On January 24, 2020, the Housing and Urban Development (HUD) Department published a Final Rule to address an outdated regulation that rendered residential properties within 300 feet of a 1,000-gallon propane tank ineligible for Federal Housing Administration (FHA)-backed loans, which are common among first-time homebuyers. A HUD regulation, based on studies from 1975 and 1982, was the underlying justification for the below provision in the FHA Single Family Housing Policy Handbook 4000.1, relied on by FHA home appraisers:
If the subject property line is located within 300 feet of an aboveground or subsurface stationary storage tank with a capacity of 1,000 gallons or more of flammable or explosive material, then the Property is ineligible for FHA insurance, and the Appraiser must notify the Mortgagee of the deficiency of MPR or MPS. This includes domestic and commercial uses as well as automotive service station tanks.
This issue came to the attention of NPGA through a member marketer who worked with a residential developer on a propane system to service a new housing community. NPGA engaged FHA and HUD to identify the underlying regulation and advocate for the incorporation of NFPA 58 standards for separation distances between propane tanks and structures. Initially, HUD proposed to permit 250-gallon propane tanks within 300 feet of an FHA-backed property; however, NPGA continued to push for a higher container volume to accommodate homes utilizing propane for multiple appliances.
Ultimately, HUD changed the regulation to: (a) exclude all underground propane tanks; (b) exclude aboveground propane tanks of 1,000 gallons or less, if they comply with NFPA 58 2017 Edition, and (c) incorporate by reference NFPA 58 – 2017 Edition. HUD also instructs FHA to update the Single-Family Housing Handbook to reflect these changes. We will follow up with the FHA staff on the update to the handbook. The effective date of the change is February 24, 2020. The new regulatory language and text of the Final Rule are available online here.
Please direct any questions or comments to NPGA’s Sarah Reboli, Deputy Counsel, Regulatory Affairs.