Final Fair Market Rents for the Housing Choice Voucher Program and Moderate Rehabilitation Single Room Occupancy Program and Other Programs Fiscal Year 2016, 77123-77197 [2015-31319]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 80, Number 238 (Friday, December 11, 2015)]
[Notices]
[Pages 77123-77197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-31319]



[[Page 77123]]

Vol. 80

Friday,

No. 238

December 11, 2015

Part III





Department of Housing and Urban Development





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Final Fair Market Rents for the Housing Choice Voucher Program and 
Moderate Rehabilitation Single Room Occupancy Program and Other 
Programs Fiscal Year 2016; Notice

Federal Register / Vol. 80 , No. 238 / Friday, December 11, 2015 / 
Notices

[[Page 77124]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5885-N-02]


Final Fair Market Rents for the Housing Choice Voucher Program 
and Moderate Rehabilitation Single Room Occupancy Program and Other 
Programs Fiscal Year 2016

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

ACTION: Notice of Final Fiscal Year (FY) 2016 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 of HUD to publish FMRs periodically, but 
not less than annually, adjusted to be effective on October 1 of each 
year. The primary uses of FMRs are to determine payment standards for 
the Housing Choice Voucher (HCV) program; to determine initial renewal 
rents for some expiring project-based Section 8 contracts; to determine 
initial rents for housing assistance payment contracts in the Moderate 
Rehabilitation Single Room Occupancy program; and, to serve as rent 
ceilings for rental assistance units in the HOME Investment 
Partnerships program. FMRs are used in the calculation of maximum award 
amounts for Continuum of Care grantees and are used in the calculation 
of flat rents in Public Housing units. Today's notice provides final FY 
2016 FMRs for all areas that reflect the estimated 40th and 50th 
percentile rent levels trended to FY 2016. The FY 2016 FMRs use rent 
data collected by Bureau of the Census by the American Community Survey 
(ACS). This rent data is collected over a five-year period, from 2009 
through 2013. These data are updated by one-year 2013 ACS data for 
areas where statistically valid one-year ACS data is available. HUD 
continues to use ACS data in different ways according to the 
statistical reliability of rent estimates. The Consumer Price Index 
(CPI) rent and utility indexes are used to further update the data to 
2014. These values are then trended forward to FY 2016. Based on the 
comments received and as way to estimate FMRs more accurately, HUD has 
replaced the historical-based annualized change in gross rent trend 
factor with a forward-looking forecast for these final FY 2016 FMRs. 
The national trend factor for the final FY 2016 FMRs uses a model that 
forecasts national rent and utility CPI indices based on economic 
assumptions used in the formulation of the President's Budget.
    The FY 2016 FMRs incorporate a change in the level of statistical 
reliability that allowed for an ACS estimate to be used in the 
calculation of FMRs. Previously, if the error of the estimate was less 
than the estimate itself, HUD used the estimate. The FY 2016 FMRs use 
ACS estimates where the size of the error is limited to half of the 
estimate. An additional change to the FY 2016 FMRs is the incorporation 
of the February 28, 2013, Office of Management and Budget (OMB) 
metropolitan area definition update based on the 2010 Decennial Census 
data. The 2013 ACS data are the first to use the new area definitions 
in the compilation of the ACS data. Bedroom ratios (comparing zero-, 
one-, three- and four-bedroom rents to the two-bedroom base rent) were 
updated from the 2010 estimations using a three-year average of five-
year ACS data.

DATES: Effective Date: The FMRs published in this notice are effective 
on the date of publication.

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.gov/portal/datasets/fmr.html. FMRs are shown at the 40th or 50th percentile in Schedule B. 
For informational purposes, the 40th percentile recent-mover rents for 
the areas with 50th percentile FMRs will be provided in the HUD FY 2016 
FMR documentation system at https://www.huduser.gov/portal/datasets/fmr/fmrs/docsys.html?data=fmr16 and the 50th percentile rents for all FMR 
areas will be published at https://www.huduser.gov/portal/datasets/50per.html after publication of final FY 2016 FMRs. Unadjusted rents 
(rents calculated directly from ACS data prior to the application of 
state minimum rents) will be made available at: https://www.huduser.gov/portal/datasets/fmr.html. These rents may be used in conjunction with 
the calculation of flat rents in the Public Housing program. 
Additionally, Small Area FMRs, which may also be used as the basis for 
Public Housing flat rents as an alternative to metropolitan wide FMRs, 
are available at: https://www.huduser.gov/portal/datasets/fmr/smallarea/.
    Questions related to use of FMRs or voucher payment standards 
should be directed to the respective local HUD program office. 
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.gov/portal/datasets/fmr.html. Federal Register notices also 
are available electronically at https://www.federalregister.gov/, the 
Federal Register Web site. Complete documentation of the methodology 
and data used to compute each area's final FY 2016 FMRs is available at 
https://www.huduser.gov/portal/datasets/fmr.html through the link 
labeled ``Individual Area Final FY 2016 FMR Documentation.'' Final FY 
2016 FMRs are available in a variety of electronic formats at https://www.huduser.gov/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 2016 
Metropolitan Area Rents and historical versions of this data will be on 
this site https://www.huduser.gov/portal/datasets/fmr/smallarea/ and there is a link from the FMR page of HUD User https://www.huduser.gov/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 and for PHAs investigating an alternative basis for 
Public Housing flat rents. 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

[[Page 77125]]

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 
the Department 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:

    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 2016 FMRs, HUD has considered 
all comments submitted in response to its September 8, 2015 (80 FR 
53819) proposed FY 2016 FMRs and includes its responses to these 
comments in 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's 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 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 2015 there were 16 areas using 50th-percentile FMRs. Of these 
16 areas, six areas were eligible for evaluation. Only three of the six 
areas will continue as 50th-percentile FMR areas; two of the remaining 
three areas do not show measurable deconcentration over the three-year 
period, will not continue as 50th-percentile FMR areas, and will not be 
considered for the 50th percentile FMR program for three years. One 
area, New Haven-Meriden, CT HUD Metro FMR Area (HMFA), that was 
evaluated graduated from the program; this area will be re-evaluated 
each year. This is a different result for the Baltimore-Columbia-
Towson, MD Metropolitan Statistical Area (MSA) than in the proposed FY 
2016 FMRs, where deconcentration was not measured. After reviewing the 
data in response to comments, it was discovered that areas up for re-
evaluation were not afforded a full three annual time-periods to 
deconcentrate. A re-evaluation of all areas using three annual time-
periods resulted in the continuation of the Baltimore metropolitan area 
in the 50th percentile FMR program; Fort Lauderdale and Richmond, even 
with the additional year, did not exhibit measurable deconcentration. 
Housing authorities in these two areas are encouraged to review the 
rules at 24 CFR 982.503(f) to determine if they qualify for continued 
use of the 50th percentile rents when setting their payment standards. 
One area, Washington, DC-VA-MD HMFA, that failed to deconcentrate as of 
FY 2013 will once again become a 50th percentile FMR area.
    In summary, there will be 14 50th-percentile FMR areas in FY 2016. 
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 2016--50th-Percentile FMR Areas and Year of Next Reevaluation
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Albuquerque, NM MSA...........................         2018  Baltimore-Columbia-Towson, MD MSA.....         2019
Chicago-Joliet-Naperville, IL HUD Metro FMR            2018  Denver-Aurora-Broomfield, CO MSA......         2018
 Area.
Hartford-West Hartford-East Hartford, CT HUD           2018  Honolulu, HI MSA......................         2018
 Metro FMR Area.
Kansas City, MO-KS HUD Metro FMR Area.........         2018  Milwaukee-Waukesha-West Allis, WI MSA.         2018
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD            2019  Riverside-San Bernardino-Ontario, CA           2018
 MSA.                                                         MSA.
Tacoma, WA HUD Metro FMR Area.................         2018  Virginia Beach-Norfolk-Newport News,           2018
                                                              VA-NC MSA.
Washington, DC-VA-MD HUD Metro FMR Area.......         2019  West Palm Beach-Boca Raton, FL HUD             2019
                                                              Metro FMR Area.
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III. Proposed FY 2016 FMRs

    On September 8, 2015 (80 FR 53819), HUD published proposed FY 2016 
FMRs with a comment period that ended October 8, 2015. 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/#!docketBrowser;rpp=25;po=0;dct=PS;D=HUD-2015-0072).

IV. FMR Methodology

    This section provides a brief overview of the calculation steps for 
the FY 2016 FMRs. For complete information on how FMR areas are 
determined by each specific FMR area, see the online documentation by 
FMR area https://www.huduser.gov/portal/datasets/fmr/fmrs/docsys.html?data=fmr16.
    The proposed FY 2016 FMRs are based on the updated metropolitan 
area definitions published by OMB on February 28, 2013. Counties that 
have been removed from metropolitan areas will be nonmetropolitan 
counties.

[[Page 77126]]

Counties that have been added to metropolitan areas will be treated as 
metropolitan county subareas. These counties will receive rents based 
on their own data if the local data is statistically reliable (with an 
error that is less than one-half of the estimate) or receive the 
metropolitan rent if their subarea estimate does not exist or is 
statistically unreliable. New multi-county metropolitan areas will be 
treated as individual county metropolitan subareas using county-based 
gross rent estimates (if statistically reliable); otherwise, a 
metropolitan, area-wide gross rent estimate is used.

A. Base Year Rents

    The U.S. Census Bureau released standard tabulations of five-year 
ACS data collected between 2009 through 2013 in December of 2014. For 
FY 2016 FMRs, HUD uses special tabulations of this five-year ACS data 
collected between 2009 through 2013 to update the base rents that 
provide the 40th and 50th percentile standard quality rents that were 
provided in May 2015. HUD has updated base rents each year based on new 
five-year data since FY 2012, for which HUD used 2005-2009 ACS data. 
For FY 2016 FMRs, HUD updated the base rents set in FY 2015 using the 
2008-2012 five-year data with the 2009-2013 five-year ACS data.\2\ HUD 
updates base rents for Puerto Rico FMRs using the 2009-2013 Puerto Rico 
Community Survey (PRCS); HUD first updated the Puerto Rico base rents 
in FY 2014 based on 2007-2011 PRCS data collected through the ACS 
program. The Bureau of the Census does not collect data annually using 
the ACS for the Pacific Islands (Guam, Northern Marianas and American 
Samoa) or the US Virgin Islands; however, as part of the 2010 Decennial 
Census, the Census Bureau conducted a ``long-form'' sample surveys for 
these areas. These data are incorporated in the FY 2016 FMRs. For the 
first time, St. John, USVI will have an FMR that is separate from St. 
Thomas, USVI and American Samoa and the Northern Mariana Islands will 
have FMRs separate from Guam.
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    \2\ The only difference in survey data between the 2008-2012 5-
year ACS data and the 2009-2013 5-year ACS data is the replacement 
of 2008 survey responses with survey responses collected in 2013. 
The 2009, 2010, 2011 and 2012 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 five-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 equal to the estimated two-
bedroom standard quality five-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 five-year ACS data.
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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 half of the 
estimate or no estimate due to inadequate sample in the 2013 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 2016 is similar to the 
methodology HUD used in FY 2015, with the only difference being the use 
of updated ACS data and the change to the statistical reliability 
assessment of the ACS data. The following describes the process for 
determining the appropriate recent mover factor.
    In general, HUD uses one-year, two-bedroom recent mover gross rents 
from the special tabulation of the ACS for the smallest geographic area 
encompassing the FMR area that 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. In these cases, the 
recent mover factor effectively removes the five-year data from the 
calculation of the FMRs. For areas with statistically reliable recent 
mover data for the FMR area itself, the one-year recent mover two-
bedroom gross rent becomes the base rent for the area. However, HUD 
bases other areas' recent mover factors on larger geographic areas if 
this is necessary to obtain statistically reliable estimates. For 
metropolitan areas that are subareas of larger metropolitan areas, the 
recent mover hierarchy is FMR area, metropolitan area, aggregated 
metropolitan parts of the state, and state. Metropolitan areas that are 
not divided follow a similar path from FMR area, to aggregated 
metropolitan parts of the state, to state. In nonmetropolitan areas, 
HUD bases the recent mover factor on the FMR area, the aggregated 
nonmetropolitan parts of the state, or if that is not available, based 
on the whole state. HUD calculates the recent mover factor as the 
percentage change between the five-year 2009-2013 standard quality two-
bedroom gross rent and the one-year 2013 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 
five-year standard quality rent is larger than the comparable one-year 
recent mover rent the recent mover factor is set to 1.0. The process 
for calculating each area's recent mover factor is detailed in the FY 
2016 Final FMR documentation system available at: https://www.huduser.gov/portal/datasets/fmr/fmrs/docsys.html?data=fmr16. 
Applying the recent mover factor to the standard quality base rent 
produces an ``as of'' 2013 recent mover two-bedroom base gross rent for 
the FMR area.
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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 half of the estimate.
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C. Other Rent Survey Data

    A new base rent has been calculated for the insular areas using the 
2010 decennial census of American Samoa, Guam, the Northern Mariana 
Islands, and the Virgin Islands. This is the first time American Samoa 
and the Northern Mariana Islands will have an FMR that is separate from 
Guam. In addition, St. Johns, VI will receive a separate FMR; 
previously it was combined with St. Thomas. The 2010 rent data is 
updated to 2013 using the change in national ACS rents from 2010 to 
2013.
    In addition to the Pacific island areas, HUD does not use the ACS 
as the base rent or recent mover factor for eight areas where the FY 
2016 FMR is based on survey data. Surveys conducted in 2012 for Hood 
River County, OR, Mountrail County, ND, Ward County, ND, and Williams 
County, ND are used as base rents. Survey data from 2012 survey still 
represents the most current data available for these areas where only 
five-year ACS data exists. These base rents are adjusted to 2014 using 
regional CPI data. Surveys conducted in 2014 for Bennington County, VT, 
Windham County, VT, Windsor County, VT, and Seattle, WA are used for 
base rents. HUD has no funds to conduct surveys of FMR areas, and so 
future surveys must be paid for by the PHAs.

D. Updates From 2013 to 2014

    HUD updates the ACS-based ``as of'' 2013 rent through the end of 
2014 using the annual change in gross rents measured from the CPI 
between 2013 and 2014. 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

[[Page 77127]]

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 2013 to 2014 for all Puerto Rico FMR areas.

E. Trend From 2014 to April 2016

    The trend factor for the final FY 2016 FMRs has been changed from 
the annualized change in median gross rents as measured across the most 
recent five years of available 1-year ACS data, used in the proposed FY 
2016 FMRs as published on September 8, 2015 (80 FR 53817). Instead, HUD 
trends the final FY 2016 FMRs forward with national forecasts of the 
rent and utility components of CPI, resulting in an increase in the FMR 
for all areas. The trend factor applied for the Proposed FY 2016 FMRs 
was 1.0334 percent; the forecast trend factor applied to the Final FY 
2016 FMRs is 1.0457. The trend factor is the weighted average change 
between the most recent annual Rent of Primary Residence and Utility 
CPIs and the same indices forecasted to the relevant fiscal year.

F. Puerto Rico Utility Adjustments

    The gross rent data from the 2009 to 2013 Puerto Rico Community 
Survey (PRCS) coupled with the local CPI data measured across Puerto 
Rico includes the utility rate increases from Commonwealth-owned 
utility companies that was the basis for utility rate adjustments 
across all Puerto Rico FMR areas in both FY 2014 and FY 2015. The FY 
2016 FMRs no longer include the utility adjustment; any changes in the 
Puerto Rico energy tariffs have been in effect long enough to be 
included in the Puerto Rico CPI. As pointed out in a comment by the 
Commonwealth of Puerto Rico Division of Housing, the South Region CPI 
was inadvertently used for the calculation of Proposed FY 2016 FMRs 
throughout Puerto Rico, and this has been corrected.

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 bedroom counts and used them to set FMRs for other units. 
HUD did this because it is much easier to update two-bedroom estimates 
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 five-year ACS data. The 
bedroom ratio methodology used in this update was the same methodology 
that was used when calculating bedroom ratios using 2000 Census data. 
The bedroom ratios HUD used in the calculation of FY 2016 FMRs have 
been updated using average data from three five-year data series (2007-
2011, 2008-2012, and 2009- 2013). This update incorporates the most 
recent available data while also smoothing the potential variability 
from the discontinuity of resetting the bedroom ratios once every five 
years.
    HUD establishes 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 FMRs are constrained to fall between 0.62 and 0.82 of the 
two-bedroom FMR; one-bedroom FMRs must be between 0.75 and 0.86 of the 
two-bedroom FMR; three-bedroom FMRs must be between 1.14 and 1.34 of 
the two-bedroom FMR; and, four-bedroom FMRs must be between 1.27 and 
1.62 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 bedroom-size 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 
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 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 zero-bedroom (efficiency) FMR.
    For low-population, nonmetropolitan counties with small or 
statistically insignificant data for any two of the three five-year ACS 
standard quality rents series used in the average, 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 2015 were updated to FY 2016 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 2016 Proposed FMRs.

VI. Small Area Fair Market Rents

    Small Area Fair Market Rents (SAFMRs) replace the use of FMRs for 
the HCV program as part of a court settlement by all public housing 
authorities (PHAs) in the Dallas, TX HMFA. SAFMRs are also used in 
HUD's demonstration program by 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. The SAFMRs used by 
Dallas and the PHAs in the demonstration 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. Similar to the bedroom ratios discussed in item G of section IV 
or this notice, HUD calculates the ZIP code rent ratio using an average 
of 2007-2011, 2008-2012, and 2009-2013 data. This average rent ratio is 
multiplied by the current two-bedroom

[[Page 77128]]

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 2016 
SAFMRs, HUD uses the updated bedroom rent ratios discussed above.\5\
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    \5\ 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 2016 FMR documentation system available at (https://www.huduser.gov/portal/datasets/fmr/fmrs/docsys.html?data=fmr16) 
contains detailed calculations for each ZIP code area in 
participating jurisdictions.
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    HUD also makes Small Area FMRs for all metropolitan areas available 
at https://www.huduser.gov/portal/datasets/fmr/smallarea/. 
Housing Authorities may use these Small Area FMRs as a guide for 
setting payment standards within their FMR area and may use them in 
requesting exception payment standards in accordance with 24 CFR 
982.503(c)(2)(A).

VII. Public Comments Overview of Comments

A. Overview

    A total of 83 comments were received and are posted on the 
regulations.gov site (not all duplicate comments were posted) (https://www.regulations.gov/#!docketBrowser;rpp=25;po=0;dct=PS;D=HUD-2015-
0072), which is also linked on the HUD User FMR page https://www.huduser.gov/portal/datasets/fmr.html. Most comments contested FMR 
reductions compared with the FY 2015 FMRs and several noted that year-
over-year changes are not keeping up with a tight rental market. While 
many comments included some type of market data, none provided market 
rent data that could be used for an adjustment of the FY 2016 FMRs. The 
FMR methodology has been the subject of Inspector General of HUD and 
Government Accounting Office studies, and it is clear that the use of 
such real-time data as found in newspaper ads or Craigslist cannot be 
used to adjust FMRs, because this data is not statistically 
representative of the FMR area. While surveys of rents must be 
conducted to contest the FMRs, HUD has been unable to fund such surveys 
for several years; consequently, PHAs must fund their own surveys, if 
needed. None of these commenters provided a statistically valid survey 
of rents that could be used to adjust the FY 2016 FMRs. The timing 
between proposed and final was admittedly too short to conduct a study 
of statistically valid rents and several commenters announced their 
intention to conduct rent surveys, which if statistically different 
will be incorporated in a revised FY 2016 FMR publication. Several 
commenters who did not experience a reduction in FY 2016 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.
    The use of FMRs in the calculation of public housing flat rents 
continues to garner comments. Small nonmetropolitan areas find the flat 
rents based on FMRs are too high for their market. Where the state 
minimum is used, a nonmetropolitan county does have the option of using 
its own, lower rent. A suggestion that FMRs be adjusted based on square 
footage of units is not feasible because the data on size of units is 
not available for all areas from a statistically reliable source. 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 HCV 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. HUD's Office of Policy Development, and Research 
supports the program office by making the Small Area FMRs and the 
unadjusted rents available as alternatives to the FMR for setting 
Public Housing flat rents.
    Many commenters oppose decreases of any level in the FMR, 
especially those commenters that operate programs that use FMRs but do 
not allow payment standard 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 2016 FMRs 
harmless, that is they wanted the FMR to remain at the FY 2015 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 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 HCV 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. According to the legal opinion, the statute must be changed 
before HUD can 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.
    The Department recognizes that significant variation in FMRs from 
year to year increases the administrative burden on all users of FMRs. 
HUD has made changes to the calculation methodology to attempt to quell 
this annual variation while comporting to the statutory requirement to 
use the most recent data available. For example, using averages of 3 
years of five-year ACS data in the calculation of the bedroom ratios 
and the small area rent ratios were implemented to increase the 
stability of these components of the calculations while also 
incorporating the most recent data each year. Moving to a tighter 
statistical standard for use of ACS estimates (less than a 50 percent 
margin of error as opposed to different from 0) is also incorporated to 
lessen the variability from sampling error within the ACS while still 
taking advantage of annually updated information. HUD will continue to 
pursue strategies that increase the stability of the FMRs from year to 
year within the limitations of the current statutory framework.
    Although there were several changes to the metropolitan area 
definitions for

[[Page 77129]]

the FY 2016 FMRs, geographic area comments were submitted for only two 
areas: Columbia city, MD and Barranquitas, PR. HUD proposed to remove 
the place-based FMR for Columbia city, MD that it had since the 1970s. 
HUD proposed to do this because Columbia city is unique among FMR areas 
to receive this treatment and was created before exception payment 
standards existed. The Final FY 2016 FMRs maintain the proposed area 
definitions and continue to incorporate Columbia city, MD as part of 
the Baltimore-Columbia-Towson, MD MSA. To ensure that voucher families 
currently living in the city are not impacted, and to ensure future 
voucher families are able to access rental units in Columbia city, HUD 
is issuing exception payment standards at up to 132 percent of the 
metropolitan FMR for the area. The comment discussing proposed FY 2016 
FMRs in Puerto Rico agreed with HUD's policy for not maintaining 
Quebradillas Municipio as part of the Barranquitas-Aibonito-
Quebradillas, PR HUD Metro FMR area, a subarea of the San Juan, PR MSA, 
noting that it was not a contiguous Municipio. The comment also 
requested that Maunaubo Municipio also be separated from Barranquitas. 
Maunaubo Municipio is also not contiguous to any of the other four 
central municipios; notwithstanding the geographic discontinuity, HUD 
did not change the Maunaubo Municipio's area definition for FY 2016. 
HUD will attempt to evaluate this request, due to geographic 
discontinuity, after acquiring the necessary data as part of the FY 
2017 FMR process.
    Several PHAs with lower proposed FY 2016 FMRs relative to FY 2015 
or earlier FMRs requested that HUD conduct a survey of rents for their 
FMR areas. As stated in the proposed FY 2016 FMR Notice, HUD does not 
have funds available to conduct surveys in FY 2016. While some areas 
provided data, the 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 (or 
Craigslist) because these sources for rents do not represent actual 
contracted rents, nor can rent reasonableness studies be used 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 within the FMR area 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 several PHAs in metropolitan and 
nonmetropolitan areas are conducting surveys and have 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 exception 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.
    HUD received a comment from the Inclusive Communities Project 
(ICP), regarding the Small Area FMRs in the Dallas, TX HUD Metro FMR 
Area. ICP used HUD's guidance on how to provide data-supported comments 
on the levels of Small Area FMRs using HUD's special tabulations of the 
distribution of gross rents by bedroom unit size for ZIP Code 
Tabulation Areas. HUD has reviewed the comment and has made the 
appropriate change to the final FY 2016 Small Area FMRs for the Dallas, 
TX HUD Metro FMR Area.

B. Issues Raised in Comments and HUD Responses

    In accordance with 24 CFR 888.115, HUD has reviewed the public 
comments that were submitted by the due date and has adjusted the 
proposed FMRs accordingly. Furthermore, HUD has determined that there 
are no comments with ``statistically valid rental survey data that 
justify the requested changes in metropolitan areas or non-metropolitan 
counties.'' HUD's responses to all known comments received by the 
comment due date and a part of the notice record https://www.regulations.gov/#!docketBrowser;rpp=25;po=0;dct=PS;D=HUD-2015-0072 
follow.
    Comment: FMR decreases do not reflect the current rental market; 
more recent data must be used for the determination of FMRs. Several of 
the areas expressing dissatisfaction with decreases, provided market 
studies, rent reasonableness findings, or rent data compiled from rents 
for large apartment projects that show that the rents in their area 
increased in the past year, while the FY 2016 FMRs show a decline from 
the FY 2015 FMRs. Over 30 comments from tenants, landlords, housing 
advocacy and development organizations and PHAs protested the reduction 
in the Oakland, CA metropolitan area that resulted from the replacement 
of a 2013 local survey with 2013 ACS one-year data. Their claim is that 
in such a tight rental market, as experienced in Oakland, even the 
relatively small decreases of less than two percent for efficiencies 
through three-bedroom units (four-bedroom FMRs decreased 10 percent 
compared with last year as a result of the bedroom ratio re-
estimation), will hurt a program with huge waiting lists and low 
success rates. Most of these commenters requested that HUD revise the 
FY 2016 FMRs by using the 2014 ACS data (one year 2014 standard 
tabulations were made available on September 17, 2015).
    HUD Response: FMRs are estimated rents, and can change from year-
to-year in ways that are different from market rent changes or economic 
activity. Such a year-over-year comparison is especially invalid when 
data from a local survey is replaced with one-year ACS data, as is the 
case for Burlington, VT, Oakland, CA, and Santa Barbara, CA. When 
economic activity decreases, rents don't necessarily decrease and some 
increased economic activity that might put pressure on rents cannot be 
measured in real time. HUD is required to use the most current data 
available and this means that local surveys conducted in 2013 must be 
replaced by 2013 ACS data for areas with one-year ACS data. HUD is 
precluded from using sources of data that are not statistically 
reliable. Rent reasonableness studies are not subject to the same 
constraints on statistical reliability and cannot be used to alter 
FMRs.
    HUD is unable to use the 2014 ACS data in the calculation of the FY 
2016 FMRs. The standard tabulations of ACS data based on the 2014 data 
collection have not been completely released at this time. Furthermore, 
HUD cannot use the standard tabulations of ACS data to

[[Page 77130]]

set the level of the FMRs for the following reasons:
    1. Standard tabulations do not provide 40th percentile rent 
estimates.
    2. Standard tabulations are not available for certain HUD 
Metropolitan FMR Areas.
    3. Standard tabulations may not be filtered to eliminate 
substandard units or units likely to be subsidized with gross rents 
below HUD's Public Housing Cut Off Rent.
    4. Standard tabulations do not have gross rents specific to recent 
movers.
    Given the limitations of the data in the standard tabulations, HUD 
reviewed the available data to determine if any improvements to the FMR 
calculations in the Oakland, CA HUD Metro FMR area could be made. One 
possibility HUD considered was to replace the CPI based gross rent 
inflation factor capturing rent growth between 2013 and 2014. The CPI 
based inflation factor for gross rents used in the proposed FY 2016 FMR 
calculation is 5.33 percent. The change in the median gross rents 
measured for the Oakland-Haywood-Berkeley, CA Metropolitan Division, 
which comprised of Alameda and Contra Costa Counties--the same as the 
FMR area, between 2013 one-year ACS data and 2014 one-year ACS data is 
only 4.1. Consequently, incorporating the information from the standard 
tabulations of ACS data that are available now would LOWER the FY 2016 
FMRs rather than raise them as the comments suggest.
    Comment: FMRs should be held harmless at the FY 2015 levels. 
Several comments requested that FMRs not be allowed to decline from 
their FY 2015 level, especially where FY 2015 data included a local 
survey. Some of these comments provided market data that showed current 
rents in apartment projects that were higher than the FMR.
    HUD Response: HUD cannot ignore the more current 2013 ACS data and 
allow FMRs to stay the same as they were for FY 2015; FY 2015 FMRs were 
based on gross rents from the 2012 ACS. By statute (42 U.S.C. 
1437f(c)(1)(B)) and regulation (24 CFR 888.113(e)), HUD is required to 
use the most current data available. Apartment buildings of five units 
or more are only one segment of the rental market in a FMR area. 
Typical data submitted in comments to this notice provided information 
on rents for units in this segment, which generally account for less 
than half of the rental market for those areas. Single-family homes, 
both attached and detached (including townhomes and duplexes), small 
rental apartments, and mobile homes make up the rest of the rental 
market. While rent surveys conducted either by HUD or a PHA would 
provide more current data than the ACS, these surveys take about two 
months to complete and can be quite expensive. HUD does not have funds 
available to conduct any surveys in 2016 and cannot delay the 
implementation of FY 2016 FMRs while new surveys are being conducted. 
Rents in areas with relatively short-term market tightening are not 
easily measured by rent surveys. Based on past experience HUD finds 
that an area must have rent increases or declines for a period of at 
least two years before changes can be accurately measured by surveys. 
Should the survey results show market conditions that are statistically 
different from the published FMRs, HUD will revise the FY 2016 FMRs. 
HUD recommends following the survey guidance available at the bottom of 
the Web page https://www.huduser.org/portal/datasets/fmr.html for small 
metropolitan areas without consistent one-year ACS data and 
nonmetropolitan areas. For large areas with significant one-year ACS 
data, the requirement for completed recent mover surveys are greater; 
there must be about 200 two-bedroom (or two-bedroom and equivalent one-
bedroom and possibly equivalent three-bedroom) recent mover surveys 
where the FMR is not within the confidence interval of the survey. HUD 
will review the results of private surveys and will revise the Final FY 
2016 FMRs if warranted. For small nonmetropolitan counties, HUD will 
work with the PHA to simplify the requirements for obtaining valid 
survey results. The selection of the units surveyed must be random and 
the distribution of the structures surveyed must be representative of 
the distribution of structure types from the 2013 ACS. HUD will not 
accept a survey that is comprised only of apartment project rentals, 
any more than it would accept private project rental data for major 
metropolitan areas as a means of revising FMRs. This data typically 
excludes single-family rentals, which are generally about one-third of 
the rental market for an area, and this percentage can be greater in 
small metropolitan areas and nonmetropolitan counties.
    Comment: Reductions in FMRs are discouraging the development of 
affordable multifamily housing projects. Decreases in FMRs reduce the 
financial viability of Low Income Housing Tax Credit (LIHTC) projects 
that are limited to Section 8 voucher.
    HUD Response: For years, HUD held income limits harmless to 
eliminate the effect of lower rents on LIHTC units, assuming rents were 
income based. But, the effect of this policy was to create areas where 
there were no changes in income limits for years, which also did not 
provide adequate rents for LIHTC projects. Congress provided statutory 
hold harmless income limits for LIHTC projects, and special income 
limits for projects in service by December 31, 2008, that were subject 
to HUD's Hold Harmless policy in either 2007 or 2008. Beginning with 
the FY 2010 HUD Income Limits HUD eliminated its hold harmless policy 
for other income limits, but limited annual changes in income limits to 
plus or minus five percent (or greater if on average there was an 
annual increase in the national median family income of more than five 
percent). Since that time, LIHTC developers have planned for decreases 
in income-based rents between the time projects are proposed and placed 
in service. FMRs have always increased and decreased with the change in 
the data. HUD cannot ignore the requirement to use the most current 
data by only implementing FMR changes in five percent increments. 
Statutory and regulatory changes are required before HUD would be able 
to implement any methodology changes that deviate from the use of the 
most current rent data available.
    Comment: Market rents did not decrease in the past year and neither 
should FMRs. Many areas protested decreases or even slight increases in 
the FMRs in areas where success rates are falling (Oakland and Santa 
Barbara) or large decreases where the economy is increasing and putting 
pressures on the housing market (Sioux City). Several commenters stated 
that market rents did not decrease and in fact increased over the past 
year, so FMRs should not decrease. Both Santa Cruz, CA and Burlington, 
VT experienced large declines in FY 2016 FMRs compared with FY 2015 
FMRs. The decline in Santa Cruz was based on the decrease in recent 
mover gross rents measured by the 2013 one-year ACS data, and in 
Burlington the decrease was driven by the replacement of a December 
2012-based local survey with 2013 one-year ACS data.
    HUD Response: FMRs do not represent a time series of rent data for 
each FMR area. When market rents for areas increase, decrease, or stay 
the same, FMRs do not necessarily have the same directional change. The 
FMR process, as currently designed, develops the best estimate of the 
40th (or 50th) percentile gross rent for a particular area using the 
timeliest available data covering the entire market area; this process 
revise past FMR estimates with updated information. Therefore, year-
over-year FMR changes can sometimes

[[Page 77131]]

seemingly conflict with perceived market trends. Annual revisions to 
all of the underlying data used to estimate FMRs are now possible with 
the five-year ACS data. Because of the nature of the ACS five-year 
tabulations, however, 80 percent of the survey observations will remain 
the same from one year to the next, but are re-weighted to match the 
population and housing unit estimates of the final year of the five- 
year range. Also many rural FMR areas rely on update factors based on 
survey results from a larger, encompassing geographic area (for 
example, state-based update factors used for nonmetropolitan counties). 
Even if the base rent is not adjusted the annual changes in FMRs do not 
necessarily reflect very recent changes in the housing market 
conditions for the smaller area but still represent HUD's best estimate 
of 40th percentile gross rents in the FMR area.
    Comment: HUD should validate its FMR estimation methodology by 
comparing one-year ACS data with fiscal year FMRs for the same year, 
beginning with a comparison of 2006 one-year ACS rent data to the FY 
2006 FMRs. This analysis would determine which aspects of HUD's 
discretionary methodology is less accurate and could help HUD modify 
its methodology to improve accuracy while adhering to the requirement 
to use the most recent data available. The up and down changes that 
occur with the final fair market rents cause a lot of problems and 
stress for the landlords, tenants and the PHAs.
    HUD Response: Because the integration of ACS data into the FMR 
estimation process has been gradual and evolving, and will continue to 
evolve to address issues like volatility in estimates arising from 
large sampling variation in smaller markets, there is not yet a basis 
for making the suggested comparison. FMR methodology and the underlying 
data have been relatively stable only between FY 2013 and FY 2016 FMRs. 
ACS data on recent-mover rents is only available for one of these 
years. Further, because the ACS only produces highly reliable estimates 
of the 40th percentile recent mover two-bedroom rent in the largest 
metropolitan areas, the comparison would only be valid for large 
markets, and FMRs have not been particularly volatile in these markets. 
Finally, the logic of this comment suggests that HUD should change the 
FMR estimation process to a model-based forecast system derived from 
time-series-panel data on rents. Again, this methodology would only be 
valid for the largest metropolitan FMR areas where a highly reliable 
recent mover rent can be derived from ACS data. It is not clear that 
the model would be feasible and accurate for smaller FMR areas, nor how 
a model-based FMR estimate would accord with statutory language 
regarding FMR estimates.
    Comment: The year-to-year volatility in FMRs has significant 
adverse impacts. A reduction of more than five percent in the published 
FMRs triggers a rent reasonableness analysis on the part of the PHA 
with jurisdiction over the area (Housing Choice Voucher Guidebook, 
directive 7420.10G). If the PHA's analysis finds that the rent being 
charged by a property owner is no longer reasonable, the owner will be 
required to reduce the rent. If the owner determines that this 
reduction will adversely affect the financial stability of the 
property, the owner will likely choose to leave the program, and the 
tenant will then have to move. Another consequence of a large reduction 
in FMRs is that owners may have to defer maintenance items because cash 
flows are no longer adequate to cover operating expenses. 
Alternatively, higher FMRs force the PHA with jurisdiction over the 
area to increase their payment standards and serve far fewer families 
within the community. This is detrimental at a time when PHAs are 
already stretching the limited amount of funding received from HUD to 
help as many families as they can. Increased FMRs will increase the 
waiting list for the HCV program and will increase the homeless 
population for an area.
    FMRs cannot decrease in economic growth areas; some of these areas 
cannot manage the voucher program even with modest FMR increases. 
Several comments, even pertaining to FMR areas with decreases below 
five percent, or with modest increases, pressed for higher FY 2016 
FMRs. Some of these areas had very tight markets and some of these 
areas already used payment standards at 110 percent of the FMRs. One 
commenter protested the retroactive effective date of October 1, 2015, 
which would not provide the time required to adjust payment standards.
    HUD Response: The FMRs are effective when published. To help manage 
the HCV program and mitigate the impact of FMR decreases, PHAs may be 
able to: (1) Use Success Rate Payment Standards 24 CFR 982.503(e); or 
(2) request Exception Payment Standards for subareas within a FMR area 
(not to exceed 50 percent of the population) at 24 CFR 982.503(c).
    Comment: Vacancy rates are low, making it impossible to absorb FMR 
decreases. Several comments stated that low or no vacancy rates in 
areas with increased economic activity require higher FMRs so that 
voucher tenants can compete for housing. In these areas, there is not 
sufficient rental housing and generally, the 2013 rental data from the 
ACS does not reflect this situation.
    HUD Response: When a market tightens rapidly, the FMRs cannot keep 
pace. The most accurate, statistically reliable data available to HUD 
is lagged by two years. Even if HUD conducts surveys of these areas, 
capturing the full scope of rent increases is difficult if the market 
condition has been occurring for less than two years; furthermore, it 
is challenging to get valid results for surveys of relatively small 
housing markets (with population under 1,000 persons). Most of the 
areas suffering from very rapidly tightening market conditions meet one 
or both of these criteria. Areas with sustained extremely low vacancy 
rates require construction of additional units. Higher FMR levels will 
not necessarily encourage additional development. These areas may use 
Exception Payment Standards for subareas within an FMR area (not to 
exceed 50 percent of the population) as described at 24 CFR 982.503(c), 
or Success Rate Payment Standards available at 24 CFR 982.503(e) to 
alleviate market pressures, or in severely disrupted rental markets.
    Comment: FY 2016 FMR decreases reduce the ability of families to 
find affordable housing. Several comments stated that FMR decreases 
make it harder for tenants to find affordable housing, so HUD should 
not implement FMR decreases. The decrease in FMRs from FY 2015 to FY 
2016 will reduce the availability of affordable housing in the area; 
landlords will be able to get higher rents from tenants that are not 
Section 8 voucher holders and so many will opt out of the program.
    HUD Response: FMRs must reflect the most current statistically 
valid data and this means that FMRs cannot be held harmless (not 
allowed to decrease) when this data shows a decline. Most of the 
declines in the FMRs are based on lower 2013 rents, and in a few cases 
the 2013 to 2014 CPI adjustment reflects a decline.
    Comment: FY 2016 FMR decreases will require existing tenants to pay 
a greater share of their income on rents. Several comments stated that 
their current tenants will have to pay a greater share of their income 
on rents, with FMR decreases.
    HUD Response: New tenants are not allowed to pay more than 40 
percent of their income on rent. Existing tenants will not have to pay 
rent based on reduced FMRs until the second anniversary of their 
Housing Assistance Payment (HAP) contract. If tenant rent

[[Page 77132]]

burden increases for an area, PHAs may use this as a justification for 
higher payment standards.
    Comment: Disabled and difficult-to-place residents suffer a 
disproportionately greater impact from FMR decreases because they have 
fewer housing choice options. Disabled residents already have fewer 
units available to them, and reducing the FMR will further reduce their 
options. Difficult to place residents, because of a history of late 
payments or other issues, will have fewer landlords willing to rent to 
them if the FMR is lower.
    HUD Response: HUD must use the most current data available and 
rents may increase and decrease. The data used as the basis for FY 2016 
FMRs is more current than what was available in the estimation of the 
FMRs for FY 2015. The rent and utility data for the FY 2016 FMRs are 
more current than for the FY 2015 FMRs and are a better representation 
of the position in the rent distribution required by the FMR 
regulations. If a family has a member with a disability, a PHA may 
establish a higher payment standard for that family as a reasonable 
accommodation as discussed in 24 CFR 982.505(d).
    Comment: HUD should institute caps and floors to limit annual FMR 
changes to five percent. A five percent change in the FMR triggers a 
rent reasonableness study, which is costly for cash-strapped PHAs. HUD 
should have instituted the same cap and floor of five percent that it 
instituted for Income Limits with the FY 2010 Income Limits.
    HUD Response: HUD is constrained by legal and regulatory language 
for its calculation of FMRs. HUD cannot ignore the requirement that it 
use the most current data by implementing FMR changes in five percent 
increments. S