The Office of Management and Budget (OMB) posted guidance for implementing Executive Order (EO) 13771 that requires federal agencies to repeal at least two existing regulations for each new proposed regulation and to calculate the incremental cost of all new regulations and repealed regulations so that there is no net cost due to regulatory action during a given year (see Memo, 2/6). OMB’s Office of Information and Regulatory Affairs (OIRA) posted a Memorandum dated February 2 on the White House website offering interim guidance specific to FY17. OMB will issue further guidance regarding FY18 and subsequent years.
According to the OIRA guidance Memorandum, EO 13771 applies to “significant” regulatory actions issued between noon, January 20, 2017 and September 30, 2017, as well as to those issued as proposed rules before noon on January 20, 2017. EO 12866, from 1993 and referenced in EO 13771, defines “significant” regulatory actions as those that have an annual effect on the economy of at least $100 million, or that “adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities (emphasis added).”
The OIRA Memorandum guidance is in the form of questions and answers. One guidance question is “which existing regulatory actions, if repealed or revised, could be considered deregulatory actions, and thus qualify for savings?” The guidance answers in part that “meaningful burden reduction through the repeal or streamlining of mandatory reporting, recordkeeping or disclosure requirements may also qualify.” Although the Memorandum reminds agencies that they “should also confirm that they will continue to achieve their regulatory objectives after the deregulatory action is undertaken,” repealing or streamlining reporting and recordkeeping could undermine the integrity of many HUD programs, especially those that have statutory obligations to serve specific populations based on income, age, disability, and unique needs such as those of people who are homeless, fleeing domestic or sexual violence, or exiting the criminal justice system.
An example of a statutory obligation is Section 3 of the “Housing and Urban Development Act of 1968,” which requires preferences in employment and training opportunities for public housing residents and low income residents in the service area of a HUD-assisted housing or community development activity. To ensure the intent of Section 3 is realized, public housing agencies, communities receiving Community Development Block Grant (CDBG) funds, and construction contractors using these funds must report their best efforts to comply with Section 3 and be subject to HUD monitoring. HUD published proposed changes to the 1994 interim rule under which Section 3 has been operating (see Memo, 3/23/15), but a final rule has not yet been issued. Incoming HUD Secretary Carson should seriously consider prioritizing improvements to Section 3, given his stated intentions to assist low income people by improving their economic conditions. If HUD issues a final Section 3 rule, EO 13771 requires HUD to jettison two others. NLIHC cannot think of two HUD rules that can justifiably be eliminated. Even if HUD removes two sets of rules, it is doubtful that any resulting cost savings would accrue to those who would still be responsible for Section 3 record keeping and reporting.
Another example is the new national Housing Trust Fund (HTF) which is targeted to extremely low income renter households, those with incomes less than 30% of the area median income or the federal poverty line. For Congress to be assured that this particular population is actually benefitting from HTF-assisted housing, states must keep records and report to the public, HUD, and Congress. The HTF is currently operating under an interim rule. HUD intends to seek public comment on the interim rule after states and other stakeholders have had about a year of experience implementing the HTF and then issue a final rule based on feedback from stakeholders. There are no good options for alternative rules that HUD would have to repeal in order to issue a final HTF rule.
It should be noted that since February 1981 when President Reagan issued EO 12291, agencies have had to prepare regulatory impact analyses that weighed benefits and costs of rules. President Obama issued EO 13563 (see Memo, 1/21/11, 3/4/11) requiring agencies to undertake “retrospective analyses of rules that might be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them.” HUD’s plan in response to Mr. Obama’s order was presented on May 26, 2011 (see Memo, 5/27/11). Consequently, HUD has already endeavored to cull any excessively burdensome regulations.
EO 13771 and the OIRA Memorandum mention only the “costs” of regulations; their benefits are not discussed. NLIHC’s position is that OIRA Memorandum overemphasizes cost by requiring them to be measured as “opportunity costs” to society, as defined in OMB Circular A-4. That Circular asserts, “The principle of ‘willingness-to-pay’ (WTP) captures the notion of opportunity cost by measuring what individuals are willing to forgo to enjoy a particular benefit.” Many pages of Circular A-4 are devoted to market-based means of estimating cost and benefit. However, most HUD regulations cannot be monetized or easily quantified; they are designed to ensure that the people whom Congress intended to assist actually benefit or that people are not harmed, for example, by lead-based paint or by racial discrimination.
The OIRA Memorandum poses a question about treating unquantified costs and cost savings (but not benefits). The answer instructs agencies to refer to OMB Circular A-4, which contains pages of discussion regarding treatment of non-quantifiable benefits and costs, but does not anticipate the dramatic force of EO 13771. Two passages in Circular A-4 touch upon the difficult-to-monetize or -quantify nature of most HUD regulations:
- “When important benefits and costs cannot be expressed in monetary units, benefit-cost analysis is less useful, and it can even be misleading, because the calculation of net benefits in such cases does not provide a full evaluation of all relevant benefits and costs.”
- “If you are not able to quantify the effects, you should present any relevant quantitative information along with a description of the unquantified effects, such as ecological gains, improvements in quality of life, and aesthetic beauty.”
Three organizations - Public Citizen, Natural Resources Defense Council, and Communication Workers of America, AFL-CIO - filed a lawsuit on February 8, asserting among other claims that EO 13771 and OIRA’s Memorandum exceed the president’s constitutional authority and violate the Administrative Procedures Act.
NLIHC has submitted a letter to Dominic J. Mancini, acting administrator of the Office of Information and Regulatory Affairs at OMB, expressing grave concern about the impact that EO 13771 will have on the low income people served by the HUD programs. That letter is at: http://bit.ly/2kdmpbj
EO 13771 is at: http://bit.ly/2kx0TlY
The OIRA Memorandum is at: http://bit.ly/2kqp6rA