Proposed Fair Market Rents for the Housing Choice Voucher Program and Moderate Rehabilitation Single Room Occupancy Program Fiscal Year 2012, 52058-52129 [2011-20932]

Download as PDF 52058 Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Notices Department of Housing and Urban Development [Docket No. FR–5567–N–01] Proposed Fair Market Rents for the Housing Choice Voucher Program and Moderate Rehabilitation Single Room Occupancy Program Fiscal Year 2012 Office of the Assistant Secretary for Policy Development and Research, HUD. ACTION: Notice of Proposed Fiscal Year (FY) 2012 Fair Market Rents (FMRs). AGENCY: 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. 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 in the HOME program. Today’s notice provides proposed FY 2012 FMRs for all areas that reflect the estimated 40th and 50th percentile rent levels trended to April 1, 2012. The FY 2012 FMRs are rebenchmarked using five-year, 2005– 2009 data collected by the American Community Survey (ACS). These data are updated using one-year ACS data in areas where statistically valid one-year ACS data is available. The Consumer Price Index (CPI) rent and utility indexes are used to further update the data from 2009 to the end of 2010. HUD continues to use ACS data in different ways according to how many twobedroom standard-quality and recentmover sample cases are available in the FMR area or its Core-Based Statistical Area (CBSA). The proposed FY 2012 FMR areas are based on current Office of Management and Budget (OMB) metropolitan area definitions and include HUD modifications that were first used in the determination of FY 2006 FMR areas. Changes to the OMB metropolitan area definitions through December 2009 are incorporated. The bedroom ratios developed using 2000 Census data continue to be used and state minimums, calculated each year from the estimated FMRs, continue to be applied. This notice also includes HUD’s responses to comments received on the March 9, 2011, (76 FR 12985), Federal Register notice (‘‘Trend Notice’’) seeking public comment regarding the wreier-aviles on DSKDVH8Z91PROD with NOTICES2 SUMMARY: VerDate Mar<15>2010 15:13 Aug 18, 2011 Jkt 223001 manner in which HUD calculates a trend factor, the time period the trend factor is applied in the FMR estimation process and related issues. HUD received four applications to participate in the Small Area FMR demonstration program. These applications are being reviewed and information on the demonstration program will be made available in a notice published at a later date. Finally, in an effort to serve HUD’s external clients who use HUD’s estimates of Area Median Family Income (MFI) and their associated Income Limits (IL), HUD is requesting comments on a proposal to establish a certain date for publishing these parameters. DATES: Comment Due Date: September 19, 2011. ADDRESSES: Interested persons are invited to submit comments regarding HUD’s estimates of the FMRs and/or HUD’s proposed timeline for publishing MFIs and ILs, as published in this notice, to the Office of 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 who is submitting hard copy comments, by mail or 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 results 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. Electronic Submission of Comments. Interested persons may submit comments electronically through the Federal eRulemaking Portal at http:// 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 PO 00000 Frm 00002 Fmt 4701 Sfmt 4703 public. Comments submitted electronically through the http:// www.regulations.gov Web site can be viewed by other commenters and interested members of the public. Commenters should follow instructions provided on that site to submit comments electronically. No Facsimile Comments. Facsimile (Fax) comments are not acceptable. Public Inspection of Comments. All comments and communications submitted to HUD will be available, without charge, 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 http:// www.regulations.gov. 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 Web site http:// www.huduser.org/portal/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 FY 2012 FMR documentation system at http:// www.huduser.org/portal/datasets/fmr/ fmrs/docsys.html&data=fmr12 and 50th percentile rents for all FMR areas will be published at http:// www.huduser.org/portal/datasets/ 50per.html after publication of final FY 2012 FMRs. 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 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 202–708–0590. 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.) FOR FURTHER INFORMATION CONTACT: SUPPLEMENTARY INFORMATION E:\FR\FM\19AUN2.SGM 19AUN2 Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Notices I. Background Section 8 of the USHA (42 U.S.C. 1437f) authorizes housing assistance to aid lower-income families in renting safe and decent housing. Housing assistance payments are limited by FMRs established by HUD for different geographic areas. In the HCV program, the FMR is the basis for determining the ‘‘payment standard amount’’ used to calculate the maximum monthly subsidy for an assisted family (see 24 CFR 982.503). In general, the FMR for an area is the amount that would be needed to pay the gross rent (shelter rent plus utilities) of privately owned, decent, and safe rental housing of a modest (non-luxury) nature with suitable amenities. In addition, all rents subsidized under the HCV program must meet reasonable rent standards. HUD’s regulations at 24 CFR 888.113 permit it to establish 50th percentile FMRs for certain areas. Electronic Data Availability: This Federal Register notice is available electronically from the HUD User page at http://www.huduser.org/datasets/ fmr.html. Federal Register notices also are available electronically from http:// www.gpoaccess.gov/fr/index.html, the U.S. Government Printing Office Web site. Complete documentation of the methodology and data used to compute each area’s proposed FY 2012 FMRs is available at http://www.huduser.org/ portal/datasets/fmr/fmrs/ docsys.html&data=fmr12. Proposed FY 2012 FMRs are available in a variety of electronic formats at http:// www.huduser.org/portal/datasets/ fmr.html. FMRs may be accessed in PDF format as well as in Microsoft Excel. Small Area FMRs based on Proposed FY 2012 Metropolitan Area Rents are available in Microsoft Excel format at the same web address. Please note that these Small Area FMRs are for reference only, and will only be used by PHAs participating in the Small Area FMR demonstration. wreier-aviles on DSKDVH8Z91PROD with NOTICES2 II. Procedures for the Development of FMRs 15:13 Aug 18, 2011 Jkt 223001 FY 2011 50TH-PERCENTILE FMR AREAS RE-EVALUATED FOR ELIGIBILITY EVALUATION IN FY 2012 Albuquerque, NM MSA. Denver-Aurora, CO MSA. Houston-BaytownSugar Land, TX HMFA. Milwaukee-WaukeshaWest Allis, WI MSA. Richmond, VA HMFA Chicago-JolietNaperville, IL HMFA 2. Hartford-West Hartford-East Hartford, CT HMFA. Kansas City, MO–KS, HMFA. North Port-Bradenton-Sarasota, FL MSA. Tacoma, WA HMFA. 2 HMFA stands for HUD Metropolitan FMR Area. 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 VerDate Mar<15>2010 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. Minimally qualified areas 1 are reviewed each year unless not qualified to be reviewed. Areas are not qualified to be reviewed if they have been made a 50th-percentile area within the last three years or have lost 50th-percentile status for failure to de-concentrate within the last three years. In FY 2011 there are 18 areas using 50th-percentile FMRs. Of these 18 areas, 10 of them have completed three years of program participation and are due for re-evaluation. The following table lists these 10 areas. Only three of the 10 areas up for reevaluation will continue to be 50thpercentile FMR areas: 1 As defined in 24 CFR 888.113(c), a minimally qualified area is an area with at least 100 census tract 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 is evaluated with 2000 Census tract data, while we are awaiting 2010 ACS data to be aggregated using 2010 Census tract definitions. PO 00000 Frm 00003 Fmt 4701 Sfmt 4703 52059 FY 2011 50TH-PERCENTILE FMR AREAS THAT CONTINUE AS 50THPERCENTILE AREAS, NEXT EVALUATION IN FY 2015 Hartford-West Hartford-East Hartford, CT HMFA. North Port-BradentonSarasota, FL MSA. Houston-BaytownSugar Land, TX HMFA. Two areas ‘‘graduated’’ from the 50thpercentile FMR program. This means that the concentration of HCV tenants is below what is required to be eligible for a 50th-percentile FMR. These two areas may be evaluated annually and may return to the program: FY 2011 50TH-PERCENTILE FMR AREAS THAT ‘‘GRADUATE,’’ EVALUATED ANNUALLY Milwaukee-WaukeshaWest Allis, WI MSA. Richmond, VA HMFA. The remaining five areas failed to deconcentrate and will not be eligible for evaluation for three years, until the FY 2015 FMRs are evaluated: FY 2011 50TH-PERCENTILE FMR AREAS THAT FAILED TO DECONCENTRATE, ELIGIBLE FOR EVALUATION IN FY 2015 Albuquerque, NM MSA. Denver-Aurora, CO MSA. Tacoma, WA HMFA. Chicago-JolietNaperville, IL HMFA. Kansas City, MO–KS, HMFA. Of the remaining eight 50th-percentile FMR areas that were not eligible for review, seven will complete three years in the program and be reviewed for the FY 2013 FMRs, as shown below: FY 2012 CONTINUING 50TH-PERCENTILE FMR AREAS SLATED FOR EVALUATION IN FY 2013 Baltimore-Towson, MD MSA. Grand Rapids-Wyoming, MI HMFA. Philadelphia-CamdenWilmington, PA– NJ–DE–MD MSA. Fort Lauderdale, FL HMFA. New Haven-Meriden, CT HMFA. Washington-Arlington-Alexandria, DC–VA–MD HMFA. West Palm BeachBoca Raton, FL HMFA. The eighth FY 2011 area, BergenPassaic, NJ HMFA, was granted authorization to use 50th-percentile FMRs in FY 2011. Therefore, under E:\FR\FM\19AUN2.SGM 19AUN2 52060 Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Notices current regulations, Bergen-Passaic, NJ HMFA, will continue in the 50th percentile program for FY 2012 and will be evaluated when the FY 2014 FMRs are calculated. There will be 10 additional 50thpercentile FMR areas, one that is new to the program, Sacramento—ArdenArcade—Roseville, CA HMFA. The other 9 areas, as listed below, all failed to deconcentrate when evaluated for the FY 2009 FMRs, but have been reinstated as 50th-percentile FMRs: FY 2012 50TH-PERCENTILE FMR AREAS REINSTATED EVALUATION IN FY 2015 Austin-Round RockSan Marcos, TX MSA. Honolulu, HI MSA ...... Orange County, CA HMFA. Riverside-San Bernardino-Ontario, CA HMFA. Virginia Beach-Norfolk-Newport News, VA–NC MSA. Fort Worth-Arlington, TX HMFA. Las Vegas-Paradise, NV MSA. Phoenix-Mesa-Glendale, AZ MSA. Tucson, AZ MSA. In summary, there will be 21 50thpercentile FMR areas in FY 2012. These areas are indicated by an asterisk in Schedule B, where all FMRs are listed by state. wreier-aviles on DSKDVH8Z91PROD with NOTICES2 III. FMR Methodology This section provides a brief overview of how the FY 2012 FMRs are computed. For complete information on how FMR areas are determined, and on how each area’s FMRs are derived, see the online documentation at: http:// www.huduser.org/portal/datasets/fmr/ fmrs/docsys.html&data=fmr12. The proposed FY 2012 FMRs are based on current OMB metropolitan area definitions and standards that were first used in the FY 2006 FMRs. OMB changes to the metropolitan area definitions through December 2009 are incorporated. There have been no area definition changes published by OMB since the publication of the FY 2011 FMRs; therefore, the FY 2012 area definitions are the same as those used in FY 2011. A. Base Year Rents The U.S. Census Bureau released standard tabulations of 5-year ACS data collected between 2005 through 2009 in December of 2010. This is the first time that updated data are available for all FMR areas and their component geographies since the release of the 2000 Decennial Census data (previous ACS releases only covered areas with 20,000 VerDate Mar<15>2010 15:13 Aug 18, 2011 Jkt 223001 or more in population). Because of this new data availability, HUD has the ability to estimate new base rents based on the 5-year ACS data. FMRs are typically based on gross rents for recent movers (those who have moved into their current residence in the last 24 months). FMRs prior to FY 2012 were calculated based on recent mover gross rent estimates from the 2000 Census or from more recent HUD commissioned surveys. However, due to the way the 5-year data are constructed, the notion of recent mover is a murky concept. The 5-year data aggregates all survey data collected between January 2005 and December 2009 for a given area. Dollar values such as gross rents are transformed from the time period in which they were collected to an overall 2009 value using the national CPI. Attempting to limit the 5-year data to those who have moved in the last 24 months severely limits the usefulness of the 5-year data. Consequently, all areas are assigned as a base rent the estimated two-bedroom standard quality 5-year gross rent from the ACS.3 Because HUD’s regulations mandate that FMRs must be published as recent mover gross rents, HUD has created a recent mover bonus factor to apply to the standard quality base rents assigned from the 5year ACS data. The recent mover bonus is described below. Local area rent surveys conducted in 2010 by HUD or PHAs are used instead of ACS-base rents when the survey results are statistically different from the ACS based rents. The surveys for Williamsport, PA, MSA and Pike County, HMFA were evaluated and are being used in place of the 2009 ACS data. A survey conducted in 2010 for the county group, Bradford-SullivanTioga, PA, was also evaluated, but there was no statistical difference from the 2009 ACS data, updated to 2010. for the same area.4 HUD then computes a z-score to determine if the 5-year standard quality rent and the 1-year recent mover rent are statistically different.5 If the two rents have a statistically significant difference, the recent mover bonus factor is set at the difference between the state nonmetropolitan 1-year recent mover rent and the state non-metropolitan 5-year standard quality rent expressed as a percentage of the state non-metropolitan 5-year standard quality rent. If the two rents are not statistically different, the recent mover bonus is set to 1.0. For metropolitan areas, the recent mover bonus is calculated in a similar fashion. HUD selects the smallest geographic area which encompasses the metropolitan area in question that has at least 100 recent mover observations to use in the calculation of the recent mover bonus factor. For HUD-defined subareas of OMB defined metropolitan areas, this means that the recent mover bonus factor may be based on the recent mover data for the subarea, the entire metropolitan area, the metropolitan portions of the state, or finally the entire state depending on which geographic level has 100 or more recent mover observations.6 Once the area with 100 or more recent mover cases has been determined, HUD calculates a z-score comparing the 1-year recent mover twobedroom gross rent with the 5-year standard quality two-bedroom gross rent for the recent mover bonus area. If the two rents are statistically different, HUD sets the recent mover bonus for the FMR area as the percentage change between the two rents for the recent mover bonus area. If the difference in rents is not statistically different, the recent mover bonus factor for the FMR area is set to 1. For FMR areas without 100 recent mover rents, a recent mover bonus is B. Recent Mover Bonus Factor 4 HUD ensures that the recent mover estimate for each non-metropolitan portion of the state has at least 100 ACS sample observations. If any state nonmetropolitan recent mover rent is based on fewer than 100 observations, the recent mover factor would be calculated based on the 1-year recent mover data and 5-year standard quality data for the entire state. 5 The change is considered statistically significant if Z is greater than 1.645 where Z is equal to the change between the estimate for the 1-year data and the 5-year estimate, over the square root of the sum of the squared standard error for the 1-year estimate and the squared standard error of the 5-year estimate. 6 For metropolitan areas that cross state boundaries, and where there are not 100 2-bedroom recent mover observations, HUD uses the weighted average update factors for the encompassing state metropolitan areas. HUD performs the Z-score test for statistical difference between the 1-year recentmover rent and 5-year standard-quality rent separately for each state metropolitan part prior to computing the weighted average update factor. Following the assignment of the standard quality two-bedroom rent described above, HUD applies a recent mover bonus to these rents. The following describes the process for determining the appropriate recent mover bonus. For non-metropolitan areas, HUD calculated the percentage change between the 5-year standard quality rent for the non-metropolitan portion of the state and the 1-year recent mover rent 3 For areas with a two-bedroom standard quality gross rent from the ACS that have a margin of error greater than the estimate or no estimate due to inadequate sample in the 2009 5-year ACS, HUD uses the two-bedroom state non-metro rent for nonmetro areas. PO 00000 Frm 00004 Fmt 4701 Sfmt 4703 E:\FR\FM\19AUN2.SGM 19AUN2 Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Notices calculated at the smallest area level that does have 100 recent movers. For metropolitan areas, this order is subarea, metropolitan area, state metropolitan area, and state. For a nonmetropolitan area a recent mover bonus based on the state nonmetropolitan area, or if that is not available it is calculated on the basis of the whole state. For an example of how the recent mover bonus is calculated for these areas, please review this methodology for Abilene, TX MSA and Baldwin County, AL, in the FY 2012 documentation system: http:// www.huduser.org/portal/datasets/fmr/ fmrs/docsys.html&data=fmr12. This process produces an ‘‘as of’’ 2009 recent mover two-bedroom base gross rent for the FMR area.7 C. Updates From 2009 to 2010 The ACS data is updated through 2009 using the one-half of the change in annual CPI measured between 2008 and 2009. This data is further updated through the end of 2010 using the annual change in CPI from 2009 to 2010. As in previous years, HUD uses Local CPI data for FMR areas with at least 75 percent of their population within Class A metropolitan areas covered by local CPI data. HUD uses Census region CPI data for FMR areas in Class B and C size metropolitan areas and nonmetropolitan areas without local CPI update factors. wreier-aviles on DSKDVH8Z91PROD with NOTICES2 D. Trend From 2010 to 2012 The national 1990 to 2000 average annual rent increase trend of 3 percent is applied to end-of-2010 rents for 15 months, to derive the proposed FY 2012 FMRs with a date of April 2012. On March 9, 2011 (76 FR 12985), HUD published a notice requesting public comment regarding the manner in which it calculates the trend factor used in determining FMR estimates to meet the statutory requirement that FMRs be ‘‘trended so the rentals will be 7 The Pacific Islands (Guam, Northern Marianas and American Samoa) as well as the US Virgin Islands are not covered by ACS data. As part of the 2010 Decennial Census, these areas were covered by a long-form survey. The results gathered by this long form survey will not be available until 2012. Therefore, HUD uses the national change in gross rents, measured between 2008 and 2009 to update last year’s FMR for these areas. Puerto Rico is covered by the Puerto Rico Community Survey within the American Community Survey; however, the gross rent data produced by the 2005–2009 ACS are not sufficient to adequately house voucher holders in Puerto Rico. This is due to the limited ability to eliminate units that do not pass the voucher program’s housing quality standards. Consequently, HUD is updating last year’s FMRs for Puerto Rico using the change in rents measured from all of Puerto Rico measured between the 2008 and 2009. For details behind these calculations, please see HUD’s Proposed FY 2012 FMR documentation system available at: http:// www.huduser.org/portal/datasets/fmr/fmrs/ docsys.html&data=fmr12. VerDate Mar<15>2010 15:13 Aug 18, 2011 Jkt 223001 current for the year to which they apply.’’ HUD’s notice provided several proposed alternatives to the current trend factor and requested comments on the alternatives as well as suggestions of other ideas. These comments are discussed in further detail later in this notice, but, in short, the commenters did not arrive at a consensus over how to change the trending methodology. Therefore, HUD will continue to consider the suggestions provided in the comments and make plans to implement a new methodology with the publication of FY 2013 Proposed FMRs. E. Bedroom Rent Adjustments HUD calculates the primary FMR estimates for two-bedroom units. This is generally the most common size of rental units and, therefore, the most reliable to survey and analyze. Formerly, after each Decennial Census, HUD calculated rent relationships between two-bedroom units and other unit sizes and used them to set FMRs for other units. HUD did this because it is much easier to update two-bedroom estimates and to use pre-established cost relationships with other bedroom sizes than it is to develop independent FMR estimates for each bedroom size. HUD did the last update of bedroom-rent relationships using 2000 Census data. A publicly releasable version of the data file used for the derivations of rent ratios is available at http:// www.huduser.org/portal/datasets/fmr/ CensusRentData/index.html. HUD made adjustments using 2000 Census data to establish rent ratios for areas with local bedroom-size intervals above or below what are considered 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 that rent for more than typical one-bedroom units). HUD established bedroom interval ranges based on an analysis of the range of such intervals for all areas with large enough samples to permit accurate bedroom ratio determinations. These ranges are: efficiency FMRs are constrained to fall between 0.65 and 0.83 of the two-bedroom FMR; onebedroom FMRs must be between 0.76 and 0.90 of the two-bedroom FMR; three-bedroom FMRs must be between 1.10 and 1.34 of the two-bedroom FMR; and four-bedroom FMRs must be between 1.14 and 1.63 of the twobedroom FMR. HUD adjusts bedroom rents for a given FMR area if the PO 00000 Frm 00005 Fmt 4701 Sfmt 4703 52061 differentials between bedroom-size FMRs were inconsistent with normally observed patterns (i.e., efficiency rents are not allowed to be higher than onebedroom rents and four-bedroom rents are not allowed to be lower than threebedroom rents). HUD further adjusts the rents for three-bedroom and larger units to reflect HUD’s policy to set higher rents for these units than would result from using unadjusted market rents. This adjustment is intended to increase the likelihood that the largest families, who have the most difficulty in leasing units, will be successful in finding eligible program units. The adjustment adds bonuses of 8.7 percent to the unadjusted three-bedroom FMR estimates and adds 7.7 percent to the unadjusted fourbedroom 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 fourbedroom FMR, and the FMR for a sixbedroom unit is 1.30 times the fourbedroom FMR. FMRs for single-room occupancy units are 0.75 times the zerobedroom (efficiency) FMR. For low-population, nonmetropolitan counties with small 2000 Census samples of recent-mover rents, HUD uses Census-defined county group data to determine rents for each bedroom size. HUD made this adjustment to protect against unrealistically high or low FMRs due to insufficient sample sizes. The areas covered by this estimation method had less than the HUD standard of 200 two-bedroom, Census-tabulated observations. The 2010 Decennial Census did not collect the information necessary to update unit bedroom rent relationships. HUD intends to use the 2006–2010 5year ACS data to update these relationships for the FY 2013 FMRs. HUD is choosing to wait until next year to ensure something closer to a consistent 10 year time period, but more importantly, because the 2010 ACS data will be published based on the 2010 Decennial Census geographic definitions. IV. Manufactured Home Space Surveys The FMR used to establish payment standard amounts for the rental of manufactured home spaces 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 E:\FR\FM\19AUN2.SGM 19AUN2 52062 Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Notices (including the cost of utilities) for the entire FMR area. All approved exceptions to these rents that were in effect in FY 2011 were updated to FY 2012 using the same data used to estimate the Housing Choice Voucher 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. wreier-aviles on DSKDVH8Z91PROD with NOTICES2 V. Review of Comments and HUD’s Responses Regarding the Methodology for Calculating the FMR Trend Factor As previously stated, the comments delivered to HUD in response to the March 9, 2011 (76 FR 12985) Federal Register notice concerning the trend factor methodology yielded only one consensus, the need for a trend factor. This section summarizes the comments received and provides HUD’s responses. In order to respond to all comments received, HUD has summarized the comments below, and has grouped the comments into two sections: General Comments and Comments on Specific HUD Questions. A. General Comments 1. Ensure fairness in FMR methodology. One commenter states that one of the most basic needs is housing and, especially in these times, many citizens who are willing to work lack opportunities to do so. As a result, these individuals may not have enough to meet their basic needs. The commenter requests that whatever methodology chosen, that it fairly and accurately evaluate the FMR for those in need, so that they might assist these individuals in meeting this most basic need. HUD Response: HUD’s methodology for calculating Fair Market Rents is constructed to be as fair as possible using the most recent data available. HUD will keep these comments in mind as it determines the appropriate method for future FMR calculation decisions. 2. FMR methodology fails to consider the cost of accessible units. Another commenter states that the process for calculating FMRs is neither fair nor sensible when applied to units that are wheelchair accessible. The current HUD process treats accessible and nonaccessible units as being similar, both in terms of availability and price, when evidence suggests the opposite. The commenter states that until HUD requires a separate analysis of FMRs for accessible units, HUD will be making policy in the dark. VerDate Mar<15>2010 15:13 Aug 18, 2011 Jkt 223001 HUD Response: HUD’s regulations allow PHAs to approve a higher payment standard on a case-by-case basis, as a reasonable accommodation for a family with a person with disabilities (refer to PIH Notice 2010–11, which was extended by PIH Notice 2011–19). There is no data available that would allow HUD to calculate a separate FMR for accessible units. 3. Correct failure of FMRs to consider cost of accessible units. The same commenter recommends that HUD, to correct the defect with respect to FMRs for wheelchair accessible units, (1) grant a 10 percent increase in rent (not to the 50th percentile, but 10 percent more dollars to the FMR), (2) grant an additional 10 percent increase with HUD approval; and (3) grant an extension of time (allowing the family to search longer for an apartment which may not even exist in that price range). The commenter notes that while there may not be statistical evidence regarding the availability of accessible apartments at current FMRs, the commenter’s experience as a person with a disability and an attorney with 30 years experience in housing law is that families looking for accessible units have fewer housing choices that cost more than average. HUD Response: HUD’s regulations concerning housing for disabled persons allow PHAs to request exception payment standards as a reasonable accommodation for families with a disabled family member. 4. Maintain the publication of FMRs in a timely manner and on a certain date. Two commenters emphasize the importance of timely publication of HUD’s FMRs. They state that timely publication permits PHAs and property owners to be able to forecast and plan for rent adjustments and operating expense budgets. Further, FMRs are used in the determination of annual income limits which cannot be published until FMR calculations are completed. Without a date certain for publication of FMRs, uncertainty surrounding the timing of the publication of income limits could worsen and owners of Low Income Housing Tax Credit (LIHTC) properties would not be able to set annual rents. HUD Response: Under current statutes and regulations, the publication date for Final FMRs remains October 1. Under current rules, FMRs must also be published for comment and given at least a 30-day comment period. HUD has suggested changes to the manner in which the publication of FMRs is completed, and due to the local coverage of ACS data, HUD has recommended that proposed FMRs no PO 00000 Frm 00006 Fmt 4701 Sfmt 4703 longer are necessary and that comments with requests for FMR reviews could be made following the publication of Final FMRs. 5. Review of Alternative Tending Methodologies. One commenter addressed each of the alternative trending methods suggested in the notice. The commenter states that it does not support Alternative 1 (use of overall Consumer Price Index (CPI) data) because local and regional CPI provides a more accurate FMR calculation for specific geographic areas than national CPI data. It also recommends that should HUD use national CPI data rather than local or regional data, it should limit its use to rent and utility, instead of overall, CPI data. The commenter supports Alternative 2 (use of rent and utilities CPI) since, according to the commenter, the use of a local or regional trend factor is a more appropriate way to calculate FMRs. The commenter does not support the use of proprietary information (Alternative 3) since the likelihood of this data providing timely, complete, and usable data, particularly for rural and remote areas, is low. The commenter also supports alternative 4 (seeking legislative change, trending to the midpoint of the fiscal year) as providing a good balance between the use of the most recent local data available and the need to publish the trend factor in advance. Finally, the commenter does not support Alternatives 5 (seeking legislative change, trending to the beginning of the fiscal year) and requests more information to fully consider Alternative 6 (eliminating the need for trending by using the most recent halfyearly CPI and publishing final FMRs between October and December). HUD Response: HUD takes these comments under advisement, and continues to consider all of these methods as well as others suggested by different commenters. B. Comments on Specific HUD Questions HUD Question: Should HUD continue to use a constant trend factor or should the trend factor be updated annually to attempt to capture market changes? 1. Four commenters recommend that HUD use a trend factor that is updated annually, noting that a constant trend factor can substantially understate true costs and put clients who depend on rental assistance and landlords who accept vouchers, at risk. One commenter, for example, states that the volatility of utility costs makes it critical that the trend factor be updated E:\FR\FM\19AUN2.SGM 19AUN2 wreier-aviles on DSKDVH8Z91PROD with NOTICES2 Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Notices annually to capture market changes. According to the commenter, this is especially important in the Northeastern United States where heating accounts for a significant portion of utility costs and price volatility is exacerbated by the significant use of fuels such as fuel oil and natural gas. According to the commenter, unless the trend factor is updated annually HUD will not be able to fairly account for utility price volatility. Annual updates of the trend factor would minimize the negative impacts of market changes. 2. A commenter states that the use of the CPI Fuels & Utilities Index masks changes in specific fuels used for home energy, and recommends that HUD replace the use of the Fuels & Utilities Index with three indices (Electricity, Utility (piped) Gas service and Motor Fuels) with the indices used to calculate a state specific trend factor by weighting them based on the percentage of rental units in the state heated by each of the 3 fuels, as provided by the ACS. The commenter recommends use of a fuel oil-specific index if one was available, but believes that the price of heating fuel oil tracks motor fuel prices enough that the Motor Fuels Index is a fair substitute. 3. Another commenter supports use of a trend factor that is updated annually but cautioned that HUD build in stopgaps that eliminate sharp peaks and valleys due to short-term instability. HUD might consider, for example, a stopgap that prevents the factor from changing more than a certain percentage each year. Another commenter recommends that HUD use a rolling average or other techniques to eliminate significant increases or decreases in FMRs. A third commenter states that using a national, constant trending factor does not make sense in a world where many of HUD’s programs depend on the local market and its changing activity. The commenter recommends the use of a trend factor that can be updated annually and based on local or regional data. The commenter also cautions that the trend factor should not be negative, as that could have serious programmatic implications, particularly for Section 8 project-based and taxcredit properties. As a result, HUD should treat trends less than or equal to zero growth as zero growth. 4. One commenter recommends that HUD continue its use of a constant trend factor since it minimizes large fluctuations from year to year. The commenter stated that a 10-year or 5year trending factor would accomplish this goal. The commenter specifically recommends, however, that HUD use a single, national trend factor, based on a VerDate Mar<15>2010 15:13 Aug 18, 2011 Jkt 223001 rolling five years of national median gross rent in the ACS. Since the commenter does not believe that ACS data are reliable enough to use as a basis for a trend factor prior to 2005, the year that the ACS was first fully implemented and collected data from every county or county equivalent in the country, the commenter states that a 5year rolling average using ACS could be implemented within a year, as soon as the ACS data becomes available. HUD Response: While more commenters supported the use of a trend factor updated annually, all were concerned with controlling volatility in the trend factor. Some who want an annual trend factor were only willing to consider annual increases. Instituting caps and floors for annual trend factors would be new to the FMR estimation process and not necessarily improve the process. Using more detailed utility data would be of little benefit. The more detailed the index of the CPI, the larger the geographic area for which this data is available on a current basis. The ACS does not provide data based on type of heating fuel for rental units, as one commenter suggested, so allocating national utility data to states and determining an appropriate fuel index cannot be done with the ACS. Caps and floors, such as never allowing the trend factor to be less than zero, could be instituted to reduce volatility, but this would also reduce anticipated improvements in accuracy of trend estimates. HUD Question: The constant trend factor that HUD has used in the past cannot be replicated for 2000 to 2010 based on available 2010 Census data. If a constant trend factor is appropriate, what data and time period should be used for a constant trend factor? 1. One commenter restates its position that a constant trend factor is not appropriate because the results will not reflect the reality of the local rental marketplace. Another commenter that expressed support for a trend factor that is updated annually, and states, should HUD use a constant trend factor, that HUD consider using ACS data for a similar period as has been used previously (10 years). 2. Another commenter expressed a preference for the CPI as the most appropriate basis for the trend factor, and restating the disadvantages of using proprietary data on rental markets. The commenter states that CPI would not add too much additional variation to FMR estimates, noting that FMRs already vary considerably from year-toyear, which in some years, has nothing to do with market conditions but rather PO 00000 Frm 00007 Fmt 4701 Sfmt 4703 52063 with corrections from prior years. Should the CPI be selected as the basis for the trend factor, the commenter recommends that HUD use the BLS series that calculate annual changes to avoid seasonality issues, since seasonal adjustments are not available at the local/regional level. 3. The same commenter states that HUD’s use of a rolling average of local/ regional ACS increases in gross rent would be a viable option, as long as HUD determined that such use better met programmatic needs of key constituencies using FMRs in their operations. The commenter concludes that any factor that is more locallyderived and that reflects changes in the market would be an improvement over the current constant, nationally-derived factor. HUD Response: Since most commenters do not support a constant trend factor, any consensus on this issue is irrelevant. The one commenter that supports the use of a constant trend factor would use the gross rents from the ACS to calculate the trend factor and that is the only way to have a constant long-term trend factor. Although some commenters recommend using CPI data for a constant long-term trend factor, their comments lacked specificity as to how to make the concept operational. CPI data seems best suited to a trend factor that changes on an annual albeit lagged, basis. HUD Question: Is a national trend factor appropriate, or should HUD limit itself to use of more local options such as regional factors? 1. One commenter states that a regional or local trend factor is more appropriate than a national factor because it provides the most accurate FMR calculation for specific geographic areas. A second commenter agreed, adding that ideally the trend factors should be state specific because there can be substantial differences in utility costs (and the factors that affect them) even within a region. A third commenter encouraged HUD update factors based on regional trends and those in the largest metro areas, or use a data set that provides the lowest level of geography without causing undue problems with sample size or computation or delays in the release. 2. A commenter recommends that HUD consider using regional CPI indices as they are readily available and include regional Fuels and Utilities Index, and more specific Indices for certain utilities (e.g., piped gas). Another commenter states that basing the trend factor on monthly local or regional CPI data would be particularly E:\FR\FM\19AUN2.SGM 19AUN2 52064 Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Notices ill-advised because monthly CPI numbers are available for a very limited set of local areas, and when available, only every other month or semiannually. In addition, the commenter states that only the national CPI data are seasonally adjusted and that potential problems with using seasonally unadjusted monthly data should be enough to preclude their use in computing FMRs. HUD Response: As with the other two issues, one commenter is concerned with the volatility of the data and prefers the use of a national, constant trend factor other commenters want the trend factor to change annually and be at least regional, or the lowest level of geography that is possible. HUD reiterates that these suggestions are contradictory: The more detailed the data the less often it is published, and then at a broader geography. That is, more detailed fuel data cannot be used along with data for the lowest geography possible. wreier-aviles on DSKDVH8Z91PROD with NOTICES2 HUD Question: Should HUD allow changes between the proposed and final FMRs resulting from updated trend factors? 1. One commenter states that HUD should be able to allow changes between proposed and final FMRs as long as the changes result in rents that more accurately reflect current, local market conditions. A second commenter agrees that permitting HUD to make changes would permit HUD to use the most recent and most local data possible. The commenter also stated that it would be more effective to discontinue the publication of proposed FMRs, but allow for public comments on the final FMRs, releasing revised final FMRs as needed. 2. One commenter states that allowing updates would provide for less certainty for housing entities. Assuming the proposed FMRs are susceptible to challenge prior to becoming final, the commenter concludes that automatic changes due to updated trend factors should not be necessary. HUD Response: The purpose of the publishing proposed FMRs would be circumvented if HUD re-estimated FMRs for the final publication using more current data. All proposed FMRs would be subject to change. HUD would prefer not to publish proposed FMRs for comment, but such a change would require a change to the statute. VerDate Mar<15>2010 15:13 Aug 18, 2011 Jkt 223001 HUD Question: Is using the more current data for estimating the FMRs more important than providing for public comment before establishing final FMRs for effect? 1. Most commenters support HUD’s continued publication of the FMRs for comment. One commenter, for example, notes that the opportunity to comment may present HUD with current data that ensures that changes to FMRs reflect actual changes in the local rental market. The commenter states that a shorter comment period of 30 days may be appropriate and reasonable if HUD uses regional data adjusted for state specific characteristics for estimating trends. The commenter added that a 90day comment period should apply if HUD changes more than just FMR levels, (e.g., changing the geographic regions where the FMRs apply) or if HUD does not start with regional and State specific data for estimating trends. 2. Another commenter that supports the elimination of a constant national trend factor states that using the most recent data possible would still not merit eliminating the public comment period. The commenter stated public comment permits its members to assess the proposed FMRs and whether they need to request reevaluation in light of current market conditions. Changing the FMRs between the publication of the proposed and final estimates would render the public comment process meaningless. 3. A third commenter states that HUD’s use of more current regional or local factors is more important than providing for public comment before establishing the final FMRs as long as there is the opportunity for public comments on the final FMRs and HUD is willing to revise the FMRs as necessary. The commenter recommends, however, that HUD release as proposed for public comment any significant changes to the data sources and the methodology it intends to use in calculating final FMRs at least 60 days prior to their release. 4. One commenter strongly opposes the elimination of a public comment period, stating that public comment adds to the reliability of the FMRs by ensuring that the expertise of individuals affected by the FMRs is considered before HUD publishes its final FMRs. Without a public comment period, there would be no way to contest FMR levels, changes in methodology, or other policy issues. The commenter concludes that while HUD suggests that using CPI data would provide more recent data and potentially shorten the trending period, PO 00000 Frm 00008 Fmt 4701 Sfmt 4703 it does not believe this is an acceptable trade off for losing the certainty of publication on October 1 and for losing the public comment period. HUD Response: HUD would prefer to eliminate the comment period, but no commenters support this position. The commenters, if anything, want a longer comment period whenever there are substantial changes to FMR estimation methodology. Given the timing of the data releases, longer comment periods of 60 to 90 days are not possible even when there are major changes, such as for geographic areas. In the past HUD has dealt with this issue of short comment periods by publishing revised final FMRs and sees this as an appropriate mechanism for the future. Clearly the commenters want a formal comment period for FMRs, so HUD will take this under advisement. HUD Question: Is the seasonality of rent and utility prices important in considering what month to collect data for trending? If so, how should HUD select the month to use or to compare it with? 1. One commenter that strongly supported the use of an annually updated trend factor states that if current, regional data with appropriate state adjustments are used, seasonality adjustments should be relatively unimportant. Another commenter states that seasonality is an important consideration if trending uses data releases separated by less than a year. A third commenter states that seasonality should be used rather than be avoided, particularly depending on the geographic area affected. HUD Response: There is disagreement on whether seasonality is a concern. HUD views seasonality as a concern because it potentially adds to the volatility of the FMR estimate. While some have proposed caps and floors for trend factor changes to reduce the volatility of FMR estimates, caps and floors tend to increase the noise in an estimate so that constrained trends will add little accuracy to FMR estimates. HUD Question: Is double counting of CPI data a concern? 1. Two commenters address this issue. Both stated that they recognize this issue but under the current proposals either do not have a strong concern about the issue or feel that the issue is not significant. HUD Response: HUD believes that when prices are increasing, the double counting of the CPI indices will not be a concern except possibly for budgetary reasons. However, when prices are falling and the FMRs could drop, this E:\FR\FM\19AUN2.SGM 19AUN2 Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Notices would become an issue with tenants, and landlords. For these reasons HUD does not find double-counting the CPI data, which is already lagged when used for the FMRs, to be an effective forecast of trend. wreier-aviles on DSKDVH8Z91PROD with NOTICES2 HUD Question: Is it more important to base a trend on the most recent data possible, or on the most specific geography? 1. One commenter states that both issues are important, and it should not be necessary to choose one over the other. The commenter notes that there are good data sources available that allow for use of both recent and locally relevant data, such as the CPI and ACS. Another commenter gave slight preference to more specific geography, but within limits. Specifically, the commenter states that if using data for areas smaller than the largest metro areas and census regions requires using significantly older data and leads to significant lags in the release of the FMRs, then more local specificity would cease to be the priority. 2. A third commenter states that geography is more important because market conditions are more likely to show greater variance from region to region over a given time period than that reflected in local or regional market conditions over the same period. HUD Response: HUD is already using the most current ACS and CPI data at the lowest level of geography. There is no way to use current data at the lowest level of geography without ensuring publication of the proposed FMRs regularly in mid- to late-August. The only more current data at the lowest geographic level that could be incorporated for a trend factor, would be the CPI data for the first-half of the year, which comes out late July. Waiting this late for calculation of FMRs would push the proposed FMR Federal Register notice to mid-August at the earliest. There would barely be time for a 30-day comment period and recalculation of final FMRs in time for the October 1 final FMR publication. There would still be double counting of the CPI data, which HUD considers problematic. HUD Question: Is it better to use rent and utility CPI data in developing a trend factor or should other prices be included? 1. One commenter states that in addition to capturing changes in rent and utilities generally, it is also important to account for changes in heating fuel prices specifically because the impacts can vary significantly State by State, and even within a region. A second commenter states that it would VerDate Mar<15>2010 15:13 Aug 18, 2011 Jkt 223001 not in advance exclude from consideration additional specific data that would assist FMRs to better reflect the price a household must be able to pay in a specific location in order to be reasonably assured of finding a decent, modest and safe home. The commenter states, however, that generally rent and utility costs in the CPI are likely sufficient. HUD Response: HUD believes that the rent and utility CPI data currently used is appropriate. The utility CPI data cannot be changed to provide a greater emphasis on heating fuel as appropriate weighting of this fuel sources is not possible. HUD Question: Should HUD pursue legislative and regulatory changes to reduce or eliminate the need for trending? 1. One commenter supported HUD seeking the legislative changes as proposed in the FY 2012 HUD budget, trending to the midpoint of the fiscal year and using CPI rent and utility data to calculate the trend. According to the commenter, this alternative provides a good balance between the use of the most recent local data available and the need to publish the trend factor in advance. The use of local and regional CPI rent and utility data would provide for more accurate FMR calculations than the use of national CPI data, and the application of the factor through the midpoint of the fiscal year would provide balance in the final FMR calculation. Another commenter states that solutions other than trending in the calculation of FMR may be acceptable as long as the calculation includes some mechanism for considering current market conditions. HUD Response: HUD would prefer to reduce the period of trending down from a 15-month period to a 6-month or 9-month period, to reduce the impact of this factor. To do so would require a legislative change that assumes the FMR represents a beginning of fiscal year rent, rather than a middle of fiscal year rent. HUD Question: Is there a data source or aggregation of sources of data provided on a more current basis than the CPI that could be used in the FMR estimation process? 1. No commenter responded that it was aware of any data source or aggregation of sources of data provided on a more current basis than the CPI that could be used in the FMR estimation process. HUD Response: HUD agrees, but the use of the most current CPI data at the lowest level of geography is the use of PO 00000 Frm 00009 Fmt 4701 Sfmt 4703 52065 the first half of the year data and, as discussed earlier, incorporating this data makes the publication of the proposed FMR so late as to not allow time for meaningful comments. Given the divergence in comments, HUD has determined that additional study is required to select an appropriate methodology to employ for this program parameter. HUD will announce a new trending methodology in the FY 2013 proposed FMRs. VI. Proposal To Formalize a Publication Date for Income Limits In the comments filed regarding the trend factor, several commenters reminded HUD of the need for publication of FMRs by a certain date. One of the reasons submitted is because HUD uses FMRs in the calculation of income limits used in various federal, state and local housing programs. Currently, there is no statutorily required publication date for income limits. In recent years, HUD has attempted to incorporate the most recent vintage of ACS data into the income limits calculations; however, due to the increase in the number and scope of ACS data products, the publication date for income limits has become later each year. In an attempt to be responsive to the concerns of the users of Income Limits, HUD is proposing to give the publication of area median family income estimates and income limits a more certain date. Currently, HUD is considering two possible timeframes for the publication of median family incomes and income limits. The first date would be October 1 at the same time that Final FMRs are published. The second date would be December 1. In either case, if HUD were to move the publication date, the FY 2012 Median Family Income estimates and the Income Limits would not benefit from any additional ACS data over what was included in the FY 2011 publication. The FY 2012 Median Family Income estimates and Income Limits, published on either October 1, 2011, or December 1, 2011, under this proposal, would be updated with the FY 2012 FMRs for the purposes of evaluating areas of relatively high or low income to housing cost relationships and would be further updated with CPI to the end of 2010 and trended to the mid-point of FY 2012 in a manner similar to what was done with the FY 2011 Median Family Income estimates and Income Limits. The FY 2013 Median Family Income estimates and Income Limits, published on October 1, 2012, or December 1, 2012, would be the first set of median family income estimates and income limits E:\FR\FM\19AUN2.SGM 19AUN2 52066 Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Notices wreier-aviles on DSKDVH8Z91PROD with NOTICES2 updated with ACS data collected from 2006–2010. VII. Request for Public Comments HUD seeks public comments on the methodology used to calculate FY 2012 Proposed FMRs and the 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 Random Digit Dialing (RDD) telephone surveys to test the accuracy of FMRs for areas where there is a sufficient number of Section 8 units to justify the survey cost of approximately $35,000–$50,000. Areas with 2,000 or more program units usually meet this cost criterion, and areas with fewer units may meet it if actual rents for twobedroom units are significantly different from the FMRs proposed by HUD. 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 may 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 where 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 statistically different from 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 Larger Public Housing Agencies in Preparing Fair Market Rent 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: http://www.huduser.org/ datasets/fmr.html. Other survey methodologies are acceptable in providing data to support VerDate Mar<15>2010 15:13 Aug 18, 2011 Jkt 223001 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 2005–2009 5-year ACS data should be used as a means of verifying if a sample is representative of the FMR area’s rental housing stock. Most surveys cover only one- and two-bedroom units, which has statistical advantages. If the survey is statistically acceptable, HUD will estimate FMRs for other bedroom sizes using ratios based on the 2000 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 may find it appropriate to relax normal sample size requirements. HUD will consider increasing manufactured home space FMRs where public comment demonstrates that 40 percent of the two-bedroom FMR is not adequate. In order to be accepted as a basis for revising the manufactured home space FMRs, comments must include a pad rental survey of the mobile home parks in the area, identify the utilities included in each park’s rental fee, and provide a copy of the applicable public housing authority’s utility schedule. HUD is also soliciting comments on its proposal to give the publication of Median Family Income estimates and income limits a certain date. Commenters should provide their assessments of the advantages and disadvantages of a certain publication date as well as their preference among the dates proposed herein. VIII. Environmental Impact This Notice involves the establishment of fair market rent schedules, which do not constitute a development decision affecting the physical condition of specific project areas or building sites. Accordingly, under 24 CFR 50.19(c)(6), this Notice is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321). Accordingly, the Fair Market Rent Schedules, which will not be codified in PO 00000 Frm 00010 Fmt 4701 Sfmt 4703 24 CFR part 888, are proposed to be amended as shown in the Appendix to this notice: Raphael W. Bostic, Assistant Secretary for Policy Development and Research. Fair Market Rents for the Housing Choice Voucher Program Schedules B and D—General Explanatory Notes 1. Geographic Coverage a. Metropolitan Areas—Most FMRs are market-wide rent estimates that are intended to provide housing opportunities throughout the geographic area in which rental-housing units are in direct competition. HUD is using the metropolitan CBSAs, which are made up of one or more counties, as defined by the Office of Management and Budget (OMB), with some modifications. HUD is generally assigning separate FMRs to the component counties of CBSA Micropolitan Areas. b. Modifications to OMB Definitions—Following OMB guidance, the estimation procedure for the FY 2012 proposed FMRs incorporates the current OMB definitions of metropolitan areas based on the 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 subareas are established, it is HUD’s view for programmatic purposes that the geographic extent of the housing markets are not yet the same as the geographic extent of the CBSAs, but may become so in the future as the social and economic integration of the CBSA component areas increases. Modifications to metropolitan CBSA definitions are made according to a formula as described below. Metropolitan area CBSAs (referred to as MSAs) may be modified to allow for subarea FMRs within MSAs based on the boundaries of old FMR areas (OFAs) within the boundaries of new MSAs. (OFAs are the FMR areas defined for the FY 2005 FMRs. Collectively they include 1999-definition MSAs/Primary Metropolitan Statistical Areas (PMSAs), metro counties deleted from 1999definition MSAs/PMSAs by HUD for FMR purposes, and counties and county parts outside of 1999-definition MSAs/ PMSAs referred to as nonmetropolitan counties.) Subareas of MSAs are assigned their own FMRs when the subarea 2000 Census Base Rent differs E:\FR\FM\19AUN2.SGM 19AUN2 Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Notices by at least 5 percent from (i.e., is at most 95 percent or at least 105 percent of) the MSA 2000 Census Base Rent, or when the 2000 Census Median Family Income for the subarea differs by at least 5 percent from the MSA 2000 Census Median Family Income. MSA subareas, and the remaining portions of MSAs after subareas have been determined, are referred to as HMFAs to distinguish these areas from OMB’s official definition of MSAs. The specific counties and New England towns and cities within each state in MSAs and HMFAs are listed in Schedule B. wreier-aviles on DSKDVH8Z91PROD with NOTICES2 2. Bedroom Size Adjustments Schedule B shows the FMRs for zerobedroom through four-bedroom units. The Schedule B addendum shows Small VerDate Mar<15>2010 15:13 Aug 18, 2011 Jkt 223001 Area FMRs for PHAs operating using Small Area FMRs within the Dallas, TX HMFA. The FMRs for unit sizes larger than four bedrooms are calculated by adding 15 percent to the four-bedroom FMR for each extra bedroom. For example, the FMR for a five-bedroom unit is 1.15 times the four-bedroom FMR, and the FMR for a six-bedroom unit is 1.30 times the four-bedroom FMR. FMRs for single-room-occupancy (SRO) units are 0.75 times the zerobedroom 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 PO 00000 Frm 00011 Fmt 4701 Sfmt 4703 52067 Schedule D are listed alphabetically by state. b. The constituent counties (and New England towns and cities) included in each metropolitan FMR area are listed immediately following the listings of the FMR dollar amounts. All constituent parts of a metropolitan FMR area that are in more than one state can be identified by consulting the listings for each applicable state. c. Two nonmetropolitan counties are listed alphabetically on each line of the non-metropolitan county listings. d. The New England towns and cities included in a nonmetropolitan county are listed immediately following the county name. 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Sfmt 9990 E:\FR\FM\19AUN2.SGM 19AUN2 EN19AU11.061</GPH> wreier-aviles on DSKDVH8Z91PROD with NOTICES2 [FR Doc. 2011–20932 Filed 8–18–11; 8:45 am]

Agencies

[Federal Register Volume 76, Number 161 (Friday, August 19, 2011)]
[Notices]
[Pages 52058-52129]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-20932]



[[Page 52057]]

Vol. 76

Friday,

No. 161

August 19, 2011

Part II





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 
2012; Notice

Federal Register / Vol. 76 , No. 161 / Friday, August 19, 2011 / 
Notices

[[Page 52058]]


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Department of Housing and Urban Development

[Docket No. FR-5567-N-01]


Proposed Fair Market Rents for the Housing Choice Voucher Program 
and Moderate Rehabilitation Single Room Occupancy Program Fiscal Year 
2012

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

ACTION: Notice of Proposed Fiscal Year (FY) 2012 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. 
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 in the HOME program. Today's notice provides proposed FY 2012 
FMRs for all areas that reflect the estimated 40th and 50th percentile 
rent levels trended to April 1, 2012. The FY 2012 FMRs are re-
benchmarked using five-year, 2005-2009 data collected by the American 
Community Survey (ACS). These data are updated using one-year ACS data 
in areas where statistically valid one-year ACS data is available. The 
Consumer Price Index (CPI) rent and utility indexes are used to further 
update the data from 2009 to the end of 2010. HUD continues to use ACS 
data in different ways according to how many two-bedroom standard-
quality and recent-mover sample cases are available in the FMR area or 
its Core-Based Statistical Area (CBSA).
    The proposed FY 2012 FMR areas are based on current Office of 
Management and Budget (OMB) metropolitan area definitions and include 
HUD modifications that were first used in the determination of FY 2006 
FMR areas. Changes to the OMB metropolitan area definitions through 
December 2009 are incorporated. The bedroom ratios developed using 2000 
Census data continue to be used and state minimums, calculated each 
year from the estimated FMRs, continue to be applied.
    This notice also includes HUD's responses to comments received on 
the March 9, 2011, (76 FR 12985), Federal Register notice (``Trend 
Notice'') seeking public comment regarding the manner in which HUD 
calculates a trend factor, the time period the trend factor is applied 
in the FMR estimation process and related issues.
    HUD received four applications to participate in the Small Area FMR 
demonstration program. These applications are being reviewed and 
information on the demonstration program will be made available in a 
notice published at a later date.
    Finally, in an effort to serve HUD's external clients who use HUD's 
estimates of Area Median Family Income (MFI) and their associated 
Income Limits (IL), HUD is requesting comments on a proposal to 
establish a certain date for publishing these parameters.

DATES: Comment Due Date: September 19, 2011.

ADDRESSES: Interested persons are invited to submit comments regarding 
HUD's estimates of the FMRs and/or HUD's proposed timeline for 
publishing MFIs and ILs, as published in this notice, to the Office of 
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 who is 
submitting hard copy comments, by mail or 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 results 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.
    Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://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 
http://www.regulations.gov Web site can be viewed by other commenters 
and interested members of the public. Commenters should follow 
instructions provided on that site to submit comments electronically.
    No Facsimile Comments. Facsimile (Fax) comments are not acceptable.
    Public Inspection of Comments. All comments and communications 
submitted to HUD will be available, without charge, 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 http://www.regulations.gov.

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 Web site http://www.huduser.org/portal/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 FY 2012 FMR 
documentation system at http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr12 and 50th percentile rents for all FMR areas 
will be published at http://www.huduser.org/portal/datasets/50per.html 
after publication of final FY 2012 FMRs.
    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 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 202-708-0590. 
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.)

SUPPLEMENTARY INFORMATION

[[Page 52059]]

I. Background

    Section 8 of the USHA (42 U.S.C. 1437f) authorizes housing 
assistance to aid lower-income families in renting safe and decent 
housing. Housing assistance payments are limited by FMRs established by 
HUD for different geographic areas. In the HCV program, the FMR is the 
basis for determining the ``payment standard amount'' used to calculate 
the maximum monthly subsidy for an assisted family (see 24 CFR 
982.503). In general, the FMR for an area is the amount that would be 
needed to pay the gross rent (shelter rent plus utilities) of privately 
owned, decent, and safe rental housing of a modest (non-luxury) nature 
with suitable amenities. In addition, all rents subsidized under the 
HCV program must meet reasonable rent standards. HUD's regulations at 
24 CFR 888.113 permit it to establish 50th percentile FMRs for certain 
areas.
    Electronic Data Availability: This Federal Register notice is 
available electronically from the HUD User page at http://www.huduser.org/datasets/fmr.html. Federal Register notices also are 
available electronically from http://www.gpoaccess.gov/fr/index.html, 
the U.S. Government Printing Office Web site. Complete documentation of 
the methodology and data used to compute each area's proposed FY 2012 
FMRs is available at http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr12. Proposed FY 2012 FMRs are available in a 
variety of electronic formats at http://www.huduser.org/portal/datasets/fmr.html. FMRs may be accessed in PDF format as well as in 
Microsoft Excel. Small Area FMRs based on Proposed FY 2012 Metropolitan 
Area Rents are available in Microsoft Excel format at the same web 
address. Please note that these Small Area FMRs are for reference only, 
and will only be used by PHAs participating in the Small Area FMR 
demonstration.

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. Minimally qualified areas \1\ are reviewed each year unless 
not qualified to be reviewed. Areas are not qualified to be reviewed if 
they have been made a 50th-percentile area within the last three years 
or have lost 50th-percentile status for failure to de-concentrate 
within the last three years.
---------------------------------------------------------------------------

    \1\ As defined in 24 CFR 888.113(c), a minimally qualified area 
is an area with at least 100 census tract 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 is evaluated with 2000 Census tract data, 
while we are awaiting 2010 ACS data to be aggregated using 2010 
Census tract definitions.
---------------------------------------------------------------------------

    In FY 2011 there are 18 areas using 50th-percentile FMRs. Of these 
18 areas, 10 of them have completed three years of program 
participation and are due for re-evaluation. The following table lists 
these 10 areas.

     FY 2011 50th-Percentile FMR Areas Re-Evaluated for Eligibility
                          Evaluation in FY 2012
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Albuquerque, NM MSA.......................  Chicago-Joliet-Naperville,
                                             IL HMFA \2\.
Denver-Aurora, CO MSA.....................  Hartford-West Hartford-East
                                             Hartford, CT HMFA.
Houston-Baytown-Sugar Land, TX HMFA.......  Kansas City, MO-KS, HMFA.
Milwaukee-Waukesha-West Allis, WI MSA.....  North Port-Bradenton-
                                             Sarasota, FL MSA.
Richmond, VA HMFA.........................  Tacoma, WA HMFA.
------------------------------------------------------------------------
\2\ HMFA stands for HUD Metropolitan FMR Area.

    Only three of the 10 areas up for re-evaluation will continue to be 
50th-percentile FMR areas:

   FY 2011 50th-Percentile FMR Areas That Continue as 50th-Percentile
                    Areas, Next Evaluation in FY 2015
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Hartford-West Hartford-East Hartford, CT    Houston-Baytown-Sugar Land,
 HMFA.                                       TX HMFA.
North Port-Bradenton-Sarasota, FL MSA.....
------------------------------------------------------------------------

    Two areas ``graduated'' from the 50th-percentile FMR program. This 
means that the concentration of HCV tenants is below what is required 
to be eligible for a 50th-percentile FMR. These two areas may be 
evaluated annually and may return to the program:

 FY 2011 50th-Percentile FMR Areas That ``Graduate,'' Evaluated Annually
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Milwaukee-Waukesha-West Allis, WI MSA.....  Richmond, VA HMFA.
------------------------------------------------------------------------

    The remaining five areas failed to deconcentrate and will not be 
eligible for evaluation for three years, until the FY 2015 FMRs are 
evaluated:

FY 2011 50th-Percentile FMR Areas That Failed To Deconcentrate, Eligible
                        for Evaluation in FY 2015
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Albuquerque, NM MSA.......................  Chicago-Joliet-Naperville,
                                             IL HMFA.
Denver-Aurora, CO MSA.....................  Kansas City, MO-KS, HMFA.
Tacoma, WA HMFA...........................
------------------------------------------------------------------------

    Of the remaining eight 50th-percentile FMR areas that were not 
eligible for review, seven will complete three years in the program and 
be reviewed for the FY 2013 FMRs, as shown below:

FY 2012 Continuing 50th-Percentile FMR Areas Slated for Evaluation in FY
                                  2013
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Baltimore-Towson, MD MSA..................  Fort Lauderdale, FL HMFA.
Grand Rapids-Wyoming, MI HMFA.............  New Haven-Meriden, CT HMFA.
Philadelphia-Camden-Wilmington, PA-NJ-DE-   Washington-Arlington-
 MD MSA.                                     Alexandria, DC-VA-MD HMFA.
West Palm Beach-Boca Raton, FL HMFA.......
------------------------------------------------------------------------

    The eighth FY 2011 area, Bergen-Passaic, NJ HMFA, was granted 
authorization to use 50th-percentile FMRs in FY 2011. Therefore, under

[[Page 52060]]

current regulations, Bergen-Passaic, NJ HMFA, will continue in the 50th 
percentile program for FY 2012 and will be evaluated when the FY 2014 
FMRs are calculated.
    There will be 10 additional 50th-percentile FMR areas, one that is 
new to the program, Sacramento--Arden-Arcade--Roseville, CA HMFA. The 
other 9 areas, as listed below, all failed to deconcentrate when 
evaluated for the FY 2009 FMRs, but have been reinstated as 50th-
percentile FMRs:

   FY 2012 50th-Percentile FMR Areas Reinstated Evaluation in FY 2015
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Austin-Round Rock-San Marcos, TX MSA......  Fort Worth-Arlington, TX
                                             HMFA.
Honolulu, HI MSA..........................  Las Vegas-Paradise, NV MSA.
Orange County, CA HMFA....................  Phoenix-Mesa-Glendale, AZ
                                             MSA.
Riverside-San Bernardino-Ontario, CA HMFA.  Tucson, AZ MSA.
Virginia Beach-Norfolk-Newport News, VA-NC
 MSA.
------------------------------------------------------------------------

    In summary, there will be 21 50th-percentile FMR areas in FY 2012. 
These areas are indicated by an asterisk in Schedule B, where all FMRs 
are listed by state.

III. FMR Methodology

    This section provides a brief overview of how the FY 2012 FMRs are 
computed. For complete information on how FMR areas are determined, and 
on how each area's FMRs are derived, see the online documentation at: 
http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr12.
    The proposed FY 2012 FMRs are based on current OMB metropolitan 
area definitions and standards that were first used in the FY 2006 
FMRs. OMB changes to the metropolitan area definitions through December 
2009 are incorporated. There have been no area definition changes 
published by OMB since the publication of the FY 2011 FMRs; therefore, 
the FY 2012 area definitions are the same as those used in FY 2011.

A. Base Year Rents

    The U.S. Census Bureau released standard tabulations of 5-year ACS 
data collected between 2005 through 2009 in December of 2010. This is 
the first time that updated data are available for all FMR areas and 
their component geographies since the release of the 2000 Decennial 
Census data (previous ACS releases only covered areas with 20,000 or 
more in population). Because of this new data availability, HUD has the 
ability to estimate new base rents based on the 5-year ACS data.
    FMRs are typically based on gross rents for recent movers (those 
who have moved into their current residence in the last 24 months). 
FMRs prior to FY 2012 were calculated based on recent mover gross rent 
estimates from the 2000 Census or from more recent HUD commissioned 
surveys. However, due to the way the 5-year data are constructed, the 
notion of recent mover is a murky concept. The 5-year data aggregates 
all survey data collected between January 2005 and December 2009 for a 
given area. Dollar values such as gross rents are transformed from the 
time period in which they were collected to an overall 2009 value using 
the national CPI. Attempting to limit the 5-year data to those who have 
moved in the last 24 months severely limits the usefulness of the 5-
year data. Consequently, all areas are assigned as a base rent the 
estimated two-bedroom standard quality 5-year gross rent from the 
ACS.\3\ Because HUD's regulations mandate that FMRs must be published 
as recent mover gross rents, HUD has created a recent mover bonus 
factor to apply to the standard quality base rents assigned from the 5-
year ACS data. The recent mover bonus is described below.
---------------------------------------------------------------------------

    \3\ For areas with a two-bedroom standard quality gross rent 
from the ACS that have a margin of error greater than the estimate 
or no estimate due to inadequate sample in the 2009 5-year ACS, HUD 
uses the two-bedroom state non-metro rent for non-metro areas.
---------------------------------------------------------------------------

    Local area rent surveys conducted in 2010 by HUD or PHAs are used 
instead of ACS-base rents when the survey results are statistically 
different from the ACS based rents. The surveys for Williamsport, PA, 
MSA and Pike County, HMFA were evaluated and are being used in place of 
the 2009 ACS data. A survey conducted in 2010 for the county group, 
Bradford-Sullivan-Tioga, PA, was also evaluated, but there was no 
statistical difference from the 2009 ACS data, updated to 2010.

B. Recent Mover Bonus Factor

    Following the assignment of the standard quality two-bedroom rent 
described above, HUD applies a recent mover bonus to these rents. The 
following describes the process for determining the appropriate recent 
mover bonus.
    For non-metropolitan areas, HUD calculated the percentage change 
between the 5-year standard quality rent for the non-metropolitan 
portion of the state and the 1-year recent mover rent for the same 
area.\4\ HUD then computes a z-score to determine if the 5-year 
standard quality rent and the 1-year recent mover rent are 
statistically different.\5\ If the two rents have a statistically 
significant difference, the recent mover bonus factor is set at the 
difference between the state non-metropolitan 1-year recent mover rent 
and the state non-metropolitan 5-year standard quality rent expressed 
as a percentage of the state non-metropolitan 5-year standard quality 
rent. If the two rents are not statistically different, the recent 
mover bonus is set to 1.0.
---------------------------------------------------------------------------

    \4\ HUD ensures that the recent mover estimate for each non-
metropolitan portion of the state has at least 100 ACS sample 
observations. If any state non-metropolitan recent mover rent is 
based on fewer than 100 observations, the recent mover factor would 
be calculated based on the 1-year recent mover data and 5-year 
standard quality data for the entire state.
    \5\ The change is considered statistically significant if Z is 
greater than 1.645 where Z is equal to the change between the 
estimate for the 1-year data and the 5-year estimate, over the 
square root of the sum of the squared standard error for the 1-year 
estimate and the squared standard error of the 5-year estimate.
---------------------------------------------------------------------------

    For metropolitan areas, the recent mover bonus is calculated in a 
similar fashion. HUD selects the smallest geographic area which 
encompasses the metropolitan area in question that has at least 100 
recent mover observations to use in the calculation of the recent mover 
bonus factor. For HUD-defined subareas of OMB defined metropolitan 
areas, this means that the recent mover bonus factor may be based on 
the recent mover data for the subarea, the entire metropolitan area, 
the metropolitan portions of the state, or finally the entire state 
depending on which geographic level has 100 or more recent mover 
observations.\6\ Once the area with 100 or more recent mover cases has 
been determined, HUD calculates a z-score comparing the 1-year recent 
mover two-bedroom gross rent with the 5-year standard quality two-
bedroom gross rent for the recent mover bonus area. If the two rents 
are statistically different, HUD sets the recent mover bonus for the 
FMR area as the percentage change between the two rents for the recent 
mover bonus area. If the difference in rents is not statistically 
different, the recent mover bonus factor for the FMR area is set to 1.
---------------------------------------------------------------------------

    \6\ For metropolitan areas that cross state boundaries, and 
where there are not 100 2-bedroom recent mover observations, HUD 
uses the weighted average update factors for the encompassing state 
metropolitan areas. HUD performs the Z-score test for statistical 
difference between the 1-year recent-mover rent and 5-year standard-
quality rent separately for each state metropolitan part prior to 
computing the weighted average update factor.
---------------------------------------------------------------------------

    For FMR areas without 100 recent mover rents, a recent mover bonus 
is

[[Page 52061]]

calculated at the smallest area level that does have 100 recent movers. 
For metropolitan areas, this order is subarea, metropolitan area, state 
metropolitan area, and state. For a nonmetropolitan area a recent mover 
bonus based on the state nonmetropolitan area, or if that is not 
available it is calculated on the basis of the whole state. For an 
example of how the recent mover bonus is calculated for these areas, 
please review this methodology for Abilene, TX MSA and Baldwin County, 
AL, in the FY 2012 documentation system: http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr12.
    This process produces an ``as of'' 2009 recent mover two-bedroom 
base gross rent for the FMR area.\7\
---------------------------------------------------------------------------

    \7\ The Pacific Islands (Guam, Northern Marianas and American 
Samoa) as well as the US Virgin Islands are not covered by ACS data. 
As part of the 2010 Decennial Census, these areas were covered by a 
long-form survey. The results gathered by this long form survey will 
not be available until 2012. Therefore, HUD uses the national change 
in gross rents, measured between 2008 and 2009 to update last year's 
FMR for these areas. Puerto Rico is covered by the Puerto Rico 
Community Survey within the American Community Survey; however, the 
gross rent data produced by the 2005-2009 ACS are not sufficient to 
adequately house voucher holders in Puerto Rico. This is due to the 
limited ability to eliminate units that do not pass the voucher 
program's housing quality standards. Consequently, HUD is updating 
last year's FMRs for Puerto Rico using the change in rents measured 
from all of Puerto Rico measured between the 2008 and 2009. For 
details behind these calculations, please see HUD's Proposed FY 2012 
FMR documentation system available at: http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr12.
---------------------------------------------------------------------------

C. Updates From 2009 to 2010

    The ACS data is updated through 2009 using the one-half of the 
change in annual CPI measured between 2008 and 2009. This data is 
further updated through the end of 2010 using the annual change in CPI 
from 2009 to 2010. As in previous years, HUD uses Local CPI data for 
FMR areas with at least 75 percent of their population within Class A 
metropolitan areas covered by local CPI data. HUD uses Census region 
CPI data for FMR areas in Class B and C size metropolitan areas and 
nonmetropolitan areas without local CPI update factors.

D. Trend From 2010 to 2012

    The national 1990 to 2000 average annual rent increase trend of 3 
percent is applied to end-of-2010 rents for 15 months, to derive the 
proposed FY 2012 FMRs with a date of April 2012.
    On March 9, 2011 (76 FR 12985), HUD published a notice requesting 
public comment regarding the manner in which it calculates the trend 
factor used in determining FMR estimates to meet the statutory 
requirement that FMRs be ``trended so the rentals will be current for 
the year to which they apply.'' HUD's notice provided several proposed 
alternatives to the current trend factor and requested comments on the 
alternatives as well as suggestions of other ideas. These comments are 
discussed in further detail later in this notice, but, in short, the 
commenters did not arrive at a consensus over how to change the 
trending methodology. Therefore, HUD will continue to consider the 
suggestions provided in the comments and make plans to implement a new 
methodology with the publication of FY 2013 Proposed FMRs.

E. Bedroom Rent Adjustments

    HUD calculates the primary FMR estimates for two-bedroom units. 
This is generally the most common size of rental units and, therefore, 
the most reliable to survey and analyze. Formerly, after each Decennial 
Census, HUD calculated rent relationships between two-bedroom units and 
other unit sizes and used them to set FMRs for other units. HUD did 
this because it is much easier to update two-bedroom estimates and to 
use pre-established cost relationships with other bedroom sizes than it 
is to develop independent FMR estimates for each bedroom size. HUD did 
the last update of bedroom-rent relationships using 2000 Census data. A 
publicly releasable version of the data file used for the derivations 
of rent ratios is available at http://www.huduser.org/portal/datasets/fmr/CensusRentData/index.html.
    HUD made adjustments using 2000 Census data to establish rent 
ratios for areas with local bedroom-size intervals above or below what 
are considered 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 that rent 
for more than typical one-bedroom units). HUD established bedroom 
interval ranges based on an analysis of the range of such intervals for 
all areas with large enough samples to permit accurate bedroom ratio 
determinations. These ranges are: efficiency FMRs are constrained to 
fall between 0.65 and 0.83 of the two-bedroom FMR; one-bedroom FMRs 
must be between 0.76 and 0.90 of the two-bedroom FMR; three-bedroom 
FMRs must be between 1.10 and 1.34 of the two-bedroom FMR; and four-
bedroom FMRs must be between 1.14 and 1.63 of the two-bedroom FMR. 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).
    HUD further adjusts the rents for three-bedroom and larger units to 
reflect HUD's policy to set higher rents for these units than would 
result from using unadjusted market rents. This adjustment is intended 
to increase the likelihood that the largest families, who have the most 
difficulty in leasing units, will be successful in finding eligible 
program units. The adjustment adds 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 
occupancy units are 0.75 times the zero-bedroom (efficiency) FMR.
    For low-population, nonmetropolitan counties with small 2000 Census 
samples of recent-mover rents, HUD uses Census-defined county group 
data to determine rents for each bedroom size. HUD made this adjustment 
to protect against unrealistically high or low FMRs due to insufficient 
sample sizes. The areas covered by this estimation method had less than 
the HUD standard of 200 two-bedroom, Census-tabulated observations.
    The 2010 Decennial Census did not collect the information necessary 
to update unit bedroom rent relationships. HUD intends to use the 2006-
2010 5-year ACS data to update these relationships for the FY 2013 
FMRs. HUD is choosing to wait until next year to ensure something 
closer to a consistent 10 year time period, but more importantly, 
because the 2010 ACS data will be published based on the 2010 Decennial 
Census geographic definitions.

IV. Manufactured Home Space Surveys

    The FMR used to establish payment standard amounts for the rental 
of manufactured home spaces 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

[[Page 52062]]

(including the cost of utilities) for the entire FMR area.
    All approved exceptions to these rents that were in effect in FY 
2011 were updated to FY 2012 using the same data used to estimate the 
Housing Choice Voucher 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.

V. Review of Comments and HUD's Responses Regarding the Methodology for 
Calculating the FMR Trend Factor

    As previously stated, the comments delivered to HUD in response to 
the March 9, 2011 (76 FR 12985) Federal Register notice concerning the 
trend factor methodology yielded only one consensus, the need for a 
trend factor. This section summarizes the comments received and 
provides HUD's responses. In order to respond to all comments received, 
HUD has summarized the comments below, and has grouped the comments 
into two sections: General Comments and Comments on Specific HUD 
Questions.

A. General Comments

    1. Ensure fairness in FMR methodology. One commenter states that 
one of the most basic needs is housing and, especially in these times, 
many citizens who are willing to work lack opportunities to do so. As a 
result, these individuals may not have enough to meet their basic 
needs. The commenter requests that whatever methodology chosen, that it 
fairly and accurately evaluate the FMR for those in need, so that they 
might assist these individuals in meeting this most basic need.
    HUD Response: HUD's methodology for calculating Fair Market Rents 
is constructed to be as fair as possible using the most recent data 
available. HUD will keep these comments in mind as it determines the 
appropriate method for future FMR calculation decisions.
    2. FMR methodology fails to consider the cost of accessible units. 
Another commenter states that the process for calculating FMRs is 
neither fair nor sensible when applied to units that are wheelchair 
accessible. The current HUD process treats accessible and non-
accessible units as being similar, both in terms of availability and 
price, when evidence suggests the opposite. The commenter states that 
until HUD requires a separate analysis of FMRs for accessible units, 
HUD will be making policy in the dark.
    HUD Response: HUD's regulations allow PHAs to approve a higher 
payment standard on a case-by-case basis, as a reasonable accommodation 
for a family with a person with disabilities (refer to PIH Notice 2010-
11, which was extended by PIH Notice 2011-19). There is no data 
available that would allow HUD to calculate a separate FMR for 
accessible units.
    3. Correct failure of FMRs to consider cost of accessible units. 
The same commenter recommends that HUD, to correct the defect with 
respect to FMRs for wheelchair accessible units, (1) grant a 10 percent 
increase in rent (not to the 50th percentile, but 10 percent more 
dollars to the FMR), (2) grant an additional 10 percent increase with 
HUD approval; and (3) grant an extension of time (allowing the family 
to search longer for an apartment which may not even exist in that 
price range). The commenter notes that while there may not be 
statistical evidence regarding the availability of accessible 
apartments at current FMRs, the commenter's experience as a person with 
a disability and an attorney with 30 years experience in housing law is 
that families looking for accessible units have fewer housing choices 
that cost more than average.
    HUD Response: HUD's regulations concerning housing for disabled 
persons allow PHAs to request exception payment standards as a 
reasonable accommodation for families with a disabled family member.
    4. Maintain the publication of FMRs in a timely manner and on a 
certain date. Two commenters emphasize the importance of timely 
publication of HUD's FMRs. They state that timely publication permits 
PHAs and property owners to be able to forecast and plan for rent 
adjustments and operating expense budgets. Further, FMRs are used in 
the determination of annual income limits which cannot be published 
until FMR calculations are completed. Without a date certain for 
publication of FMRs, uncertainty surrounding the timing of the 
publication of income limits could worsen and owners of Low Income 
Housing Tax Credit (LIHTC) properties would not be able to set annual 
rents.
    HUD Response: Under current statutes and regulations, the 
publication date for Final FMRs remains October 1. Under current rules, 
FMRs must also be published for comment and given at least a 30-day 
comment period. HUD has suggested changes to the manner in which the 
publication of FMRs is completed, and due to the local coverage of ACS 
data, HUD has recommended that proposed FMRs no longer are necessary 
and that comments with requests for FMR reviews could be made following 
the publication of Final FMRs.
    5. Review of Alternative Tending Methodologies. One commenter 
addressed each of the alternative trending methods suggested in the 
notice. The commenter states that it does not support Alternative 1 
(use of overall Consumer Price Index (CPI) data) because local and 
regional CPI provides a more accurate FMR calculation for specific 
geographic areas than national CPI data. It also recommends that should 
HUD use national CPI data rather than local or regional data, it should 
limit its use to rent and utility, instead of overall, CPI data. The 
commenter supports Alternative 2 (use of rent and utilities CPI) since, 
according to the commenter, the use of a local or regional trend factor 
is a more appropriate way to calculate FMRs. The commenter does not 
support the use of proprietary information (Alternative 3) since the 
likelihood of this data providing timely, complete, and usable data, 
particularly for rural and remote areas, is low. The commenter also 
supports alternative 4 (seeking legislative change, trending to the 
midpoint of the fiscal year) as providing a good balance between the 
use of the most recent local data available and the need to publish the 
trend factor in advance. Finally, the commenter does not support 
Alternatives 5 (seeking legislative change, trending to the beginning 
of the fiscal year) and requests more information to fully consider 
Alternative 6 (eliminating the need for trending by using the most 
recent half-yearly CPI and publishing final FMRs between October and 
December).
    HUD Response: HUD takes these comments under advisement, and 
continues to consider all of these methods as well as others suggested 
by different commenters.

B. Comments on Specific HUD Questions

HUD Question: Should HUD continue to use a constant trend factor or 
should the trend factor be updated annually to attempt to capture 
market changes?
    1. Four commenters recommend that HUD use a trend factor that is 
updated annually, noting that a constant trend factor can substantially 
understate true costs and put clients who depend on rental assistance 
and landlords who accept vouchers, at risk. One commenter, for example, 
states that the volatility of utility costs makes it critical that the 
trend factor be updated

[[Page 52063]]

annually to capture market changes. According to the commenter, this is 
especially important in the Northeastern United States where heating 
accounts for a significant portion of utility costs and price 
volatility is exacerbated by the significant use of fuels such as fuel 
oil and natural gas. According to the commenter, unless the trend 
factor is updated annually HUD will not be able to fairly account for 
utility price volatility. Annual updates of the trend factor would 
minimize the negative impacts of market changes.
    2. A commenter states that the use of the CPI Fuels & Utilities 
Index masks changes in specific fuels used for home energy, and 
recommends that HUD replace the use of the Fuels & Utilities Index with 
three indices (Electricity, Utility (piped) Gas service and Motor 
Fuels) with the indices used to calculate a state specific trend factor 
by weighting them based on the percentage of rental units in the state 
heated by each of the 3 fuels, as provided by the ACS. The commenter 
recommends use of a fuel oil-specific index if one was available, but 
believes that the price of heating fuel oil tracks motor fuel prices 
enough that the Motor Fuels Index is a fair substitute.
    3. Another commenter supports use of a trend factor that is updated 
annually but cautioned that HUD build in stopgaps that eliminate sharp 
peaks and valleys due to short-term instability. HUD might consider, 
for example, a stopgap that prevents the factor from changing more than 
a certain percentage each year. Another commenter recommends that HUD 
use a rolling average or other techniques to eliminate significant 
increases or decreases in FMRs. A third commenter states that using a 
national, constant trending factor does not make sense in a world where 
many of HUD's programs depend on the local market and its changing 
activity. The commenter recommends the use of a trend factor that can 
be updated annually and based on local or regional data. The commenter 
also cautions that the trend factor should not be negative, as that 
could have serious programmatic implications, particularly for Section 
8 project-based and tax-credit properties. As a result, HUD should 
treat trends less than or equal to zero growth as zero growth.
    4. One commenter recommends that HUD continue its use of a constant 
trend factor since it minimizes large fluctuations from year to year. 
The commenter stated that a 10-year or 5-year trending factor would 
accomplish this goal. The commenter specifically recommends, however, 
that HUD use a single, national trend factor, based on a rolling five 
years of national median gross rent in the ACS. Since the commenter 
does not believe that ACS data are reliable enough to use as a basis 
for a trend factor prior to 2005, the year that the ACS was first fully 
implemented and collected data from every county or county equivalent 
in the country, the commenter states that a 5-year rolling average 
using ACS could be implemented within a year, as soon as the ACS data 
becomes available.
    HUD Response: While more commenters supported the use of a trend 
factor updated annually, all were concerned with controlling volatility 
in the trend factor. Some who want an annual trend factor were only 
willing to consider annual increases. Instituting caps and floors for 
annual trend factors would be new to the FMR estimation process and not 
necessarily improve the process. Using more detailed utility data would 
be of little benefit. The more detailed the index of the CPI, the 
larger the geographic area for which this data is available on a 
current basis. The ACS does not provide data based on type of heating 
fuel for rental units, as one commenter suggested, so allocating 
national utility data to states and determining an appropriate fuel 
index cannot be done with the ACS. Caps and floors, such as never 
allowing the trend factor to be less than zero, could be instituted to 
reduce volatility, but this would also reduce anticipated improvements 
in accuracy of trend estimates.
HUD Question: The constant trend factor that HUD has used in the past 
cannot be replicated for 2000 to 2010 based on available 2010 Census 
data. If a constant trend factor is appropriate, what data and time 
period should be used for a constant trend factor?
    1. One commenter restates its position that a constant trend factor 
is not appropriate because the results will not reflect the reality of 
the local rental marketplace. Another commenter that expressed support 
for a trend factor that is updated annually, and states, should HUD use 
a constant trend factor, that HUD consider using ACS data for a similar 
period as has been used previously (10 years).
    2. Another commenter expressed a preference for the CPI as the most 
appropriate basis for the trend factor, and restating the disadvantages 
of using proprietary data on rental markets. The commenter states that 
CPI would not add too much additional variation to FMR estimates, 
noting that FMRs already vary considerably from year-to-year, which in 
some years, has nothing to do with market conditions but rather with 
corrections from prior years. Should the CPI be selected as the basis 
for the trend factor, the commenter recommends that HUD use the BLS 
series that calculate annual changes to avoid seasonality issues, since 
seasonal adjustments are not available at the local/regional level.
    3. The same commenter states that HUD's use of a rolling average of 
local/regional ACS increases in gross rent would be a viable option, as 
long as HUD determined that such use better met programmatic needs of 
key constituencies using FMRs in their operations. The commenter 
concludes that any factor that is more locally-derived and that 
reflects changes in the market would be an improvement over the current 
constant, nationally-derived factor.
    HUD Response: Since most commenters do not support a constant trend 
factor, any consensus on this issue is irrelevant. The one commenter 
that supports the use of a constant trend factor would use the gross 
rents from the ACS to calculate the trend factor and that is the only 
way to have a constant long-term trend factor. Although some commenters 
recommend using CPI data for a constant long-term trend factor, their 
comments lacked specificity as to how to make the concept operational. 
CPI data seems best suited to a trend factor that changes on an annual 
albeit lagged, basis.
HUD Question: Is a national trend factor appropriate, or should HUD 
limit itself to use of more local options such as regional factors?
    1. One commenter states that a regional or local trend factor is 
more appropriate than a national factor because it provides the most 
accurate FMR calculation for specific geographic areas. A second 
commenter agreed, adding that ideally the trend factors should be state 
specific because there can be substantial differences in utility costs 
(and the factors that affect them) even within a region. A third 
commenter encouraged HUD update factors based on regional trends and 
those in the largest metro areas, or use a data set that provides the 
lowest level of geography without causing undue problems with sample 
size or computation or delays in the release.
    2. A commenter recommends that HUD consider using regional CPI 
indices as they are readily available and include regional Fuels and 
Utilities Index, and more specific Indices for certain utilities (e.g., 
piped gas). Another commenter states that basing the trend factor on 
monthly local or regional CPI data would be particularly

[[Page 52064]]

ill-advised because monthly CPI numbers are available for a very 
limited set of local areas, and when available, only every other month 
or semi-annually. In addition, the commenter states that only the 
national CPI data are seasonally adjusted and that potential problems 
with using seasonally unadjusted monthly data should be enough to 
preclude their use in computing FMRs.
    HUD Response: As with the other two issues, one commenter is 
concerned with the volatility of the data and prefers the use of a 
national, constant trend factor other commenters want the trend factor 
to change annually and be at least regional, or the lowest level of 
geography that is possible. HUD reiterates that these suggestions are 
contradictory: The more detailed the data the less often it is 
published, and then at a broader geography. That is, more detailed fuel 
data cannot be used along with data for the lowest geography possible.
HUD Question: Should HUD allow changes between the proposed and final 
FMRs resulting from updated trend factors?
    1. One commenter states that HUD should be able to allow changes 
between proposed and final FMRs as long as the changes result in rents 
that more accurately reflect current, local market conditions. A second 
commenter agrees that permitting HUD to make changes would permit HUD 
to use the most recent and most local data possible. The commenter also 
stated that it would be more effective to discontinue the publication 
of proposed FMRs, but allow for public comments on the final FMRs, 
releasing revised final FMRs as needed.
    2. One commenter states that allowing updates would provide for 
less certainty for housing entities. Assuming the proposed FMRs are 
susceptible to challenge prior to becoming final, the commenter 
concludes that automatic changes due to updated trend factors should 
not be necessary.
    HUD Response: The purpose of the publishing proposed FMRs would be 
circumvented if HUD re-estimated FMRs for the final publication using 
more current data. All proposed FMRs would be subject to change. HUD 
would prefer not to publish proposed FMRs for comment, but such a 
change would require a change to the statute.
HUD Question: Is using the more current data for estimating the FMRs 
more important than providing for public comment before establishing 
final FMRs for effect?
    1. Most commenters support HUD's continued publication of the FMRs 
for comment. One commenter, for example, notes that the opportunity to 
comment may present HUD with current data that ensures that changes to 
FMRs reflect actual changes in the local rental market. The commenter 
states that a shorter comment period of 30 days may be appropriate and 
reasonable if HUD uses regional data adjusted for state specific 
characteristics for estimating trends. The commenter added that a 90-
day comment period should apply if HUD changes more than just FMR 
levels, (e.g., changing the geographic regions where the FMRs apply) or 
if HUD does not start with regional and State specific data for 
estimating trends.
    2. Another commenter that supports the elimination of a constant 
national trend factor states that using the most recent data possible 
would still not merit eliminating the public comment period. The 
commenter stated public comment permits its members to assess the 
proposed FMRs and whether they need to request reevaluation in light of 
current market conditions. Changing the FMRs between the publication of 
the proposed and final estimates would render the public comment 
process meaningless.
    3. A third commenter states that HUD's use of more current regional 
or local factors is more important than providing for public comment 
before establishing the final FMRs as long as there is the opportunity 
for public comments on the final FMRs and HUD is willing to revise the 
FMRs as necessary. The commenter recommends, however, that HUD release 
as proposed for public comment any significant changes to the data 
sources and the methodology it intends to use in calculating final FMRs 
at least 60 days prior to their release.
    4. One commenter strongly opposes the elimination of a public 
comment period, stating that public comment adds to the reliability of 
the FMRs by ensuring that the expertise of individuals affected by the 
FMRs is considered before HUD publishes its final FMRs. Without a 
public comment period, there would be no way to contest FMR levels, 
changes in methodology, or other policy issues. The commenter concludes 
that while HUD suggests that using CPI data would provide more recent 
data and potentially shorten the trending period, it does not believe 
this is an acceptable trade off for losing the certainty of publication 
on October 1 and for losing the public comment period.
    HUD Response: HUD would prefer to eliminate the comment period, but 
no commenters support this position. The commenters, if anything, want 
a longer comment period whenever there are substantial changes to FMR 
estimation methodology. Given the timing of the data releases, longer 
comment periods of 60 to 90 days are not possible even when there are 
major changes, such as for geographic areas. In the past HUD has dealt 
with this issue of short comment periods by publishing revised final 
FMRs and sees this as an appropriate mechanism for the future. Clearly 
the commenters want a formal comment period for FMRs, so HUD will take 
this under advisement.
HUD Question: Is the seasonality of rent and utility prices important 
in considering what month to collect data for trending? If so, how 
should HUD select the month to use or to compare it with?
    1. One commenter that strongly supported the use of an annually 
updated trend factor states that if current, regional data with 
appropriate state adjustments are used, seasonality adjustments should 
be relatively unimportant. Another commenter states that seasonality is 
an important consideration if trending uses data releases separated by 
less than a year. A third commenter states that seasonality should be 
used rather than be avoided, particularly depending on the geographic 
area affected.
    HUD Response: There is disagreement on whether seasonality is a 
concern. HUD views seasonality as a concern because it potentially adds 
to the volatility of the FMR estimate. While some have proposed caps 
and floors for trend factor changes to reduce the volatility of FMR 
estimates, caps and floors tend to increase the noise in an estimate so 
that constrained trends will add little accuracy to FMR estimates.
HUD Question: Is double counting of CPI data a concern?
    1. Two commenters address this issue. Both stated that they 
recognize this issue but under the current proposals either do not have 
a strong concern about the issue or feel that the issue is not 
significant.
    HUD Response: HUD believes that when prices are increasing, the 
double counting of the CPI indices will not be a concern except 
possibly for budgetary reasons. However, when prices are falling and 
the FMRs could drop, this

[[Page 52065]]

would become an issue with tenants, and landlords. For these reasons 
HUD does not find double-counting the CPI data, which is already lagged 
when used for the FMRs, to be an effective forecast of trend.
HUD Question: Is it more important to base a trend on the most recent 
data possible, or on the most specific geography?
    1. One commenter states that both issues are important, and it 
should not be necessary to choose one over the other. The commenter 
notes that there are good data sources available that allow for use of 
both recent and locally relevant data, such as the CPI and ACS. Another 
commenter gave slight preference to more specific geography, but within 
limits. Specifically, the commenter states that if using data for areas 
smaller than the largest metro areas and census regions requires using 
significantly older data and leads to significant lags in the release 
of the FMRs, then more local specificity would cease to be the 
priority.
    2. A third commenter states that geography is more important 
because market conditions are more likely to show greater variance from 
region to region over a given time period than that reflected in local 
or regional market conditions over the same period.
    HUD Response: HUD is already using the most current ACS and CPI 
data at the lowest level of geography. There is no way to use current 
data at the lowest level of geography without ensuring publication of 
the proposed FMRs regularly in mid- to late-August. The only more 
current data at the lowest geographic level that could be incorporated 
for a trend factor, would be the CPI data for the first-half of the 
year, which comes out late July. Waiting this late for calculation of 
FMRs would push the proposed FMR Federal Register notice to mid-August 
at the earliest. There would barely be time for a 30-day comment period 
and recalculation of final FMRs in time for the October 1 final FMR 
publication. There would still be double counting of the CPI data, 
which HUD considers problematic.
HUD Question: Is it better to use rent and utility CPI data in 
developing a trend factor or should other prices be included?
    1. One commenter states that in addition to capturing changes in 
rent and utilities generally, it is also important to account for 
changes in heating fuel prices specifically because the impacts can 
vary significantly State by State, and even within a region. A second 
commenter states that it would not in advance exclude from 
consideration additional specific data that would assist FMRs to better 
reflect the price a household must be able to pay in a specific 
location in order to be reasonably assured of finding a decent, modest 
and safe home. The commenter states, however, that generally rent and 
utility costs in the CPI are likely sufficient.
    HUD Response: HUD believes that the rent and utility CPI data 
currently used is appropriate. The utility CPI data cannot be changed 
to provide a greater emphasis on heating fuel as appropriate weighting 
of this fuel sources is not possible.
HUD Question: Should HUD pursue legislative and regulatory changes to 
reduce or eliminate the need for trending?
    1. One commenter supported HUD seeking the legislative changes as 
proposed in the FY 2012 HUD budget, trending to the midpoint of the 
fiscal year and using CPI rent and utility data to calculate the trend. 
According to the commenter, this alternative provides a good balance 
between the use of the most recent local data available and the need to 
publish the trend factor in advance. The use of local and regional CPI 
rent and utility data would provide for more accurate FMR calculations 
than the use of national CPI data, and the application of the factor 
through the midpoint of the fiscal year would provide balance in the 
final FMR calculation. Another commenter states that solutions other 
than trending in the calculation of FMR may be acceptable as long as 
the calculation includes some mechanism for considering current market 
conditions.
    HUD Response: HUD would prefer to reduce the period of trending 
down from a 15-month period to a 6-month or 9-month period, to reduce 
the impact of this factor. To do so would require a legislative change 
that assumes the FMR represents a beginning of fiscal year rent, rather 
than a middle of fiscal year rent.
HUD Question: Is there a data source or aggregation of sources of data 
provided on a more current basis than the CPI that could be used in the 
FMR estimation process?
    1. No commenter responded that it was aware of any data source or 
aggregation of sources of data provided on a more current basis than 
the CPI that could be used in the FMR estimation process.
    HUD Response: HUD agrees, but the use of the most current CPI data 
at the lowest level of geography is the use of the first half of the 
year data and, as discussed earlier, incorporating this data makes the 
publication of the proposed FMR so late as to not allow time for 
meaningful comments.
    Given the divergence in comments, HUD has determined that 
additional study is required to select an appropriate methodology to 
employ for this program parameter. HUD will announce a new trending 
methodology in the FY 2013 proposed FMRs.

VI. Proposal To Formalize a Publication Date for Income Limits

    In the comments filed regarding the trend factor, several 
commenters reminded HUD of the need for publication of FMRs by a 
certain date. One of the reasons submitted is because HUD uses FMRs in 
the calculation of income limits used in various federal, state and 
local housing programs. Currently, there is no statutorily required 
publication date for income limits. In recent years, HUD has attempted 
to incorporate the most recent vintage of ACS data into the income 
limits calculations; however, due to the increase in the number and 
scope of ACS data products, the publication date for income limits has 
become later each year.
    In an attempt to be responsive to the concerns of the users of 
Income Limits, HUD is proposing to give the publication of area median 
family income estimates and income limits a more certain date. 
Currently, HUD is considering two possible timeframes for the 
publication of median family incomes and income limits. The first date 
would be October 1 at the same time that Final FMRs are published. The 
second date would be December 1. In either case, if HUD were to move 
the publication date, the FY 2012 Median Family Income estimates and 
the Income Limits would not benefit from any additional ACS data over 
what was included in the FY 2011 publication. The FY 2012 Median Family 
Income estimates and Income Limits, published on either October 1, 
2011, or December 1, 2011, under this proposal, would be updated with 
the FY 2012 FMRs for the purposes of evaluating areas of relatively 
high or low income to housing cost relationships and would be further 
updated with CPI to the end of 2010 and trended to the mid-point of FY 
2012 in a manner similar to what was done with the FY 2011 Median 
Family Income estimates and Income Limits. The FY 2013 Median Family 
Income estimates and Income Limits, published on October 1, 2012, or 
December 1, 2012, would be the first set of median family income 
estimates and income limits

[[Page 52066]]

updated with ACS data collected from 2006-2010.

VII. Request for Public Comments

    HUD seeks public comments on the methodology used to calculate FY 
2012 Proposed FMRs and the 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 Random Digit Dialing (RDD) telephone surveys to test the 
accuracy of FMRs for areas where there is a sufficient number of 
Section 8 units to justify the survey cost of approximately $35,000-
$50,000. Areas with 2,000 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.
    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 
may 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 where 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 
statistically different from 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 
Larger Public Housing Agencies in Preparing Fair Market Rent 
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: http://www.huduser.org/datasets/fmr.html.
    Other survey methodologies are acceptable in providing data to 
supp