New Update: HUD and USDA Announce Adoption of Minimum Energy Standards that will Lower Monthly Costs for Homeowners and Renters

HUD No. 24-089 HUD Public Affairs (202) 708-0685

Policy Update Thursday April 25, 2024

WASHINGTON - Today, the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Agriculture (USDA) announced the adoption of the updated Minimum Energy Standards for new single and multifamily homes. Adoption of these standards will yield significant cost savings for residents, reduce energy use and pollution, improve resident health and comfort, and increase resilience in extreme weather events of both single and multifamily homes. Energy standards use tried and true cost saving insulation, air sealing, and efficient windows, lighting, and heating and cooling systems to lower monthly energy bills for families living in newly constructed HUD and USDA- supported properties.

"Many people have been caught by surprise when utility costs spike. Families should never have to find themselves making hard choices about whether to heat their home in winter or use cooling during a heat wave." said Marion McFadden, Principal Deputy Assistant Secretary for Community Planning and Development. "The most cost-effective moment to invest in common sense energy efficiency is when you're building a new home. These updates don't just benefit the residents of these homes. They benefit us all by reducing carbon emissions that lead to climate change. Emissions savings from these standards is equivalent to taking 46,000 cars off the road every year."

This Notice fulfills a statutory requirement under The Energy Independence and Security Act of 2007, which requires HUD and USDA to jointly 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.

The vast majority of HUD-financed units that will be built to the updated standards are single-family units, and the payback period-the amount of time it takes for homebuyers to start seeing savings through lower energy bills-for their homes is swift. As a result of the updated energy standards, energy efficiency improvements of 37% will cut energy costs by more than $950 per year, saving homeowners tens-of-thousands of dollars over the lifetime of the home. The upfront costs of the energy efficiency improvements can be rolled into an FHA mortgage, which means that after paying for their mortgage, taxes and insurance, families can put almost $400 back in their pocket every year, saving almost $25,000 over a 30-year mortgage or $15,000 after financing. In new multifamily housing that is four stories and above these standards save households $224 per apartment per year.

The Biden-Harris Administration and USDA remain committed to ensuring people have access to safe, decent, and affordable housing in rural America," USDA Rural Development Under Secretary Dr. Basil Gooden said. "Housing is an essential foundation for upward financial mobility and helps address issues related to economic inequality. People everywhere deserve to benefit from affordable energy costs in the places they call home that they can invest back into their families, businesses and communities. Today's announcement marks a step towards building more energy efficient homes for people in rural areas, which is a step that enables us to build a better future for all."

Energy bills are one of the largest costs associated with owning or renting a home, especially for low- and moderate-income families. On average, low-income households spend three times more of their income on energy bills than the national average. 1 in 4 American households - and 50% of low-income households - struggle to pay their energy bills. The impact of implementing the updated energy standards is critically important for low- and moderate-income households, since they are more likely to spend a high 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 fewer resources available for other necessities.

Many parts of the country continue to experience significant increases in extreme hot and cold temperatures and severe weather events due to climate change. These updated energy standards will make homes more resilient to extreme weather, physically durable, and improve efficiency to operate. Energy standards are proven to save lives in extreme heat and cold, especially during a power outage.

The updated minimum energy standards will generate an estimated reduction of as much as 6.35 million metric tons in carbon emissions over 30 years, generating an annual societal cost savings of $13.9 million.

This determination impacts new construction for specific HUD and United States Department of Agriculture (USDA) financed programs, including 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, Section 811 Supportive Housing for Persons with Disabilities, and USDA Direct Home Loan and Guaranteed Home Loan programs.