Environmental Review (NEPA / HUD Part 58)
The federally required review of a project's environmental effects that must be completed before HUD money, or other money for a HUD-assisted project, can be committed to it.
What Is Environmental Review?
Environmental review is the process of identifying how a proposed project could affect people and the natural environment before federal money is spent on it. The underlying law is the National Environmental Policy Act (NEPA) of 1969, plus related laws and HUD standards on historic preservation, floodplains, wetlands, noise, contamination, and more.
When HUD reviews a project itself, it follows 24 CFR Part 50. Much more often, a city, county, state or tribe takes on HUD’s legal responsibility under 24 CFR Part 58. That government is called the responsible entity. Part 58 covers programs such as the Community Development Block Grant, HOME, and homeless assistance grants.
How It Works
The responsible entity classifies the project and documents its findings in an environmental review record:
| Level | What it means | Housing examples |
|---|---|---|
| Exempt | No NEPA review needed | Planning studies, engineering and design costs, inspections |
| Categorically excluded | No assessment needed, but related laws may still apply | Multifamily rehabilitation that changes unit density by no more than 20% and costs less than 75% of replacement cost; actions on up to four units on a site |
| Environmental assessment (EA) | Written analysis ending in a finding of no significant impact, or a decision to go further | Most new apartment construction |
| Environmental impact statement (EIS) | Full study for potentially significant effects | Very large projects, such as 2,500 or more housing units |
After the review, the responsible entity usually publishes notices, waits out public comment periods, and submits a Request for Release of Funds (RROF). HUD or the state then allows at least 15 days for objections before approving it.
The most important rule is in Section 58.22. Until the release is approved, no participant may commit HUD funds or take choice-limiting actions, such as acquiring the site or beginning construction, even with non-HUD money. An option to buy land at a nominal cost is allowed if it depends on finishing the review.
Why It Matters for Workforce Housing
Many affordable and workforce housing deals layer a small amount of HOME or CDBG money into the capital stack as gap financing. That one source brings the entire project under Part 58. Developers who close on land or start site work first can lose that funding entirely. Building the review into the schedule early, and budgeting for studies such as a Phase I environmental site assessment, avoids costly delays.
Recent Changes
The White House Council on Environmental Quality removed its government-wide NEPA regulations through an interim rule published in February 2025. It adopted that rule as final, without changes, effective January 8, 2026. Agencies now rely on their own procedures. HUD’s Part 58 rules were still in the Code of Federal Regulations as of late September 2026, but related requirements continue to change. Check HUD guidance for the current requirements before starting a review.
Sources
- eCFR — 24 CFR Part 58, Environmental Review Procedures for Entities Assuming HUD Environmental Responsibilities (opens in a new tab)
- 24 CFR § 58.22 — Limitations on activities pending clearance (Cornell LII) (opens in a new tab)
- Federal Register — CEQ, Removal of NEPA Implementing Regulations (final rule, effective January 8, 2026) (opens in a new tab)
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