Office of the Secretary; Fair Market Rents for the Section 8 Housing Assistance Payments ProgramFiscal Year 1997

Federal RegisterMay 8, 1996

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Text

SUMMARY: Section 8(c)(1) of the United States Housing Act of 1937

requires the Secretary to publish FMRs annually to be effective on

October 1 of each year. FMRs are used for the Section 8 Rental

Certificate Program (including space rentals by owners of manufactured

homes under that program); the Moderate Rehabilitation Single Room

Occupancy program; housing assisted under the Loan Management and

Property Disposition programs; payment standards for the Rental Voucher

program; and any other programs whose regulations specify their use.

Today's notice provides proposed FY 1997 FMRs for all areas.

DATES: Comments due date: July 1, 1996.

ADDRESSES: Interested persons are invited to submit comments regarding

HUD's estimates of the FMRs as published in this Notice to the Office

of the General Counsel, Rules Docket Clerk, Room 10276, Department of

Housing and Urban Development, 451 Seventh Street SW., Washington, DC

20410. Communications should refer to the above docket number and title

and should contain the information specified in the ``Request for

Comments'' section. To ensure that the information is fully considered

by all of the reviewers, each commenter is requested to submit two

copies of its comments, one to the Rules Docket Clerk and the other to

the Economic and Market Analysis Staff in the appropriate HUD Field

Office. A copy of each communication submitted will be available for

public inspection and copying during regular business hours (7:30 a.m.-

5:30 p.m. Eastern Time) at the above address.

FOR FURTHER INFORMATION CONTACT: Gerald Benoit, Operations Division,

Office of Rental Assistance, telephone (202) 708-0477. For technical

information on the development of schedules for specific areas or the

method used for the rent calculations, contact Alan Fox, Economic and

Market Analysis Division, Office of Economic Affairs, telephone (202)

708-0590. Hearing- or speech-impaired persons may use the

Telecommunications Devices for the Deaf (TTY) by contacting the Federal

Information Relay Service at 1-800-877-8339. (Other than the ``800''

TDD number, telephone numbers are not toll free.)

SUPPLEMENTARY INFORMATION: Section 8 of the United States Housing Act

of 1937 (the Act) (42 U.S.C. 1437f) authorizes housing assistance to

aid lower income families in renting decent, safe, and sanitary

housing. Assistance payments are limited by FMRs established by HUD for

different areas. In general, the FMR for an area is the amount that

would be needed to pay the gross rent (shelter rent plus utilities) of

privately owned, decent, safe, and sanitary rental housing of a modest

(non-luxury) nature with suitable amenities.

Publication of FMRs

Section 8(c) of the Act requires the Secretary of HUD to publish

FMRs periodically, but not less frequently than annually. The

Department's regulations provide that HUD will develop FMRs by

publishing proposed FMRs for public comment and after evaluating the

public comments, publish the final FMRs (see 24 CFR 888.115). The

proposed FY 1997 FMR schedules at the end of this document list the FMR

levels for the Rental Certificate program (Schedule B), and for the

areas where the manufactured home space FMRs have had modifications

approved (Schedule D).

Method Used To Develop FMRs

FMR Standard: FMRs are gross rent estimates; they include shelter

rent and the cost of utilities, except telephone. HUD sets FMRs to

assure that a sufficient supply of rental housing is available to

program participants. To accomplish this objective, FMRs must be both

high enough to permit a selection of units and neighborhoods and low

enough to serve as many families as possible. The level at which FMRs

are set is expressed as a percentile point within the rent distribution

of standard quality rental housing units. The current definition used

is the 40th percentile rent, the dollar amount below which 40 percent

of the standard quality rental housing units rent. The 40th percentile

rent is drawn from the distribution of rents of units which are

occupied by recent movers (renter households who moved into their unit

within the past 15 months). Newly built units less than two years old

are excluded, and adjustments have been made to correct for the below

market rents of public housing units included in the data base.

Data Sources: HUD used the most accurate and current data available

to develop the FMR estimates. The sources of survey data used for the

base-year estimates are:

(1) the 1990 Census, which provides statistically reliable rent

data for all FMR areas;

(2) the Bureau of the Census' American Housing Surveys (AHSs),

which are used to develop between-Census revisions for the largest

metropolitan areas and which have accuracy comparable to the decennial

Census; and

(3) Random Digit Dialing (RDD) telephone surveys of individual FMR

areas, which are based on a sampling procedure that uses computers to

select statistically random samples of rental housing.

The base-year FMRs are updated using trending factors based on

Consumer Price Index (CPI) data for rents and utilities or HUD regional

rent change factors developed from RDD surveys. Annual average CPI data

are available individually for 102 metropolitan FMR areas. RDD regional

rent change factors are developed annually for the metropolitan and

nonmetropolitan parts of each of the 10 HUD regions. The RDD factors

are used to update the base year estimates for all FMR areas that do

not have their own local CPI survey.

State Minimum FMRs: Starting with the FY 1996 FMRs, HUD implemented

a new minimum FMR policy in response to numerous public concerns that

FMRs in rural area were too low to operate the program successfully. As

a result, FMRs are established at the higher of the local FMR or the

Statewide average of nonmetropolitan counties, subject to a ceiling

rent cap. The State minimum also affects a small number of metropolitan

areas whose rents would otherwise fall below the State minimum.

FY 1997 FMRs: This document proposes revised FMRs that reflect

estimated 40th percentile rent levels trended to April 1, 1997. FMRs

have been calculated separately for each bedroom size category. For

most FMR areas, the bedroom size ratios are based on 1990 Census data

for that area. Exceptions have been made for areas with local bedroom

size rent intervals below an acceptable range. For those areas the

bedroom size intervals selected were the minimums determined after

outliers had been excluded from the distribution of bedroom ratios for

all metropolitan areas. Higher ratios continue to be used

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for three-bedroom and larger size units than would result from using

the actual market relationships. This is done to assist the largest,

most difficult to house families in finding program-eligible units.

RDD Surveys: RDD surveys are used to obtain statistically-reliable

FMR estimates for selected FMR areas. This survey technique involves

drawing random samples of renter units occupied by recent movers. RDD

surveys exclude public housing units, units built in the past two

years, seasonal units, non-cash rental units, and those owned by

relatives. A HUD analysis has shown that the slight downward RDD survey

bias caused by including some rental units that are in substandard

condition is almost exactly offset by the slight upward bias that

results from surveying only units with telephones.

On average, about 8,000 telephone numbers need to be contacted to

achieve the target survey sample level of at least 400 eligible

responses. RDD surveys have a high degree of statistical accuracy;

there is a 95 percent likelihood that the recent mover rent estimates

developed using this approach are within 3 to 4 percent of the actual

rent value. Virtually all of the estimates will be within 5 percent of

the actual value.

Today's notice proposes reduced FMRs based on RDD surveys for 7

areas. They are the Aguadilla, Arecibo, Ponce, and the nonmetropolitan

areas of PR, plus the Danbury, CT, Portland, ME, and Portsmouth-

Rochester, NH-ME FMR areas.

AHS Areas: AHSs cover the largest metropolitan areas on a four-year

cycle, encompassing nearly half of the nation's rental housing stock.

The 40th percentile rents for these areas are calculated from the

distributions of two-bedroom units occupied by recent movers. Public

housing units, newly constructed units and units that fail a housing

quality test are excluded from the rental housing distributions before

the FMRs are calculated. The proposed FY 1997 FMRs incorporate the

results of the 1994 AHSs. Based on the 1994 survey results, the FMRs

for the Orange County, CA and Riverside-San Bernardino, CA FMR areas

are being proposed with decreases. No changes were necessary for 5

other AHS areas. The FMRs for Buffalo-Niagara Falls, NY, Dallas, TX,

Fort Worth-Arlington, TX, Milwaukee-Waukesha, WI, and San Diego, CA,

were updated in the normal manner.

FMR Area Definition Change

At the request of the Rural Housing and Community Development

Service (RHS), HUD has reevaluated the Lafayette Louisiana FMR area

definition and has decided to use the full OMB metropolitan area

definition. This publication, therefore, proposes the revised

definition, consisting of Acadia, Lafayette, St. Landry, and St. Martin

Parishes. HUD accepts the RHS position that there is significant

commuting among these four Parishes and that they should be treated as

a single housing market area for FMR purposes.

The proposed FY 1997 FMRs for the Lafayette FMR area, therefore,

are based on an RDD survey of the four-Parish area conducted by HUD in

1995 and updated to the as-of date of this year's FMR estimates. As a

result of combining the four Parishes into one FMR area, the proposed

FMRs for Lafayette and St. Martin Parishes are $21 lower and those for

Acadia and St. Landry Parishes are $37 higher than last year's levels.

HUD invites public comments on the appropriateness of the revised FMR

area definition as well as the accuracy of the proposed FMRs.

Manufactured Home Space FMRs

Manufactured home space FMRs are 30 percent of the applicable

Section 8 Rental Certificate program FMR for a two-bedroom unit. HUD

accepts public comments requesting modifications of these FMRs where

they are thought to be inadequate to run the program. In order to be

accepted as a basis for revising the FMRs, such comments must contain

statistically valid survey data that show the 40th percentile space

rent (excluding the cost of utilities) for the entire FMR area. This

program uses the same FMR area definitions as the Section 8 Rental

Certificate program. Manufactured home space FMR revisions are

published as final FMRs in Schedule D. Once approved, the revised

manufactured home space FMRs establish new base year estimates that are

updated annually using the same data used to update the Rental

Certificate program FMRs.

Puerto Rico FMRs

RDD surveys were conducted for all Puerto Rico FMR areas during

1995. For three of them, Aguadilla, Arecibo, and Ponce, not enough

sample cases were obtained in 1995 to be usable with sufficient

confidence for FMR purposes. In early 1996, HUD resumed and completed

the RDD surveys of these three areas, and re-evaluated the 1995

nonmetropolitan survey results, and this Federal Register notice

includes proposed reductions for all of them. This notice also corrects

an erroneous statement in the February 21, 1996 Federal Register notice

regarding Aguadilla and the nonmetropolitan areas that their RDD

surveys had been completed. The FMRs for the nonmetropolitan areas of

Puerto Rico are being proposed for reduction, using data from the 1995

RDD survey. As stated in previous Federal Register notices on this

subject, the Puerto Rico surveys used an augmented questionnaire which

included many questions regarding housing quality, and the survey was

administered in Spanish. This completes HUD's RDD-based review of FMRs

throughout Puerto Rico.

Technical Correction--Santa Rosa, CA

In the February 21, 1996, Federal Register publication (61 FR

6690), the FMRs for the zero-bedroom, 3-bedroom, and 4-bedroom sizes

for the Santa Rosa, CA PMSA were in error. The corrected FY 1996 FMRs

are as follows:

------------------------------------------------------------------------

Bedroom

----------------------------------

0 1 2 3 4

------------------------------------------------------------------------

Santa Rosa, CA PMSA.................. $512 581 753 1047 1236

------------------------------------------------------------------------

FMRs for Federal Disaster Areas

Under the authority granted in 24 CFR part 899, the Secretary finds

good cause to waive the regulatory requirements that govern requests

for geographic area FMR exceptions for areas that are declared disaster

areas by the Federal Emergency Management Agency (FEMA) during FY 1996.

HUD is prepared to grant disaster-related exceptions up to 10 percent

above the applicable FMRs. HUD field offices are authorized to approve

such exceptions for: (1) Single-county FMR areas and for individual

county parts of multi-county FMR areas that qualify as disaster areas

under the Robert T. Stafford Disaster Relief and Emergency Assistance

Act; if (2) the PHA certifies that damage to the rental housing stock

as a result of the disaster is so substantial that it has increased the

prevailing rent levels in the affected area. Such exceptions must be

requested in writing by the responsible PHAs. Once approved by HUD,

they will remain in effect until superseded by the publication of the

final FY 1999 FMRs.

Request for Comments

HUD seeks public comments on FMR levels for specific areas.

Comments on

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FMR levels must include sufficient information (including local data

and a full description of the rental housing survey methodology used)

to justify any proposed changes. Changes may be proposed in all or any

one or more of the bedroom-size categories on the schedule.

Recommendations and supporting data must reflect the rent levels that

exist within the entire FMR area.

HUD recommends use of professionally-conducted Random Digit Dialing

(RDD) telephone surveys to test the accuracy of FMRs for areas where

there is a sufficient number of Section 8 units to justify the survey

cost of $10,000-$12,000. Areas with 500 or more program units usually

meet this criterion, and areas with fewer units may meet it if actual

two-bedroom FMR rents are significantly different from the FMRs

proposed by HUD. In addition, HUD has developed a version of the RDD

survey methodology for smaller, nonmetropolitan PHAs. This methodology

is designed to be simple enough to be done by the PHA itself, rather

than by professional survey organizations, at a cost of $5,000 or less.

PHAs in nonmetropolitan areas may, in certain circumstances, do

surveys of groups of counties. All grouped county surveys must be

approved in advance by HUD. PHAs are cautioned that the resultant FMRs

will not be identical for the counties surveyed; each individual FMR

area will have a separate FMR based on its relationship to the combined

rent of the cluster of FMR areas.

PHAs that plan to use the RDD survey technique may obtain a copy of

the appropriate survey guide by calling HUD USER on 1-800-245-2691.

Larger PHAs should request ``Random Digit Dialing Surveys; A Guide to

Assist Larger Public Housing Agencies in Preparing Fair Market Rent

Comments.'' Smaller PHAs should obtain ``Rental Housing Surveys; A

Guide to Assist Smaller Public Housing Agencies in Preparing Fair

Market Rent Comments.''

HUD prefers, but does not mandate, the use of RDD telephone

surveys, or the more traditional method described in the small PHA

survey guide along with the simplified RDD methodology. Other survey

methodologies are acceptable as long as the surveys submitted provide

statistically reliable, unbiased estimates of the 40th percentile gross

rent. Survey samples should preferably be randomly drawn from a

complete list of rental units for the FMR area. If this is not

feasible, the selected sample must be drawn so as to be statistically

representative of the entire rental housing stock of the FMR area. In

particular, surveys must include units of all rent levels and be

representative by structure type (including single-family, duplex and

other small rental properties), age of housing unit, and geographic

location. The decennial Census should be used as a starting point and

means of verification for determining whether the sample is

representative of the FMR area's rental housing stock.

Local rental housing surveys conducted with alternative methods

must include the same type of documentation required of the RDD-type

surveys. Specifically, PHA submissions must include:

--Identification of the 40th percentile gross rent (gross rent is rent

including the cost of utilities) and the actual distribution (or

distributions if more than one bedroom size is surveyed) of the

surveyed units rank-ordered by gross rent.

--An explanation of how the rental housing sample was drawn and a copy

of the survey questionnaire, transmittal letter, and any publicity

materials.

--An explanation of how the contract rents of the individual units

surveyed were converted to gross rents. (For RDD-type surveys HUD

requires use of the Section 8 utility allowance schedule.)

--An explanation of how the survey excluded units built within two

years prior to the survey date.

--The date the rent data were collected so that HUD can apply a

trending factor to update the estimate. If the survey has already been

trended to this date, the date the survey was conducted and a

description of the trending factor used.

--Copies of all survey sheets.

Since FMRs are based on standard quality units and units occupied

by recent movers, both of which are difficult to identify and survey,

HUD will accept surveys of all rental units and apply appropriate

adjustments.

Most surveys cover only one- and two-bedroom units, in which case

HUD will make the adjustments for other size units consistent with the

differentials established on the basis of the 1990 Census data for the

FMR area. When three- and four-bedroom units are surveyed separately to

determine FMRs for these unit size categories, the commenter should

multiply the 40th percentile survey rents by 1.087 and by 1.077,

respectively, to determine the FMRs. The use of these factors will

produce the same upward adjustments in the rent differentials as those

used in the HUD methodology.

Other Matters

A Finding of No Significant Impact with respect to the environment

as required by the National Environmental Policy Act (42 U.S.C. 4321-

4374) is unnecessary, since the Section 8 Rental Certificate program is

categorically excluded from the Department's National Environmental

Policy Act procedures under 24 CFR 50.20(d).

The undersigned, in accordance with the Regulatory Flexibility Act

(5 U.S.C. 605(b)), hereby certifies that this Notice does not have a

significant economic impact on a substantial number of small entities,

because FMRs do not change the rent from that which would be charged if

the unit were not in the Section 8 program.

The General Counsel, as the Designated Official under Executive

Order No. 12606, The Family, has determined that this Notice will not

have a significant impact on family formation, maintenance, or well-

being. The Notice amends Fair Market Rent schedules for various Section

8 assisted housing programs, and does not affect the amount of rent a

family receiving rental assistance pays, which is based on a percentage

of the family's income.

The General Counsel, as the Designated Official under section 6(a)

of Executive Order No. 12611, Federalism, has determined that this

Notice will not involve the preemption of State law by Federal statute

or regulation and does not have Federalism implications. The Fair

Market Rent schedules do not have any substantial direct impact on

States, on the relationship between the Federal government and the

States, or on the distribution of power and responsibility among the

various levels of government.

The Catalog of Federal Domestic Assistance program number is

14.156, Lower-Income Housing Assistance Program (section 8).

Accordingly, the Fair Market Rent Schedules, which will be codified

in 24 CFR Part 888, are amended as follows:

Dated: April 30, 1996.

Henry G. Cisneros,

Secretary.

Fair Market Rents for the Section 8 Housing Assistance Payments

Program

Schedules B and D--General Explanatory Notes

1. Geographic Coverage

a. The FMRs shown in Schedule B incorporate the Office of

Management and Budget's (OMB) most current definitions of metropolitan

areas (with the exceptions discussed in paragraph b). HUD uses the OMB

Metropolitan Statistical Area (MSA) and Primary

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Metropolitan Statistical Area (PMSA) definitions for FMR areas because

they closely correspond to housing market area definitions. FMRs are

housing market-wide rent estimates that are intended to provide housing

opportunities throughout the geographic area in which rental housing

units are in direct competition.

b. The exceptions are counties deleted from seven large

metropolitan areas whose revised OMB definitions were determined by HUD

to be larger than the housing market areas. The FMRs for the following

counties (shown by the metropolitan area) are calculated separately and

are shown in Schedule B within their respective States under the

``Metropolitan FMR Areas'' listing:

Metropolitan Area and Counties Deleted

Atlanta, GA--Carroll, Pickens, and Walton Counties.

Chicago, IL--DeKalb, Grundy and Kendall Counties.

Cincinnati-Hamilton, OH-KY-IN--Brown County, Ohio; Gallatin, Grant and

Pendleton Counties in Kentucky; and Ohio County, Indiana.

Dallas, TX--Henderson County.

Flagstaff, AZ-UT--Kane County, UT

New Orleans, LA--St. James Parish.

Washington, DC--Berkeley and Jefferson Counties in West Virginia; and

Clarke, Culpeper, King George and Warren counties in Virginia.

c. FMRs also are established for nonmetropolitan counties and for

county equivalents in the United States, for nonmetropolitan parts of

counties in the New England states and for FMR areas in Puerto Rico,

the Virgin Islands, and the Pacific Islands.

d. FMRs for the areas in Virginia shown in the table below were

established by combining the Census data for the nonmetropolitan

counties with the data for the independent cities that are located

within the county borders. Because of space limitations, the FMR

listing in Schedule B includes only the name of the nonmetropolitan

county. The complete definitions of these areas including the

independent cities are as follows:

Virginia Nonmetropolitan County FMR Area and Independent Cities

Included

------------------------------------------------------------------------

County Cities

------------------------------------------------------------------------

Allegheny............................. Clifton Forge and Covington

Augusta............................... Staunton and Waynesboro

Carroll............................... Galax

Frederick............................. Winchester

Greensville........................... Emporia

Halifax............................... South Boston

Henry................................. Martinsville

Montgomery............................ Radford

Rockbridge............................ Buena Vista and Lexington

Rockingham............................ Harrisonburg

Southhampton.......................... Franklin

Wise.................................. Norton

------------------------------------------------------------------------

e. FMRs for Section 8 manufactured home spaces are 30 percent of

the two-bedroom Section 8 Rental Certificate program FMRs, with the

exception of the areas listed in Schedule D whose manufactured home

space FMRs have been revised on the basis of public comments. Once

approved, the revised manufactured home space FMRs establish new base-

year estimates that are updated annually using the same data used to

estimate the Rental Certificate program FMRs. The FMR area definitions

used for manufactured home spaces are the same as for the Section 8

Certificate program.

2. Arrangement of FMR Areas and Identification of Constituent Parts

a. The FMR areas in Schedule B are listed alphabetically by

metropolitan FMR area and by nonmetropolitan county within each State.

The exception FMRs for manufactured home spaces in Schedule D are

listed alphabetically by State.

b. The constituent counties (and New England towns and cities)

included in each metropolitan FMR area are listed immediately following

the listings of the FMR dollar amounts. All constituent parts of a

metropolitan FMR area that are in more than one State can be identified

by consulting the listings for each applicable State.

c. Two nonmetropolitan counties are listed alphabetically on each

line of the nonmetropolitan county listings.

d. The New England towns and cities included in a nonmetropolitan

part of a county are listed immediately following the county name.

e. The FMRs are listed by dollar amount on the first line beginning

with the FMR area name.

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[FR Doc. 96-11417 Filed 5-7-96; 8:45 am]

BILLING CODE 4210-32-C

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