Proposed Fair Market Rents for the Housing Choice Voucher Program and Moderate Rehabilitation Single Room Occupancy Program; Fiscal Year 2007, 34726-34786 [06-5411]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 71, Number 115 (Thursday, June 15, 2006)]
[Notices]
[Pages 34726-34786]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-5411]



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Part III





Department of Housing and Urban Development





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Proposed Fair Market Rents for the Housing Choice Voucher Program and 
Moderate Rehabilitation Single Room Occupancy Program; Fiscal Year 
2007; Notice

Federal Register / Vol. 71, No. 115 / Thursday, June 15, 2006 / 
Notices

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5068-N-01]


Proposed Fair Market Rents for the Housing Choice Voucher Program 
and Moderate Rehabilitation Single Room Occupancy Program; Fiscal Year 
2007

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

ACTION: Notice of Proposed Fiscal Year (FY) 2007 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. 
Today's notice proposes FMRs for FY2007. The proposed numbers would 
amend FMR schedules used to determine payment standard amounts for the 
Housing Choice Voucher program, to determine initial renewal rents for 
some expiring project-based Section 8 contracts, and to determine 
initial rents for housing assistance payment (HAP) contracts in the 
Moderate Rehabilitation Single Room Occupancy program. Other programs 
may require use of FMRs for other purposes.
    The proposed FY2007 FMRs continue to use the revised Office of 
Management and Budget (OMB) area definitions that were issued in 2003 
and were used in establishing FY2006 FMR areas and FMRs. They also 
continue to use the same calculation methodology. They differ, however, 
in that a limited number of additional modifications to the county-
based statistical areas as defined by OMB have been made in response to 
public comments received on the December 16, 2005, Federal Register 
notice on the proposed FY2006 income limit calculation methodology.
    In the FY2006 FMRs, HUD disaggregated OMB-defined areas when the 
FMRs of their components as defined by FY2005 FMR areas differed by 
more than 5 percent to better reflect housing market relationships. 
Most FY2006 FMR areas consisting of multiple FY2005 FMR areas after the 
5 percent test was applied to rents had similar income limits among the 
component parts. A few such areas would have substantial declines in 
income limits for some of their component parts under the FY2006 FMR 
area definitions. Income limit decreases are disruptive to certain HUD 
and other Federal housing subsidy programs. Income limit areas 
generally have the same boundaries as FMR areas.
    In order to minimize large changes in income limits in these 
combined areas with similar rents but differing income levels, HUD is 
proposing for FY2007 FMRs to form FMR sub-areas within OMB-defined 
metropolitan areas in all cases where sub-area median family incomes 
differ from OMB-defined area median family incomes by more than 5 
percent. The FMR estimates have been trended to April 2007, the mid-
point of FY2007.

DATES: Comments Due Date: August 1, 2006.

ADDRESSES: Interested persons are invited to submit comments regarding 
HUD's estimates of the FMRs as published in this notice to the Office 
of the General Counsel, Rules Docket Clerk, Department of Housing and 
Urban Development, 451 Seventh Street, SW., Room 10276, Washington, DC 
20410-0001. Communications should refer to the above docket number and 
title and should contain the information specified in the ``Request for 
Comments'' section.
    Submission of Hard Copy Comments. To ensure that the information is 
fully considered by all of the reviewers, each commenter that is 
submitting hard copy comments, by mail or by hand delivery, is 
requested to submit two copies of its comments to the address above, 
one addressed to the attention of the Rules Docket Clerk and the other 
addressed to the attention of Economic and Market Analysis Division 
staff in the appropriate HUD field office. Due to security measures at 
all Federal agencies, submission of comments by mail often result in 
delayed delivery. To ensure timely receipt of comments, HUD recommends 
that any comments submitted by mail be submitted at least two weeks in 
advance of the public comment deadline to ensure timely receipt by HUD.
    Electronic Submission of Comments. Since July 2004, HUD has been 
able to receive comments electronically. Interested persons may now 
submit comments electronically through the Federal eRulemaking Portal 
at https://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
https://www.regulations.gov Web site can be viewed by other commenters 
and interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.
    No Facsimile Comments. Facsimile (FAX) comments are not acceptable. 
In all cases, communications must refer to the docket number and title.
    Public Inspection of Public Comments. All comments and 
communications submitted to HUD will be available, without change, for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at (202) 708-3055 (this 
is not a toll-free number). Copies of all comments submitted are 
available for inspection and downloading at https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For technical information on the 
methodology used to develop fair market rents or a listing of all fair 
market rents, please call the HUD USER information line at 800-245-2691 
or access the information on the HUD Web site, https://www.huduser.org/
datasets/fmr.html. FMRs are listed 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 FY2007 FMR documentation system at: https://www.huduser.org/
datasets/fmr/fmrs/index.asp?data=fmr07. Any questions related to use of 
FMRs or voucher payment standards should be directed to the respective 
local HUD program staff. Questions on how to conduct FMR surveys or 
further methodological explanations may be addressed to Marie L. Lihn 
or Lynn A. Rodgers, Economic and Market Analysis Division, Office of 
Economic Affairs, Office of Policy Development and Research, telephone 
(202) 708-0590. Persons with hearing or speech impairments may access 
this number through TTY by calling the toll-free Federal Information 
Relay Service at (800) 877-8339. (Other than the HUD USER information 
line and TDD numbers, telephone numbers are not toll free.)

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 areas. In the Housing Choice Voucher program, the FMR 
is the basis for

[[Page 34727]]

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 Housing 
Choice Voucher program must meet reasonable rent standards. The interim 
rule published on October 2, 2000 (65 FR 58870), established 50th 
percentile FMRs for certain areas.
    Electronic Data Availability: This Federal Register notice is 
available electronically from the HUD news page: https://
www.hudclips.org. Federal Register notices also are available 
electronically from the U.S. Government Printing Office Web site: 
https://www.gpoaccess.gov/fr/. Complete documentation of the 
methodology and data used to compute each area's Proposed FY2007 FMRs 
is available at: https://www.huduser.org/datasets/fmr/fmrs/
index.asp?data=fmr07.

II. Procedures for the Development of FMRs

    Section 8(c) of the USHA requires the Secretary of HUD to publish 
FMRs periodically, but not less frequently than annually. Section 8(c) 
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 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.)
    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 and, for areas that were formerly eligible for FMRs at the 
50th percentile three years ago, whether these areas continue to remain 
eligible to use 50th percentile FMRs. The regulations provide that once 
an area is determined eligible for 50th percentile FMRs, that area is 
eligible to use 50th percentile FMRs for a period of three years. In a 
notice published February 14, 2006, HUD designated the 24 areas 
determined eligible for the 50th percentile FMRs, and these changes 
became effective on March 1, 2006 (see https://www.huduser.org/datasets/
fmr.html for further information on the designation of 50th percentile 
FMR areas). These areas will not be evaluated for three years. Of the 
areas that did not meet the test for continued use of 50th percentile 
FMRs, HUD found only one area ineligible because of lack of progress in 
alleviating concentration of voucher tenants, the Bergen-Passaic 
metropolitan area. This area is ineligible to use FMRs set at the 50th 
percentile for the next three years, however, it may be eligible for a 
higher payment standard, as discussed in 24 CFR 982.503(f). All other 
areas are evaluated annually to determine if they become newly 
eligible.
    The following areas have been determined to be newly eligible based 
on the rules specified in the February 14, 2006, notice and on Housing 
Choice Voucher program data as of December 31, 2005: Dallas, TX HMFA, 
Fort Lauderdale, FL HMFA, San Diego-Carlsbad-San Marcos, CA MSA, West 
Palm Beach-Boca Raton, FL HMFA.

III. FMR Methodology

    The proposed FY2007 FMRs generally follow the same calculation 
methodology used for FY2006, but include a limited number of changes in 
metropolitan area definitions resulting from an alteration in HUD's 
formula for dividing OMB-defined metropolitan areas. HUD continues to 
use the most recent core-based metropolitan statistical areas in 
calculating FMRs as defined by OMB in OMB Bulletin 06-01 with some 
modifications that disaggregate some OMB areas (see https://
www.whitehouse.gov/omb/bulletins/fy2006/b06-01.pdf). The most recent 
OMB definitions have been implemented with modifications intended to 
minimize changes in both FMRs and income limits due solely to the use 
of the most recent OMB definitions. All proposed metropolitan FMR areas 
consist of areas within OMB metropolitan areas. The FY2006 FMRs created 
separate FMR areas for any parts of old metropolitan areas, or formerly 
nonmetropolitan counties, that would have more than a 5 percent 
increase or decrease in their 2000 Census base 40th percentile 2-
bedroom rent as a result of implementing the new OMB definitions. Most 
FY2006 FMR areas consisting of multiple parts of old metropolitan areas 
and/or formerly nonmetropolitan counties after the 5 percent test was 
applied to rents had similar income limits among the component parts. A 
few such areas would have substantial declines in income limits for 
some of their component parts under the FY2006 FMR area definitions. 
Income limit decreases are disruptive to certain HUD and other federal 
housing subsidy programs where unit rents are tied to current income 
limits. HUD, therefore, generally does not allow income limits to 
fall--a ``hold harmless'' policy. Without an income limit hold harmless 
policy, program rent revenue in subsidized rental projects with rents 
tied to income limits may fall below expense and debt service levels 
potentially leading to default on debt or departure from the program. 
Income limit areas generally have the same boundaries as FMR areas (the 
only difference being statutorily mandated exceptions). In order to 
minimize large changes in income limits in these combined areas with 
similar rents but differing income levels, HUD is proposing for the 
FY2007 FMRs to create separate FMR areas for any parts of old 
metropolitan areas, or formerly nonmetropolitan counties, that would 
have: More than a 5 percent increase or decrease in their 2000 Census 
base area median family income as a result of implementing the new OMB 
definitions; and a sufficiently large sample of 2000 Census recent 
mover rents to compute an individual FMR.
    The addition of the 2000 Census base median family income analysis 
can have three possible effects on an FMR area and its FMRs as defined 
in FY2006: (1) A new sub-area may be formed e.g., Kendall County, IL 
HMFA removed from the Chicago-Naperville-Joliet, IL HMFA); (2) an 
existing sub-area may be assigned its own 2000 Census base rent instead 
of the CBSA base rent (e.g., Danbury, CT HMFA); or (3) an existing sub-
area may lose a component which affects the computation of the sub-
area's 2000-to-2005 update factor (e.g., Youngstown-Warren-Boardman, OH 
HMFA lost the new Sharon, PA HMFA). A complete list of changes from the 
FY2006 FMRs due to the use of the 2000 Census Base Median Family Income 
comparison in forming metropolitan sub-areas is provided in subsection 
F below.
    For nonmetropolitan areas, FMRs continue to be calculated at the 
county level.

A. Data Sources: 2000 Census Base Rents

    FY2005 FMRs were benchmarked for most areas using 2000 Decennial 
Census

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data, which served to correct estimation errors that accumulated since 
1994 when FMRs were benchmarked with 1990 Decennial Census data. At 
HUD's request, the Census Bureau prepared a publicly-releasable data 
file that permits almost exact replication of HUD's 2000 Census base 
rent calculations in all areas except those with few rental units. This 
data set is located on HUD's HUD USER Web site at: https://
www.huduser.org/datasets/fmr/CensusRentData/. An area-
specific explanation of how FY2005 FMRs were benchmarked to the 2000 
Census and updated can be found at https://www.huduser.org/datasets/fmr/
fmrs/index.asp?data=docs.
    The proposed FY2007 FMRs are also benchmarked to the 2000 Census. 
The 2000 Census base rents computed for the proposed FY2007 FMRs use 
the same computational techniques as used in the FY2005 benchmarking. 
The 2000 Census base rents for old FMR areas are used, along with the 
Revised Final FY2005 FMRs, to determine the 2000 to 2005 portion of the 
2000 to 2007 update factor for the new FMR areas. CPI gross rent and 
utility indexes are used for the remainder. A publicly releasable 
version of the data used in preparing the proposed FY2007 FMRs is 
available at the following Web site: https://www.huduser.org/datasets/
fmr/fmrs/index.asp?data=fmr07.

B. FMR Updates: 2000 Census to 2005

    For the new FMR areas, used in the FY2006 FMRs and revised for the 
proposed FY2007 FMRs, update factors from the 2000 Census base rent to 
2005 are computed using weighted average update factors derived from 
Old FMR Area Revised Final FY2005 FMRs, Old FMR Area 2000 Census Base 
Rents and 2000 Census 100 Percent Population Counts as described at 
https://www.huduser.org/datasets/fmr/fmrs/index.asp?data=fmr07.
    After 2000 Census base rent estimates were established for each old 
FMR area and bedroom size; they are updated from the estimated Census 
date of April 1, 2000 to April 1, 2005 (the midpoint of FY2005). Update 
factors for the period were based either on the area-specific Consumer 
Price Index (CPI) survey data that were available for the largest 
metropolitan areas or on HUD random digit dialing (RDD) survey data by 
region.
    For areas with local CPI surveys, CPI annual data on rents and 
utilities were used to update the Census rent estimates. Three-quarters 
of the 2000 CPI change factor was used to bring the FMR estimates 
forward from April to December of 2000. Annual CPI survey data could 
then be used for calendar years 2001, 2002, and 2003. Trending to cover 
the period from December 2003 to April 1, 2005, was then needed. An 
annual trending factor of 3 percent, based on the average annual 
increase in the median Census gross rent between 1990 and 2000, was 
used to update estimates from the end of 2003 (i.e., the last date for 
which CPI data were available) until the midpoint of the fiscal year in 
which the estimates were used. The 15-month trending factor was 3.75 
percent (3 percent times 15/12).
    For areas without local CPI surveys, the same process was used 
except that regional RDD survey data were substituted for CPI data. 
Regional RDD surveys were done for 20 areas--the metropolitan and non-
metropolitan part of each of the 10 HUD regions. Areas covered by CPI 
metropolitan surveys were excluded from the RDD metropolitan regional 
surveys.
    HUD also conducted random digit dialing telephone surveys for 
selected areas and incorporated these into FMR update factors. The 
specific 2000-to-2005 update factors that apply to each FY2007 FMR 
area's constituent parts are described at https://www.huduser.org/
datasets/fmr/fmrs/index.asp?data=fmr07.

C. Updates From 2005 to Proposed FY2007

    After using the old FMR area data to update rents to 2005, 
metropolitan area and non-metropolitan county update factors from 2005 
to 2007 are applied to derive the proposed FY2007 FMRs. All new FMR 
areas that are parts of new metropolitan areas are generally updated 
with the same metropolitan area-level 2005 to 2007 update factor.
    Specifically, local CPI data is used to move rents from the end of 
2003 to the end of 2005 and the same 15-month trending factor is then 
applied. Regional RDDs, however, were not conducted in 2004 or 2005 in 
anticipation of the arrival of American Community Survey (ACS) data. 
Therefore, for proposed FY2007 FMRs, Census region level CPI data for 
Class B and C size cities is being used to update areas without local 
CPI update factors. Data from the 2005 ACS will be used to replace 
regional CPI data if it becomes available in time for inclusion in the 
final FY2007 publication. Once full-scale ACS data collections become 
available in the latter part of 2006, sample sizes will be large enough 
to estimate FMRs for the larger metropolitan areas on an annual basis 
and for other areas on a two- to four-year basis.
    Random digit dialing (RDD) surveys are conducted for areas HUD has 
reason to believe may have unusual rent movements. One RDD was 
completed in time for publication of FY2007 proposed FMRs. The RDD for 
Miami-Miami Beach-Kendall, FL HMFA indicated an increase in the 2-
bedroom FMR from $937 to $1,018. HUD is conducting special RDD surveys 
in several Gulf Coast FMR areas using a special protocol to detect 
possible changes in rents since Hurricanes Katrina and Rita. The 
addition of the post-hurricane protocols delayed results of these 
surveys so they are not available for inclusion in this notice. 
Significant changes in rents revealed by these surveys will be included 
in final FY2007 FMRs.
    The area-specific data and computations used to determine FMR area 
definitions and calculate proposed FY2007 FMRs can be found at https://
www.huduser.org/datasets/fmr/fmrs/index.asp?data=fmr07.

D. Large Bedroom Rents

    FMR estimates are calculated for two-bedroom units. This is 
generally the most common size of rental units, and therefore the most 
reliable to survey and analyze. After each decennial Census, rent 
relationships between two-bedroom units and other unit sizes are 
calculated and used to set FMRs for other units. This is done because 
it is much easier to update two-bedroom estimates and to use pre-
established cost relationships with other bedroom sizes than it is to 
develop independent FMR estimates for each bedroom size. This was last 
done using 2000 Census data. A publicly releasable version of the data 
file used that permits derivations of rent ratios is available at 
https://www.huduser.org/datasets/fmr/CensusRentData/.
    The rents for three-bedroom and larger units continue to reflect 
HUD's policy to set higher rents for these units than would result from 
using normal 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 bonuses of 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

[[Page 34729]]

occupancy units are 0.75 times the zero-bedroom (efficiency) FMR.
    A further adjustment was made using 2000 Census data in 
establishing rent ratios for areas with local bedroom-size intervals 
above or below what are considered to be reasonable ranges or where 
sample sizes are inadequate to accurately measure bedroom rent 
differentials. Experience has shown that highly unusual bedroom ratios 
typically reflect inadequate sample sizes or peculiar local 
circumstances that HUD would not want to utilize in setting FMRs (e.g., 
luxury efficiency apartments in New York City that rent for more than 
typical one-bedroom units). Bedroom interval ranges were established 
based on an analysis of the range of such intervals for all areas with 
large enough samples to permit accurate bedroom ratio determinations. 
The ranges used were: Efficiency units are constrained to fall between 
0.65 and 0.83 of the two-bedroom FMR; one-bedroom units must be between 
0.76 and 0.90 of the two-bedroom unit; three-bedroom units must be 
between 1.10 and 1.34 of the two-bedroom unit; and four-bedroom units 
must be between 1.14 and 1.63 of the two-bedroom unit. Bedroom rents 
for a given FMR area were then adjusted if the differentials between 
bedroom-size FMRs were inconsistent with normally observed patterns 
(e.g., efficiency rents were not allowed to be higher than one-bedroom 
rents and four-bedroom rents were set at a minimum of 3 percent higher 
than three-bedroom rents).
    For low-population, non-metropolitan counties with small Census 
recent-mover rent samples, Census-defined county group data were used 
in determining rents for each bedroom size. This adjustment was made to 
protect against unrealistically high or low FMRs due to insufficient 
sample sizes. The areas covered by this new estimation method had less 
than the HUD standard of 200 two-bedroom Census-tabulated observations.

E. Future FMR Annual Updates

    HUD believes the current OMB definitions of metropolitan 
statistical areas (MSAs) are reasonable definitions of housing markets 
whose relevance will increase with time. That is, while HUD makes 
distinctions among housing markets within some of these areas based on 
differences in rents and incomes measured in 2000, the new MSAs are 
probably better reflections of current rental housing markets than of 
2000 rental housing markets, and will be shown to be increasingly good 
approximations of housing markets as more data are gathered in the 
future. Therefore, future updates to FMRs will be made at the 
metropolitan area level and applied to all FMR areas within 
metropolitan areas where they have been separately designated.
    HUD-funded random digit dialing (RDD) telephone surveys will 
generally be conducted at the metropolitan area level and compared to 
the metropolitan area rent estimate to see if adjustments need to be 
made. If an RDD indicates that a metropolitan area rent needs to be 
changed, the metropolitan area-level change factor will be computed and 
applied to FMR area FMRs within the metropolitan area. HUD will accept 
information supplied by local housing authorities to make adjustments 
to FMRs.
    The release of 2005 Census American Community Survey data later 
this year will initiate a major change in FMR calculations. Starting in 
2005, the Census fully implemented ACS surveys, which are annual 
surveys that collect essentially all of the data that were collected on 
the 2000 Census long form (sample survey). The surveys are large enough 
to provide annual FMR estimates for large metropolitan areas, and two 
or more years of data can be combined to provide reliable estimates for 
smaller areas. The ACS offers more current and accurate rent data than 
have ever been systematically available for calculating FMRs. HUD will 
re-benchmark all metropolitan areas and FMR areas when sufficient ACS 
or other data are available to estimate rents at the same level of 
accuracy for all FMR areas. To the extent such detailed data are 
available, the FY2007 separation of sub-areas within metropolitan areas 
will be re-examined to determine if FMR area base rents and median 
family incomes from the new survey are sufficiently different to 
warrant their continued separation within the metropolitan area for 
areas separated based on 2000 Census base rent and base median family 
income differentials.

F. FMR Area Changes Resulting From 2000 Census Base Median Family 
Income Comparisons

    For this notice, HUD created separate FMR areas based on 2000 
Census base median family incomes for any parts of old metropolitan 
areas, or formerly nonmetropolitan counties, that have a differential 
of more than 5 percent from the current OMB area 2000 Census base 
median family income. The limited number of areas in question did not 
qualify as separate areas based on the 2000 Census base rent analysis 
that was used to determine FMR areas in FY2006. Therefore, these areas 
should not have substantial increases or decreases in their FMRs if 
they are treated as separate income limit/FMR sub-areas. The addition 
of the 2000 Census base median family income analysis can have three 
possible effects on an FMR area and its FMRs as defined in FY2006: (1) 
A new sub-area may be formed; (2) an existing sub-area may be assigned 
its own 2000 Census base rent instead of the CBSA base rent; or (3) an 
existing sub-area may lose a component which affects the computation of 
the sub-area's 2000-to-2005 update factor.
    The table below provides a list of the areas affected by this new 
approach. It compares the FY2006 FMR to the Revised FY2006 Rent that 
reflects the impact of the 2000 Census base median family income 
comparison for the new metropolitan area and its former FMR area 
components. The difference shown is the difference between the 
currently effective FY2006 FMR and what it would have been if the new 
area had been used to calculate FY2006 FMRs (the FY2006 Equivalent Rent 
with Income Comparison). The FY2006 Equivalent Rent, which is provided 
for informational purposes only and is not intended to be effective, 
provides the link between the current and the proposed FMRs for an 
area. For a complete explanation of how each FMR area definition is 
determined and how the proposed FY2007 FMRs for the area are computed, 
see https://www.huduser.org/datasets/fmr/fmrs/index.asp?data=fmr07.

                        Areas Changed by 2000 Census Base Median Family Income Comparison
----------------------------------------------------------------------------------------------------------------
                                                                      FY2006          FY2006
                                                   Final  FY2006    equivalent      equivalent
                      Areas                       FMR (no income     rent with       rent less       Proposed
                                                    comparison)       income       final FY2006     FY2007 FMR
                                                                    comparison          FMR
----------------------------------------------------------------------------------------------------------------
                                  Areas Changed From CBSA Base to Sub-Area Base
----------------------------------------------------------------------------------------------------------------
Bangor, ME HMFA.................................             642             670              28             704

[[Page 34730]]

 
Bloomington, IN HMFA............................             621             648              27             668
Danbury, CT HMFA................................            1148            1195              47            1267
Hagerstown, MD HMFA.............................             629             639              10             673
Iowa City, IA HMFA..............................             653             662               9             682
Jefferson City, MO HMFA.........................             504             507               3             522
Jonesboro, AR HMFA..............................             490             503              13             523
Manchester, NH HMFA.............................            1013             966             -47            1001
Miami-Miami Beach-Kendall, FL HMFA..............             911             883             -28        \1\ 1018
New York, NY HMFA...............................            1133            1123             -10            1189
San Juan-Guaynabo, PR HMFA......................             403         \2\ 486              83             506
----------------------------------------------------------------------------------------------------------------
                                                  New Sub-Areas
----------------------------------------------------------------------------------------------------------------
Kendall County, IL HMFA.........................             901             878             -23             911
Union County, OH HMFA...........................             655             691              36             712
Martinsburg, WV HMFA............................             629             622              -7             655
Calloway County, MO HMFA........................             504             503              -1             518
Shelby County, KY HMFA..........................             563             580              17             602
Monroe County, GA HMFA..........................             542             524             -18             545
Fort Lauderdale, FL HMFA *......................             911             993              82            1054
West Palm Beach-Boca Raton, FL HMFA *...........             911             996              85            1057
Monmouth-Ocean, NJ HMFA.........................            1133            1105             -28            1170
Sharon, PA HMFA.................................             541             543               2             562
----------------------------------------------------------------------------------------------------------------
      Areas Whose Rent Changed Solely Due to Loss of Part to New Sub-Area and Its Effect on Update Factors
----------------------------------------------------------------------------------------------------------------
Columbus, OH HMFA...............................             655             654              -1             674
Louisville, KY-IN HMFA..........................             563             562              -1             584
Youngstown-Warren-Boardman, OH HMFA.............             541             539              -2            558
----------------------------------------------------------------------------------------------------------------
\1\ Includes an RDD-based adjustment.
\2\ This rent includes the results of the Puerto Rico RDD revision described in a separate notice published June
  2, 2006 at 71 FR 32123-4.
* Also becomes 50th percentile FMR area in FY2007.

IV. Manufactured Home Space Surveys

    The FMR used to establish payment standard amounts for the rental 
of manufactured home spaces in the Housing Choice Voucher 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 that were in effect in 
FY2006 were updated to FY2007 using the same data used to estimate the 
Housing Choice Voucher program FMRs if the respective FMR area's 
definition had remained the same. If the result of this computation was 
higher than 40 percent of the re-benchmarked 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. Areas with definitional 
changes that previously had exception manufactured housing space rental 
FMRs are requested to submit new surveys to justify higher than 
standard space rental FMRs if they believe higher space rental 
allowances are needed.

V. Request For Public Comments

    HUD seeks public comments on FMR levels for specific areas. 
Comments on FMR levels must include sufficient information (including 
local data and a full description of the rental housing survey 
methodology used) to justify any proposed changes. Changes may be 
proposed in all or any one or more of the unit-size categories on the 
schedule. Recommendations and supporting data must reflect the rent 
levels that exist within the entire FMR area.
    For the supporting data, HUD recommends the use of professionally 
conducted RDD telephone surveys to test the accuracy of FMRs for areas 
where there is a sufficient number of Section 8 units to justify the 
survey cost of approximately $20,000 to $30,000. Areas with 500 or more 
program units usually meet this cost criterion, and areas with fewer 
units may meet it if actual rents for two-bedroom units are 
significantly different from the FMRs proposed by HUD. In addition, HUD 
has developed a version of the RDD survey methodology for smaller, 
nonmetropolitan PHAs. This methodology is designed to be simple enough 
to be done by the PHA itself, rather than by professional survey 
organizations, at a cost of $5,000 or less.
    PHAs in nonmetropolitan areas may, in certain circumstances, 
conduct surveys of groups of counties. HUD must approve all county-
grouped surveys in advance. PHAs are cautioned that the resulting FMRs 
will not be identical for the counties surveyed; each individual FMR 
area will have a separate FMR based on the relationship of rents in 
that area to the combined rents in the cluster of FMR areas. In 
addition, PHAs are advised that counties whose FMRs are based on the 
combined rents in the cluster of FMR areas will not have their FMRs 
revised unless the grouped survey results show a revised FMR above the 
combined rent level.
    PHAs that plan to use the RDD survey technique should obtain a copy 
of the appropriate survey guide. Larger PHAs should request HUD's 
survey guide entitled ``Random Digit Dialing Surveys; A Guide to Assist 
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Comments.'' Smaller PHAs should obtain the guide entitled ``Rental 
Housing Surveys; A Guide to Assist Smaller Public Housing Agencies in 
Preparing Fair Market Rent Comments.'' These guides are available from 
HUD USER on 800-245-2691, or from HUD's Web site, in Microsoft Word or 
Adobe Acrobat format, at the following address: https://www.huduser.org/
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 by structure type (including single-family, 
duplex, and other small rental properties), age of housing unit, and 
geographic location. The decennial Census should be used as a 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. If the survey is statistically acceptable, HUD 
will estimate FMRs for other bedroom sizes using ratios based on the 
decennial Census. 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 
is prepared 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.
    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:

    Dated: May 30, 2006.
Darlene F. Williams,
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--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. The 
proposed FY2007 FMRs reflect a change in metropolitan area definitions. 
HUD is using the metropolitan Core-Based Statistical Areas (CBSA), 
which are made up of one or more counties, as defined by the Office of 
Management and Budget, 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 FY2007 proposed FMRs incorporates the 
current OMB definitions of metropolitan areas based on the Core-Based 
Statistical Area (CBSA) standards as implemented with 2000 Census data, 
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 sub-areas are established, it is HUD's view 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 Areas CBSAs (referred to as Metropolitan Statistical 
Areas or MSAs) may be modified to allow for sub-area 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 FY2005 FMRs. 
Collectively they include 1999 definition MSAs/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 non-metropolitan counties.) Sub-areas of MSAs are 
assigned their own FMRs when the sub-area 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 sub-area differs by at least 5 percent 
from the MSA 2000 Census Median Family Income. MSA sub-areas, and the 
remaining portions of MSAs after sub-areas 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 the FMR tables.

2. Bedroom Size Adjustments

    Schedules B shows the FMRs for 0-bedroom through 4-bedroom units. 
The FMRs for unit sizes larger than 4 bedrooms are calculated by adding 
15 percent to the 4-bedroom FMR for each extra bedroom. For example, 
the FMR for a 5-bedroom unit is 1.15 times the 4-bedroom FMR, and the 
FMR for a 6-bedroom unit is 1.30 times the 4-bedroom FMR. FMRs for 
single-room-occupancy (SRO) units are 0.75 times the 0-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 nonmetropolitan county listings.
    d. The New England towns and cities included in a nonmetropolitan 
part of a county are listed immediately following the county name.

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[FR Doc. 06-5411 Filed 6-14-06; 8:45 am]
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