HUD: New Energy Benchmarking Requirements for Section 8, Multifamily FHA Insured and PRAC Properties

HUD’s Office of Multifamily Housing published a notice in the Federal Register creating a 60-day period for public comment (comments due December 5, 2016) for a new proposed benchmarking regulation. Generally speaking, the proposed policy would require owners of certain HUD-Assisted and FHA insured multifamily properties to provide benchmarking data for energy and water utilities every 3 years or at the occurrence of certain events. Covered properties include:

  • Section 202 Project Rental Assistance Contracts (PRAC)
  • Section 811 PRAC and Project Rental Assistance contracts
  • Section 202/162 Project Assistance Contracts
  • Section 202 Senior Preservation Rental Assistance Contracts
  • Section 8 Housing Assistance Payment contracts
  • Multifamily Housing properties insured under Sections 223(a)(7), 223(f),
    221(d)(3) 221(d)(4), 220, 231, 236, and 241(a).

Note that only properties that have been in existence for at least 12 months and that include 21 housing units or more are covered by this proposed regulation. Properties with less than 21 units are encouraged to submit data, although not required.

Owners will be encouraged to voluntarily submit data to HUD annually but will be required to submit water and energy benchmarking data every 3 years on the following schedule:

  • For HUD-assisted properties with a utility allowance, at the time of a triennial utility allowance baseline calculation;
  • For HUD-assisted properties where there is no utility allowance, every third year at the time of financial statement submission;
  • Prior to issuance of new FHA mortgage insurance under Sections 223(a)(7), 223(f), and 241(a);
  • With a Capital Needs Assessment submission required by the Office of Asset Management and Portfolio Oversight in HUD’s Office of Multifamily Housing Programs on a 10-year cycle;
  • With a Capital Needs Assessment submission required as part of any enforcement action.

If benchmarking data was collected during 2020, for example, that data would suffice for 2021, 2022, or 2023. If reporting was required in the year 2024, however, more recent data would be required. Energy data must be entered using ENERGY STAR Portfolio Manager software, a free web tool provided by the EPA, and electronically submitted to HUD. EPA is still developing a counterpart tool for water metrics, and water data will not be required until that tool is made available.

HUD also notes that it “will consider requests for additional time to submit benchmarking data from owners who experience unexpected delays in obtaining sufficient sample data from utility providers or encounter unforeseeable technical difficulties.”

HUD has dedicated technical assistance resources to help owners collect, track, and analyze energy data. This includes building a website with tools, case studies, and links to federal resources. The utility benchmarking requirement will apply when executing any covered transaction beginning 90 days after OMB approval of the PRA request, and not sooner than April 15, 2017. The first scheduled submission date for a majority of assisted-housing respondents is estimated to occur in 2019. Multifamily Housing will finalize the timing and requirements in a forthcoming Housing Notice that will be published after this notice is approved.

The notice has been expected for some time as part of President Obama’s Climate Action Plan, and is part of HUD’s broader efforts to reduce energy usage in its multifamily portfolio. It is meant to encourage and empower owners to make data-driven decisions that result in reduced operating costs and improved building performance. Other recent and related efforts include standardizing allowance methodologies, offering incentives to owners through the Better Buildings Challenge, lowering mortgage insurance premiums for energy efficient properties, and developing a “pay for success” demonstration program, which should be launched in the next few months.