U.
S.
DEPARTMENT
OF
HOUSING
AND
URBAN
DEVELOPMENT
WASHINGTON,
DC
20410­
0500
AMERICA'S
AFFORDABLE
COMMUNITIES
INITIATIVE
www.
hud.
gov
espanol.
hud.
gov
March
31,
2004
Mr.
Jesse
Pritts,
P.
E.
U.
S.
Environmental
Protection
Agency
Office
of
Water
Office
of
Science
and
Technology
Engineering
and
Analysis
Division
(
4303T)
1200
Pennsylvania
Avenue,
NW
Washington,
DC
20460
Dear
Mr.
Pritts:

The
Office
of
Management
and
Budget
(
OMB)
recently
contacted
HUD
to
advise
that
the
U.
S.
Environmental
Protection
Agency
(
EPA)
is
concluding
its
rulemaking
on
Effluent
Limitation
Guidelines
and
New
Source
Performance
Standards
for
the
Construction
and
Development
Category,
for
which
a
proposed
rule
was
published
on
June
24,
2002.
As
Director
of
America's
Affordable
Communities
Initiative
within
the
Department
of
Housing
and
Urban
Development
(
HUD),
I
would
like
to
reiterate
concerns
with
this
rule
that
were
earlier
raised
in
2002
by
John
C.
Weicher,
HUD's
Assistant
Secretary
for
Housing
and
Federal
Housing
Commissioner,
to
the
extent
that
these
concerns
may
still
be
relevant
to
this
rulemaking.
America's
Affordable
Communities
Initiative
(
Initiative)
is
a
departmentwide
initiative,
which
commenced
in
June
2003,
and
focuses
on
breaking
down
regulatory
barriers
at
the
federal,
state,
and
local
levels
that
impede
the
production
or
rehabilitation
of
affordable
housing.
Because
of
the
focus
and
work
of
the
Initiative,
this
EPA
rule
and
its
status
were
brought
to
my
attention.

HUD
staff
previously
reviewed
an
April
5,
2002,
draft
of
this
rule
during
EPA's
development
of
the
proposed
rule,
and
concerns
were
expressed
on
the
draft
rule
provided
to
HUD.
HUD
has
not
reviewed
this
rule
since
prior
to
its
publication
as
a
proposed
rule.
It
is
our
understanding
that
EPA
is
making
final
decisions
about
this
rule
and
therefore,
on
behalf
of
HUD
and
the
Initiative,
I
am
submitting
for
EPA's
consideration
the
concerns
with
this
rule
first
relayed
by
Commissioner
Weicher
in
the
spring
of
2002,
in
the
event
that
some
or
all
of
these
concerns
remain
relevant
to
the
decisions
being
considered
by
EPA
about
the
revised
proposed
rule.

Commissioner
Weicher
noted
HUD's
particular
concern
that
the
proposed
$
4.2
billion
option
described
by
EPA
could
seriously
affect
the
housing
of
lower­
income
and
moderate­
income
families.
The
effect
on
the
rental
market
is
likely
to
make
it
harder
to
achieve
the
national
housing
goal
of
a
decent
home
for
all
families,
and
the
effect
on
single­
family
homes
is
likely
to
make
it
harder
for
young
families
to
buy
their
first
homes.
2
In
addition
to
this
particular
concern,
HUD's
concerns
with
the
initial
draft
rule
and
supporting
analyses
fall
into
two
general
areas:
the
overall
scope
of
the
initial
draft
rule,
and
the
estimates
of
its
cost/
economic
impact
on
the
construction
of
single­
family
and
multifamily
housing
and
housing
markets
in
general.
We
repeat
HUD's
offer
made
by
Commissioner
Weicher
to
make
available
to
EPA
the
expertise
of
HUD
with
housing
markets
so
that
EPA's
rule
and
accompanying
analyses
that
take
into
consideration
the
impact
of
the
rule
on
the
housing
market.
Again,
the
following
presents
a
reiteration
of
the
concerns
previously
raised
by
HUD.

Scope
of
the
Rule
The
Circuit
Court
consent
decree
under
which
this
rule
is
being
issued
does
not
appear
to
require
EPA
to
create
effluent
guidelines
for
post­
construction
storm
water
controls.
We
would
urge
EPA
to
drop
provisions
related
to
post­
construction
controls
from
the
rule
because
they
are
not
required,
and
because
they
seem
to
account
for
the
majority
of
the
cost
of
the
rule
according
to
EPA's
analysis.
Also,
for
reasons
outlined
below
we
do
not
believe
that
the
"
infrastructure
savings"
that
EPA
expects
to
be
available
for
post­
construction
controls
under
the
draft
proposed
rule
will
in
fact
be
realized,
so
that
the
higher
cost
estimates
associated
with
EPA's
"
no
infrastructure
savings"
scenarios
are
more
likely
to
be
correct.

Accounting
for
Storm
Water
Control
Costs
Estimated
compliance
costs
appear
to
be
implausibly
low.
This
may
be
due
to
the
requirement
of
Executive
Order
12866
that
the
Economic
Analysis
of
the
draft
proposed
rule
evaluate
the
incremental
cost
of
the
draft
proposed
rule
taking
the
existing
regulatory
regime
as
the
fixed
baseline.
In
this
case,
however,
the
baseline
has
not
been
fully
implemented
(
Phase
II
Storm
Water
rules
become
effective
in
March
2003).
While
estimates
of
the
compliance
costs
of
the
baseline
regulations
appear
in
an
appendix
to
chapter
5
of
the
Economic
Analysis,
this
appendix
does
not
contain
a
sufficiently
detailed
description
of
the
baseline
technology
to
provide
a
basis
for
determining
the
reasonableness
of
the
estimates
of
incremental
costs
of
the
draft
proposed
rule.
The
Economic
Analysis
should
include
a
side­
by­
side
table
clearly
describing
baseline
technologies
and
their
costs,
describing
technologies
compliant
with
the
draft
proposed
rule
and
the
costs,
and
the
net
difference
in
costs.

"
Infrastructure
Savings"

The
Economic
Analysis
of
the
draft
proposed
rule
contemplates
the
realization
of
"
infrastructure
savings"
through
the
use
of
"
Low­
Impact
Development
(
LID)"
and
other
techniques
to
comply
with
the
provisions
of
the
rule.
These
techniques
supposedly
could
accomplish
the
effluent
reductions
but
use
less
expensive
forms
of
infrastructure
than
conventional
construction
that
is
not
compliant
with
the
draft
proposed
rule.
The
techniques
listed
in
the
draft
proposed
rule
include
the
use
of
"
swales,
bioretention
cells
(
highly
permeable
engineered
soils
planted
with
vegetation),
 
and
depression
storage"
to
control
runoff
and
remove
pollutants.
Storm
water
would
be
retained
on
the
property
or
in
the
neighborhood
for
a
significantly
longer
period
of
time,
rather
than
being
carried
away,
for
example,
by
more
conventional
curbs
and
gutters.
LID
and
related
practices
have
not
been
widely
used
in
the
construction
industry
and
their
use
would
result
in
new
developments
that
are
substantially
different
in
appearance
from
most
existing
developments.
3
Homebuyers
are
likely
to
regard
the
change
as
a
reduction
in
quality
of
the
housing
in
the
community
rather
than
a
savings
in
cost.
The
reduction
in
quality
may
cause
the
sales
prices
of
homes
in
LID
developments
to
fall
below
any
actual
infrastructure
savings
realized.
Builders
may
be
unwilling
to
take
such
risks,
which
would
result
in
little
or
no
use
of
LID
or
other
techniques
that
would
generate
infrastructure
savings.

In
addition,
the
LID
and
related
techniques
appear
from
their
description
to
be
more
land
intensive
than
other,
more
expensive,
storm
water
control
techniques.
Affordable
housing
developments,
particularly
in
high
housing­
cost
markets
are
built
at
relatively
higher
densities
to
fit
the
most
units
onto
the
available
land,
keeping
prices
low
by
reducing
land
costs
per
unit.
Such
intensive
use
of
land
is
unlikely
to
leave
the
open
land
space
necessary
for
LID
and
other
infrastructure­
saving
methods
of
storm
water
control.
Thus,
infrastructure
savings
are
least
likely
to
be
realized
in
the
lower
end
of
the
new
housing
market
or
in
affordable
multifamily
construction.

Housing
Affordability
Analysis
EPA's
analysis
of
the
effects
of
the
rule
on
housing
affordability
focus
on
a
model
singlefamily
unit
with
a
final
baseline
price
of
$
288,397
and
households
within
a
narrow
income
range
around
that
required
to
afford
this
house
(
assuming
conventional
mortgage
market
income
constraints).
While
the
model
unit
analysis
is
useful
in
tracing
the
impact
of
the
draft
proposed
rule
through
the
development
process
to
measure
the
potential
impact
on
final
house
price,
the
use
of
the
model
house
price
in
analyzing
affordability
effects
of
the
rule
is
inadequate.
It
entirely
ignores
the
majority
of
the
new
single­
family
housing
market.
According
to
the
Census
Bureau,
the
mean
price
of
a
newly
constructed
single­
family
home
was
$
208,000
in
2001.
In
fact,
in
2001,
40
percent
of
newly
constructed
homes
sold
for
less
than
$
150,000.
Clearly,
new
homes
are
sold
at
a
wide
range
of
prices
to
households
throughout
the
income
distribution.
We
would
recommend
that
EPA
widen
the
affordability
and
analysis
better
to
reflect
the
market
for
new
housing.

The
Economic
Analysis
of
the
draft
proposed
rule
offers
a
variety
of
estimates
of
the
cost
increase
for
single­
family
homes.
These
range
from
several
hundred
dollars
up
to
over
$
2,200
(
the
figure
$
2,228
appears
in
Appendix
F
to
Chapter
5
as
the
combined
cost
of
Phase
II
rules
that
become
effective
in
March
2003
and
the
draft
proposed
rule).
Whatever
the
best
estimate
may
be
within
the
range,
or
higher
or
lower­
the
most
vulnerable
families
in
America
will
feel
the
greatest
impact
of
increases
in
overall
housing
costs.
While
at
higher
incomes
a
$
2,200
increase
in
house
price
would
only
affect
the
family's
choice
of
a
house,
those
at
the
margin
of
homeownership
would
find
a
$
2,200
increase,
or
even
a
much
smaller
increase,
to
be
much
more
serious.
Some
families
would
certainly
find
themselves
priced
completely
out
of
the
market
unable
to
purchase
any
home
at
all.
FHA's
Data
show
that
such
families
are
disproportionately
members
of
minority
groups.

Multifamily
Housing
Impact
With
respect
to
multifamily
housing,
the
Economic
Analysis
of
the
draft
proposed
rule
is
quite
brief
and
omits
several
important
aspects
of
the
multifamily
housing
market,
in
particular
the
predominance
of
lower­
income
households
in
multifamily
housing
and
the
effect
of
the
rule
of
housing
financed
and
constructed
with
federal
subsidies.
While
the
Economic
Analysis
estimates
the
effects
of
the
rule
on
the
costs
of
construction
of
multifamily
housing,
it
does
not
relate
these
4
effects
back
to
the
rental
market.
In
many
markets,
low­
income
households
have
great
difficulty
finding
adequate
rental
housing
except
at
very
high
rent
burdens
(
measured
as
rent­
to­
income
ratios).
Some
of
the
impact
estimates
in
the
Economic
Analysis
seem
to
indicate
that
compliance
costs
of
the
draft
proposed
rule
are
higher
for
the
multifamily
housing
sector
than
for
the
singlefamily
housing
sector.
The
increase
in
the
cost
of
new
rental
housing
under
the
draft
proposed
rule
would
be
felt
throughout
the
rental
housing
market.
This
will
adversely
affect
low­
income
renter
households,
particularly
those
seeking
employment
and
housing
opportunities
in
growing
suburban
areas
where
the
draft
proposed
rule's
impact
on
affordable
housing
construction
would
be
greatest.
EPA
should
consider
adding
an
assessment
of
the
relative
effects
of
the
rule
on
households
in
different
parts
of
the
income
distribution.

EPA
should
include
in
the
Economic
Analysis
an
assessment
of
the
effects
of
the
draft
proposed
rule
on
federal
multifamily
housing
construction
subsidy
and
mortgage
insurance
programs
including
the
Low­
Income
Housing
Tax
Credit
(
LIHTC),
Mortgage
Revenue
Bonds
(
MRBs),
and
HUD's
Section
202,
Section
811,
and
Section
221(
d)(
3)
programs.
In
all
of
these
programs,
the
amounts
supporting
each
multifamily
project
are
related
to
the
depreciable
capital
costs
of
the
project,
while
the
total
budget
authority
of
the
programs
is
limited.
If
compliance
costs
of
the
draft
proposed
rule
are
included
in
depreciable
basis,
the
total
number
of
units
that
can
be
produced
under
these
programs
will
be
reduced.
On
the
other
hand,
if
compliance
costs
cannot
be
covered
by
these
government
funding
sources,
these
costs
will
need
to
be
financed
with
other
sources
of
funds,
making
multifamily
projects
generally
more
difficult
to
finance
and
produce.

We
thank
EPA
for
consideration
of
HUD's
views
on
this
rule.
If
you
have
questions,
please
do
not
hesitate
to
contact
me
at
(
202)
708­
0282.

Sincerely,

A.
Bryant
Applegate
Director,
America's
Affordable
Communities
Initiative
