New HUD, USDA agreement will streamline environmental rules

Two leading government agencies responsible for affordable housing development announced an agreement aimed at aligning environmental standards and guidelines to support rural markets. 

The memorandum of understanding from the Department of Housing and Urban Development and U.S. Department of Agriculture is the latest example of the deregulatory stance taken by the Trump administration this year. Benefits are more likely to appear in the long term for lenders, with more immediate favorable outcomes hitting the construction community first.

"It mostly affects developers, not how we originate single-family USDA or FHA loans," said Ashley Harris, director of homebuyer education at Missouri-based Neighbors Bank in a message sent to National Mortgage News. "There's nothing lenders need to do right now."

The moves, though, showed government agencies are heading in the right direction to support rural housing markets, she continued.

"Consolidating work between the agencies should lower costs and shorten timelines for developers, and the borrowers we work with every day ultimately benefit from more affordable housing options," Harris added.

Meanwhile, appraisers also will be able to take advantage of  joint physical inspections for properties funded by both departments.  

New joint objectives

Initially included as a requirement in the 21st Century ROAD to Housing Act, the MOU features new objectives applied to both agencies that should result in greater collaboration as well as likely revisions or elimination of standards in place.    

Objectives are set to focus on: 

• Category exclusions in the environmental review process for projects funded by HUD and USDA.
• A process to appoint a lead agency and streamline adoption of environmental impact statements and assessments with the approval by the other department for housing construction jointly funded by both.
• Compliance with certain environmental regulations, which were in effect on January 1, 2025, except as required to amend, add or remove categorical exclusions through standard rulemaking procedures.
• A study to explore the feasibility of a dual physical inspection process for housing projects funded by HUD and USDA
  

Leaders of both agencies hailed the agreement's impact on removing "burdensome regulations" and bureaucracy. 
"HUD and USDA are working together to streamline environmental reviews and end regulations that hinder rural housing development," said Department of Housing and Urban Development Secretary Scott Turner in a press release.

"For too long, regulation and bureaucracy have slowed the growth of the next generation of America's rural homeowners," added USDA Secretary Brooke Rollins.

Coordinating the efforts to align the two government units are Drew McCall and Reid Wilson, chief of staff and deputy chief of staff for HUD, alongside Rural Housing Service Administrator George Kelly for USDA. 

The announcement comes as HUD is in the process of updating several policies to encourage housing construction and financing and remove regulation many have described as onerous.  

In June, the department updated the definition of a manufactured home, removing permanent-chassis requirements on such units that previously caused lenders to avoid originations for such properties. Just weeks earlier, the Federal Housing Administration, which falls under HUD governance, issued a request for information to update single-family minimum property requirements. 

Both HUD and USDA also killed a clean-energy mandate this year that was originally instituted by the Biden administration. The rule called for homebuilders to abide by conservation rules for newly built properties and was introduced by the International Code Council in 2021.