How Affordable Housing Developers Can Use the NYC Brownfield Program To Satisfy NEPA

All Federal agencies are required to comply with the National Environmental Policy Act (NEPA), 42 U.S.C. 4321 et seq. The federal Department of Housing and Urban Development (HUD) has established regulations implementing NEPA at 24 CFR Part 50 when HUD staff performs environmental reviews and Part 58 when local governments assume HUD responsibility. In New York City, the New York City Department of Housing Preservation and Development (HPD) has assumed responsibility for environmental review that would normally be performed by HUD.

All property proposed for use in HUD programs must be free of hazardous materials, contamination, toxic chemicals and gases, and radioactive substances where the hazard could affect the health and safety of occupants or conflict with the intended use of the property.  See 24 CFR Parts 50.3(i) and 58.5(i)(2). As a result, developers of affordable projects receiving funding from HUD or HPD often have to perform environmental reviews for the presence of hazardous materials to comply with NEPA

Under 24 CFR 58.40(b), HPD must have an Environmental Assessment (EA) prepared to identify all potential environmental impacts, whether beneficial or adverse, and the conditions that would change as a result of the project. Environmental reviews are generally conducted for new construction, major rehabilitation, leasing, acquisition and change in use under a range of HUD programs. The most common programs for which HPD performs environmental reviews are HUD’s HOME Investment Partnership Program (HOME) and the Neighborhood Stabilization Program (NSP). HPD utilizes federal HOME funds to finance the construction of new and rehabilitation of existing housing including vacant and occupied single room occupancy buildings (SRO), small homes (buildings with fewer than 12 units) and multi-family buildings. The reviews must be completed before the release of funds and acquisition of property.

The developer will be required to conduct a phase 1. If the phase 1 identifies Recognized Environmental Conditions (RECs), the developer will have to propose a phase 2 work plan for approval by New York City Department of Environmental Protection (DEP). Note that sometimes HUD or HPD may disagree with the phase 1 findings and require a Phase II even if the phase 1 did not identify RECs. If the investigation confirms the presence of contamination above applicable levels, the developer will a remedial action plan (RAP) for review and approval by the DEP.

The existence of an approved the RAP enables HPD to issue a Notice of Finding of No Significant Impact (FONSI) certifying that the project will not have a significant impact on the environment and therefore will not require preparation of an Environmental Impact Statement (EIS). HPD will then also issue Notice of Intent to Request a Release of Funds (NOI/RROF). The developer would normally implement the RAP and submit a remedial action report to DEP for final approval.

The DEP approval will simply confirm that the developer has satisfactorily completed the RAP. The certification will not confer any liability protection under CERCLA or the state Environmental Conservation Law (ECL) nor provide contribution protection. Moreover, the HPD funding often does not cover remediation costs which can create a funding gap for a project that already has very tight margins.

When facing the prospect of implementing a remedial action, developers should consider enrolling the project in the New York City Brownfield Cleanup Program (NYCBCP) which is administered by the Mayor’s Office of Environmental Remediation (OER). By performing the cleanup under the NYCBCP, the developer will not only receive a liability release that will be honored by the NYSDEC but also be able to tap a suite of investigation/cleanup grant programs offered by OER that can help plug the funding gap caused by the need to perform remedial actions.

Developers can enter the NYCBCP even after DEP has approved a RAP. Often times, all that a developer will have to do is to convert the DEP-approved RAP into the template form used by OER. This is because both DEP and OER follow the NYSDEC remedial program requirements set forth at 6 NYCRR Part 375. The NYCBCP is perhaps the most nimble remedial program in the country. OER staff is particularly responsive to the needs of applicants and will work hard to find a way to accommodate the construction schedule of an applicant.

All is not lost if you have learned about the NYCBCP after construction has started or is significantly completed. OER has developed a “look back” track where projects may be able to obtain liability protection if the remedial action conforms to the OER program requirements. However, “look back” applicants will not be eligible for the NYCBCP funding incentives.

Developers, their consultants and project attorneys should seriously consider using the NYCBCP to project remedial obligations required to comply with NEPA.

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