Environmental Review

Environmental Review Requirements

HOME projects, unlike LIHTC projects, are subject to certain Federal environmental review requirements. Therefore, when HOME funding is invested in a tax credit project, the PJ must undertake an environmental review. The presence of tax credits presents important timing issues that the PJ must consider. LIHTC projects are under strict deadlines to meet carryover commitments and for placement in service. To ensure the LIHTC project meets these deadlines, the PJ must be sensitive to the LIHTC time constraints and undertake the environmental review as quickly as possible.

Environmental Review Requirements

Before a PJ can commit any HOME funds to a project, it must conduct an environmental review in accordance with 24 CFR Part 58 (also known as a “Part 58 review”) to ensure that the proposed project does not negatively impact the surrounding environment and that the property site itself is safe for development. The PJ and LIHTC owner are prohibited from taking any “choice limiting action” on the project (such as acquisition, demolition, or construction) until the environmental clearance is secured.

The environmental review is not generally required for the LIHTC program, and therefore it will not have been completed prior to the LIHTC owner’s application to the PJ for HOME funding. Under most tax credit project funding circumstances, the PJ will be considered the Responsible Entity (RE), and the release of funds must be approved by HUD.

PJs may also be subject to state or local environmental review laws. State or local requirements do not pre-empt the Federal standards. Both sets of requirements must be met. Generally, adherence to the more stringent standards (usually the Federal standards) can help to achieve compliance for both.

For more information on the PJ’s responsibilities in performing its environmental reviews in accordance with 24 CFR Part 58, see HUD Notice CPD-01-11, Environmental Review and the HOME Investment Partnerships Program , issued July 17, 2001, and available on the HOME Program website at https://www.hud.gov/program_offices/comm_planning/affordablehousing/programs/home/.

Determining the Level of Environmental Review

The environmental review process is the same for a HOME-LIHTC project as it is for any project that has HOME funding alone. HOME-LIHTC projects most likely will be classified as one of the following:

  • Subject to an environmental assessment (24 CFR 58.36). Multifamily new construction, conversion, or substantial rehabilitation projects are subject to a full environmental assessment, known as the NEPA Environmental Assessment (EA). An Environmental Impact Statement (EIS) may be triggered as a result of the EA, but this is not common among tax credit projects. It is unlikely that an EIS could be completed within the strict deadlines under the LIHTC rules, and such projects are not likely to be awarded credits until the environmental issues are resolved.

    Note: Part 58 defines “major rehabilitation” to include projects where the costs of rehabilitation exceed 75 percent of replacement cost, the project increases density by more than 20 percent, or the project converts nonhousing space to housing use.

  • Categorically excluded from NEPA requirements (24 CFR 58.35). Existing residential projects that are subject to only minor rehabilitation and do not involve increases in density or changes in use are generally classified as “categorically excluded,” and are subject to only Part 58.5 and 58.6 authorities (commonly referred to as the “non-NEPA requirements” or the “Statutory Checklist”). If no environmental compliance issues are found, the project may be converted to exempt (24 CFR 58.34(a)(12)).

Timing for the Environmental Review in a HOME-LIHTC Project

In any project, it is desirable to secure the environmental review quickly because no activity on a project can move forward until it is complete. However, if a project has an LIHTC allocation or that allocation is imminent, PJs will need especially to commence with the environmental review and determine the environmental classification of the project quickly. LIHTC projects are under strict deadlines to meet carryover and for placement in service requirements. Since PJs cannot commit funds and the developer cannot undertake “choice limiting activities” before clearance is secured, PJs need to be able to move quickly to conduct the review, so as not to jeopardize the developer’s ability to meet tax credit deadlines.

  • For some projects, there may be time-saving steps the PJs can take when initiating the environmental review process:
  • For projects with other Federal assistance in addition to HOME, there may be opportunities to cooperate on the environmental review with other state or local entities that might also need to conduct environmental review for the other Federal funding source(s).
  • For projects that are planned for multiple phases (because of tax credit availability or market absorption issues), aggregation is encouraged under Part 58. Aggregation enables the PJ to conduct the review of the entire project up-front. It gives a better picture of environmental impact, and it might save time in review of later phases.

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