The National Environmental Policy Act (NEPA) is expansive, exhaustive and inescapable. For developers in the affordable housing segment, HUD approval hinges on demonstrating that a proposed project will comply with the items on their Statutory Checklist prior to a commitment of funding.

NEPA provides widespread protection for the people, wildlife, resources and history of a specific geographic area. A number of federal and state regulatory agencies enforce NEPA, notably the U.S. Department of Housing and Urban Development (HUD). 

HUD requires the demonstration of compliance in 14 different NEPA categories before an agreement can be finalized to expend funds on property “acquisition, construction, conversion, demolition, movement, rehabilitation or repair.”  

First, the good news:

While the prospect of a NEPA review can be daunting, the odds are generally favorable for residential developers. By far the most common outcome is a “Finding of No Significant Impact (FONSI), confirming that the “project will not result in a significant impact on the quality of the human environment.”

An Overview of NEPA Compliance Categories

Historic Preservation 

Any project involving federal funds triggers what’s known as a Section 106 review by the State Historic Preservation Officer (SHPO).  

The SHPO issues findings on whether proposed projects have an adverse effect on historic properties, and if so, what steps might be required to address adverse effects.

Flood Insurance and Floodplain Management

This process begins by checking the Federal Emergency Management Agency (FEMA) floodplain map to determine if the property is within a Special Flood Hazard Area (SFHA) – land located within a 100-year floodplain (an area with a one percent chance of a significant flood in a given year). Flood insurance is required for all properties located within a SFHA.

View the FEMA floodplain map here.

Wetland Protection

While the presence of wetlands is usually obvious from an initial site assessment, a review of the National Wetlands Inventory (NWI) or a consultation with an appropriate governmental agency is recommended. 

HUD discourages both SFHA and wetlands development, but there are exceptions. HUD outlines an eight-step process to determine that there are no practicable alternatives to either floodplain or wetlands development.

Coastal Zone Management and Coastal Barrier Resources 

The Coastal Zone Management Act (CZMA) protects sensitive soils and vegetation in coastal regions. If the state where the proposed project is located has a designated coastal zone, state authorities can assist with confirming that the project does not fall within a CZMA zone, or that development will be consistent with federally-approved state coastal zone management plans.

Approximately 1.3 million acres of land associated with aquatic habitat have been designated within the Coastal Barrier Resources System (CBRS). In most cases, these areas are ineligible for new federally-assisted projects.  

Sole Source Aquifers

A principal or sole source aquifer (SSA) is an underground water source that supplies at least 50 percent of the drinking water consumed in the area overlying it. Environmental Protection Agency (EPA) SSA maps indicate areas where no alternative drinking water source(s) which could physically, legally, and economically supply all those who depend upon the aquifer.  

SSA designation gives the EPA authority to review all proposed federally-financed projects impacting the area to reduce the risk of ground water contamination and health hazards.

Endangered Species

The Endangered Species Act, administered by the U.S. Fish and Wildlife Service and the National Marine Fisheries Service, was enacted in 1973 “to protect and recover imperiled species and the ecosystems upon which they depend.” It contains provisions to ensure that projects authorized, funded or carried out by a federal agency (such as HUD-sanctioned developments) do not result in destruction or adverse modification of critical habitats.  

Learn more here. 

Wild and Scenic Rivers

The Wild and Scenic Rivers Act of 1968 preserves certain rivers with outstanding natural, cultural, and recreational values while also recognizing the potential for their appropriate use and development. The Nationwide Rivers Inventory (NRI) is a listing of more than 3,200 qualifying river segments in the U.S.  

The Council on Environmental Quality (CEQ) provides guidance to federal agencies including HUD regarding projects to ensure that they seek to avoid or mitigate actions that would adversely affect NRI river segments.  

Air Quality

NEPA reviews also encompass issues of air quality, ensuring that developments are not associated with the emission of certain pollutants, air toxics or greenhouse gasses or the storage of hazardous chemicals. HUD may require an environmental impact report (EIR) and, depending on its findings, possibly extensive mitigation steps to offset potential impacts.

Farmland Protection

The Farmland Protection Policy Act (FPPA) of 1981 seeks to minimize the conversion of farmland to nonagricultural uses by programs completed with federal funds or assistance. State-supported projects and those without federal assistance are not subject to the FPPA. The U.S. Department of Agriculture’s Natural Resources Conservation Service (USDA/NRCS) oversees FPPA compliance.

Noise Control and Abatement

HUD has established standards for acceptable noise levels. The HUD Noise Guidebook outlines procedures for conducting noise assessments.  A number of noise mitigation measures, varying in effectiveness and cost, may be employed, including acoustical site planning, architectural design or construction, and hardscape or vegetation-based barriers.

Explosive and Flammable Operations

A blast or explosion hazard evaluation is required to avoid establishing a HUD site near a potentially explosive source such as an above ground storage tank (AST) or a facility manufacturing or handling explosive or fire-prone substances.

HUD’s Acceptable Separation Distance Assessment Tool can be used to calculate an Acceptable Separation Distance (ASD) beyond which an explosion or combustion is not likely to expose individuals to injury or buildings to damage from blast overpressure or thermal radiation. 

Airport Hazards

HUD has established standards to prevent incompatible development in proximity to an airfield, requiring special documentation and potential mitigation steps for projects located within 15,000 feet of a military airfield or 2,500 feet of a civilian airport.

Learn more here.

Contamination and Toxic Substances 

HUD policy dictates that “all property proposed for use in HUD programs be free of hazardous materials, contamination, toxic chemicals and gasses, and radioactive substances, where a hazard could affect the health and safety of occupants or conflict with the intended utilization of the property.”

Failure to document due diligence in this area, such as a Phase I Environmental Site Assessment (ESA) and subsequent activities, such as a Phase II ESA, could result in liability for clean-up costs, third party lawsuits and costly delays.

Environmental Justice

A 1994 Executive Order requires that federal agencies including HUD ensure that actions protect the environment and the health of humans regardless of race, color, national origin or income.

An environmental review should provide evidence that a proposed project will not create an adverse and disproportionate environmental impact or aggravate existing adverse environmental conditions. If the project has the potential to adversely impact low-income or minority populations, documentation of meaningful engagement with the community in a participatory planning process to address those effects must be provided.

Learn more here.

This article draws heavily on the very helpful information published on the HUD Exchange, an online platform providing HUD’s community partners, including residential developers, with information, guidance, services, and tools. More detailed information about all of the items on the HUD Statutory Checklist can be found at the HUD Exchange.