Rulemaking is a process for developing and issuing rules. The rulemaking process can lead to the issuance of a new rule, an amendment to an existing rule, or the repeal of an existing rule.
Broadly stated, a rule is an agency statement that prescribes a course of conduct or action that must be taken.
The Administrative Procedure Act defines “rule” to mean “the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency and includes the approval or prescription for the future of rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services or allowances therefore or of valuations, costs, or accounting, or practices bearing on any of the foregoing.” 5 U.S.C. § 551.
HUD defines “rule” to mean “all or part of any Departmental statement of general or particular applicability and future effect designed to: (1) Implement, interpret, or prescribe law or policy, or (2) describe the Department's organization, or its procedure or practice requirements.” 24 CFR § 10.2. In this definition, HUD also states that the term regulation is sometimes applied to a rule that has been published in the Code of Federal Regulations. Id.
There are three basic types of rules:
a. Legislative Rules. These rules create legally binding rights and obligations for the agency and the public. These rules are designed to implement, interpret, or prescribe law or policy. A legislative rule is entitled to deference and enforcement by courts, provided the rule (1) was issued in accordance with Administrative Procedure Act (APA) and any agency-created procedural requirements (typically publication in the Federal Register for notice and comment), (2) was issued pursuant to statutory authority, and (3) does not violate any other law (for example, the Constitution or other federal laws).
b. Non-legislative Rules. These rules are of two subtypes:
i. Interpretive Rules. As the name suggests, these rules interpret the meaning of statutes or legislative rules that an agency administers.
ii. Policy Statements. Policy Statements advise the public of how the agency plans to carry out certain discretionary power that it is authorized to exercise.
c. Organizational and Procedural Rules. These rules describe the agency’s structure and the agency’s methods of operation, and the performance of its functions. For example, such rules may delegate authority to make certain decisions to a particular office or official within the agency.
As noted in HUD’s definition of “rule,” rule and regulation have the same meaning. The term “rule,” however, is the term used to describe documents published in the Federal Register. These documents are referred to as proposed rules, interim rules, and final rules. The Office of the Federal Register does not use the term “regulation” to refer to the category of “rules” published in the Federal Register. The term “regulation” is the term used to refer to “rules” that are codified in the Code of Federal Regulations (CFR).
Federal agencies derive their authority to regulate from Congress. Such authority may be provided through a specific law or from an agency’s organic statute. Organic statute refers to the statute that establishes the agency, its functions, and its responsibilities. HUD’s authority to issue regulations is found in section 7(d) of the Department and Housing Urban Development Act (Department of HUD Act), 42 U.S.C. § 3535, which is HUD’s organic statute. Section 7(d) provides as follows:
(d) The Secretary may delegate any of his functions, powers, and duties to such officers and employees of the Department as he may designate, may authorize such successive redelegations of such functions, powers, and duties as he may deem desirable, and may make such rules and regulations as may be necessary to carry out his functions, powers, and duties. (Emphasis added.)
Unless otherwise indicated, the following presents the requirements applicable to the “notice and comment” process for issuing legislative rules.
- Notice and comment rulemaking under the Administrative Procedure Act (APA). The APA sets forth the basic requirements for notice and comment rulemaking (also called “informal” rulemaking), the process generally used by agencies to issue legislative rules. Other statutes, executive orders, or agency rules may impose additional requirements. Although informal rulemaking may seem very formal because of the processes that are encompassed in issuance of rules, the term “formal rulemaking” refers to rules that are developed through a trial-like procedure, which involves hearings that are recorded by transcript. Section 553 of Title 5 of the U.S. Code establishes basic requirements that govern all Federal agencies’ rulemaking.
- Notice and comment rulemaking under HUD’s “Rule on Rules” - 24 CFR Part 10. HUD’s regulations in 24 CFR Part 10 implement HUD’s policy for providing for public participation in HUD’s rulemaking process. Section 553(a)(2) of the APA exempts agencies from notice and comment for agency rules that relate to agency public property, loans, grants, benefits, or contracts. This exemption is referred to as the proprietary exemption. The overwhelming majority of HUD’s programs relate to public property, loans, grants, benefits, or contracts. In 1969, the Administrative Conference of the United States (ACUS) recommended that the APA be amended to eliminate the propriety exemption and ACUS urged agencies administering exempt programs to voluntarily use notice and comment procedure, without legislative action. ACUS is an independent federal agency dedicated to, among other things, promoting wide public participation and efficiency in the rulemaking process. HUD responded to the request of ACUS to voluntarily waive the proprietary exemption, through the establishment of the regulations in 24 CFR Part 10. In establishing these regulations, HUD states in the first section of the regulations that “[i]t is the policy of the Department of Housing and Urban Development to provide for public participation in rulemaking with respect to all HUD programs and functions, including matters that relate to public property, loans, grants, benefits, or contracts even though such matters would not otherwise be subject to rulemaking by law or Executive policy.” (24 CFR § 10.1)
- Exemption from notice and comment under the APA. Section 553(b) of the APA provides that notice and comment is not required when the agency finds (and incorporates the finding and a brief statement of reasons therefore in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.
- Exemption from notice and comment under HUD’s Rule on Rules. HUD’s Rule on Rules adopts the “good cause” exception in the APA. Section 10.1 of HUD’s regulations provides in relevant part that “[u]nless required by statute, notice and public procedure will be omitted if the Department determines in a particular case or class of cases that notice and public procedure are impracticable, unnecessary or contrary to the public interest. In a particular case, the reasons for the determination shall be stated in the rulemaking document. Notice and public procedure may also be omitted with respect to statements of policy, interpretative rules, rules governing the Department's organization or its own internal practices or procedures, or if a statute expressly so authorizes.”
- Notice of Proposed Rulemaking (NPRM). In notice and comment rulemaking, an agency must first issue a NPRM and provide an opportunity for public comment on its proposed regulations before the agency can issue a final rule. As noted in the preceding section, there are exceptions to the requirement for notice and comment. The NPRM explains the need, source of authority, and reasons for the regulations being proposed either as new regulations or as changes to existing regulations. The NPRM will contain either the text of a proposed rule or a description of the subjects and issues involved. The agency’s explanation of its proposal may include how the agency chose its proposed solution to the problem or alternative solutions that the agency is considering. Although the public may comment on anything in the proposal, HUD sometimes includes specific questions on which HUD particularly seeks feedback and data. The NPRM also includes such information as the deadline for public comments, how and where to file comments, and people to contact for further information about the proposal.
- NPRM publication. When an agency issues a NPRM, it is published in the Federal Register, which provides online and print access to the official text of federal laws, presidential documents and agency regulations and notices. The Federal Register is the daily journal of the Federal Government that contains Federal agencies rules, proposed rules, and public notices. Publication in the Federal Register provides the requisite legal notification of new regulations and new policy or regulatory changes or policy changes made by Federal agencies. The Federal Register is online and daily publications can be found at http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=FR.
- Congressional prepublication review for HUD rules issued for comment. Before HUD can publish a rule for comment, or a proposed rule or an interim rule which solicits comment, under section 7(o)(2) of the Department of HUD Act, HUD must submit its rule to its House and Senate authorizing committees (House Financial Services and Senate Banking) for a review period of 15 calendar days, which includes weekends and holidays and is not dependent upon Congress being in session. Section 7(o)(2) provides that the House and Senate authorizing committees are to select from HUD’s Semiannual Agenda of Regulations the rules that the committees wish to review. However, the Committees have generally requested to see all HUD rules issued for comment.
- Public comment period. HUD’s regulations in 24 CFR Part 10 provide that generally HUD will publish a NPRM with a 60-day public comment period. Sometimes, given the interest in or complexity of the subject matter, HUD may provide a longer comment period. Part 10 also provides for HUD to issue a rule for effect (interim or final) if HUD can establish that seeking public comment is “impracticable, unnecessary or contrary to the public interest.” Members of the public may request more time to comment; and HUD may grant this request if a clear reason is presented that informs HUD of the benefit of extending or reopening the comment period.
- Public comments. The volume and length of comments received in response to a NPRM vary depending on the nature and scope of the proposed rule changes. HUD may receive thousands of comments or only a few, and individual comments may be hundreds of pages or only a paragraph or two. Public comments are generally very helpful to agencies in making final decisions about new proposed regulations or proposed regulatory changes. The public may offer better ways to achieve policy objectives or may identify problems or deficiencies or weaknesses with the proposal presented. Generally, rules are improved through public participation. Sometimes, commenters offer interesting statements or suggestions but do not include data or an analysis that would aid in determining whether to pursue the commenters’ statements or suggestions. While anyone may comment on agency rules, and all are welcome to comment, the ultimate decision on whether to pursue new regulations or regulatory changes must be based on a foundation that supports the final decisions made. Additionally, an agency is not required to respond to every comment or change a rule in response to comment, but the agency must consider comments with an open-mind and respond to relevant comments. See Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519, 551 (1978), Advocates for Highway & Auto Safety v. Federal Highway Admin., 28 F.3d 1288, 1292-1293 (D.C. Cir. 1994), Center for Auto Safety v. Peck, 751 F. 2d. 1336, 1355 n 15 (D.C. Cir. 1985), Independent U. S. Tanker Owners Committee v. Lewis, 690 F.2d 908, 910, 920 (D.C. Cir. 1982), Portland Cement Ass'n v Ruckelshaus, 486 F. 2d. 375, 393 (D.C. Cir. 1973), cert denied, 417 U.S 921 (1974). Included in this document is a section on how to prepare effective comments. The government wide portal, Regulations.gov, found at www.regulations.gov, is intended to make it easier for the general public to participate in the federal regulations review process. Users of this website can search by agency or word to find proposed rules and other policy documents open for public comment. Search results include a docket ID, Federal Register citation and date for when the regulation was first published, and final date for comments. The results also have links to view the Federal Register announcement in text or PDF formats and a link to a Web form for submitting comments. The full docket of materials includes the text of all public comments received.
- Reply comments. Using Regulations.gov allows for reply comments, in which members of the public may respond to each other’s initial comments. Reply comments are especially valuable because they allow the public to point out flaws in other parties’ initial comments.
- Public docket. The rulemaking docket is the electronic file in which HUD places its rules and related materials (e.g., the NPRM, any extensions of comment periods, regulatory impact analyses, and final rules), supporting documents that it prepares, and public comments, replies, and ex parte presentations related to the rulemaking. The public dockets for HUD’s rules are available on Regulations.gov.
- Logical outgrowth test. The APA notice and comment process recognizes that changes may be made to the proposed rule based on the public comments received, but the courts have required that any changes made in the final rule be of a type that could have been reasonably anticipated by the public – a logical outgrowth of the proposal. If a change is not a logical outgrowth of the proposal in the NPRM, an agency is required to provide the public with a further opportunity for comment.
- The final rule. After the comment period closes and public comments have been reviewed and analyzed, the agency must decide whether to proceed to issue a final rule based on the proposed rule or based substantially on the proposed rule, issue an interim rule, which is a rule for effect but for which public comment is generally taken (and also referred to as an interim final rule), issue a new or modified proposal, withdraw the proposed rule, or take no action on the proposal. A final rule must include an explanatory preamble and the rule text. The preamble includes a response to the significant, relevant issues raised in public comments and a statement providing the basis and the purpose (i.e., an explanation) of the rule. Agencies are not required to respond to each commenter; similar comments may be grouped together with an opening statement such as “several commenters suggested that.”
- Final rule publication. The final rule is published in the Federal Register. In addition to the publication in the Federal Register, the final rule is also posted on the agency’s docket file in www.regulations.gov.
- Effective date. Section 553 of the APA provides that a “substantive” rule for effect (a final rule or interim final rule) shall be published not less than 30 days before its effective date except the 30-day delayed effective date shall not apply to: a substantive rule which grants or recognizes an exemption or relieves a restriction; interpretive rules and statements of policy; or a rule for which an agency presents good cause to provide an effective date less than 30-days following publication in the Federal Register. This delay allows affected parties time to come into compliance with the new rules. For the same reason, agencies sometimes will set compliance dates that are later than the effective date of the rule. Section 7(o)(3) of the Department of HUD Act provides that no rule issued for effect (an interim or final rule) can take effect earlier than 30 days after publication of the rule. Section 7(o)(3) also provides that for a rule that imposes a civil money penalty, the rule may not become effective until after the expiration of a public comment period of not less than 60 days. Section 7(o)(4) of the Department of HUD Act provides that the delayed effective dates required by section 7(o)(3) may be waived upon the written request of the Secretary of HUD to the Chairs and Ranking members of HUD’s House and Senate authorizing committees (the House Financial Services Committee and the Senate Banking Committee). The Congressional Review Act, 5 U.S.C. 801 through 809, provides that major rules— those rules that have a $100 million impact on the economy or a major impact on an industry, government or consumers, or those affecting competition, productivity or international trade—cannot go into effect until 60 days after the date of publication. For all final rules, whether major or not, the Congressional Review Act requires that before any rule goes into effect on the date planned by the agency, the agency is required to submit a “rule report” to Congress (to the Speaker of the House, and President of the Senate) and the Government Accountability Office (GAO) for review. A rule report includes a copy of the rule; a concise summary of the rule, including whether the rule is “major”; and the effective date of the rule. The Congressional Review Act applies to all final rules, with exceptions including rules of particular applicability; orders (e.g., adjudications, permits, licenses); rules relating to agency management or personnel; and rules of agency organization, procedure or practice that do not substantially affect the rights or obligations of non-agency parties.
Agencies may take steps in addition to the minimum requirements of the APA to increase or improve opportunities for public participation in the rulemaking process and to obtain that participation very early in the development process. The principal additional steps include the following:
- Solicitation of Comment or Information. From time-to-time, HUD may issue a notice in the Federal Register on a matter in which HUD is considering undertaking rulemaking or other administrative action. The notice describes the issue of interest to HUD and HUD requests data, comments, and other information from the public relevant to the issue presented. Responses assist HUD in determining an appropriate course of action--which may or may not involve rulemaking. Examples of this type of document are “HUD Administrative Fee Formula – Solicitation of Comment,” published in the Federal Register on June 26, 2015, at 80 FR 36832, and “Federal Housing Administration (FHA) Single Family Quality Assurance – Solicitation of Information on Quality Lending Practices,” published in the Federal Register on July 9, 2015, at 78 FR 41075.
- Advance Notice of Proposed Rulemaking (ANPRM). An ANPRM is a notice that seeks early input on a contemplated rulemaking before the proposed rule (NPRM) is issued. Early input often assists in the determination of whether to proceed with the contemplated rulemaking. An example of an ANPR issued by HUD is “Establishing a More Effective Fair Market Rent (FMR) System; Using Small Area Fair Market Rents (SAFMRs) in Housing Choice Voucher Program Instead of the Current 50th Percentile FMRs; Advanced Notice of Proposed Rulemaking,” published in the Federal Register on June 2, 2015, at 80 FR 31332.
- Supplemental Notice of Rulemaking. From time to time, additional public comment may be solicited on a NPRM or an interim final rule before a decision is made to issue final regulations. Even if another round of comment on the proposals is not required, additional comments assist in further focusing the final regulations to be issued or deciding how to address new information or changing circumstances. For example, HUD sought additional public comment on its Emergency Solutions Grants program interim rule through a notice titled “Emergency Solutions Grants (ESG) Program, Solicitation of Comment on Specific Issues,” published on June 3, 2015, at 80 FR 31538.
- Public meetings. Public meetings before or after a proposal is issued can be helpful for a variety of reasons. Public meetings offer the opportunity for interaction with and among participants with different views on the issues involved. A record is created summarizing the public meeting for the rulemaking records.
The Office of Information and Regulatory Affairs (OIRA) was established by Congress in 1980 through the Paperwork Reduction Act (PRA) for the purpose of reviewing proposed collections of information and developing government-wide information policies. Located within the Office of Management and Budget (OMB), OIRA’s responsibilities grew to include reviewing agency rulemakings under President Reagan’s Executive Order 12291 (E.O. 12291). E.O. 12291 required that executive branch agencies submit virtually all proposed rules and final rules to OIRA for review.
Executive Order 12866 (Regulatory Planning and Review), signed by President Clinton in September 1993, replaced President Reagan's E.O. 12291 and remains the executive order that governs OIRA review of rules. E.O. 12866 establishes the principles agencies must follow when developing regulations, including encouragement of the use of cost-benefit analysis, risk assessment, and performance-based regulatory standards. E.O. 12866 also establishes the regulatory planning process for each agency, delegating authority to OIRA to coordinate agency rulemaking efforts with the regulatory priorities of the President.
With respect to review of individual rules, Executive Order 12866 provides that OIRA will review “significant regulatory actions” as this term is defined in the executive order. A “significant regulatory action” as defined by E.O. 12866 generally is any regulatory action that is likely to result in a rule that may:
- Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities;
- Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;
- Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or
- Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive order.
A rule that has an annual effect on the economy of $100 million or more is referred to as an economically significant rule. OIRA generally has 90 days to a review a rule, but such time period may be less or more depending upon the length and complexity of the rule, as well as public or interagency interest.
Almost all HUD rules, because of their budgetary implications, (i.e., involving grants, loans, or financial assistance) are subject to OIRA review under Executive Order 12866.
Information about OMB-OIRA can be found at https://www.whitehouse.gov/omb/inforeg_regmatters.
How does the Regulatory Flexibility Act and the Rule of Chief Counsel for Advocacy of the Small Business Administration impact agency rulemaking?
The Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA), requires federal agencies to review regulations for their impact on small businesses and consider less burdensome alternatives. The RFA requires that agencies determine, to the extent feasible, the rule's economic impact on small entities, explore regulatory options for reducing any significant economic impact on a substantial number of such entities, and explain their ultimate choice of regulatory approach. Unless an agency certifies that a rule does not have a significant economic impact on a substantial number of small entities, the RFA requires a formal analysis of the potential adverse economic impacts on small entities.
The Small Business Administration’s Chief Counsel for Advocacy must review proposed and final rules anticipated to have a significant economic impact on a substantial number of small entities. NPRMs and final rules generally contain a regulatory flexibility analysis for this purpose.
The Paperwork Reduction Act (PRA), enacted in 1980 and amended in 1995, is designed to reduce the total amount of paperwork burden that the Federal Government imposes on private businesses and citizens. As noted earlier, the PRA established OIRA, and OIRA oversees agency compliance with the PRA. Agencies are subject to the PRA if they seek to collect information from 10 or more individuals or entities. The fact that the collection does not involve paper (it may be any form of collection) or that the collection is voluntary on the part of the individual or entity does not exempt the agency from compliance with the PRA. The PRA imposes Federal Register notice and comment procedural requirements on agencies that seek to collect information from the public. Agencies must obtain approval from OIRA, in the form of an OMB control number, before they may collect information from the public.
Therefore, if a rule would impose an information collection on the public, such as by requiring a form to be filled out or certain records to be maintained, HUD must obtain OMB approval. The notice and comment process may be satisfied by the notice and comment processes required of a rule or involve a separate notice and comment process recorded in the Federal Register. The OMB approval process can take approximately 120 days (less under emergency circumstances). HUD’s existing OMB-approved information collection requests are available here: http://www.reginfo.gov/public/do/PRAMain
The Unfunded Mandates Reform Act (UMRA) of 1995 was enacted in an effort to reduce the costs associated with federal imposition of responsibilities, duties, and regulations upon state, local, and tribal governments and the private sector without providing the funding appropriate to the costs imposed by those responsibilities. Title I of UMRA established new procedures designed to ensure that Congress fully considers the potential effects of unfunded federal mandates before imposing them in legislation.
Title II of UMRA contains requirements imposed on covered federal agencies during the rulemaking process. Specifically, the act requires Cabinet departments and independent agencies (but not independent regulatory agencies) to, among other things:
- Prepare a written statement containing specific descriptions and estimates for any proposed rule or any final rule for which a proposed rule was published that includes any federal mandate that may result in the expenditure of $100 million or more in any year by state, local, or tribal governments, in the aggregate, or the private sector. One of the items required in the written statement is a qualitative and quantitative assessment of the anticipated costs and benefits of the mandate (Section 202);
- Identify and consider a reasonable number of regulatory alternatives and select the least costly, most cost-effective, or least burdensome alternative (or explain why that alternative was not selected) for each rule for which a written statement is prepared (Section 205);
- Develop a plan in which agencies provide notice of regulatory requirements to potentially affected small governments (Section 203); and
- Develop an effective process to permit elected officers of state, local, and tribal governments (or their designees) to provide input in the development of regulatory proposals containing significant intergovernmental mandates (Section 204).
UMRA does not apply to conditions for federal assistance or duties stemming from participation in voluntary federal programs. Since the majority of HUD’s programs are federal assistance programs and are voluntary, UMRA does not apply to these programs.
Depending on the subject matter of the rule, there are other statutes and executive orders that may require an agency to make additional findings and/or certifications and may require coordination with other agencies. One such requirement is an environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321).
In addition to authorizing rulemaking through legislation, as noted earlier in this Overview, under section 7(o) of the Department of HUD Act and in accordance with Congressional requests pursuant to that section, HUD must submit all rules issued for comment to HUD’s Congressional authorizing committees for a 15-day prepublication review. Rules for comment include proposed rules and interim rules. Under the Congressional Review Act, agencies must submit final rules to Congress. The Congressional Review Act also provides an expedited legislative process by which Congress can overturn a rule, but a rule can only be overturned by a bill passed by both the House and Senate, and signed by the President. Congress can also use a variety of processes as part of its oversight of agency action, including holding hearings, issuing reports, or adopting legislation.
Under the APA, a rule can be challenged in court on the basis that it is arbitrary, capricious, an abuse of discretion; that it is contrary to the Constitution or a statute; or that the agency failed to follow required legal procedures. Even if a court does not overturn an agency’s rule for one of these reasons, it may send the matter back for further consideration or explanation by the agency. The APA also provides that an agency can be sued to “compel agency action unlawfully withheld or unreasonably delayed.” 5 U.S.C. 706(1).