,232,087 8.8
NC..................... 2009................. 31,297,407 4,545,258 88,763,865 6.9
ND..................... NC................... 1,052,232 200,451 3,162,698 5.2
NE..................... 2018................. 128,294 62,463 356,167 2.1
NH..................... 2009................. 1,035,284 183,401 4,007,029 5.6
NJ..................... 2009................. 4,441,704 588,565 7,189,226 7.5
NM..................... 2009................. 5,754,766 538,116 9,352,990 10.7
NV..................... 2009................. 14,142,779 1,286,230 17,406,347 11.0
NY..................... 2018................. 200,168 162,163 2,611,431 1.2
OH..................... 2009................. 8,873,994 1,037,565 16,123,974 8.6
OK..................... 2009................. 8,877,981 1,365,072 28,580,458 6.5
OR..................... 2018................. 0 0 0 0.0
PA..................... 2009................. 6,180,500 819,910 14,047,324 7.5
RI..................... 2009................. 518,212 87,987 1,876,922 5.9
SC..................... 2009................. 23,184,247 3,483,230 71,411,236 6.7
SD..................... NC................... 1,207,381 259,053 4,908,339 4.7
TN..................... <2009................ 22,760,783 3,072,624 58,511,424 7.4
TX..................... 2018................. 6,304,697 6,980,223 96,334,751 0.9
UT..................... 2009................. 12,810,311 1,271,438 21,270,223 10.1
VA..................... 2009................. 17,825,103 2,760,236 58,859,601 6.5
VT..................... 2021................. 0 0 0 0.0
WA..................... 2021................. 0 0 0 0.0
WI..................... 2006................. 1,388,510 204,039 3,760,117 6.8
WV..................... 2009................. 3,521,350 517,015 10,091,785 6.8
WY..................... None................. 560,916 80,664 1,688,720 7.0
----------------------------------------------------------------------------------------------------------------

[[Page 31790]]

This LCC figure covers a single year's cohort of HUD and USDA
financed housing. Annual effects will increase as more cohorts are
added to the stock of new HUD- and USDA-assisted, insured or guaranteed
energy-efficient housing. In the second year, with two cohorts in
place, there could be a stream of almost $150 million (future value) of
energy savings. The number of units affected every year will decline as
states update their standards to the 2021 IECC, or industry adopts the
prescribed above-code standards. Thus, we expect the aggregate annual
incremental effects to taper off. The maximum annual effect of all
cohorts is not likely to exceed somewhere between three or four times
the annual effect of a single-year cohort. While a new code edition is
typically published every three years, since HUD and USDA must consider
the affordability and availability impacts of each edition when it is
published, this Notice LCC savings cover one year's cohort. See
``Aggregate Incremental Impacts of IECC Update'' in the Regulatory
Impact Analysis (p.39) for further discussion.
The Regulatory Impact Analysis at www.regulations.gov provides an
estimated first cost of $553 million, annual energy savings of $73
million and net LCC savings that range from $971 million (7% discount
factor) to $1.48 billion (3% discount factor). (See RIA Figures 20 and
21).

C. Preliminary Affordability Determination--2021 IECC

Based on the analysis provided above, HUD and USDA have determined
that adoption of the 2021 IECC will not negatively impact the
affordability of homes covered by the statute. This conclusion
recognizes the profile of FHA borrowers, who according to FHA's 2021
Annual Report are typically first-time home buyers (84 percent) who are
more likely than repeat buyers to be especially price sensitive. While
the national average cost shown in Table 5 of adopting this standard is
$5,500, this represents a 2.1 percent increase in the average cost of a
new FHA-insured home in 2020, and the incremental costs (shown in Table
6) exceed $5,000/unit relative to the 2009 IECC baseline in only nine
states. In all cases this translates into a relatively modest increase
in down payment and other first costs: a national average of $715,
which represents approximately 0.3 percent of the average FHA-insured
new home mortgage, or an average USDA-guaranteed loan.\56\ For
qualifying purposes, a hypothetical borrower earning $5,000/month with
a 4.5 percent down payment will require an additional income of $85
(1.7 percent) a month to qualify for the average new home; and monthly
payments will increase by $31/month on a 30-year 4.25 percent fixed
rate mortgage, from $1,800/month to $1,831/month.\57\
---------------------------------------------------------------------------

\56\ Average USDA Section 502 Direct Loan 2018-20 of $191,100,
and of Section 502 Guaranteed Loan of $210,700. Incremental cost of
$5,500 equals 2.9 percent and 2.6 percent respectively of these
loans; down payment costs are .27 percent and .34 percent. For
average FHA new home mortgage of $263,000 (2020), added first cost
equals 2.1 percent, average down payment equals 2.1 percent.
\57\ See Fannie Mae Financial Calculator, front-end Debt to
Income ratio, monthly payment includes Principal, Interest, Property
Taxes of $1,500/year, Insurance of $1,200/year and HOA payment of
$50/month. https://fm.fanniemae.com/homeownership/resources/financial-calculators.
---------------------------------------------------------------------------

Unlike other added costs associated with the home purchase
transaction, these incremental costs yield significant costs savings to
the borrower. In all Climate Zones, annual energy savings in Year One
exceeds increases in debt service. Debt service increases average just
$20/month for net positive cash flows of $35/month after debt service.
While there is likely to be variability in actual cash flows depending
on energy use associated with family size and behavior, the data shows
that on average the adoption of these measures are likely to improve
overall affordability in light of these positive cash flows.
An additional affordability consideration is whether increased down
payment costs due to the added or incremental cost will negatively
impact home buyers with regard to qualifying for a a mortgage, or down
payment requirements. This is especially important for first-time home
buyers who typically have lower cash availability for down payments.
PNNL estimates increased down payment and other up-front costs range
from $362 to $875 for conventional mortgages.\58\ Note that these down
payments assume an average of 10 percent down, whereas the typical FHA
borrower is likely to pay only 4.5 percent down; \59\ the incremental
down payment cost is therefore likely to be lower for FHA borrowers
than the typical homeowner modeled by PNNL, with down payment increases
ranging from as low as $163 to $393, which represent 0.06-0.15 percent
of the average cost of an FHA new home in 2020, of $263,000. At 5%
down, the average downpayment increase is estimated to be $278.
---------------------------------------------------------------------------

\58\ Average price in 2021 for all FHA-insured purchases,
including existing homes, was $239,000.
\59\ HUD, Annual Report to Congress Regarding the Financial
Status of the Federal Housing Administration Mutual Mortgage
Insurance Fund, November 2021. https://www.hud.gov/sites/dfiles/Housing/documents/2021FHAAnnualReportMMIFund.pdf.
---------------------------------------------------------------------------

Note that energy costs and savings are generally not factored into
current underwriting practices for single family mortgages, i.e., while
positive cash flows related to improved energy efficiency will be
realized, they are not specifically included in the Principal Interest,
Taxes and Insurance (PITI) debt-to-income ratios typically used by
lenders to qualify borrowers. Conversely, despite the significant cost
savings likely to be realized from adoption of more efficient energy
codes, there are generally no direct incentives for borrowers to
purchase more efficient homes either through lower Mortgage Insurance
Premiums or lower interest rates. Multifamily financing, on the other
hand, does take into account energy savings: FHA offers the Green
Mortgage Insurance Premium to multifamily borrowers who build to a
green building standard, which may include the most recent energy code
as a mandatory element, or may offer additional points if the building
meets or exceeds the latest IECC or ASHRAE 90.1 standard.
Equity Impacts
The Regulatory Impact Analysis (RIA) that accompanies this Notice
includes an extensive equity analysis, which discusses the
disproportionate energy burden experience by low-income borrowers--and
conversely the increased benefits likely to be realized by low-income
borrowers from increased efficiency. See the Equity Impacts section of
the RIA (p.84) at www.regulations.gov.
Lower-income households face disproportionately higher energy
burdens; they spend a higher share of their gross household income on
energy costs.\60\ Two-thirds of low-income households earning up to 200
percent of the federal poverty level face high energy burdens, spending
more than 6 percent of their income on energy bills. Black, Hispanic,
Native American, and older adult households, as well as families
residing in manufactured housing and low-income households with a
person with a disability, experience disproportionately high energy
burdens.
---------------------------------------------------------------------------

\60\ https://www.energy.gov/scep/slsc/low-income-community-energy-solutions.
---------------------------------------------------------------------------

Since increasing energy efficient codes will lower the energy
burden for buyers of energy efficient homes; more efficient codes will
at the same time be most beneficial to lower-income households. These
codes typically require added first costs, but HUD and

[[Page 31791]]

USDA single family insured or guaranteed programs include mitigating
factors which may make this investment more affordable to eligible
borrowers, e.g., lower down payment requirements (3.5% for FHA-backed
mortgages compared to 20 percent required for conventional financing),
as well as more flexible underwriting requirements such as lower
allowable credit scores. USDA's Direct Loan program serves an
underserved market, very low or extremely low-income borrowers in rural
areas, through no- or low-down payment requirements, as well as
significant interest rate subsidies. FHA's low-rise multifamily housing
serves a renter population that is not directly responsible for any
additional first costs.
The overall conclusion provided in the RIA concerning the equity
impacts of a minimum energy standard are that lower-income households
will benefit more from the existence of energy-efficient housing but
may be challenged in their ability to address first costs. Empirical
work has shown that residential energy is a necessary good, but that
reducing its cost through energy efficiency requires an additional
investment that lower-income households may not have the disposable
income to accommodate. If, however, the Notice encourages the supply of
energy efficiency in the affordable housing stock, then low- households
will gain. Precise impacts are likely to vary by housing market and
climate zone.

III. ASHRAE 90.1-2019 Affordability Determination

A. Overview

EISA requires HUD to consider the adoption of revisions to ASHRAE
90.1 for HUD-assisted multifamily programs.\61\ Published and revised
every three years in coordination with the publication schedule of the
IECC, the standard provides minimum requirements for the energy-
efficient design of commercial buildings, including residential
buildings with more than three stories.\62\
---------------------------------------------------------------------------

\61\ USDA multifamily programs are not covered by the Act.
\62\ Standard 90.1 is published in October of the year two years
before the year listed for the IEC, to allow the latest version of
standard 90.1 to be submitted to the IECC for inclusion in the
commercial chapter of the IECC.
---------------------------------------------------------------------------

ASHRAE 90.1 includes several compliance pathways. The first is the
prescriptive path, which establishes energy-related criteria for
individual building components, including minimum insulation levels,
maximum lighting power, and controls for lighting and heating,
ventilation, air conditioning, and refrigeration systems. Some
requirements are considered mandatory, even when one of the optional
paths is utilized.
ASHRAE 90.1 also includes two optional whole-building performance
paths. The first is the Energy Cost Budget method, which allows the
designer to trade off compliance among various code requirements, using
established energy modeling protocols. A building is deemed in
compliance when the annual energy cost of the proposed design is no
greater than the annual energy cost of the reference building design
(baseline). ASHRAE 90.1 also includes a second performance approach,
the Performance Rating Method in Appendix G. Appendix G has been used
to rate the performance of buildings that exceed the requirements of
Standard 90.1 for above-code programs, such as LEED, Green Globes,
ASHRAE Standard 189.1, the International Green Construction Code, the
National Green Building Standard, and other above-code programs.
Current HUD-USDA Standard and Subsequent Revisions
In their May 2015 Final Determination, HUD and USDA established the
2007 edition of ASHRAE 90.1 (ASHRAE 90.1-2007) as the minimum standard
for HUD-assisted multifamily properties. ASHRAE has revised the code
four times since the publication of the 2007 edition. ASHRAE 90.1-2010
was published in October 2010. There were 56 positive changes to the
2007 edition code, including revised requirements for the building
envelope, HVAC systems, commissioning, lighting, and power.\63\ DOE
determined that the 2010 ASHRAE code would yield national energy cost
savings of 7.72 percent in mid-rise apartment buildings and 6.99
percent in high-rise apartment buildings over the previous 2007
code.\64\
---------------------------------------------------------------------------

\63\ A ``positive change'' is defined as a change to the code
that results in increased energy efficiency. Other changes might
include items that are either savings-neutral, or, in rare cases,
may lower energy efficiency.
\64\ Pacific Northwest National Laboratory for the Department of
Energy, Cost-effectiveness of ASHRAE Standard 90.1-2010 Compared to
ASHRAE Standard 90.1-2007, May 2013, Tables C.2. See http://www.pnnl.gov/main/publications/external/technical_reports/PNNL-22043.pdf.
---------------------------------------------------------------------------

The next edition, ASHRAE 90.1-2013, published in October 2013,
included 52 changes over the 2010 edition, most of which were
determined by DOE to be relatively minor. Only six were applicable to
residential buildings, including improved lighting controls and
decreased lighting power densities, increased building envelope
requirements for ``opaque assemblies and fenestration,'' and increased
efficiency requirements for smaller air conditioners and heat
pumps.\65\ These amendments resulted in an average energy savings of
5.4 percent in mid-rise apartment buildings and 6.9 percent in high-
rise multifamily buildings (site energy) over ASHRAE 90.1-2010.\66\
Cost savings were estimated by DOE to be 5.0 percent for mid-rise
apartments and 8.7 percent for high-rise apartments.
---------------------------------------------------------------------------

\65\ PNNL, National Cost-effectiveness of ANSI/ASHRAE/IES
Standard 90.1-2013, January 2015. See https://www.pnnl.gov/main/publications/external/technical_reports/PNNL-23824.pdf.
\66\ 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 Building,
September 26, 2014. Table IV.5. See https://www.federalregister.gov/documents/2014/09/26/2014-22882/determination-regarding-energy-efficiency-improvements-in-ansiashraeies-standard-901-2013-energy.
For more detailed analysis, see PNNL, ANSI/ASHRAE/IES Standard 90.1-
2013 Determination of Energy Savings: Quantitative Analysis, August
2014. Available at https://www.pnnl.gov/main/publications/external/technical_reports/PNNL-23479.pdf.
---------------------------------------------------------------------------

The following edition, ASHRAE 90.1-2016, yielded an additional 3.6
percent site energy savings for mid-rise apartment buildings, and 4.0
percent for high-rise apartment buildings.\67\ Energy cost savings were
estimated by DOE to be 3.9 percent and 5.1 percent respectively over
the 2013 edition for these two building types.
---------------------------------------------------------------------------

\67\ PNNL/DOE Preliminary Energy Savings Analysis, ANSI/ASHRAE/
IES Standard 90.1-2016, June 2017. Available at https://www.energy.gov/sites/default/files/2017/07/f35/Preliminary_90.1-2016_Energy_Savings_Analysis.pdf.
---------------------------------------------------------------------------

DOE's quantitative analysis concluded that ASHRAE 90.1-2019 for
mid-rise and high-rise multifamily buildings (representing 11.65
percent of all commercial buildings) would yield an additional site
energy savings of 2.65 percent over the 2016 edition, and energy cost
savings (Energy Cost Index (ECI)) of 2.5 percent.^{68 69 70}
---------------------------------------------------------------------------

\68\ Op cit., PNNL, Energy Savings Analysis, July 2021.
\69\ PNNL, Impacts of Model Building Energy Codes--Interim
Update, July 21, 2021. https://www.pnnl.gov/main/publications/external/technical_reports/PNNL-31437.pdf. For all commercial
buildings, DOE estimates national site energy savings of 4.7 percent
and energy cost savings of approximately 4.3 percent.
\70\ 86 FR 40543 (July 28, 2021), Final Determination Regarding
Energy Efficiency Improvements in ANSI/ASHRAE/IES Standard 90.1-
2019, https://www.federalregister.gov/documents/2021/07/28/2021-15971/final-determination-regarding-energy-efficiency-improvements-in-ansiashraeies-standard-901-2019.
---------------------------------------------------------------------------

Tables 8 and 9 show the changes in incremental costs for each code
cycle since the 2007 edition. Table 8 shows that per square foot costs
increased for

[[Page 31792]]

the first two cycles (2010 and 2013) in a prototype mid-rise apartment
building modeled by PNNL in five representative climate zones. In 2013,
for example, the incremental cost of complying with ASHRAE 90.1 ranged
from just 0.17 $/sf to 0.69 $/sf, or 0.14 to 0.59 percent of total
building costs. In contrast, the last two code cycles (both 2016 and
2019) have seen incremental cost savings rather than cost increases as
a result of complying with these codes. In all cases, the incremental
cost, whether a cost increase or a cost savings, is a small fraction of
the total per building first cost (111 $/sf in 2010 to $218 $/sf in
2019).

Table 8--Incremental ASHRAE 90.1.-2019 Construction Costs
[$/sf and %/sf]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Building 2A 3A 3B 4A 5A
-----------------------------------------------------------------------------------------------
Year First cost ($/ Tampa ($/ Atlanta ($/ El Paso ($/ New York ($/ Buffalo ($/
ft\2\) ft\2\) ft\2\) ft\2\) ft\2\) ft\2\)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2019.................................................... $218 ($0.36) ($0.37) ($0.40) ($0.30) ($0.29)
-0.16% -0.17% -0.19% -0.14% -0.13%
2016.................................................... $194 ($0.54) ($0.51) ($0.53) ($0.37) ($0.73)
-0.28% -0.27% -0.27% -0.19% -0.38%
2013.................................................... $117 $0.17 $0.69 $0.69 $0.38 $0.58
0.14% 0.59% 0.59% 0.33% 0.50%
2010.................................................... $111 $0.62 $0.62 $0.62 $0.62 $0.62
0.56% 0.56% 0.56% 0.56% 0.56%
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 9 shows building-level incremental cost or cost savings for
each code cycle since 2007. In Climate Zone 2A (Tampa) for example, the
incremental cost for the prototype mid-rise building was estimated to
be $20,858 and $5,711 for the 2010 and 2013 editions respectively,
followed by a combined savings of $30,167 in the following 2016 and
2019 codes.

Table 9--Incremental ASHRAE 90.1 Construction Costs
[$/Prototype 32-Unit Building]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Prototype bldg first cost 2A 3A 3B 4A
------------------------------------------------------------------------------------------------------------------ ------------------------------------------
Code El ($/ New ($/
($/bldg) Tampa ($/bldg) Atlanta ($/bldg) Paso bldg) York bldg) Buffalo
------------------------------------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------
2019........................................... $7.36 million.................... ($11,992) ($12,389) ($13,661) ($9,966) ($9,674)
2016........................................... $6.55 million.................... ($18,175) ($17,353) ($17,944) ($12,430) ($24,614)
2013........................................... $3.95 million.................... $5,711 $23,214 $23,358 $12,891 $19,577
2010........................................... $3.75 million.................... $20,858 $20,858 $20,858 $20,858 $20,858
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ASHRAE 90.1-2019 Overview
This Notice addresses the most recent published edition of ASHRAE
90.1, ASHRAE 90.1-2019. In its qualitative analysis of the code, DOE
identified a total of 88 changes, or addenda, to ASHRAE 90.1-
2016.^{71 72} Twenty-nine changes were determined to have a
positive impact on energy efficiency (i.e., yield energy savings).
These 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 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.
---------------------------------------------------------------------------

\71\ Pacific Northwest National Laboratory for the U.S.
Department of Energy, Energy Savings Analysis: ANSI/ASHRAE/IES
Standard 90.1-2019, July 21, 2021. https://www.energycodes.gov/sites/default/files/2021-07/Standard_90.1-2019_Final_Determination_TSD.pdf.
\72\ DOE determined that 59 of the 88 addenda will 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.
Changes with impacts which do not become effective within three
years from the publication of Standard 90.1-2019 (i.e., until a
cutoff date of December 31, 2022), are also considered as having no
impact within the context of this analysis.
---------------------------------------------------------------------------

Current State Adoption of ASHRAE 90.1-2019
Table 10 shows the current adoption status of ASHRAE 90.1 for mid-
rise or high-rise multifamily buildings. As of September 2022, five
states have adopted ASHRAE 90.1-2019. A total of 32 states and the
District of Columbia have adopted an ASHRAE standard that is equivalent
to or above the current HUD-USDA standard (one of the 2010, 2013, 2016
or 2019 editions), while 18 states have adopted codes that are
currently equivalent to or below the current HUD-USDA standard or have
no statewide codes.\73\
---------------------------------------------------------------------------

\73\ DOE, Status of State Energy Code Adoption--Commercial,
https://www.energycodes.gov/status/commercial. Note that the codes
shown in Table 10 and Figure 4 represent DOE/PNNL's Determination of
the standard that the state-adopted code is equivalent to,
reflecting amendments that may have been adopted by each state.

[[Page 31793]]

Table 10--Current Adoption of ASHRAE 90.1 (September 2022) Multifamily
Mid- and High-Rise Buildings
------------------------------------------------------------------------

------------------------------------------------------------------------
Above Current HUD-USDA Standard (32 states and DC)
------------------------------------------------------------------------
ASHRAE 90.1 2019 (5 states plus DC )
------------------------------------------------------------------------
Washington Oregon
California Vermont
Massachusetts District of Columbia
------------------------------------------------------------------------
ASHRAE 90.1 2016 (2 states)
------------------------------------------------------------------------
New Jersey New York
------------------------------------------------------------------------
ASHRAE 90.1-2013 (19)
------------------------------------------------------------------------
Alabama Montana
Delaware Nebraska
Florida Nevada
Georgia New Mexico
Idaho Pennsylvania
Illinois Texas
Michigan Utah
Maryland Virginia
Maine Hawaii
Rhode Island...........................
------------------------------------------------------------------------
ASHRAE 90.1-2010 (6)
------------------------------------------------------------------------
Connecticut Minnesota
New Hampshire West Virginia
North Carolina Wisconsin
------------------------------------------------------------------------
At or Below Current HUD-USDA Standard (18)
------------------------------------------------------------------------
ASHRAE 90.1-2007 (8)
------------------------------------------------------------------------
Arkansas Louisiana
Iowa Ohio
Indiana South Carolina
Kentucky Tennessee
------------------------------------------------------------------------
No Statewide Code (8)
------------------------------------------------------------------------
Alaska Missouri (Home Rule)
Colorado (Home Rule) North Dakota (Home Rule)
Kansas (Home Rule) South Dakota (Home Rule)
Mississippi Wyoming (Home Rule)
------------------------------------------------------------------------
Older Than ASHRAE 90.1-2007 (2)
------------------------------------------------------------------------
Arizona (Home Rule) Oklahoma
------------------------------------------------------------------------
U.S Territories
------------------------------------------------------------------------
Guam N Mariana Islands (2001)
Puerto Rico American Samoa
U.S. Virgin Islands....................
------------------------------------------------------------------------

[[Page 31794]]

[GRAPHIC] [TIFF OMITTED] TN18MY23.004

Impacted Multifamily Housing
Table 11, below, provides the estimated number of new mid-rise or
high-rise multifamily units that are estimated to be impacted annually
by the proposed Determination on ASHRAE 90.1-2019. Using a three-year
average (2019 to 2021) annual production for each program, HUD
preliminarily estimates that a total of 17,900 new mid- or high-rise
multifamily units (four or more stories) will be impacted annually in
the states that had not yet adopted this version of ASHRAE 90.1. This
includes approximately 13,700 FHA-insured multifamily units, 400 public
housing units, and approximately 2,800 HOME- and 300 HTF-financed
units. No USDA-guaranteed multifamily units are impacted since these
are not covered under this Notice.

Table 11--High Rise Multifamily Units Potentially Impacted by ASHRAE 90.1-2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
Housing trust FHA
State PIH HOME fund RAD multifamily Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
AK...................................................... 0 18 13 25 0 56
AL...................................................... 34 29 0 0 207 270
AR...................................................... 0 67 8 16 105 196
AZ...................................................... 0 58 0 38 278 374
CA (2019(............................................... 8 378 0 12 107 505
CO...................................................... 8 72 0 10 440 530
CT...................................................... 15 22 0 0 81 118
DC (2019)............................................... 7 0 0 0 89 96
DE...................................................... 0 2 0 48 0 50
FL...................................................... 94 124 56 21 953 1248
GA...................................................... 21 80 0 0 513 614
HI...................................................... 2 0 0 0 0 2
IA...................................................... 0 3 3 0 0 6
ID...................................................... 0 25 17 73 7 122
IL...................................................... 22 56 0 0 260 338
IN...................................................... 0 60 0 0 32 92
KS...................................................... 0 4 19 0 36 59
KY...................................................... 0 34 0 2 122 158
LA...................................................... 8 105 1 3 80 197
MA...................................................... 0 9 0 35 316 360
MD...................................................... 0 77 0 0 547 624
ME...................................................... 0 21 19 24 10 74
MI...................................................... 11 54 0 0 65 130
MN...................................................... 2 73 0 5 391 471
MO...................................................... 0 138 1 0 286 425
MS...................................................... 0 0 0 0 0 0
MT...................................................... 0 19 2 21 44 86
NC...................................................... 4 79 0 0 852 935
ND...................................................... 0 17 8 0 0 25
NE...................................................... 0 0 0 0 191 191
NH...................................................... 0 33 4 46 69 152
NJ...................................................... 27 75 0 0 32 134
NM...................................................... 0 5 9 12 74 100
NV...................................................... 3 216 2 1 59 281
NY...................................................... 10 156 0 27 932 1125

[[Page 31795]]

OH...................................................... 7 83 0 0 68 158
OK...................................................... 0 0 7 10 52 69
OR (2019)............................................... 0 92 8 30 24 154
PA...................................................... 27 45 0 0 54 126
RI...................................................... 0 2 15 2 23 42
SC...................................................... 0 10 0 0 152 162
SD...................................................... 0 63 47 37 8 155
TN...................................................... 1 9 16 103 484 613
TX...................................................... 54 114 36 0 4,310 4514
UT...................................................... 0 1 0 17 307 325
VA...................................................... 8 38 9 0 596 651
VT (2019)............................................... 0 38 16 0 5 59
WA (2019)............................................... 10 47 4 31 266 358
WI...................................................... 4 41 0 0 111 156
WV...................................................... 0 5 6 5 46 62
WY...................................................... 0 10 1 0 12 23
Territories............................................. .............. .............. .............. .............. .............. ..............
Puerto Rico............................................. 41 86 .............. .............. .............. 127
-----------------------------------------------------------------------------------------------
Total............................................... 428 2,793 327 645 13,696 17,889
-----------------------------------------------------------------------------------------------
45 states + DC...................................... 417 2,229 299 538 13,067 16,550
--------------------------------------------------------------------------------------------------------------------------------------------------------

B. ASHRAE 90.1-2019 Affordability Analysis

Cost Benefit Analysis
In its Final Determination of improved energy efficiency for
commercial buildings, including multifamily buildings, DOE completes
both a ``qualitative'' analysis and a ``quantitative'' analysis to
assess increased efficiency of ASHRAE Standard 90.1.\74\ In addition to
a quantitative and qualitative analysis of the new code, PNNL publishes
a cost benefit analysis of each of the codes, which considers the
added, or incremental cost for the new standard. In addition, PNNL has
published its methodology for evaluating the cost-effectiveness of
commercial energy code changes, including multifamily buildings, and
that methodology is used by HUD and USDA for this determination.\75\
For more detail on the methodology developed by DOE for their cost-
benefit analysis, see PNNL's 2015 cost-effectiveness report.\76\
---------------------------------------------------------------------------

\74\ 86 FR 40543 (July 28, 2021), Final Determination Regarding
Energy Efficiency Improvements in ANSI/ASHRAE/IES Standard 90.1-
2019. https://www.govinfo.gov/content/pkg/FR-2021-07-28/pdf/2021-15971.pdf.
\75\ PNNL, Methodology for Evaluating Cost-Effectiveness of
Commercial Energy Code Changes, January 2015. https://www.pnnl.gov/main/publications/external/technical_reports/PNNL-23923.pdf.
\76\ Ibid.
---------------------------------------------------------------------------

Evaluating cost-effectiveness requires three primary steps: (1)
evaluating the energy and energy cost savings of code changes, (2)
evaluating the incremental and replacement costs related to the
changes, and (3) determining the cost-effectiveness of energy code
changes based on those costs and savings over time. The DOE methodology
estimates the energy impact by simulating the effects of the code
change(s) on typical new buildings, assuming both old and new code
provisions are implemented fully and correctly. The methodology does
not estimate rates of code adoption or compliance. Cost-effectiveness
is defined primarily in terms of LCC evaluation, although the DOE
methodology includes several metrics intended to assist states
considering adoption of new codes.
Building Prototypes
The basis for DOE's ASHRAE cost-benefit analysis are 16 prototype
building models representing different commercial sector building
types. Of the 16 prototypes modeled by DOE, two are multifamily
buildings--a 4-floor mid-rise apartment building and a 10-floor high-
rise apartment building. Table 12 provides detailed characteristics of
the mid-rise prototype.
---------------------------------------------------------------------------

\77\ PNNL, Impacts of Standard 90.1-2007 for Commercial
Buildings at State Level. https://www.pnnl.gov/main/publications/exter00nal/technical_reports/PNNL-18544.pdf.

Table 12--Mid-Rise Apartment Building Prototype Characteristics \77\
------------------------------------------------------------------------

------------------------------------------------------------------------
GENERAL
------------------------------------------------------------------------
Building Type.......................... Multifamily residential
building.
Gross Floor Area....................... 33,700 sf.
Building Shape......................... Rectangle.
Aspect Ratio........................... 2.75 (152 ft x 56 ft).
Number of Floors....................... 4.
Activity Area.......................... Each floor has 8 (25' x 38')
apartments, except ground
floor which has 7 apartments
and one lobby/office.
Window-to-Wall Ratio................... 15% (4 ft high view windows).
Floor Height........................... 10 ft.
Floor-to-Ceiling Height................ 10 ft (for the office area
only).
Exterior Wall.......................... Steel-framed wall.
Roof................................... Insulation entirely above deck,
metal deck roof.

[[Page 31796]]

Floor.................................. 8'' Slab-on-grade.
------------------------------------------------------------------------
INTERNAL LOADS
------------------------------------------------------------------------
Occupancy:
Number of People................... 78 persons total (average 2.5
persons per apartment unit).
Lighting:
Average Power Density.............. Apartment units: 0.36
w/sf.
Corridors: 0.5 w/sf.
Office area: 1.1 w/sf.
Plug Load:
Average Power Density.............. 0.62 w/sf.
HVAC:
Heating Type....................... Gas furnace.
Cooling Type....................... Split system DX (one per
apartment).
Fan Control........................ Constant volume.
Distribution/Terminal Units........ Single zone/direct air.
Cooling T-stat..................... 75 [deg]F (no setback assumed).
Heating T-stat..................... 70 [deg]F (no setback assumed).
------------------------------------------------------------------------
WATER HEATER
------------------------------------------------------------------------
Water Heater Type...................... Individual residential electric
storage water heater.
Tank Capacity, gallons................. 20 (per apartment unit).
Supply Temperature, [deg]F............. 120.
------------------------------------------------------------------------

ASHRAE 90.1-2019 Incremental Costs
Table 13 provides annual cost savings, added construction costs,
and net LCC savings for the mid-rise multifamily prototype
building.\78\ Cost estimates typically use current national average
prices. Labor costs are based on estimated hours and current crew labor
rates from RS Means. In some cases, cost estimates completed for a
prior code cycle are still applicable and are adjusted for inflation
rather than creating a new cost estimate or obtaining current unit
prices throughout the cost estimate. Where cost estimates are updated,
inflation factors specific to the equipment are used. These inflation
factors are developed for each specific equipment or insulation type by
comparing RS Means from the time of the estimate with the current RS
Means.
---------------------------------------------------------------------------

\78\ Special tabulation provided by DOE/PNNL to HUD of costs and
savings for mid-rise multifamily buildings only, 9/2/21.
---------------------------------------------------------------------------

Added construction costs average $574/building, or just $18/unit.
This low average per-unit increase in cost is because in two of the
climate zones analyzed, construction costs are expected to be lower for
ASHRAE 90.1-2019 relative to the USDA-HUD 2007 baseline: construction
costs for ASHRAE 90.1-2019 are projected to decrease by $257/unit in
Climate Zone 2A, and by $142/unit in Climate Zone 4A. Conversely, the
highest increase is projected to be $285/unit in Climate Zone 3B,
followed by $274 per unit in Climate Zone 3A. Added or incremental
construction cost can be negative for some building types for some of
the following reasons:
Fewer light fixtures are required when the allowed
lighting power is reduced. Also, changes from fluorescent to LED
technology result in reduced lighting costs in many cases and longer
lamp lives, requiring fewer lamp replacements.
Smaller heating, ventilating, and air[hyphen]conditioning
(HVAC) equipment sizes can result from the lowering of heating and
cooling loads due to other efficiency measures, such as better building
envelopes. For example, Standard 90.1-2019 has more stringent
fenestration U-factors for some climate zones. This results in smaller
equipment and distribution systems, resulting in a negative first
cost.\79\
---------------------------------------------------------------------------

\79\ See, for example, PNNL: https://www.energycodes.gov/sites/default/files/2021-07/Cost-effectiveness_of_ASHRAE_Standard_90-1-2019-NorthCarolina.pdf.
---------------------------------------------------------------------------

Annual energy cost savings average $7,153 per building, or $224 per
unit, yielding LCC savings of an estimated $188,337 per building or
$5,886 per unit. Simple paybacks are immediate in two of the five
climate zones analyzed, and 0.4 to 1.5 years in the remaining climate
zones, resulting in an extremely fast average payback of just 0.1
years.

Table 13--ASHRAE 90.1-2019 Added Costs and Savings--National
[2019 Edition vs. 2007 baseline]
----------------------------------------------------------------------------------------------------------------
Per square foot
----------------------------------------------------------------------------------
Climate zone Annual cost Added construction Net LCC savings, $/
savings, $/ft \2\ cost, $/ft \2\ ft \2\ Simple payback years
----------------------------------------------------------------------------------------------------------------
2A........................... 0.253 -0.244 6.37 Immediate.
3A........................... 0.213 0.260 5.42 1.2.
3B........................... 0.186 0.270 4.89 1.5.
4A........................... 0.206 -0.135 5.68 Immediate.
5A........................... 0.207 0.075 5.44 0.4.
National Weighted Average.... 0.212 0.017 5.58 0.1.
----------------------------------------------------------------------------------------------------------------

[[Page 31797]]

Per building Per unit
-----------------------------------------------------------------------------------------------
Climate zone Annual Added Net LCC Annual Added Net LCC
savings $/ construction savings $/ savings $/ construction savings $/
bldg. cost, $/bldg. bldg. unit cost, $/unit unit
--------------------------------------------------------------------------------------------------------------------------------------------------------
2A...................................................... 8,536 (8,233) 214,924 267 -257 6,716
3A...................................................... 7,187 8,772 182,871 225 274 5,715
3B...................................................... 6,276 9,110 164,989 196 285 5,156
4A...................................................... 6,950 (4,555) 191,643 217 -142 5,989
5A...................................................... 6,984 2,531 183,546 218 79 5,736
National Weighted Average............................... 7,153 574 188,337 224 18 5,886
--------------------------------------------------------------------------------------------------------------------------------------------------------

State-Level Results
Table 14 provides multifamily added costs and savings for ASHRAE
90.1-19 over the 2007 edition for individual states.\80\ Most states
(38 states plus the District of Columbia) show lower per-unit added
costs for adoption of ASHRAE 90.1-2019 compared to the 2007 standard.
Incremental cost savings per unit range from a low of $44 in Illinois
to a high of $425 in Oregon. Only 13 states show increased incremental
costs: Alabama, California, Georgia, Mississippi, Montana, North
Carolina, Nevada, Oklahoma, South Carolina, South Dakota, Tennessee,
Vermont, Wisconsin. For these 13 states, increased costs average $169/
unit, ranging from $22/unit in Nevada to $381/unit in California. The
average incremental cost for all states is just $18/unit.
---------------------------------------------------------------------------

\80\ Ibid., DOE/PNNL Special Tabulation provided to HUD 9/2/21.

Table 14--ASHRAE 90.1-2019 Added Costs and Savings--States
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net LCC savings, Net LCC savings,
Incremental cost Energy cost Energy cost scenario 1 scenario 2 Simple payback
State Current code $/unit savings $/bldg./ savings, $/unit/ (publicly-owned), (privately- (years)
yr yr $/unit owned), $/unit
--------------------------------------------------------------------------------------------------------------------------------------------------------
AK................. No Code.......... (319) 7,828 245 9,652 8,604 Immediate.
AL................. 2013............. 210 10,493 328 6,275 5,705 0.9.
AR................. 2007............. (23) 5,736 179 5,321 4,835 Immediate.
AZ................. Home Rule........ (234) 5,702 178 6,466 5,938 Immediate.
CA................. 2016............. 381 9,211 288 6,523 6,041 1.6.
CO................. No Code.......... (72) 6,208 194 5,630 5,201 Immediate.
CT................. 2010............. (122) 7,322 229 8,055 7,423 Immediate.
DC................. 2016............. (314) 6,748 211 6,959 6,189 Immediate.
DE................. 2013............. (347) 6,208 194 6,537 5,778 Immediate.
FL................. 2013............. (127) 5,871 183 6,657 6,039 Immediate.
GA................. 2013............. 229 9,515 297 5,693 5,213 1.1.
HI................. Home Rule........ (297) 5,938 186 11,457 10,357 Immediate.
IA................. 2007............. (117) 5,601 175 5,975 5,458 Immediate.
ID................. 2013............. (60) 7,592 237 5,135 4,698 Immediate.
IL................. 2013............. (44) 8,536 267 6,450 6,028 Immediate.
IN................. 2007............. (182) 5,770 180 6,527 5,970 Immediate.
KS................. No Code.......... (308) 5,972 187 6,655 6,113 Immediate.
KY................. 2007............. (328) 9,211 288 5,947 5,377 Immediate.
LA................. 2007............. (172) 6,782 212 6,237 5,627 Immediate.
MA................. 2016............. (148) 6,208 194 8,424 7,549 Immediate.
MD................. 2013............. (303) 5,263 164 6,445 5,848 Immediate.
ME................. No Code.......... (56) 4,994 156 7,160 6,461 Immediate.

[[Page 31798]]

MI................. 2013............. (88) 6,782 212 6,475 5,978 Immediate.
MN................. 2010............. (54) 7,659 239 6,915 6,271 Immediate.
MO................. No Code.......... (333) 7,457 233 6,434 5,902 Immediate.
MS................. No Code.......... 161 8,199 256 5,985 5,527 0.7.
MT................. 2013............. 94 14,744 461 5,620 5,114 0.5.
NC................. 2010............. 157 4,859 152 5,125 4,699 0.9.
ND................. No Code.......... (57) 6,276 196 6,220 5,584 Immediate.
NE................. 2013............. (124) 7,085 221 5,546 5,072 Immediate.
NH................. 2010............. (6) 7,018 219 7,022 6,394 Immediate.
NJ................. 2016............. (285) 7,254 227 7,477 6,812 Immediate.
NM................. 2013............. (305) 7,794 244 5,807 5,300 Immediate.
NV................. 2013............. 22 6,613 207 5,150 4,758 0.1.
NY................. 2016............. (305) 6,917 216 8,454 7,754 Immediate.
OH................. 2007............. (192) 6,984 218 6,151 5,640 Immediate.
OK................. No Code.......... 150 7,389 231 5,330 4,836 0.8.
OR................. 2016............. (425) 6,276 196 5,878 5,421 Immediate.
PA................. 2013............. (256) 5,061 158 6,524 5,811 Immediate.
PR................. 2007............. 0 8,098 253 ................. ................. 0.0.
RI................. 2010............. (200) 5,668 177 8,171 7,518 Immediate.
SC................. 2007............. 186 6,276 196 5,684 5,221 0.9.
SD................. No Code.......... 297 6,343 198 5,359 4,945 1.6.
TN................. 2007............. 118 5,061 158 6,086 5,525 0.5.
TX................. 2013............. (155) 6,276 196 5,581 5,182 Immediate.
UT................. 2013............. (104) ................. 0 5,366 4,930 Immediate.
VA................. 2013............. (275) 6,006 188 5,297 4,754 Immediate.
VT................. 2016............. 137 7,187 225 7,341 6,652 0.5.
WA................. 2016............. (432) 8,772 274 5,992 5,481 Immediate.
WI................. 2010............. 59 5,027 157 6,400 5,909 0.3.
WV................. 2010............. (96) 6,343 198 6,093 5,479 Immediate.
WY................. No Code.......... (180) 5,736 179 5,952 5,426 Immediate.
Average............ ................. 18 7,153 224 6,394 5,886 0.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Key: No Code = No statewide code; Home Rule = Home Rule state.

All states show energy cost savings, both those with incremental
cost increases as well as those that show lower incremental costs.
Annual energy cost savings average $224/unit, ranging from $156/unit
(Maine) to $461/unit (Montana). For the prototype 32-unit mid-rise
building, this translates into an average annual cost savings of
$7,153/building, ranging from $4,994 annual cost savings in Maine to
$14,744 in Montana.
The annual energy cost savings relative to lower incremental costs
in many states yield ``negative'' simple paybacks in these states;
where that is the case, Table 15 shows these paybacks as ``immediate.''
Average simple payback for all states is just 0.1 years, or 1.2 months.
The states showing lower incremental costs show immediate paybacks: For
example, Ohio shows a decrease in first costs of $192 per unit, but
annual energy cost savings of $218, in which case the payback on this
investment is immediate.
Table 14 also shows life cycle cost savings for this investment.
Average Life Cycle Cost savings for privately owned buildings are
$5,886/unit, with LCC savings estimated to be highest in Hawaii
($10,357 per building) and lowest in North Carolina ($4,699 per
building).
Total Life Cycle Cost Savings
Table 15 shows total estimated LCC Savings for ASHRAE 90.1-2019
relative

[[Page 31799]]

to ASHRAE 90.1-2007. For the total estimated units that could be
impacted by the adoption of this code, incremental costs will be an
estimated $1.76 million lower than the cost of construction to the 2007
baseline. Annual energy costs savings are estimated to be $3.37
million, and national LCC savings $90.87 million for privately owned
buildings.

Table 15--Total Life Cycle Savings--States (2020$)
[ASHRAE 90.1-2019 against 90.1-2007 baseline]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net LCC savings, Net LCC savings,
Annual energy Added scenario 1 scenario 2
State Total units cost savings, $/ construction (publicly-owned), (privately- Simple payback (years)
state cost, $/state $/state owned), $/state
--------------------------------------------------------------------------------------------------------------------------------------------------------
AK.......................... 56 18,199 (17,731) 535,672 477,505 Immediate.
AL.......................... 270 66,046 56,652 1,694,138 1,540,410 0.9.
AR.......................... 196 35,042 (4,535) 1,040,340 945,314 Immediate.
AZ.......................... 374 87,032 (87,426) 2,415,231 2,217,933 Immediate.
CA.......................... 505 ................. ................. ................. ................. ...........................
CO.......................... 530 94,351 (37,964) 2,981,277 2,754,052 Immediate.
CT.......................... 118 33,966 (14,432) 950,540 875,890 Immediate.
DC.......................... 96 ................. ................. ................. ................. ...........................
DE.......................... 50 9,603 (17,171) 323,588 286,010 Immediate.
FL.......................... 1,248 319,626 (157,840) 8,305,011 7,534,226 Immediate.
GA.......................... 614 129,477 140,483 3,495,238 3,200,678 1.1.
HI.......................... 2 922 (595) 22,914 20,714 Immediate.
IA.......................... 6 1,164 (702) 35,851 32,751 Immediate.
ID.......................... 122 18,523 (7,332) 626,446 573,192 Immediate.
IL.......................... 338 66,286 (14,968) 2,179,969 2,037,417 Immediate.
IN.......................... 92 20,371 (16,781) 600,445 549,228 Immediate.
KS.......................... 59 12,939 (18,165) 392,658 360,683 Immediate.
KY.......................... 158 28,987 (51,810) 939,575 849,615 Immediate.
LA.......................... 197 44,545 (33,771) 1,225,497 1,105,745 Immediate.
MA.......................... 360 ................. ................. ................. ................. ...........................
MD.......................... 624 128,954 (188,826) 4,021,926 3,648,880 Immediate.
ME.......................... 74 17,902 (4,107) 526,279 474,899 Immediate.
MI.......................... 130 28,099 (11,377) 841,739 777,180 Immediate.
MN.......................... 471 102,798 (25,327) 3,256,772 2,953,840 Immediate.
MO.......................... 425 83,348 (141,603) 2,734,363 2,508,516 Immediate.
MS.......................... ................. ................. ................. ................. ................. #DIV/0!
MT.......................... 86 15,866 8,023 480,495 437,223 0.5.
NC.......................... 935 168,579 146,890 4,792,171 4,393,892 0.9.
ND.......................... 25 4,903 (1,423) 155,494 139,599 Immediate.
NE.......................... 191 33,430 (23,764) 1,059,288 968,665 Immediate.
NH.......................... 152 38,464 (962) 1,067,365 971,847 Immediate.
NJ.......................... 134 31,789 (38,147) 1,001,861 912,850 Immediate.
NM.......................... 100 17,625 (30,319) 577,846 527,384 Immediate.
NV.......................... 281 44,442 6,222 1,447,028 1,337,109 0.1.
NY.......................... 1,125 299,968 (342,651) 9,506,499 8,719,231 Immediate.
OH.......................... 158 31,319 (30,320) 971,893 891,097 Immediate.
OK.......................... 69 12,784 10,256 365,096 331,295 0.8.
OR.......................... 154 ................. ................. ................. ................. ...........................
PA.......................... 126 24,710 (32,283) 822,084 732,143 Immediate.
PR.......................... 127 ................. ................. ................. ................. 0.0.
RI.......................... 42 11,946 (8,314) 339,113 311,984 Immediate.
SC.......................... 162 34,333 30,062 920,830 845,845 0.9.
SD.......................... 155 28,996 45,938 828,025 764,005 1.6.
TN.......................... 613 137,556 72,330 3,727,585 3,384,017 0.5.
TX.......................... 4,514 875,739 (699,639) 25,191,762 23,392,691 Immediate.
UT.......................... 325 53,375 (33,872) 1,741,174 1,599,869 Immediate.
VA.......................... 651 101,587 (179,150) 3,448,464 3,094,969 Immediate.
VT.......................... ................. ................. ................. ................. ................. ...........................
WA.......................... ................. ................. ................. ................. ................. ...........................
WI.......................... 156 33,061 9,211 998,409 921,760 0.3.
WV.......................... 62 12,290 (5,949) 377,780 339,669 Immediate.
WY.......................... 23 4,123 (4,147) 136,895 124,794 Immediate.
National.................... 17,889 3,365.065 (1,757,336) 99,102,626 90,886,616 Immediate.
--------------------------------------------------------------------------------------------------------------------------------------------------------

The Regulatory Impact Analysis at www.regulations.gov provides a
more granular analysis of the estimated cost benefits associated with
building to the ASHRAE 90.1-2019 standard, taking into account each
state's current baseline code. Using current state baselines, RIA
Figure 28 estimates a total incremental cost savings of $10.8 million,
and a LCC savings of $48.1 million (at a 3 percent discount rate).

[[Page 31800]]

[GRAPHIC] [TIFF OMITTED] TN18MY23.005

C. Preliminary Affordability Determination--ASHRAE 90.1-2019

In light of the significant estimated savings, both annual and LCC
savings, and the nominal cost increase shown in Tables 13 and 14, HUD
and USDA have determined that the adoption of ASHRAE 90.1-2019 will not
negatively impact the affordability of the multifamily housing covered
by this Notice. As shown in Table 14, the weighted national average
incremental cost for adoption of this edition is just $18/unit, while
the annual energy cost savings per unit averages $224/unit. In all but
13 states, the incremental costs of building to this standard have in
fact decreased, not increased, relative to the current HUD-USDA ASHRAE
90.1-2007 standard: in none of these states is the added construction
cost more than $381/unit, and in that state (California), annual energy
cost savings are estimated to be $288/year, yielding a rapid Simple
Payback of just 1.6 years. Average (unweighted) payback for all states
is 0.1 years (1.2 months), with most states showing an immediate
payback due to the lower incremental/first costs. Estimated first costs
are also a nominal fraction of total construction costs: the weighted
national average of 0.017 $/sf (less than two cents) in added costs
represents just 0.16 percent of the estimated total building cost of
$218/sf. Finally in every state analyzed, the net LCC savings are
positive, with a weighted national average of $5,886 for privately
owned buildings.

IV. Impact on Availability of Housing

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

2009 IECC--Single Family

In its 2015 Final Determination adopting the 2009 IECC, HUD
concluded ``[t]hough 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
affordable housing exchanged in the market.'' \81\
---------------------------------------------------------------------------

\81\ 80 FR 25901 at 25918 (May 6, 2015).
---------------------------------------------------------------------------

The current proposed update of IECC requirements constitutes a more
expansive impact. The per unit cost is greater than for the previous
rule. PNNL's estimate of the upfront cost of building to 2021 IECC is
approximately $5,500, ranging from a low upfront incremental cost of
$3,000 in Climate Zone 1 to a high of $6,800 in Climate Zone 8.
Likewise, the geographic scope of the impact of the proposed rule is
also more extensive than in 2015. In 2015, construction only in those
16 states that had not yet adopted the 2009 IECC or its equivalent was
directly affected. Conversely, only three jurisdictions have adopted
the 2021 IECC. Under this Notice, approximately 100,000 newly built
units would have to comply with the 2021 IECC standard, compared to an
estimate of 10,000 annually for the 2015 notice that required IECC 2009
as a minimum standard. This merits a more detailed discussion of the
potential impacts on the availability of housing to program
participants as well as the housing market overall. As set forth in
this section of this Notice, HUD and USDA preliminarily find that there
would be no noticeable impact on the supply of housing covered by this
Notice; there are many ways for both homebuyers and builders to address
the costs of the Notice if buying or building to the 2021 IECC is not
advantageous; but that, under very specific conditions, availability
could be constrained.
The focus of this availability analysis is on the purchase of newly
built homes by FHA-insured borrowers. While other covered programs are
important, FHA-insured single-family purchases represent the
overwhelming majority of units that would be affected by final adoption
of the proposed standards. Homebuyers and builders of single-family
homes will be more sensitive to the IECC requirement than renters and
builders affected by the ASHRAE update because the estimated
incremental cost for single-family homes is greater than the
incremental cost of updating ASHRAE.

Builder Impacts

Builders are required to build to the 2021 IECC standard only if
they wish to sell the new home to a borrower who has a mortgage insured
by FHA or guaranteed by USDA. If builders predict that the construction
costs outweigh the expected private benefits of building to the 2021
IECC standard, then the supply of newly built homes for FHA-financed
borrowers would contract. FHA-insured borrowers would still be able to
find housing within the existing housing stock, but their opportunities
could be restricted.
One incentive for builders to build to the 2021 IECC standard is to
preserve FHA-insured borrowers as potential customers. As shown below,
in 2020, FHA-insured loans financed 1 percent of the purchases of newly
built homes in the Northeast, 8.3 percent in the Midwest, 11 percent in
the West, and

[[Page 31801]]

24.5 percent of purchases in the South. FHA-insured borrowers can be a
large portion of potential buyers of new construction in some markets.
The regions where construction activity is high (e.g., South and
West) are also areas where a higher share of buyers of new construction
are FHA-insured. In such markets, builders would be more inclined to
build to the energy code required by this Notice. Having more potential
customers increases competition for a home and would reduce the
opportunity costs of time on market.

Table 16--Type of Financing of New Single-Family Homes
[Homes sold in the United States, 2020]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Thousands of homes Percent financed
---------------------------------------------------------------- Total ---------------------------------------------------------------
Conventional FHA VA Cash Conventional FHA VA Cash
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Northeast....................................... 25 (Z) 1 2 28 89.3 1.0 3.6 7.1
Midwest......................................... 60 6 2 4 72 83.3 8.3 2.8 5.6
South........................................... 244 96 31 21 392 62.2 24.5 7.9 5.4
West............................................ 128 19 18 8 173 74.0 11.0 10.4 4.6
U.S............................................. 457 122 52 35 665 68.6 18.3 7.8 5.3
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Annual Characteristics of New Housing, U.S. Census.
Z = Less than 500 units or less than 0.5 percent.

The cost to a developer of adopting the standard includes the added
building costs, loss of potential customers unwilling to pay the
additional price, and any other distortions in design introduced by the
regulation. The builder can reasonably be expected to build an
affordable home to the 2021 IECC standard if: FHA-insured borrowers are
a significant part of the market for newly built homes; there is a
sufficient market return from energy efficiency; and the builder is
able to pass on some of the cost to the buyer. Under these conditions,
which will vary by climate zone and the state of the housing market,
availability is not likely expected to be adversely affected.
A second possibility is that the builder continues to build
affordable homes but not to the 2021 IECC. This would be the case when
and where there are significant profits from building new homes for
low-income homebuyers, even if not FHA-insured; FHA-insured borrowers
are not a major part of the market, perhaps because conventional loans
are relatively more affordable; the unlikely case that lower-income
homebuyers do not place a significant premium on energy efficiency; or
the builder is unable to pass on costs to the buyer. Under this
scenario, the total supply of affordable housing would not necessarily
be adversely affected, but new construction for FHA borrowers could
decline.
A third possibility is that the profit margin from building
affordable housing is so slim that any change to the market would lead
to a very different development decision. One alternative may be for
builders to build housing for higher-income buyers. This strategy could
place the home out of reach of FHA-insured borrowers and thus reduce
the availability of affordable housing, albeit not housing for higher-
income borrowers.

Single Family Market Impacts

The change in market quantity depends not only on the decisions of
builders and the real estate industry more broadly but also on the
willingness of buyers to absorb a price change. The percentage
reduction of quantity is greater as demand and supply are more
responsive to price changes and as the incremental cost constitutes a
larger portion of the sales price.
The impact on availability, as measured by the quantity of housing,
would be given by:
[GRAPHIC] [TIFF OMITTED] TN18MY23.006

The percentage change in the quantity of housing, [Delta]Q/Q,
depends on the price elasticity of demand ED (the percentage change in
quantity demanded from a percentage change in price), the price
elasticity of supply ES, and the incremental cost [Delta]C, as a
fraction of the pre-regulation sales price P. The percentage reduction
of quantity is greater as demand and supply are more responsive to
price changes (more price elastic), and the incremental cost
constitutes a larger portion of the sales price before the introduction
of the cost.\82\
---------------------------------------------------------------------------

\82\ The pass-through rate is the proportion of the cost paid by
buyers, which is higher as demand is less price elastic and supply
is more price elastic.
---------------------------------------------------------------------------

Estimates from studies of the price elasticities of demand and
supply vary due to differences in methods, data, and geographies and
time periods examined. Generally, the estimate of the price elasticity
of demand for housing is below -1, as low as -0.2 for low-income
households, but has been estimated to be above -1. Generally, lower
income households have a lower measured price elasticity of demand for
housing. The positive association between income and the absolute value
of price elasticity stems from shelter being a necessary good.\83\
---------------------------------------------------------------------------

\83\ Mayo (1981) shows this to be the case when a household must
consume a minimum amount of housing (a Stone-Geary utility
function).
---------------------------------------------------------------------------

The price elasticity of supply and demand has been estimated at a
wide variety of levels for different housing markets, primarily due to
differences in the ease of building additional units, depending on the
metropolitan area, neighborhood and even type of housing.\84\ The
incremental cost of adopting the 2021 IECC is expected to be
approximately 2 percent of the pre-regulation sales price (a $5,500
incremental cost and $250,000 sales price). Our most cautious estimate
is that the approximately 2 percent increase in construction cost would
reduce the production of homes for FHA-insured borrowers by 1.5
percent, which represents a 0.2 percent reduction of all homes
available to FHA-insured homebuyers.
---------------------------------------------------------------------------

\84\ Gyourko and Saiz (2006) attribute the local variation in
construction activity to more than the cost of materials but also to
local wages, local topography, and the local regulatory environment.
---------------------------------------------------------------------------

This estimate is considered a ``worst-case'' scenario because it
does not account for any of the positive effects of energy-efficiency.
Any adverse impacts on availability would be diminished when there is a
perceptible demand for energy-efficient homes.
In addition, there would be no adverse effects on availability if
FHA-insured homebuyers were able to find close substitutes in other
submarkets. Finding a close substitute may be more difficult in rural
areas where there is less available housing stock. USDA

[[Page 31802]]

guaranteed and direct loans are limited to eligible areas as defined by
USDA and exclude central cities. Thus, there could be a greater
relative burden on Section 502 guaranteed loans: about half of USDA's
guaranteed and direct home loans are to borrowers in rural areas as
defined by the 2010 Census as compared to about one-fifth of FHA
mortgages (AHS, 2019).
However, adoption of the new code is not expected to have any
spillover impacts on other housing submarkets given the relatively
small size of the directly affected FHA and USDA submarkets. The
purchase of new homes by FHA-insured borrowers represents only 2.3
percent of all residential sales in 2020. As a portion of all home
purchases (all homebuyers, new and existing homes), FHA-financed
purchases of new construction range from slightly more than 0 percent
in the Northeast to slightly less than 3.6 percent in the South.
Energy efficiency has also been shown to impart an economic value
to buildings. The willingness to pay for this benefit will vary among
homebuyers. If there is a sufficient proportion who expect to realize
those gains, then there will be a demand for housing built to the 2021
IECC that could partially counteract any adverse impacts on
availability. See the discussions in the Regulatory Impact Analysis at
www.regulations.gov in the ``Capitalization of Energy Efficiency
Standard'' section (p.74).
Empirical studies cited in the RIA suggest there is a statistically
significant and positive influence of energy efficiency on real estate
values.\85\ One study examining the residential market in California
found that a green label adds about 2.1 percent to the value of a home.
This premium is slightly above the costs of bringing a home in
compliance with the green labels (Energy Star, LEED, and EnergyPoint).
---------------------------------------------------------------------------

\85\ Laquatra, J., Housing Market Capitalization of Energy
Efficiency Revisited, 2002.
---------------------------------------------------------------------------

Another study examined the premium placed on the Energy Star
certification on homes in Gainesville, Florida and found that there is
a premium for these homes but that the premium diminishes when the home
is resold; this finding could suggest that energy efficiency is a
motivator for buying newly built homes.\86\ Another two studies
examined the effects of a label, which would be a voluntary option for
the builder, rather than a code, which is obligatory.\87\ In another
study, researchers found that energy performance certificates do not
play a role in determining market value but that energy efficiency
itself is capitalized into housing sales prices (about 2 percent for
every 10 percent reduction of energy consumption).\88\
---------------------------------------------------------------------------

\86\ Bruegge, C., Deryugina, T. and Myers, E., 2019. The
distributional effects of building energy codes. Journal of the
Association of Environmental and Resource Economists, 6(S1), pp.
S95-S127.
\87\ Bruegge et al., 2016; Kahn, Matthew E., and Nils Kok. ``The
capitalization of green labels in the California housing market.''
Regional Science and Urban Economics 47 (2014): 25-34.
\88\ Aydin, Erdal, Dirk Brounen, and Nils Kok. ``The
capitalization of energy efficiency: Evidence from the housing
market.'' Journal of Urban Economics 117 (2020): 103243.
---------------------------------------------------------------------------

A survey by the National Association of Home Builders found that
the median borrower was willing to pay an extra $5,000 upfront to save
$1000/year in utility bills.\89\ This tradeoff would be equivalent to
the resident receiving 10 years of benefits at a 20 percent discount
rate or 30 years of benefits at 25 percent discount rate. A recent
survey of the National Association of Realtors found that sixty five
percent of realtors believed that energy efficiency was valuable in
promoting residential units. (However, the majority of realtors (57
percent) were ``not sure'' as to the impact of energy efficiency on
sales price.) \90\
---------------------------------------------------------------------------

\89\ Ford, Carmel. ``How Much Are Buyers Willing to Pay for
Energy Efficiency?'' Eye on Housing: National Association of Home
Builders Discusses Economics and Housing Policy. April 12, 2019.
https://eyeonhousing.org/2019/04/how-much-are-buyers-willing-to-pay-for-energy-efficiency/.
\90\ National Association of Realtors, REALTORS and
Sustainability Report--Residential, 2021, https://www.nar.realtor/sites/default/files/documents/2021-realtors-and-sustainability-report-04-20-2021.pdf.
---------------------------------------------------------------------------

A study of commercial buildings showed that a study with an Energy
Star certification will rent for about 3 percent more per square foot
and sell for as much as 16 percent more. The authors were able to
disentangle the value of the label itself from the value of energy
savings stemming from increased energy efficiency. Energy savings were
important: a 10 percent decrease in energy consumption led to an
increase in value of about one percent over and above the rent and
value premium for a labeled building.\91\
---------------------------------------------------------------------------

\91\ Eichholz, P., N. Kok and J. Quigley, ``Doing Well by Doing
Good? Green Office Buildings,'' American Economic Review 100:5
(2010): 2492-2509.
---------------------------------------------------------------------------

All of this empirical research shows that there are profit
incentives to providing energy efficiency. Such a price gain would
diminish any adverse effects on the supply of housing, although it is
also evidence that bidding for energy efficiency could reduce
affordability.

Evidence From Prior (2009 IECC) Code Adoption

Examining FHA new construction loans by the level of a state's
energy-efficiency standards can provide a rough indicator of the
potential impact of the IECC on availability. Having required a minimum
standard equal to the 2009 IECC (in 2015), the FHA-insured purchase of
new construction could depend on the strictness of the state-wide code
relative to the 2009 IECC. However, as shown in Table 17, in states
where the state-wide standard is lower than that required by HUD and
USDA, the proportion of FHA loans for new construction appears similar
to states that have adopted stricter codes. For the group where the
state-wide code is at least as stringent as the 2009 IECC, the
proportion of FHA-insured new construction loans is 16.9 percent, which
is slightly higher than the 15.1 percent for the states where energy
codes are below IECC 2009. Despite the cyclical nature of new
construction, there is no compelling evidence that the availability of
newly built owner-occupied housing will be adversely affected.

Table 17--FHA-Insured Single Family Forward Loans, 2021, Grouped by Region and Strictness of State-Wide
Standard, United States
----------------------------------------------------------------------------------------------------------------
New All purchase Percent new
State-wide energy standard construction loans (%)
----------------------------------------------------------------------------------------------------------------
Less than IECC 2009............................................. 14,800 98,300 15.1
Same as IECC 2009............................................... 61,900 445,800 13.9
Higher then IECC 2009........................................... 47,000 226,700 21.0
----------------------------------------------------------------------------------------------------------------
South
----------------------------------------------------------------------------------------------------------------
Less than IECC 2009............................................. 5,400 32,600 16.6

[[Page 31803]]

Same as IECC 2009............................................... 49,390 225,000 21.9
Higher than IECC 2009........................................... 37,900 116,000 32.7
----------------------------------------------------------------------------------------------------------------
West
----------------------------------------------------------------------------------------------------------------
Less than IECC 2009............................................. 8,090 42,275 19.1
Same as IECC 2009............................................... 5,490 32,500 16.9
Higher than IECC 2009........................................... 9,050 73,900 12.3
----------------------------------------------------------------------------------------------------------------
Midwest
----------------------------------------------------------------------------------------------------------------
Less than IECC 2009............................................. 1,310 23,400 5.6
Same as IECC 2009............................................... 5,650 122,000 4.6
Higher than IECC 2009........................................... 165 3,270 5.1
----------------------------------------------------------------------------------------------------------------
Northeast
----------------------------------------------------------------------------------------------------------------
Less than IECC 2009............................................. 0 0 ..............
Same as IECC 2009............................................... 1,410 66,000 2.1
Higher than IECC 2009........................................... 500 33,660 1.5
----------------------------------------------------------------------------------------------------------------

There is some regional variation. In the South, the proportion of
new construction is much higher in states above the IECC 2009 (32.7
percent) than in states below (16.6 percent). In the West, the
proportion of FHA new construction is lower in states with energy codes
above the IECC 2009 (12.3 percent) than in states below (19.1 percent).
A clear pattern is not identifiable in either the Northeast or Midwest.
Diverse climate zones and housing markets could explain why different
regions appear to respond differently to the energy standard.

Variability in Building Practices in Relation to Energy Codes

Note that there is wide variability in enforcement of, or
compliance with, building codes in general. Some states do not adopt
statewide building codes, others adopt for only certain building types
that may exclude single family housing, some states adopt codes with
amendments, while others that have adopted building codes may not
enforce them, either in their entirety or only for certain building
types.\92\
---------------------------------------------------------------------------

\92\ Lawrence Berkeley National Laboratory, The Cost of
Enforcing Building Codes, Phase I, April 2013. Table 1 shows varying
compliance rates: https://www.researchgate.net/publication/282136731_The_Cost_of_Enforcing_Building_Energy_Codes_Phase_1.
---------------------------------------------------------------------------

Conversely, there are a number of above-code energy efficiency or
green building standards that meet or exceed the 2021 IECC that a
growing number of builders are incorporating as standard building
practice. Energy Star for New Homes, historically set at 10 percent
above the current state energy code, but as of January 2023 set at 10
percent over the 2015 IECC across all states, has a new construction
adoption rate of nine percent of all single-family homes nationally.
There are also a smaller number built to the DOE's Zero Energy Ready
Home (ZERH) standards. In addition, certain green building standards
set Energy Star as a minimum requirement. With Infrastructure Reduction
Act tax credits of $2,500 now available for Energy Star Certified
Homes, and $5,000 for DOE Zero Energy Ready Homes, the market share for
these above-code standards is likely to increase.
There is widespread regional variation in adoption of these
standards are not typically mandated by municipalities for single
family home construction. There are regional variations in above-code
standards among builders as well. For example, for Energy Star New
Homes, adoption rates in most states are below five percent, with very
little in the northeast, while in the southwest the share of Energy
Star new homes is much higher, e.g., Arizona is around 40 percent.\93\
---------------------------------------------------------------------------

\93\ https://www.energystar.gov/newhomes/energy_star_certified_new_homes_market_share.
---------------------------------------------------------------------------

In the multifamily sector, some builders build to above code
standards like LEED, Enterprise Green Communities, ICC 700 National
Green Building Standard, PHIUS, the Living Building Challenge or
regional programs like Earthcraft. Most of these programs embed Energy
Star New Construction within their standards while also addressing
other areas of health and disaster resilience requirements. Some
municipalities may require one of these above-code standards for new
construction of multifamily housing. In the affordable housing sector,
each state may also drive the choice of compliance with above-code
standards through their Low-Income Housing Tax Credit Qualified
Allocation Plans (QAPs). State QAPs may call out these above-code
standards specifically or may allocate points to other matching funding
streams that incentivize or require specific above-code standards.

ASHRAE 90.1-2019--Rental Housing

USDA and HUD have preliminarily determined that in light of the
extremely small incremental first costs, or, in many cases, negative
first costs, adoption of ASHRAE 90.1-2019 will not negatively impact
the availability of multifamily units financed or insured through these
programs. Simple paybacks times are extremely low for the small number
of states that will see an increase in first costs, in most cases less
than one year. The estimate of the direct cost of construction of
moving to this code is not greater than zero. Even if there were a
slight increase in construction costs, the estimates of energy savings
are sizeable enough such that the benefits would offset the costs for
property managers. There could be some builders of multi-family
properties who are doubtful of the return and so view the ASHRAE 90.1-
2019 requirement as a net burden. For the hesitant developer, there
remain other incentives to comply: FHA multifamily loans allow a higher
LTV than is common and Low-Income Housing Tax Credits that are
frequently used by

[[Page 31804]]

developers in conjunction with HUD financing often carry a requirement
or incentive for energy efficiency. In addition, FHA's lower Green
Mortgage Insurance Premium provides a strong incentive for developers
to adopt an above-code standard.

V. Implementation

Section 109(d) of Cranston-Gonzalez (42 U.S.C. 12709) automatically
applies to all covered programs upon completion and publication of the
specified affordability and availability determinations by HUD and
USDA. Accordingly, once a Final Determination has been made by HUD and
USDA under section 109(d) (42 U.S.C. 12709(d)) and published,
additional notice and comment rulemaking will not be required for the
covered programs. The new codes, if found not to negatively affect both
the availability and affordability of covered housing, will
automatically apply, subject to administrative actions such as
mortgagee letters, notices, or amendments to handbooks and conforming
regulations that may be required by individual programs.
Based on DOE findings on improvements in energy efficiency and
energy savings, and a subsequent HUD and USDA Final Determination with
respect to both housing affordability and availability, HUD and USDA
programs specified under EISA will implement procedures to ensure that
recipients of HUD and USDA funding, assistance, or insurance comply
with the 2021 IECC and ASHRAE 90.1-2019 code requirements, commencing
no later than 30 days after the date of publication of a Notice of
Final Determination. 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, Notices of
Funding Opportunity (NOFOs), Builder's Certification Form HUD-92541,
and amendments to relevant handbooks. Conforming rulemaking will be
required to update FHA's single family minimum property standards at 24
CFR 200.926d, Public Housing Capital Fund energy standards at 24 CFR
905, and HOME property standards at 24 CFR 92.251, though as noted
above, this would not entail notice and comment rulemaking. USDA will
update minimum energy requirements at 7 CFR part 1924.
To enable these administrative and conforming rulemaking procedures
to be implemented and to provide the industry with adequate time to
prepare for these requirements and incorporate them in project plans
and specifications, proposals or applications, adoption of the new
construction standards described in this Notice will take effect as
follows:
(1) For FHA-insured multifamily programs, the standards set forth
by this Notice are applicable 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, the standards set forth by this Notice are applicable 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 residential new construction projects for which HOME
funds applications are committed by Participating Jurisdictions no
later than 180 days after the effective date of a Final Determination.
(4) For Public Housing Capital Fund new construction projects for
which approvals are submitted the standards set forth by this Notice
are applicable no later than 180 days after the effective date of a
Final Determination.

Alternate Compliance Paths

HUD and USDA will accept certain energy and green building
certifications as evidence of compliance with the standards addressed
in this Notice, provided that they require energy efficiency levels
that meet or exceed the 2021 IECC or ASHRAE 90.1-2019. These may
include standards referenced in one or more HUD or USDA programs, such
as the ICC-700 National Green Building Standard, Enterprise Green
Communities, Energy Star Certified New Homes, Energy Star Indoor Air
Plus, DOE Zero Energy Ready Homes, Leadership in Energy and
Environmental Design (LEED), Living Building Challenge or Passive
House, as well as one or more regional or local standards such as
Earthcraft, Earth Advantage, or Greenpoint Rated New Home.\94\ HUD and
USDA will publish a list of those standards that comply with the
minimum energy efficiency requirements of this Notice. HUD and USDA
will also accept certifications of compliance of state or local codes
or standards for which credible third-party documentation exists that
these meet or exceed the 2021 IECC and ASHRAE 90.1-2019.
---------------------------------------------------------------------------

\94\ Energy Star Certified New Homes Version 3.2 and DOE's Zero
Energy Ready Homes set the 2021 IECC as the baseline standard.
---------------------------------------------------------------------------

VI. Request for Public Comment

HUD and USDA welcome comments on all aspects of this Preliminary
Determination, but are especially interested in comments on the
following subjects:
(1) HUD and USDA are requesting comments on whether the higher
first-costs associated with adopting the 2021 IECC over the current
2009 IECC standard for USDA- or HUD-assisted housing, or relative to
the most recent 2018 IECC, may lower homebuyer options, despite the
significant life-cycle cost savings over the life of the mortgage
described in this Notice, i.e., whether adoption of the 2021 IECC may
limit the availability of such housing to otherwise-qualified buyers or
renters.
(2) HUD and USDA request comments from code officials on the
current status of code adoption in their states, and the anticipated
timetable for adopting the next revision of the IECC and/or ASHRAE
codes, their equivalent, or higher, as well as from code officials in
home rule jurisdictions that may adopt the codes independently of state
action. HUD and USDA wish to establish the extent to which adoption of
the latest IECC and ASHRAE 90.1 standards aligns with state or local
home rule adoption of these codes.
(3) HUD and USDA request comments on the cost benefit analysis
utilized by PNNL as described in Sections II.B and III.B of this
Preliminary Determination.
(4) Anecdotal reports suggest that because manually operated
bathroom fans allowed under the IECC to meet ventilation requirements
rely on occupant action to operate them, these may impact indoor air
quality and the health of occupants. HUD and USDA request comments on
this possible health concern.
(5) HUD and USDA are requesting comment on the extent to which the
2021 IECC air leakage requirements (3 air changes per hour or 5 air
changes per hour at 50 pascals depending on Climate Zone) may present
fire code issues for attached single family homes or low-rise
multifamily properties, and, if such issues exist, cost-effective
solutions that have been developed in the field or are currently being
developed to address them.
(6) HUD and USDA seek comment on the time required for builders and
building designers to familiarize themselves with the new codes, the
training or technical support that may be required by building
professionals and local code officials on the new requirements of the
2021 IECC and ASHRAE 90.1-2019 standards, workforce training needs, and
any other

[[Page 31805]]

issues related to implementation of these standards. Comments on
particular challenges or issues facing rural areas in adoption and/or
implementation of these codes are also requested.
(7) The construction industry has experienced COVID-related supply
chain challenges for certain products and materials, particularly but
not exclusively for lumber products, leading to significant price
increases in such products as framing lumber, plywood, and oriented
strand board (OSB).\95\ HUD and USDA solicit comments on the duration,
persistence and intensity of these price increases, the extent to which
they may impact the cost of energy related products or materials
covered by the IECC or ASHRAE energy codes addressed in this Notice,
and to what extent these supply chain issues may impact implementation
of the codes addressed by this Notice.
---------------------------------------------------------------------------

\95\ Softwood lumber prices in North America, https://www.nrcan.gc.ca/our-natural-resources/domestic-and-international-markets/current-lumber-pulp-panel-prices/13309#panel.
---------------------------------------------------------------------------

(8) HUD and USDA currently provide incentives or require green
building standards for some programs. The agencies are seeking to
maximize alignment between the 2021 IECC and ASHRAE 90.1-2019 and those
green building standards that are encouraged or incentivized through
these programs. During the implementation phase of this Notice, HUD and
USDA will seek certifications from all green building or above-code
energy performance standard-setting bodies as to their establishing
2021 IECC and ASHRAE 90.1-2019 standards as the baseline against which
they measure above-code energy performance. The agencies seek
preliminary comments from current green building or above-code energy
performance standard-setting bodies on their (1) current minimum IECC
and ASHRAE 90.1 requirements; and/or (2) proposed establishment of the
2021 IECC and ASHRAE 90.1-2019 as the baseline for such standards.

VII. Environmental Impact

A Finding of No Significant Impact with respect to the environment
has been made in accordance with HUD regulations at 24 CFR part 50 and
USDA Rural Development regulations at 7 CFR part 1970, which implement
section 102(2)(C) of the National Environmental Policy Act of 1969 (42
U.S.C. 4332(2)(C)). That finding is posted at www.regulations.gov and
is also 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). HUD welcomes and is prepared to receive calls
from individuals who are deaf or hard of hearing, as well as
individuals with speech or communication disabilities. To learn more
about how to make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

Adrianne Todman,
Deputy Secretary, U.S. Department of Housing and Urban Development.
Anthony Shea,
Acting Deputy Secretary, U.S. Department of Agriculture.
[FR Doc. 2023-10596 Filed 5-17-23; 8:45 am]
BILLING CODE 4210-67-P