Energy standards have been documented as the single most effective means of upgrading the efficiency of buildings. By significantly lowering energy costs, energy standards help support housing affordability. Energy standards also contribute to improved health, including lower asthma rates, reduced respiratory symptoms, and generally benefit health impacts for residents. Lastly, more energy efficient homes have been shown to enable residents to improve the “passive survivability” of a home in the event of extreme heat and cold events and related power outages.

Minimum Energy Standards

The adoption of updated energy standards lowers costs for American families by reducing monthly energy bills and providing health benefits. On average, families will save $80/month in homes built to the 2021 IECC rather than the 2009 IECC. However, the benefits go beyond savings on energy bills as energy efficient buildings are shown to improve indoor air quality, control humidity levels to prevent mold, and support mental health by improving physical comfort^[1]. These health impacts equate to reduced medical costs for families and an improved quality of life, aligning with HUD’s mission to provide quality, affordable homes for all.

¹ Health and Safety Benefits of Clean Energy | Department of Energy

Minimum Energy Standards

Housing affordability is critically important for the low-income households HUD serves through many of its programs. These households often face inequitable energy burdens, meaning that they spend a greater 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 less funds available for other necessities. For example, a study from American Council for an Energy-Efficient Economy (ACEEE) in 2020 found that low-income households in Baltimore experience an energy burden above 21.7%, seven times the national median burden.

Minimum Energy Standards

The Energy Independence and Security Act of 2007 amended the Cranston Gonzalez National Affordable Housing Act to require HUD (along with USDA) to 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.

Minimum Energy Standards

HUD is required by statute to consider adopting the latest version of the IECC and ASRHAE 90.1 standards if the Department determines that the revised standards do not negatively affect the availability or affordability of new construction. This Notice specifically requires the adoption of the 2021 IECC and ASHRAE 90.1-2019 as a result of the favorable availability and affordability analysis.

Minimum Energy Standards

Energy standards are updated every three years. Homes built to HUD’s newly adopted standards – the 2021 IECC and ASHRAE 90.1-2019 – are estimated by the Department of Energy to be 34.3 percent and 22.5 percent more efficient, respectively, than HUD’s previous requirements, the 2009 IECC and ASHRAE 90.1-2007. Additionally, DOE found the 2021 IECC to have national energy cost savings of 8.66% above the 2018 standard. For ASHRAE, DOE found the 2019 standard to have national energy cost savings of 4.3% compared to ASHRAE 90.1-2016.

Minimum Energy Standards

By statute, the determination impacts specific HUD financed programs. These include 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, and Section 811 Supportive Housing for Persons with Disabilities.

Minimum Energy Standards

No. The Notice only applies to new multifamily and single-family construction. Additionally, manufactured housing is not covered by this Notice. The most effective time to implement energy standards is at construction, which is why these standards do not apply to renovation projects. Later remodeling for efficiency is significantly more expensive.

Minimum Energy Standards

HUD estimates approximately 165,000 new housing units could be impacted by this Notice each year. An estimated 150,000 units are new single family or low-rise multifamily housing units covered by the IECC, while an estimated 15,000 units are larger multifamily housing covered by ASHRAE 90.1. Additionally, an estimated 150,000 are HUD-financed, while 15,000 are USDA-financed. The largest single category of new housing likely to be impacted by the Notice is FHA-insured multifamily and single family homes (140,000 units).

Minimum Energy Standards

On a national average, a homebuyer can expect to save an estimated $960 on their energy bills in the first year, or a total of $25,100 over the life of a 30-year mortgage. HUD estimates increased downpayment and other closing costs of $550 and increased mortgage payments of just over $35/month. The impacts will vary across climate zones, states, and localities depending on changes in market conditions; however, HUD found the standards to be affordable and cost effective within each state.

Minimum Energy Standards

• In Florida, a hot-humid state, a homebuyer can expect to save an estimated $45/month on their energy bills, or a total of $14,700 over the life of a 30-year mortgage. HUD estimates increased downpayment and other closing costs of $330 and increased mortgage payments of just over $20/month. As a result, the net savings to the homebuyer will be an estimated $25/month – enabling the homebuyer to pay...
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• In Florida, a hot-humid state, a homebuyer can expect to save an estimated $45/month on their energy bills, or a total of $14,700 over the life of a 30-year mortgage. HUD estimates increased downpayment and other closing costs of $330 and increased mortgage payments of just over $20/month. As a result, the net savings to the homebuyer will be an estimated $25/month – enabling the homebuyer to pay off the upfront costs within the first 18 months.

• In a warm-humid state like Georgia, a homebuyer can expect to save an estimated $80/month on their energy bills, or a total of $25,300 over the life of a 30-year mortgage. HUD estimated increased downpayment and other closing costs of $520 and increased mortgage payments of $35/month. As a result, the net savings to the homebuyer will be an estimated $45/month – enabling the homebuyer to pay off the upfront costs within the first 14 months.

• In South Dakota, a cold climate state, a homebuyer can expect to save an estimated $100/month on their energy bills, or a total of $32,450 over the life of a 30-year mortgage. HUD estimates increased downpayment and other closing costs of $450 and increased mortgage payments of $30/month. As a result, the net savings to the homebuyer will be an estimated $70/month – enabling the homebuyer to pay off the upfront costs within the first year.

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Yes, contingent on evidence provided to HUD that the green building certification sets the 2021 IECC and ASHRAE 90.1-2019 as mandatory minimum standards, or a determination from DOE or EPA that the certification achieves a performance level equal to or greater than these standards. HUD will publish an annual list of the green building standards that meet or exceed the 2021 IECC and ASHRAE 90.1-2019. If a covered program incentivizes or encourages a green building standard that does not meet these standards, the developer is still required to meet the 2021 IECC or ASHRAE 90.1-2019 standard.

Minimum Energy Standards

HUD will accept any standard that meets or exceeds the efficiency of the 2021 IECC and ASHRAE 90.1-2019, based on a Department of Energy (DOE) energy efficiency analysis. The 2024 IECC has not yet been published; once published and DOE has determined that it is more efficient than the previous version, HUD and USDA will accept this edition as a compliance path for the 2021 IECC. ASHRAE 90.1-2022 is already in compliance, since DOE recently determined that it is more efficient than ASHRAE 90.1-2019.

Minimum Energy Standards

In the event of a materials shortage that impacts the ability of builders to comply with the new IECC or ASHRAE 90.1 standards, builders should contact HUD or USDA with information on the product shortage. HUD will publish a Notice acknowledging possible material shortages and provide options for builders to comply with the new standards.

Minimum Energy Standards

As of March 2024, five states have adopted a standard that meets or exceeds the 2021 IECC. Another five states have adopted the 2021 IECC, but with amendments. Additionally, at least 20 states are actively considering adoption of the 2021 IECC. For ASHRAE 90.1-2019, 10 states and the District of Columbia have adopted a version that meets or exceeds ASHRAE 90.1-2019. Two additional states adopted...
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As of March 2024, five states have adopted a standard that meets or exceeds the 2021 IECC. Another five states have adopted the 2021 IECC, but with amendments. Additionally, at least 20 states are actively considering adoption of the 2021 IECC. For ASHRAE 90.1-2019, 10 states and the District of Columbia have adopted a version that meets or exceeds ASHRAE 90.1-2019. Two additional states adopted the standard with amendments. States that have already adopted standards that meet or exceed these standards are as follows:

2021 IECC	ASHRAE 90.1-2019
California Connecticut New Jersey Vermont Washington	California Connecticut District of Columbia Maryland Massachusetts Montana New Jersey Oregon Utah Vermont Washington

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States that require an energy standard that does not meet the 2021 IECC for residential buildings or ASHRAE 90.1-2019 for commercial buildings must still comply with the requirements of this Notice. HUD plans to support this Notice with technical assistance and training to better enable builders, architects, and engineers to meet these new energy standard requirements.

Minimum Energy Standards

The Inflation Reduction Act (IRA) significantly expanded and extended tax credits and other financial incentives for energy efficient upgrades to both new and existing homes...
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The Inflation Reduction Act (IRA) significantly expanded and extended tax credits and other financial incentives for energy efficient upgrades to both new and existing homes.

• For new homes, the IRA provides Section 45L tax credits of $2,500 for single family projects built to EPA’s Energy Star Single Family New Construction standard (Version 3.1 and Version 3.2 beginning January 2025), or $5,000 for DOE’s Zero Energy Ready Homes (ZERH) certified homes. These energy efficiency standards are modeled to exceed the 2021 IECC by 10-20%.

• Multifamily properties also qualify for these tax credits, with higher credits for projects that meet prevailing wage requirements. Multifamily tax credits are allocated per unit. For more information, please visit https://home.treasury.gov/news/press-releases/jy1768.

• The Commercial Buildings Energy Efficiency 179D Tax Deduction is available for energy efficiency investments in new multifamily construction with deductions ranging from $0.50 to $5.00 per square foot.

• DOE’s Home Electrification and Appliance (HEAR) Rebates with up to $14,000 for low- and moderate-income households may also be available for new housing, contingent on how the rebates program is administered within a given state (states must choose to allow new construction funding).

• EPA's recently awarded Greenhouse Gas Reduction Fund (GGRF) ($20 billion) may also be available for low-cost financing for developers that meet program requirements.

• An additional homeowner 30% tax credit is available for solar and renewable energy investments.

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The implementation timeline varies by program and extended compliance timeframes were incorporated based on industry comments during the public comment period. The implementation timeline is as follows:...
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The implementation timeline varies by program and extended compliance timeframes were incorporated based on industry comments during the public comment period. The implementation timeline is as follows:

Program	Compliance Date
HOME and Housing Trust Fund	180 days after effective date* (If layered with other HUD funding, later compliance date applies)
FHA-Insured Multifamily	12 months after effective date
FHA-Insured/USDA guaranteed Single Family	18 months after effective date
Public Housing - Capital Fund, Project Based Vouchers	12 months after effective date
Competitive Grants (Choice Neighborhoods, Section 202, Section 811)	Next published NOFO after effective date.
All programs, projects located in persistent poverty rural areas	24 months after effective date.

*Effective Date is 30 days after Federal Register publication date.

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More information on the IECC and ASHRAE standards can be found at https://training.energycodes.gov/ui/catalog/219. This is the Resource Hub developed by DOE’s Building Energy Codes Program.

Minimum Energy Standards

Yes, HUD is in the process of developing a technical assistance and training program to support implementation. Training and technical assistance will be offered to impacted builders, developers, code officials, as well as appraisers and other stakeholders. Additional technical assistance is also available from the...
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Yes, HUD is in the process of developing a technical assistance and training program to support implementation. Training and technical assistance will be offered to impacted builders, developers, code officials, as well as appraisers and other stakeholders. Additional technical assistance is also available from the U.S. Department of Energy (DOE) to support states, local governments, and industry stakeholders in meeting the latest energy standards through new funding provided under the Bipartisan Infrastructure Law (BIL) and Inflation Reduction Act (IRA).

BIL Section 40511 and IRA Section 50131 provide over $1.2 billion in federal funding and technical assistance for states, local government, and other stakeholders supporting the successful adoption and implementation of building energy standards, including the provisions of the 2021 IECC and Standard 90.1-2019. Eligible activities include energy standard education, training and compliance support for builders, contractors, design professionals, appraisers, home energy raters, manufacturers, trade organizations, and range of design and construction industry stakeholders. More information on the BIL and IRA building energy standards initiatives are available on DOE’s website.

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Yes, many FHA borrowers can ultimately finance the 1.75% upfront MIP in their mortgage, rather than incurring this additional immediate out of pocket expense at the time of their home purchase. By financing the upfront MIP in their mortgage, the FHA homebuyer will save an estimated $120 in upfront costs resulting from the additional costs of the energy efficient home’s purchase price. As a result, the homebuyer can reduce...
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Yes, many FHA borrowers can ultimately finance the 1.75% upfront MIP in their mortgage, rather than incurring this additional immediate out of pocket expense at the time of their home purchase. By financing the upfront MIP in their mortgage, the FHA homebuyer will save an estimated $120 in upfront costs resulting from the additional costs of the energy efficient home’s purchase price. As a result, the homebuyer can reduce their out-of-pocket costs, at the time of purchase, from an estimated $550 to $430. This is shown in the illustrative example below. By adding this expense to the mortgage, mortgage payments will increase by just $8/year ($0.67/month).

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The amount of time it takes to save for a down payment will depend on the income of the household and housing prices in the location where the household wishes to purchase a home. At today’s median FHA homebuyer income, an individual wishing to buy a median-priced FHA new home will need to save at a personal savings rate of 2.4% of income up to 7.8 years to save up for...
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The amount of time it takes to save for a down payment will depend on the income of the household and housing prices in the location where the household wishes to purchase a home. At today’s median FHA homebuyer income, an individual wishing to buy a median-priced FHA new home will need to save at a personal savings rate of 2.4% of income up to 7.8 years to save up for a 5% FHA down payment, or 4.4 years for a 3.5% minimum down payment. We estimate that the increased down payment requirement for the energy efficient home could add 1.1 months (3.5% down payment) to two months (5% down payment) to these general estimate periods. (Assumes Bureau of Economic Affairs reported a personal savings rate of 3.8 percent in January 2024 (share of disposable income) which was somewhat lower than savings rates in 2023. Renter savings rates are lower (2.4%) whereas homeowner savings rates are higher (9.2%)).²

² Moody’s Analytics reports 2.4%-9.2% savings rates: https://www.moodysanalytics.com/-/media/article/2021/averting-an-eviction-crisis.pdf

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HUD primarily relies on a nominal interest rate of 5.3%; however, the Final Determination also includes a scenario with a 6.5% nominal interest rate. HUD found each of these scenarios to be affordable. The 5.3% nominal rate reflects the approximate two-year Freddie Mac average rates. Additionally, this aligns with the 5% rate currently established in the Department of Energy’s cost effectiveness methodology, which HUD aligns with for this analysis.

Minimum Energy Standards

DOE’s analysis received extensive public and interagency review before it was published. However, HUD is aware of and has extensively reviewed third-party analyses of the 2021 IECC. There is significant alignment between these reports and DOE with regard to energy savings: they all show comparable results for energy and cost savings. However, significant differences are found in....
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DOE’s analysis received extensive public and interagency review before it was published. However, HUD is aware of and has extensively reviewed third-party analyses of the 2021 IECC. There is significant alignment between these reports and DOE with regard to energy savings: they all show comparable results for energy and cost savings. However, significant differences are found in construction cost estimates: one report found the 2021 IECC to be less cost effective than DOE’s construction cost estimates; another report found construction costs to be more cost effective (or positive) than DOE’s analysis. The key differences are found in the prototype home used for the analysis, profit margins, and cost of materials.

DOE's analysis used by HUD and USDA relies on life-cycle cost analysis (LCCA) following OMB guidance and uses reliable and widely used sources for cost estimates, such as RS Means. Congressionally-recognized energy standard development bodies—ICC and ASHRAE—all base their economic criteria and analysis on LCCA. In contrast, the third-party analysis used simple payback analysis, which does not adequately or accurately reflect the incremental costs and savings experienced by the homeowner.

For these reasons, HUD is confident in the underlying DOE analysis utilized in the determination. At the same time, HUD updated DOE’s construction cost estimates to reflect the significant supply chain cost increases experienced by the building industry between 2020-23 as well as key economic and cash flow factors to better reflect current market conditions.

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