MEMORANDUM FOR: CPD Field Directors

Multifamily Housing Field Directors

Public Housing Field Directors

Field Environmental Officers

Program Environmental Clearance Officers

FROM: Richard H. Broun, Director, Office of Community Viability, DPV

SUBJECT: Highlights of changes to 24 CFR part 58 and related conforming
changes to 24 CFR parts 50, 574, 582, 583, 970

This memorandum highlights the final rule changes published in the
Federal Register on September 29, 2003 (68 FR 56115 -- 56131) to
environmental regulation at 24 CFR Part 58 --- "Environmental Review
Procedures for Entities Assuming HUD Environmental Responsibilities"
(hereafter Part 58). The rule will be effective October 29, 2003. The
rule updates the list of 24 HUD programs and related assumption
authorizations, makes conforming changes to environmental provisions in
certain program regulations with a cross-reference to Part 58, and
otherwise updates and clarifies HUD's environmental policy and
procedures including conforming changes to HUD's regulations at 24 CFR
part 50, which govern when HUD staff performs the environmental review.
The final rule is posted on the HUD Environmental Website at:
<http://www.hud.gov/offices/cpd/energyenviron/environment/lawsandregs/regs/part58/changes.pdf>

Two major changes are found at §§ 58.22 and 58.5(i)(2):

\(1\) Section 58.22 clarifies that [all]{.underline} project
participants are prohibited from undertaking projects or activities
pending HUD's approval of the recipient's request for release of funds
if the activity or project would have an adverse environmental impact or
limit the choice of reasonable alternatives. Previously there was some
confusion as to whether the limitations applied to all the partners in
the project. However, §58.22 clearly and unambiguously states that
limitations on activities pending environmental clearance apply to
recipients and any participator in the development process, including
public or private nonprofit or for-profit entities, or any of their
contractors; and

\(2\) Section 58.5(i)(2) states HUD's policy that a project site is free
of hazardous materials that could affect the health and safety of the
occupants and specifies the criteria necessary in an environmental
review to support HUD's policy. These changes were made to conform to
the longstanding provision at 24 CFR 50.3(i). HUD regulations do not
require an ASTM Phase I analysis, although a Phase I report or
equivalent analysis is a possible means for complying with §58.5(i)(2).

All changes to 24 CFR part 58, as well as conforming changes to 24 CFR
part 50 are highlighted in the attachment.

Attachment

**Highlights of Changes to 24 CFR part 58 (68 FR 56115, September 29,
2003):**

-   Programs and activities subject to Part 58 has expanded. The
    Supplementary Section of the rule lists the names of the 26 HUD
    programs subject to Part 58 (see page 56125). Section 58.1(b)
    provides the specific statutory authority allowing these programs to
    use Part 58 procedures.

-   A new provision at §58.1(c) clarifies that activities assisted with
    repayments to a revolving loan fund initially assisted with HUD
    funds are subject to the environmental review requirements only if
    the HUD funding program regulation continue to treat the activities
    as subject to the Federal requirements.

-   Terms, abbreviations and definitions have been revised to reflect
    conformity with the applicable programs and activities subject to
    Part 58.

-   A new section at § 58.4(c) clarifies that under NAHASDA and Section
    184 program, Indian tribes have a choice whether or not to assume
    environmental responsibilities under Part 58.

-   HUD environmental standards in §58.5 (i)(2) replaces a reference to
    the obsolete HUD Notice 79-33 on toxic chemicals and radioactive
    materials with updated requirements regarding contamination
    including a policy that project sites be free of contamination that
    could affect the health and safety of occupants or conflict with the
    intended utilization of the property. The new requirement is similar
    to that identified in the longstanding policy at 24 CFR 50.3(i), and
    reads:

> §58.5 (i) [HUD environmental standards**.**]{.underline}
>
> \* \* \*

(2)(i) Also, it is HUD policy that all properties that are being
proposed for use in HUD programs be free of hazardous materials,
contamination, toxic chemicals and gases, and radioactive substances,
where a hazard could affect the health and safety of occupants or
conflict with intended utilization of the property.

\(ii\) The environmental review of multifamily housing with five or more
dwelling units (including leasing), or non-residential property, must
include the evaluation of previous uses of the site or other evidence of
contamination on or near the site, to ensure that the occupants of
proposed sites are not adversely affected by any of the hazards listed
in §58.5(i)(2)(i).

\(iii\) Particular attention should be given to any proposed site on or
in the general proximity of such areas as dumps, landfills, industrial
sites, or other locations that contain, or may have contained, hazardous
wastes.

\(iv\) The responsible entity shall use current techniques by qualified
professionals to undertake investigations determined necessary.

-   The list of recipients that are not responsible entities that may
    object to the non-recipient responsible entity conducting the
    environmental review on the basis of performance, timing, or
    compatibility of objectives has been revised and updated at
    §58.11(b). Added were HOPWA recipients; excluded were Indian housing
    recipients.

-   Major changes in §58.22 include the following:

(1) Subsection (a) through (c) makes clear the following: (i)
    limitations on

activities apply not only to recipients, but also to other project
participants, such as public or private non-profit or for-profit
entities and their contractors; (ii) undertaking an activity that would
have adverse environmental impact or limit the choice of alternatives,
as well as committing non-HUD funds to such activity is prohibited
before the request for release of funds and environmental certification
have been approved; and (iii) in accord with NEPA regulations of the
Council on Environmental Quality (40 CFR 1506.1(b)), if a recipient is
considering an application from a prospective subrecipient or
beneficiary and is aware that the applicant is about to take an action
within the recipient's jurisdiction that is prohibited by § 58.22(a),
the recipient shall promptly notify the applicant that the recipient
will take appropriate action to ensure that the objectives and
procedures of NEPA are achieved. Conforming changes made to §§58.72 and
58.75 to cover other partners in the development process;

(2) Subsection (e) reflects a new statutory amendment that permits an

organization, consortium or affiliate under the Self-Help Homeownership
Opportunity Program (SHOP) to advance non-grant funds to acquire land
prior to the completion of the environmental review process. This is
generally considered a choice limiting action that otherwise is
prohibited under §58.22(a). However, §58.22(e) makes clear that
advancing non-grant funds for property acquisition is done at the risk
of the purchaser regarding the outcome of the environmental review. In
addition, under §58.22(a), HUD grant funds may not be committed or
expended for land acquisition prior to completion of the environmental
review and HUD's approval of the request for release of funds (RROF).
Finally, Part 58 continues to prohibit project-related physical actions
on any land so acquired with non-grant funds, such as construction,
prior to completion of the environmental review and approval of the
RROF;

There were no policy changes to the subsections covering options
agreements and relocation. The entire Section reads:

**§58.22 Limitations on activities pending clearance.**

\(a\) Neither a recipient nor any participant in the development
process, including public or private nonprofit or for-profit entities,
or any of their contractors, may commit HUD assistance under a program
listed in §58.1(b) on an activity or project until HUD or the State has
approved the recipient's RROF and the related certification have been
approved, neither a recipient nor any participant in the development
process may commit non-HUD funds on or undertake an activity or project
under a program listed in §58.1(b) if the activity or project would have
an adverse environmental impact or limit the choice of reasonable
alternatives.

\(b\) If a project or activity is exempt under §58.34, or is
categorically excluded (except in extraordinary circumstances) under
§58.35(b), no RROF is required and the recipient may undertake the
activity immediately after the responsible entity has documented its
determination as required in §58.34(b) and §58.35(d), but the recipient
must comply with applicable requirements under §58.6.

\(c\) If a recipient is considering an application from a prospective
subrecipient or beneficiary and is aware that the prospective
subrecipient or beneficiary is about to take an action within the
jurisdiction of the recipient that is prohibited by §58.22(a), then the
recipient will take appropriate action to ensure that the objectives and
procedures of NEPA are achieved.

\(d\) An option agreement on a proposed site or property is allowable
prior to the completion of the environmental review if the option
agreement is subject to a determination by the recipient on the
desirability of the property for the project as a result of the
completion of the environmental review in accordance with this part and
the cost of the option is a nominal portion of the purchase price. There
is no constraint on the purchase of an option by third parties that have
not been selected for HUD funding, have no responsibility for the
environmental review and have no say in the approval or disapproval of
the project.

\(e\) [Self-Help Homeownership Opportunity Program (SHOP)]{.underline}.
In accordance with section 11(d)(2)(A) of the Housing Opportunity
Program Extension Act of 1996 (42 U.S.C. 12805 note), an organization,
consortium, or affiliate receiving assistance under the SHOP program may
advance nongrant funds to acquire land prior to completion of an
environmental review and approval of a Request for Release of Funds
(RROF) and certification, notwithstanding §58.22(a). Any advances to
acquire land prior to approval of the RROF and certification are made at
the risk of the organization, consortium, or affiliate and reimbursement
for such advances may depend on the result of the environmental review.
This authorization is limited to the SHOP program only and all other
forms of HUD assistance are subject to the limitations in paragraph (a)
of this section.

\(f\) [Relocation.]{.underline} Funds may be committed for relocation
assistance before the approval of the RROF and related certification for
the project provided that the relocation assistance is required by 24
CFR part 42.

-   The rule revises the first sentence of § 58.33(b) concerning when
    and how the pre-submission comment periods for the Notice of Finding
    of No Significant Impact (FONSI Notice) and/or the Notice of Intent
    to Request a Release of Funds (NOI/RROF) may be combined with the
    post-submission comment period for the Request for Release of Funds
    (RROF). Under the final rule, the combined procedure could be used
    if funds are needed on an emergency basis due to a locally declared
    emergency as well as during a Presidentially declared disaster and
    there is immediate need for public action to protect public safety.

-   Three of the NEPA categorical exclusions in §58.35 are revised, one
    new exclusion is added, and conforming changes are made to §50.20:

(1) For rehabilitation, a new subsection is added at §58.35(a)(3)(i)
    that allows a

> categorical exclusion in the case of a building for residential use
> (with one to four units) when the density is not increased beyond four
> units, the land use is not changed, and the footprint of the building
> is not increased in a floodplain or in a wetland.

(2) For individual actions at §58.35(a)(4), the rule clarifies that the
    exclusion for an individual action on a one-to four-family dwelling
    would apply when there are no more than four dwelling units on any
    site, whether in one or multiple buildings.

(3) For leasing and equity loans, §58.35(a)(5) is revised to clarify
    that acquisition for the same use includes leasing and equity loans;

> \(4\) For supplemental assistance (including insurance or guarantee),
> the rule adds
>
> at § 58.35(b)(7) a new exclusion from NEPA and §58.5 environmental
> requirements any approval of supplemental assistance to complete a
> project previously approved under Part 58, if the project or
> activities have already been environmentally assessed by the same
> responsible entity, unless a reevaluation of the environmental
> findings is required under §58.47(a).

-   The rule revises §§58.72 and 58.75 to conform to the changes in
    §58.22.

-   For the following HUD programs, the rule replaces the reference to
    environmental review procedures of Part 50 with a reference to Part
    58 procedures. The new reference also reflects the applicability of
    Part 50 procedures in those cases when HUD determines under §58.11
    that HUD itself will be responsible to perform environmental
    responsibilities:

(1) Housing Opportunities for Persons With Aids (HOPWA) §574.510;

\(2\) Shelter Plus Care §582.230;

\(3\) Supportive Housing §583.230; and

\(4\) Demolition or Disposition of Public Housing Projects §970.4

**Highlights of Changes to 24 CFR part 50:**

-   The rule clarifies at §50.19(b)(15) that activities to assist
    homebuyers to purchase existing dwelling units also applies to
    dwelling units under construction and is categorically excluded, not
    subject to the Federal laws and authorities cited in §50.4.
    Activities to assist homebuyers include closing costs and
    downpayment assistance, interest buydowns and similar activities
    that result in the transfer of title.

-   Conforming changes to categorical exclusions at § 50.20 were made to
    make Part 50 consistent with similar changes made in §58.35 and
    explained above.

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Official Record Copy U.S. Department of Housing and Urban Development
form HUD-713.1 (02/03)

> Previous edition is obsolete.

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Official Record Copy U.S. Department of Housing and Urban Development
form HUD-713.1 (02/03)

> Previous edition is obsolete.