Topic Question
Minimum Energy Standards

Why are energy standards important?

Energy standards have been documented as the single most effective means of upgrading the efficiency of buildings. By significantly lowering energy costs, energy standards help support housing affordability. Energy standards also contribute to improved health, including lower asthma rates, reduced respiratory symptoms, and generally benefit health impacts for residents. Lastly, more energy efficient homes have been shown to enable residents to improve the “passive survivability” of a home in the event of extreme heat and cold events and related power outages.

Minimum Energy Standards
Minimum Energy Standards

How can the adoption of updated energy standards lower costs for American families?

The adoption of updated energy standards lowers costs for American families by reducing monthly energy bills and providing health benefits. On average, families will save $80/month in homes built to the 2021 IECC rather than the 2009 IECC. However, the benefits go beyond savings on energy bills as energy efficient buildings are shown to improve indoor air quality, control humidity levels to prevent mold, and support mental health by improving physical comfort[1]. These health impacts equate to reduced medical costs for families and an improved quality of life, aligning with HUD’s mission to provide quality, affordable homes for all.

1 Health and Safety Benefits of Clean Energy | Department of Energy

Minimum Energy Standards
Minimum Energy Standards

Why are energy standards particularly important to HUD?

Housing affordability is critically important for the low-income households HUD serves through many of its programs. These households often face inequitable energy burdens, meaning that they spend a greater percentage of their income on energy bills each month. On average, these households spend 2.6 times more of their income on energy bills than the national average, which results in less funds available for other necessities. For example, a study from American Council for an Energy-Efficient Economy (ACEEE) in 2020 found that low-income households in Baltimore experience an energy burden above 21.7%, seven times the national median burden.

Minimum Energy Standards
Minimum Energy Standards

Why is HUD updating these energy standard requirements now?

The Energy Independence and Security Act of 2007 amended the Cranston Gonzalez National Affordable Housing Act to require HUD (along with USDA) to adopt the latest energy standards, contingent on a determination that they will not negatively impact the affordability and availability of the covered homes. This Notice brings HUD into compliance with the statute.

Minimum Energy Standards
Minimum Energy Standards

What standards are covered by this Notice?

HUD is required by statute to consider adopting the latest version of the IECC and ASRHAE 90.1 standards if the Department determines that the revised standards do not negatively affect the availability or affordability of new construction. This Notice specifically requires the adoption of the 2021 IECC and ASHRAE 90.1-2019 as a result of the favorable availability and affordability analysis.

Minimum Energy Standards
Minimum Energy Standards

How do the standards covered by this determination compare with previous standards?

Energy standards are updated every three years. Homes built to HUD’s newly adopted standards – the 2021 IECC and ASHRAE 90.1-2019 – are estimated by the Department of Energy to be 34.3 percent and 22.5 percent more efficient, respectively, than HUD’s previous requirements, the 2009 IECC and ASHRAE 90.1-2007. Additionally, DOE found the 2021 IECC to have national energy cost savings of 8.66% above the 2018 standard. For ASHRAE, DOE found the 2019 standard to have national energy cost savings of 4.3% compared to ASHRAE 90.1-2016.

Minimum Energy Standards
Minimum Energy Standards

Which HUD programs are impacted by this Notice?

By statute, the determination impacts specific HUD financed programs. These include FHA-insured single family and multifamily homes, Housing Trust Fund, HOME Investment Partnerships Program, Rental Assistance Demonstration (RAD), Project Based Vouchers, Public Housing Capital Fund, Capital Fund Financing Program, Choice Neighborhoods, Section 202 Supportive Housing for the Elderly, and Section 811 Supportive Housing for Persons with Disabilities.

Minimum Energy Standards
Minimum Energy Standards

Does this Notice impact both new and existing housing?

No. The Notice only applies to new multifamily and single-family construction. Additionally, manufactured housing is not covered by this Notice. The most effective time to implement energy standards is at construction, which is why these standards do not apply to renovation projects. Later remodeling for efficiency is significantly more expensive.

Minimum Energy Standards
Minimum Energy Standards

How many new housing units will this Notice impact annually?

HUD estimates approximately 165,000 new housing units could be impacted by this Notice each year. An estimated 150,000 units are new single family or low-rise multifamily housing units covered by the IECC, while an estimated 15,000 units are larger multifamily housing covered by ASHRAE 90.1. Additionally, an estimated 150,000 are HUD-financed, while 15,000 are USDA-financed. The largest single category of new housing likely to be impacted by the Notice is FHA-insured multifamily and single family homes (140,000 units).

Minimum Energy Standards
Minimum Energy Standards

What are the affordability benefits to HUD-USDA borrowers and renters? How will this benefit me as a homeowner or renter?

On a national average, a homebuyer can expect to save an estimated $960 on their energy bills in the first year, or a total of $25,100 over the life of a 30-year mortgage. HUD estimates increased downpayment and other closing costs of $550 and increased mortgage payments of just over $35/month. The impacts will vary across climate zones, states, and localities depending on changes in market conditions; however, HUD found the standards to be affordable and cost effective within each state.

Minimum Energy Standards
Minimum Energy Standards

Are there specific examples HUD can share about these cost savings?

• In Florida, a hot-humid state, a homebuyer can expect to save an estimated $45/month on their energy bills, or a total of $14,700 over the life of a 30-year mortgage. HUD estimates increased downpayment and other closing costs of $330 and increased mortgage payments of just over $20/month. As a result, the net savings to the homebuyer will be an estimated $25/month – enabling the homebuyer to pay...
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Minimum Energy Standards

Will HUD-USDA accept third party green building certifications that may already be required or incentivized as acceptable compliance paths for these standards?

Yes, contingent on evidence provided to HUD that the green building certification sets the 2021 IECC and ASHRAE 90.1-2019 as mandatory minimum standards, or a determination from DOE or EPA that the certification achieves a performance level equal to or greater than these standards. HUD will publish an annual list of the green building standards that meet or exceed the 2021 IECC and ASHRAE 90.1-2019. If a covered program incentivizes or encourages a green building standard that does not meet these standards, the developer is still required to meet the 2021 IECC or ASHRAE 90.1-2019 standard.

Minimum Energy Standards
Minimum Energy Standards

Why is HUD not requiring the newer 2024 IECC and ASHRAE 90.1-2022 standards? ASHRAE 90.1-2022 has already been determined by the Department of Energy (DOE) to be more energy efficient than the 2019 standard and the 2024 IECC is expected to be published in early 2024.

HUD will accept any standard that meets or exceeds the efficiency of the 2021 IECC and ASHRAE 90.1-2019, based on a Department of Energy (DOE) energy efficiency analysis. The 2024 IECC has not yet been published; once published and DOE has determined that it is more efficient than the previous version, HUD and USDA will accept this edition as a compliance path for the 2021 IECC. ASHRAE 90.1-2022 is already in compliance, since DOE recently determined that it is more efficient than ASHRAE 90.1-2019.

Minimum Energy Standards
Minimum Energy Standards

In the event of a materials shortage, what can builders do to meet the HUD requirement?

In the event of a materials shortage that impacts the ability of builders to comply with the new IECC or ASHRAE 90.1 standards, builders should contact HUD or USDA with information on the product shortage. HUD will publish a Notice acknowledging possible material shortages and provide options for builders to comply with the new standards.

Minimum Energy Standards
Minimum Energy Standards

How many states have already adopted either the 2021 IECC or ASHRAE 90.1-2019?

As of March 2024, five states have adopted a standard that meets or exceeds the 2021 IECC. Another five states have adopted the 2021 IECC, but with amendments. Additionally, at least 20 states are actively considering adoption of the 2021 IECC. For ASHRAE 90.1-2019, 10 states and the District of Columbia have adopted a version that meets or exceeds ASHRAE 90.1-2019. Two additional states adopted...
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Minimum Energy Standards

What happens if my state has not adopted these standards? How will these standards impact construction in my state?

States that require an energy standard that does not meet the 2021 IECC for residential buildings or ASHRAE 90.1-2019 for commercial buildings must still comply with the requirements of this Notice. HUD plans to support this Notice with technical assistance and training to better enable builders, architects, and engineers to meet these new energy standard requirements.

Minimum Energy Standards
Minimum Energy Standards

What tax credits or rebates are available to support homebuilders in meeting these standards?

The Inflation Reduction Act (IRA) significantly expanded and extended tax credits and other financial incentives for energy efficient upgrades to both new and existing homes...
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Minimum Energy Standards

What is the timing of this requirement for projects to utilize these new energy standards?

The implementation timeline varies by program and extended compliance timeframes were incorporated based on industry comments during the public comment period. The implementation timeline is as follows:...
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Minimum Energy Standards

Where can I go to learn more about IECC and ASHRAE standards?

More information on the IECC and ASHRAE standards can be found at https://training.energycodes.gov/ui/catalog/219. This is the Resource Hub developed by DOE’s Building Energy Codes Program.

Minimum Energy Standards
Minimum Energy Standards

Will HUD offer Technical Assistance or Support?

Yes, HUD is in the process of developing a technical assistance and training program to support implementation. Training and technical assistance will be offered to impacted builders, developers, code officials, as well as appraisers and other stakeholders. Additional technical assistance is also available from the...
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Minimum Energy Standards

Can the homeowner’s additional upfront expenses for a new IECC 2021-compliant home be reduced by financing FHA’s Upfront Mortgage Insurance Premium (MIP) in the mortgage?

Yes, many FHA borrowers can ultimately finance the 1.75% upfront MIP in their mortgage, rather than incurring this additional immediate out of pocket expense at the time of their home purchase. By financing the upfront MIP in their mortgage, the FHA homebuyer will save an estimated $120 in upfront costs resulting from the additional costs of the energy efficient home’s purchase price. As a result, the homebuyer can reduce...
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Minimum Energy Standards

How much longer will it likely take me to save for the additional upfront down payment required to finance this energy efficient home?

The amount of time it takes to save for a down payment will depend on the income of the household and housing prices in the location where the household wishes to purchase a home. At today’s median FHA homebuyer income, an individual wishing to buy a median-priced FHA new home will need to save at a personal savings rate of 2.4% of income up to 7.8 years to save up for...
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Minimum Energy Standards

What interest rate does HUD rely on for the affordability analysis?

HUD primarily relies on a nominal interest rate of 5.3%; however, the Final Determination also includes a scenario with a 6.5% nominal interest rate. HUD found each of these scenarios to be affordable. The 5.3% nominal rate reflects the approximate two-year Freddie Mac average rates. Additionally, this aligns with the 5% rate currently established in the Department of Energy’s cost effectiveness methodology, which HUD aligns with for this analysis.

Minimum Energy Standards
Minimum Energy Standards

HUD relies largely on the Department of Energy’s cost effectiveness analysis of the 2021 IECC; however, two other independent analyses found different results. What is the reason for these differences?

DOE’s analysis received extensive public and interagency review before it was published. However, HUD is aware of and has extensively reviewed third-party analyses of the 2021 IECC. There is significant alignment between these reports and DOE with regard to energy savings: they all show comparable results for energy and cost savings. However, significant differences are found in....
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Content current as of April 25, 2024.