Final Fair Market Rents for the Housing Choice Voucher Program and Moderate Rehabilitation Single Room Occupancy Program Fiscal Year 2015, 59786-59855 [2014-23677]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 79, Number 192 (Friday, October 3, 2014)]
[Notices]
[Pages 59786-59855]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-23677]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5807-N-03]


Final Fair Market Rents for the Housing Choice Voucher Program 
and Moderate Rehabilitation Single Room Occupancy Program Fiscal Year 
2015

AGENCY: Office of the Assistant Secretary for Policy Development and 
Research, HUD.

ACTION: Notice of Final Fiscal Year (FY) 2015 Fair Market Rents (FMRs).

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SUMMARY: Section 8(c)(1) of the United States Housing Act of 1937 
(USHA) requires the Secretary to publish FMRs periodically, but not 
less than annually, adjusted to be effective on October 1 of each year. 
This notice publishes the final FY 2015 FMRs for programs operating 
under Section 8 of the United States Housing Act of 1937 (The Act) or 
directed to use FMRs as calculated under Section 8 of the act. 
Currently the programs operating under Section 8 of the act are the 
Housing Choice Voucher, the Moderate Rehabilitation, and the project-
based voucher programs. Additionally, based on Section 210 of Division 
L, Title II of the Consolidated Appropriations Act, 2014, Public 
Housing Authorities administering Public Housing must use these FMRs in 
calculating Flat Rents for public housing. Today's notice provides 
final FY 2015 FMRs for all areas that reflect the estimated 40th and 
50th percentile rent levels trended to April 1, 2015. The FY 2015 FMRs 
are based on 5-year, 2008-2012 standard quality rents collected by the 
American Community Survey (ACS). These 5-year rents are updated by one-
year recent-mover 2012 ACS rents. HUD uses the Consumer Price Index 
(CPI) rent and utility indexes to further update the data from 2012 to 
the end of 2013. HUD continues to use ACS data in different ways 
according to the statistical reliability of rent estimates for areas of 
different population sizes and counts of rental units.
    The final FY 2015 FMRs in this notice have no methodology changes. 
HUD continues to use the Puerto Rico Community Survey (PRCS) data (the 
PRCS is a part of the ACS program) and the Consumer Price Index data 
calculated specifically for Puerto Rico, as it first did for the FY 
2014 FMRs. HUD also continues to adjust the FMRs for Puerto Rico based 
on validated information related to utility rates, which have not shown 
up in the gross rent or CPI data. The trend factor, applied to all FMR 
areas, is the average annual change in national gross rents between 
2007 and 2012.
    The final FY 2015 FMR areas use the Office of Management and Budget 
(OMB) metropolitan area definitions as updated through December 1, 2009 
and include HUD modifications that were first used in the determination 
of FY 2006 FMR areas. The February 28, 2013 update to the OMB 
metropolitan area definitions are not been incorporated in the FY 2015 
FMRs process due to the timing of the release and the availability of 
ACS data. HUD will work toward incorporating these new area definitions 
into the Proposed FY 2016 FMRs. The Department hopes to provide more 
implementation details in an anticipated publication in January 2015.
    The January 2015 notice will also discuss and solicit comments on 
several topics related to the calculation of FMRs, including the 
implementation of the February 28, 2013 OMB Metropolitan Area 
Definitions and

[[Page 59787]]

possible measures the Department is considering that would reduce the 
concentration of Section 8 voucher tenants. For example, HUD is 
evaluating alternatives to the current 50th percentile FMR program 
whose purpose was to mitigate excessive geographic concentration of 
voucher tenants. HUD will solicit comments to determine interest in a 
program that is based on different measures for determining how many 
and which areas would receive special FMRs to encourage 
deconcentration, as well as on alternative FMR-based tools for 
promoting deconcentration such as Small Area FMRs estimated at the ZIP 
code level.
    The final FY 2015 notice updates the FMRs for Bennington, Windham, 
and Windsor counties in Vermont to incorporate the results of surveys 
received after publication of the proposed FY 2015 FMRs. These surveys 
result in increases for all three nonmetropolitan counties.

DATES: Effective Date: The FMRs published in this notice are effective 
on October 1, 2014.

FOR FURTHER INFORMATION CONTACT: For technical information on the 
methodology used to develop FMRs or a listing of all FMRs, please call 
the HUD USER information line at 800-245-2691 or access the information 
on the HUD USER Web site https://www.huduser.org/portal/datasets/fmr.html. FMRs are shown at the 40th or 50th percentile in Schedule B. 
For informational purposes, 40th percentile recent-mover rents for the 
areas with 50th percentile FMRs will be provided in the HUD FY 2015 FMR 
documentation system at https://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr15 and 50th percentile rents for all FMR areas 
will be published at https://www.huduser.org/portal/datasets/50per.html 
after publication of final FY 2015 FMRs.
    Questions related to use of FMRs or voucher payment standards 
should be directed to the respective local HUD program staff. For flat 
rent questions, please contact Todd Thomas, Acting Director of the 
Public Housing Management and Occupancy Division of the Public Housing 
Office at 202-708- 5849. Questions on how to conduct FMR surveys or 
concerning further methodological explanations may be addressed to 
Marie L. Lihn or Peter B. Kahn, Economic and Market Analysis Division, 
Office of Economic Affairs, Office of Policy Development and Research, 
telephone 202-402-2409. Persons with hearing or speech impairments may 
access this number through TTY by calling the toll-free Federal Relay 
Service at 800-877-8339. (Other than the HUD USER information line and 
TDD numbers, telephone numbers are not toll-free.)
    Electronic Data Availability: This Federal Register notice is 
available electronically from the HUD User page at https://www.huduser.org/datasets/fmr.html. Federal Register notices also are 
available electronically from https://www.gpoaccess.gov/fr/, 
the U.S. Government Printing Office Web site. Complete documentation of 
the methodology and data used to compute each area's final FY 2015 FMRs 
is available at https://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr15. Final FY 2015 FMRs are available in a variety 
of electronic formats at https://www.huduser.org/portal/datasets/fmr.html. FMRs may be accessed in PDF format as well as in Microsoft 
Excel. A new HUD User page has been developed for Small Area FMRs and 
those based on final FY 2015 Metropolitan Area Rents and historical 
versions of this data will be on this site, with a link from the FMR 
page of HUD User https://www.huduser.org/portal/datasets/fmr.html. 
Please note that these Small Area FMRs are for reference only, except 
where they are used by public housing authorities (PHAs) participating 
in the Small Area FMR demonstration. With approval from the Housing 
Voucher Management Division of the Office of Public and Indian Housing 
(PIH) these Small Area FMRs may be used in the process of determining 
exception payment standards.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 8 of the USHA (42 U.S.C. 1437f) authorizes housing 
assistance to aid lower-income families in renting safe and decent 
housing. Housing assistance payments are limited by FMRs established by 
HUD for different geographic areas. In the HCV program, the FMR is the 
basis for determining the ``payment standard amount'' used to calculate 
the maximum monthly subsidy for an assisted family (see 24 CFR 
982.503). 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, and safe rental housing of a modest (non-luxury) nature 
with suitable amenities. In addition, all rents subsidized under the 
HCV program must meet reasonable rent standards. HUD's regulations at 
24 CFR 888.113 require it to establish 50th percentile FMRs for certain 
areas.

II. Procedures for the Development of FMRs

    Section 8(c)(1) of the USHA requires the Secretary of HUD to 
publish FMRs periodically, but not less frequently than annually. 
Section 8(c)(1) states, in part, as follows:

    Proposed fair market rentals for an area shall be published in 
the Federal Register with reasonable time for public comment and 
shall become effective upon the date of publication in final form in 
the Federal Register. Each fair market rental in effect under this 
subsection shall be adjusted to be effective on October 1 of each 
year to reflect changes, based on the most recent available data 
trended so the rentals will be current for the year to which they 
apply, of rents for existing or newly constructed rental dwelling 
units, as the case may be, of various sizes and types in the market 
area suitable for occupancy by persons assisted under this section.

    HUD's regulations at 24 CFR part 888 provide that HUD will develop 
proposed FMRs, publish them for public comment, provide a public 
comment period of at least 30 days, analyze the comments, and publish 
final FMRs. (See 24 CFR 888.115.) For FY 2015 FMRs, HUD has considered 
all comments submitted in response to its August 15, 2014 (78 FR 47339) 
proposed FY 2015 FMRs but its responses are posted on its Web site 
because of the time required to publish this notice.
    In addition, HUD's regulations at 24 CFR 888.113 set out procedures 
for HUD to assess whether areas are eligible for FMRs at the 50th 
percentile. Minimally qualified areas \1\ are reviewed each year unless 
not eligible to be reviewed. Areas that currently have 50th percentile 
FMRs are evaluated for progress in voucher tenant concentration after 
three years in the program. Continued eligibility is determined using 
HUD administrative data that show levels of voucher tenant 
concentration. The levels of voucher tenant concentration must be above 
25 percent and show a decrease in concentration since the last 
evaluation. At least 85 percent of the voucher units in the area must 
be reported for a determination on the

[[Page 59788]]

status of a 50th percentile area. Areas are not qualified for review if 
they are within the three-year period as a 50th-percentile area or have 
lost 50th-percentile status for failure to de-concentrate within the 
last three years.
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    \1\ As defined in 24 CFR 888.113(c), a minimally qualified area 
is an area with at least 100 Census tracts where 70 percent or fewer 
of the Census tracts with at least 10 two-bedroom rental units are 
Census tracts in which at least 30 percent of the two bedroom rental 
units have gross rents at or below the two bedroom FMR set at the 
40th percentile rent. This continues to be evaluated with 2000 
Decennial Census information. Although the 5-year ACS tract level 
data is available, HUD plans to implement new 50th percentile areas 
in conjunction with the implementation of new OMB area definitions.
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    In FY 2014 there were 19 areas using 50th-percentile FMRs. Of these 
19 areas, 13 areas were eligible for evaluation. Only four of the 13 
areas will continue as 50th percentile FMR areas; those nine areas that 
do not continue as 50th percentile areas did not show measurable 
deconcentration and will not be evaluated for an additional three-year 
period, as required by the regulation. An additional six areas that 
failed to deconcentrate as of FY 2012 will once again become 50th 
percentile FMR areas.
    In summary, there will be 16 50th-percentile FMR areas in FY 2015. 
In Schedule B, where all FMRs are listed by state and area, an asterisk 
designates the 50th percentile FMR areas. The following table lists the 
FMR areas along with the year of their next evaluation.

                         FY 2015 50th-Percentile FMR Areas and Year of Next Reevaluation
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Albuquerque, NM MSA...........................         2018   Baltimore-Towson, MD HUD Metro FMR            2016
                                                               Area.
Chicago-Joliet-Naperville, IL HUD Metro FMR            2018   Denver-Aurora-Broomfield, CO MSA.....         2018
 Area.
Fort Lauderdale, FL HUD Metro FMR Area........         2016   Hartford-West Hartford-East Hartford,         2018
                                                               CT HUD Metro FMR Area.
Honolulu, HI MSA..............................         2018   Kansas City, MO-KS HUD Metro FMR Area         2018
Milwaukee-Waukesha-West Allis, WI MSA.........         2018   New Haven-Meriden, CT HUD Metro FMR           2016
                                                               Area.
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD            2016   Richmond, VA HUD Metro FMR Area......         2016
 MSA.
Riverside-San Bernardino-Ontario, CA MSA......         2018   Tacoma, WA HUD Metro FMR Area........         2018
Virginia Beach-Norfolk-Newport News, VA-NC MSA         2018   West Palm Beach-Boca Raton, FL HUD            2016
                                                               Metro FMR Area.
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III. Proposed FY 2015 FMRs

    On August 15, 2014 (79 FR 48178), HUD published proposed FY 2015 
FMRs with a comment period that ended September 15, 2014. HUD has 
considered all public comments received and HUD provides responses to 
these comments on the FMR Web site https://www.huduser.org/portal/datasets/fmr.html. HUD does not specifically identify each commenter, 
but all comments are available for review on the Federal Government's 
Web site for capturing comments on proposed regulations and related 
documents (Regulations.gov--https://www.regulations.gov/#!docketDetail;D=HUD-2014-0065).

IV. FMR Methodology

    This section provides a brief overview of the calculation steps for 
the FY 2015 FMRs. For complete information on how FMR areas are 
determined by each specific FMR area, see the online documentation 
https://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr15.
    The FY 2015 FMRs use OMB metropolitan area definitions and 
standards that were first used in the FY 2006 FMRs. OMB changes to the 
metropolitan area definitions through December 2009 are incorporated. 
HUD has not incorporated the February 28, 2013 OMB metropolitan area 
definition changes because the Census Bureau did not incorporate these 
definitions into the 2012 ACS tabulations; therefore, the FY 2015 area 
definitions are the same as those used in FY 2014. HUD anticipates that 
the new OMB area definitions (based on the 2010 decennial Census) will 
replace those based on the 2000 Census (first incorporated into the 
FMRs with the FY 2006 publication that replaced those based on the 1990 
Census) with the FY 2016 proposed FMRs.

A. Base Year Rents

    HUD used special tabulations of 5-year ACS data collected between 
2008 through 2012. For FY 2015 FMRs, HUD updated the base rents set in 
FY 2014 using the 2007-2011 5-year data with the 2008-2012 5-year ACS 
data.\2\
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    \2\ The only difference in survey data between the 2007-2011 5-
year ACS data and the 2008-2012 5-year ACS data is the replacement 
of 2007 survey responses with survey responses collected in 2012. 
The 2008, 2009 2010 and 2011 survey responses remain intact; 
however, the weighting placed on each survey response is updated by 
the Census Bureau during the process of aggregating the data to be 
as of the final year of the 5-year period.
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    HUD historically based FMRs on gross rents for recent movers (those 
who have moved into their current residence in the last 24 months). 
However, due to the nature of the 5-year ACS data, HUD developed a new 
methodology for calculating recent-mover FMRs in FY 2012. As in FY 
2012, HUD assigns all areas a base rent which is the estimated two-
bedroom standard quality 5-year gross rent from the ACS.\3\ Because 
HUD's regulations mandate that FMRs represent recent mover gross rents, 
HUD continues to apply a recent mover factor to the standard quality 
base rents assigned from the 5-year ACS data. Calculation of the recent 
mover factor is described below.
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    \3\ For areas with a two-bedroom standard quality gross rent 
from the ACS that have a margin of error greater than the estimate 
or no estimate due to inadequate sample in the 2012 5-year ACS, HUD 
uses the two-bedroom state non-metro rent for non-metro areas.
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B. Recent Mover Factor

    Following the assignment of the standard quality two-bedroom rent 
described above, HUD applies a recent mover factor to these rents. The 
calculation of the recent mover factor for FY 2015 is similar to the 
methodology used in FY 2014, with the only difference being the use of 
updated ACS data. The following describes the process for determining 
the appropriate recent mover factor.
    In general, HUD uses the 1 year ACS-based two-bedroom recent mover 
gross rent estimate from the smallest geographic area encompassing the 
FMR area for which the estimate is statistically reliable to calculate 
the recent mover factor.\4\ HUD calculates some areas' recent mover 
factors using data collected just for the FMR area. However, HUD bases 
other areas' recent mover factor on larger geographic areas if this is 
necessary to obtain statistically reliable estimates. For metropolitan 
areas that are sub-areas of larger metropolitan areas, the order is FMR 
area, metropolitan area, aggregated metropolitan parts of the state, 
and state. Metropolitan areas that are not divided into subparts follow 
a similar path from FMR area, to aggregated metropolitan parts of the 
state, to state. In nonmetropolitan areas the recent mover factor is 
based on the FMR area, aggregated nonmetropolitan parts of the state, 
or if that is not available, on the basis of the whole state. HUD 
calculates the recent mover factor as the percentage change between the 
5-year

[[Page 59789]]

2008-2012 standard quality two-bedroom gross rent and the 1-year 2012 
recent mover two-bedroom gross rent for the recent mover factor area. 
HUD does not allow recent mover factors to lower the standard quality 
base rent; therefore, if the 5-year standard quality rent is larger 
than the comparable 1-year recent mover rent, the recent mover factor 
is set to 1. The process for calculating each area's recent mover 
factor is detailed in the FY 2015 Final FMR documentation system 
available at: https://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr15. Applying the recent mover factor to the 
standard quality base rent produces an ``as of'' 2012 recent mover two-
bedroom base gross rent for the FMR area.\5\
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    \4\ For the purpose of the recent mover factor calculation, a 
statistically reliable estimate occurs where the recent mover gross 
rent has a margin of error that is less than the estimate itself.
    \5\ The Bureau of the Census does not collect the ACS data in 
the Pacific Islands (Guam, Northern Marianas and American Samoa) or 
the US Virgin Islands. As part of the 2010 Decennial Census, the 
Census Bureau conducted a ``long-form'' sample surveys for these 
areas. These data were not released in time to be included in FY 
2015 FMRs. Therefore, HUD uses the national change in gross rents, 
measured between 2011 and 2012 to update last year's FMRs for these 
areas.
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C. Other Rent Survey Data

    HUD does not use the ACS as the base rent or recent mover factor 
for 16 areas where the FY 2015 FMR was adjusted based on survey data 
collected in late 2012, 2013, or 2014. PHAs conducted surveys for the 
following areas: Bennington County, VT, Hood River County, OR, Oakland, 
CA, Santa Barbara, CA, Stamford, CT, Windham County, VT, and Windsor 
County, VT, while HUD conducted surveys for Burlington, VT, Cheyenne, 
WY, Danbury, CT, Flagstaff, AZ, Mountrail County, ND, Odessa, TX, 
Rochester, MN, Ward County, ND, and Williams County, ND. HUD has no 
funds to conduct surveys of FMR areas, and so all future surveys must 
be paid for by the PHAs.

D. Updates From 2012 to 2013

    HUD updates the ACS-based ``as of'' 2012 rent through the end of 
2013 using the annual change in CPI from 2012 to 2013. As in previous 
years, HUD uses Local CPI data coupled with Consumer Expenditure Survey 
(CEX) data for FMR areas with at least 75 percent of their population 
within Class A metropolitan areas covered by local CPI data. HUD uses 
Census region CPI data for FMR areas in Class B and C size metropolitan 
areas and nonmetropolitan areas without local CPI update factors. 
Additionally, HUD is using CPI data collected locally in Puerto Rico as 
the basis for CPI adjustments from 2012 to 2013 for all Puerto Rico FMR 
areas. Following the application of the appropriate CPI update factor, 
HUD converts the ``as of'' 2013 CPI adjusted rents to ``as of'' 
December 2013 rents by multiplying each rent by the national December 
2013 CPI divided by the national annual 2013 CPI value.

E. Trend From 2013 to 2015

    As in FY 2014, HUD continues to calculate the trend factor as the 
annualized change in median gross rents as measured across the most 
recent 5 years of available 1-year ACS data. The national median gross 
rent in 2007 was $789 and $884 in 2012. The overall change between 2007 
and 2012 is 12.04 percent and the annualized change is 2.30 percent. 
Over a 15-month time period, the effective trend factor is 2.883 
percent. HUD applies this trend factor to the ``as of'' December 2013 
rents to produce FMRs that correspond to the middle of the 2015 fiscal 
year.

F. Puerto Rico Utility Adjustments

    The gross rent data from the 2008 to 2012 Puerto Rico Community 
Survey (PRCS) does not include the utility rate increases from 
Commonwealth-owned utility companies from last year that were submitted 
as part of the comments from Puerto Rico housing agencies. HUD included 
additional utility values in the final FY 2014 FMRs to account for 
these changes in Puerto Rico and these utility adjustments are 
continued for all areas of Puerto Rico in the FY 2015 FMRs.
    The table below shows the fixed amounts that are added to the 
Puerto Rico FMRs by bedroom count.

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                                                                        0--Bedroom       1--Bedroom       2--Bedroom       3--Bedroom       4--Bedroom
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Utility Adjustment.................................................             $20              $25              $35              $40              $50
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G. Bedroom Rent Adjustments

    HUD calculates the primary FMR estimates for two-bedroom units. 
This is generally the most common sized rental unit and, therefore, the 
most reliable to survey and analyze. Formerly, after each decennial 
Census, HUD calculated rent relationships between two-bedroom units and 
other unit sizes and used them to set FMRs for other units. HUD did 
this because it is much easier to update two-bedroom estimates annually 
and to use pre-established cost relationships with other unit bedroom 
counts than it is to develop independent FMR estimates for each unit 
bedroom count. When calculating FY 2013 FMRs, HUD updated the bedroom 
ratio adjustment factors using 2006-2010 5-year ACS data using similar 
methodology to what was implemented when calculating bedroom ratios 
using 2000 Census data to establish rent ratios. The bedroom ratios 
used in the calculation of FY 2015 FMRs remain the 2006-2010 based 
ratios applied to the two-bedroom FMR computed from the 2012 ACS data.
    HUD established bedroom interval ranges based on an analysis of the 
range of such intervals for all areas with large enough samples to 
permit accurate bedroom ratio determinations. These ranges are: 
Efficiency (zero-bedroom) FMRs are constrained to fall between 0.59 and 
0.81 of the two-bedroom FMR; one-bedroom FMRs must be between 0.74 and 
0.84 of the two-bedroom FMR; three-bedroom FMRs must be between 1.15 
and 1.36 of the two-bedroom FMR; and four-bedroom FMRs must be between 
1.24 and 1.64 of the two-bedroom FMR. (The maximums for the three-
bedroom and four-bedroom FMRs are irrespective of the adjustments 
discussed in the next paragraph.) HUD adjusts bedroom rents for a given 
FMR area if the differentials between unit bedroom-count FMRs were 
inconsistent with normally observed patterns (i.e., efficiency rents 
are not allowed to be higher than one-bedroom rents and four-bedroom 
rents are not allowed to be lower than three-bedroom rents). The 
bedroom ratios for Puerto Rico follow these constraints.
    HUD further adjusts the rents for three-bedroom and larger units to 
reflect HUD's policy to set higher rents for these units than would 
result from using unadjusted market rents. This adjustment is intended 
to increase the likelihood that the largest families, who have the most 
difficulty in leasing units, will be successful in finding eligible 
program units. The adjustment adds 8.7 percent to the unadjusted three-
bedroom FMR estimates and adds 7.7 percent to the unadjusted four-
bedroom

[[Page 59790]]

FMR estimates. The FMRs for unit sizes larger than four bedrooms are 
calculated by adding 15 percent to the four-bedroom FMR for each extra 
bedroom. For example, the FMR for a five-bedroom unit is 1.15 times the 
four-bedroom FMR, and the FMR for a six-bedroom unit is 1.30 times the 
four-bedroom FMR. FMRs for single-room occupancy units are 0.75 times 
the efficiency FMR.
    For low-population, nonmetropolitan counties with small or 
statistically insignificant 2006-2010 5-year ACS recent-mover rents, 
HUD uses state non-metropolitan data to determine bedroom ratios for 
each unit bedroom count. HUD made this adjustment to protect against 
unrealistically high or low FMRs due to insufficient sample sizes.

V. Manufactured Home Space Surveys

    The FMR used to establish payment standard amounts for the rental 
of manufactured home spaces (pad rentals including utilities) in the 
HCV program is 40 percent of the FMR for a two-bedroom unit. HUD will 
consider modification of the manufactured home space FMRs where public 
comments present statistically valid survey data showing the 40th-
percentile manufactured home space rent (including the cost of 
utilities) for the entire FMR area.
    All approved exceptions to these rents based on survey data that 
were in effect in FY 2014 were updated to FY 2015 using the same data 
used to estimate the HCV program FMRs. If the result of this 
computation was higher than 40 percent of the new two-bedroom rent, the 
exception remains and is listed in Schedule D. The FMR area definitions 
used for the rental of manufactured home spaces are the same as the 
area definitions used for the other FMRs. No additional exception 
requests were received in the comments to the FY 2015 Proposed FMRs.

VI. Small Area Fair Market Rents

    Small Area Fair Market Rents (SAFMRs) are used as part of a court 
settlement by all public housing authorities (PHAs) in the Dallas, TX 
HMFA. They are also used as part of HUD's demonstration program for 
five PHAs the Housing Authority of the County of Cook (IL), the City of 
Long Beach (CA) Housing Authority, the Chattanooga (TN) Housing 
Authority, the Town of Mamaroneck (NY) Housing Authority, and the 
Laredo (TX) Housing Authority. These FMRs are listed in the Schedule B 
addendum.
    SAFMRs are calculated using a rent ratio determined by dividing the 
median gross rent across all bedrooms for the small area (a ZIP code) 
by the similar median gross rent for the metropolitan area of the ZIP 
code. This rent ratio is multiplied by the current two-bedroom rent for 
the entire metropolitan area containing the small area to generate the 
current year two-bedroom rent for the small area. In small areas where 
the median gross rent is not statistically reliable, HUD substitutes 
the median gross rent for the county containing the ZIP code in the 
numerator of the rent ratio calculation. For FY 2015 SAFMRs, HUD 
continues to use the rent ratios developed in conjunction with the 
calculation of FY 2013 FMRs based on 2006-2010 5-year ACS data.\6\
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    \6\ HUD has provided numerous detailed accounts of the 
calculation methodology used for Small Area Fair Market Rents. 
Please see our Federal Register notice of April 20, 2011 (76 FR 
22125) for more information regarding the calculation methodology. 
HUD's Final FY 2015 FMR documentation system available at (https://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr15) 
contains detailed calculations for each ZIP code area in 
participating jurisdictions.
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VII. Public Comments Overview of Comments

A. Overview

    A total of 64 comments were received and posted on the 
regulations.gov site (https://www.regulations.gov/#!docketDetail;D=HUD-
2014-0065), which is also linked on the HUD User FMR page https://www.huduser.org/portal/datasets/fmr.html. Most comments contested FMR 
reductions compared with the FY 2014 FMRs and some contested reductions 
in FMRs over several years. None of these commenters provided a 
statistically valid survey of rents that could be used to adjust the FY 
2015 FMR. While the timing between proposed and final was short, only 
one commenter announced its intention to conduct a rent survey, but did 
not file a formal comment. Several commenters who did not experience a 
reduction in FY 2015 FMRs complained about the small increase in light 
of rental market conditions for their area. And some nonmetropolitan 
areas were concerned with the large increases and decreases that the 
ACS data provides.
    A significant proportion of the comments opposed the use of FMRs in 
the calculation of public housing flat rents. While FMRs are used in 
other HUD programs, the methodology used in determining FMRs and the 
publication of FMRs for comment is primarily in support of the Section 
8 Housing Choice Voucher program. Other HUD programs must rely on the 
current FMR methodology. The adjustment of flat rents by FMRs is an 
issue for the program staff in the Division of Housing Management and 
Occupancy of PIH.
    Decreases of any level in the FMR were opposed especially for 
certain HUD programs and other programs that use FMRs but do not allow 
flexibility in applying FMRs, such as the Continuum of Care program and 
the Low-Income Housing Tax Credit program (LIHTC). Several comments 
requested that HUD hold the FY 2015 FMRs harmless, that is they wanted 
the FMR to remain at the FY 2014 level, or some earlier level if it 
would otherwise be lower. In addition to, or instead of, implementing a 
hold harmless policy, several comments asked HUD to limit annual 
increases and decreases of FMRs to five percent, or at the very least 
impose a hard floor of five percent on decreases. This inability to 
hold FMRs harmless at some previously higher level is especially 
difficult for LIHTC landlords and developers to understand because no 
such legal prohibition exists for the calculation of HUD's income 
limits which are also used in the rent calculation for these units. HUD 
has been able to use such measures in constraining income limit 
increases and decreases, but HUD is specifically precluded from 
incorporating these changes into the FMR methodology by the statutory 
language governing FMRs requiring the use of the most recent available 
data. As stated in previous FMR notices, HUD's Housing Choice Voucher 
program counsel reviewed the statutory language governing the 
calculation of FMRs to determine if the Department has the authority to 
institute caps and floors on the amount the FMRs could change annually. 
Based on this review, HUD's program counsel issued a legal opinion that 
HUD CANNOT impose floors or caps in changes in FMRs because this would 
violate the portion of the statute that directs HUD to use the most 
current data available. The legal opinion is that the statute needs to 
be changed in order for HUD to implement these types of caps and 
floors. No statutory changes regarding the use of the most recent 
available data have since been enacted; consequently, HUD does not have 
the authority to use a hold harmless policy or other policy which would 
permit HUD to impose caps and floors on FMR changes. HUD is required to 
use the most recent available data and FMRs must increase or decrease 
based on this data. Ignoring decreases or phasing decreases or 
increases in over several years would not fully implement FMRs based on 
the most recent available data.
    Comments were received that oppose the current methodology used to 
define FMR areas. HUD has not incorporated

[[Page 59791]]

the new metropolitan area definitions released by OMB on February 28, 
2013 for the FY 2015 FMRs, but will begin to review how to incorporate 
these new area definitions.
    Several PHAs with lower proposed FY 2015 FMRs relative to FY 2014 
or earlier FMRs requested that HUD conduct a survey of rents for their 
FMR areas. As stated in the proposed FY 2015 FMR Notice, HUD 
anticipates it will have no funds to conduct surveys in FY 2015. While 
one area provided data, this data could not be accepted as the basis 
for changing FMRs because it did not meet the threshold for 
representativeness and/or statistical reliability established for 
rental survey data to be used in FMR determinations. HUD may not use 
data from newspaper ads because these do not represent actual 
contracted rents, or rent reasonableness studies as these typically do 
not sample units randomly. Other data provided may be acceptable, but 
the sources and method of collection must be identified. Data must be 
collected randomly and cover the entire rental stock including single-
family units, not just large apartment projects. Single family units 
and smaller apartment buildings are an important part of the rental 
market and cannot be ignored. HUD did receive notification that one PHA 
in a nonmetropolitan area is conducting its own survey and has sought 
guidance from HUD on the survey methodology. Any other PHAs interested 
in surveys to support changes in FMRs should review section VIII of 
this notice for further information regarding acceptable survey 
methodology.
    For areas that are considering conducting their own surveys, HUD 
would caution them to explore all no-cost options as a means of 
alleviating problems they are having with low FMRs. HUD has experience 
conducting surveys in areas with low or no vacancy rates and this 
experience has shown that it is extremely difficult to capture accurate 
gross rent levels in tight markets. For that reason, HUD provides 
emergency exception payment standards up to 135 percent of the FMR for 
the Section 8 voucher program in areas impacted by natural resource 
exploration or in presidentially declared disaster areas. PHAs 
interested in applying for these emergency payment standards should 
contact their local HUD field office. Other programs that use FMRs will 
have to pursue similar strategies such as exception payment standards 
or hold harmless provisions within the statutory and regulatory 
framework governing those programs.

B. Issues Raised in Comments and HUD Responses

    In accordance with 24 CFR 888.115, HUD has reviewed the public 
comments that have been submitted by the due date and has determined 
that there are no comments with ``statistically valid rental survey 
data that justify the requested changes.'' HUD's responses to all known 
comments received by the comment due date and a part of the notice 
record https://www.regulations.gov/#!docketDetail;D=HUD-2014-0065 are 
located at https://www.huduser.org/portal/datasets/fmr.html.

VIII. Rental Housing Surveys

    In 2011, HUD solicited bidders to study the methodology used to 
conduct local area surveys of gross rents to determine if the Random 
Digit Dialing (RDD) methodology could be improved upon. The Department 
undertook this study due to the increasing costs and declining response 
rates associated with telephone surveys. Furthermore, the advent of the 
1-year ACS limits the need for surveys in large metropolitan areas. 
Based on this research, the Department decided that its survey 
methodology should be changed with mail surveys being the preferred 
method for conducting surveys, because of the lower cost and greater 
likelihood of survey responses. These surveys, however, take almost 
twice as long to conduct as prior survey methods took, and when 
response times are most critical, the Department may choose to conduct 
random digit dialing surveys as well, as the budget permits. 
Unfortunately, the anticipated budget does not permit HUD to conduct 
any surveys in FY 2015. The methodology for both types of surveys along 
with the survey instruments is posted on the HUD USER Web site, at the 
bottom of the FMR page in a section labeled Fair Market Rent Surveys 
at: https://www.huduser.org/portal/datasets/fmr.html
    Other survey methodologies are acceptable in providing data to 
support comments if the survey methodology can provide statistically 
reliable, unbiased estimates of the 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 to be statistically representative of the entire rental housing 
stock of the FMR area. Surveys must include units at all rent levels 
and be representative of structure type (including single-family, 
duplex, and other small rental properties), age of housing unit, and 
geographic location. The 2008-2012 5-year ACS data should be used as a 
means of verifying if a sample is representative of the FMR area's 
rental housing stock.
    Most surveys cover only one- and two-bedroom units, which has 
statistical advantages because these are generally the most abundant 
rental units in an area. However in nonmetropolitan areas and some 
metrolitan areas, three-bedroom units are also surveyed because there 
are significant rental units at this size in the FMR area. If the 
survey is statistically acceptable, HUD will estimate FMRs for other 
bedroom sizes using ratios based on the 2006-2010 5-year ACS data. A 
PHA or contractor that cannot obtain the recommended number of sample 
responses after reasonable efforts should consult with HUD before 
abandoning its survey; in such situations, HUD may find it appropriate 
to relax normal sample size requirements.
    HUD will consider increasing manufactured home space FMRs where 
public comment demonstrates that 40 percent of the two-bedroom FMR is 
not adequate. In order to be accepted as a basis for revising the 
manufactured home space FMRs, comments must include a pad rental survey 
of the mobile home parks in the area, identify the utilities included 
in each park's rental fee, and provide a copy of the applicable public 
housing authority's utility schedule.
    As stated earlier in this Notice, HUD is required to use the most 
recent data available when calculating FMRs. Therefore, in order to re-
evaluate an area's FMR, HUD requires more current rental market data 
than the 2012 ACS.

VIII. Environmental Impact

    This Notice involves the establishment of fair market rent 
schedules, which do not constitute a development decision affecting the 
physical condition of specific project areas or building sites. 
Accordingly, under 24 CFR 50.19(c)(6), this Notice is categorically 
excluded from environmental review under the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321).
    Accordingly, the Fair Market Rent Schedules, which will not be 
codified in 24 CFR part 888, are proposed to be amended as shown in the 
Appendix to this notice:


[[Page 59792]]


    Dated: September 29, 2014.
Katherine M. O'Regan,
Assistant Secretary for Policy Development and Research.

Fair Market Rents for the Housing Choice Voucher Program

Schedules B and D--General Explanatory Notes

1. Geographic Coverage
    a. Metropolitan Areas--Most FMRs are market-wide rent estimates 
that are intended to provide housing opportunities throughout the 
geographic area in which rental-housing units are in direct 
competition. HUD is using the metropolitan CBSAs, which are made up of 
one or more counties, as defined by the Office of Management and Budget 
(OMB), with some modifications. HUD is generally assigning separate 
FMRs to the component counties of CBSA Micropolitan Areas.
    b. Modifications to OMB Definitions--Following OMB guidance, the 
estimation procedure for the FY 2015 Final FMRs incorporates the OMB 
definitions of metropolitan areas based on the CBSA standards as 
implemented with 2000 Census data updated through December 1, 2009, but 
makes adjustments to the definitions to separate subparts of these 
areas where FMRs or median incomes would otherwise change significantly 
if the new area definitions were used without modification. In CBSAs 
where subareas are established, it is HUD's view for programmatic 
purposes that the geographic extent of the housing markets are not yet 
the same as the geographic extent of the CBSAs, but may become so in 
the future as the social and economic integration of the CBSA component 
areas increases. Modifications to metropolitan CBSA definitions are 
made according to a formula as described below.
    Metropolitan area CBSAs (referred to as MSAs) may be modified to 
allow for subarea FMRs within MSAs based on the boundaries of old FMR 
areas (OFAs) within the boundaries of new MSAs. (OFAs are the FMR areas 
defined for the FY 2005 FMRs. Collectively they include 1999-definition 
MSAs/Primary Metropolitan Statistical Areas (PMSAs), metro counties 
deleted from 1999-definition MSAs/PMSAs by HUD for FMR purposes, and 
counties and county parts outside of 1999-definition MSAs/PMSAs 
referred to as nonmetropolitan counties.) Subareas of MSAs are assigned 
their own FMRs when the subarea 2000 Census Base Rent differs by at 
least 5 percent from (i.e., is at most 95 percent or at least 105 
percent of) the MSA 2000 Census Base Rent, or when the 2000 Census 
Median Family Income for the subarea differs by at least 5 percent from 
the MSA 2000 Census Median Family Income. MSA subareas, and the 
remaining portions of MSAs after subareas have been determined, are 
referred to as HUD Metro FMR Areas (HMFAs) to distinguish these areas 
from OMB's official definition of MSAs.
    The specific counties and New England towns and cities within each 
state in MSAs and HMFAs are listed in Schedule B.
2. Bedroom Size Adjustments
    Schedule B shows the FMRs for zero-bedroom through four-bedroom 
units. The Schedule B addendum shows Small Area FMRs for all PHAs 
operating using Small Area FMRs. The FMRs for unit sizes larger than 
four bedrooms are calculated by adding 15 percent to the four-bedroom 
FMR for each extra bedroom. For example, the FMR for a five-bedroom 
unit is 1.15 times the four-bedroom FMR, and the FMR for a six-bedroom 
unit is 1.30 times the four-bedroom FMR. FMRs for single-room-occupancy 
(SRO) units are 0.75 times the zero-bedroom FMR.
3. 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 non-metropolitan county listings.
    d. The New England towns and cities included in a nonmetropolitan 
county are listed immediately following the county name.
BILLING CODE 4210-67-P

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  Schedule D--FY 2015 Exception Fair Market Rents for Manufactured Home
         Spaces in the Section 8 Housing Choice Voucher Program
------------------------------------------------------------------------
           State                      Area name             Space rent
------------------------------------------------------------------------
California.................  Los Angeles-Long Beach, CA             $694
                              HUD Metro FMR Area.
                             Orange County, CA HUD Metro             842
                              FMR Area.
                             * Riverside-San Bernardino-             549
                              Ontario, CA MSA.
                             San Diego-Carlsbad-San                  839
                              Marcos, CA MSA.
                             Santa Rosa-Petaluma, CA MSA             773
                             Vallejo-Fairfield, CA MSA..             622
Colorado...................  Boulder, CO MSA............             512
Maryland...................  St. Mary's County..........             518
Oregon.....................  Bend, OR MSA...............             361
                             Salem, OR MSA..............             523
Pennsylvania...............  Adams County...............             579
Washington.................  Olympia, WA MSA............             628
                             Seattle-Bellevue, WA HUD                693
                              Metro FMR Area.
West Virginia..............  Logan County...............             469
                             McDowell County............             469
                             Mercer County..............             469
                             Mingo County...............             469
                             Wyoming County.............             469
------------------------------------------------------------------------
* 50th percentile FMR areas.

[FR Doc. 2014-23677 Filed 10-2-14; 8:45 am]
BILLING CODE 4210-67-C