Environmental Assessments for HUD 221(d)(4) Loans
In addition to getting a site appraisal, a market study, and other third-party reports, getting an HUD environmental assessment is an essential part of the HUD 221(d)(4) application process. Environmental assessments are required to determine that a potential project is in compliance with local, state, and federal environmental regulations, as well as to make sure that the project does not negatively impact the environment as a whole, the project site, and current or future residents. This means, among other things, that projects must be "free of hazardous materials, contamination, toxic chemicals and gases, and radioactive substances."
Phase I Environmental Site Assessment
One of the most common site assessments for HUD multifamily construction loan projects is the American Society for Testing and Materials (ASTM) Phase I Environmental Site Assessment, commonly known as a Phase I.
Elements of Phase I ESAs
A Phase I Environmental Assessment looks into any past uses of the site that could impact future residents, including:
Determining any previous use of hazardous chemicals, petroleum products, and previous pesticide use
For HUD 221(d)(4) substantial rehabilitation properties, Phase I also looks into potentially hazardous structural elements, like asbestos or lead-based paints, as well as mold and radon
Phase I looks into any past environmental liens on the property
Other Phase I Facts
The entire Phase I process may take a month, so it's usually to an owner/developer's advantage to begin this process as early as possible
Phase I must be used within 6 months of closing a deal
A Phase I less than a year old may still be able to expedite the new Phase I process, saving significant time and money
Phase II Environmental Assessment
In cases where there may be a serious or significant history of site contamination, as determined by a Phase I assessment, a Phase II assessment may be required. This involves taking physical samples and doing testing in order to create a secondary report.
Elements of Phase II ESAs
A Phase II environmental assessment may involve:
Surface and sub-surface soil analysis
Installation of monitoring wells
Indoor air sampling
Mold, asbestos sampling, and lead sampling
Due to the fact that it involves physical sampling a Phase II may take significantly longer and be more expensive than a Phase I. However, this completely depends on the scope of the project and the severity of the potential contamination.