Establishing a More Effective Fair Market Rent (FMR) System; Using Small Area Fair Market Rents (SAFMRs) in Housing Choice Voucher Program Instead of the Current 50th Percentile FMRs; Advanced Notice of Proposed Rulemaking, 31332-31336 [2015-13430]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 80, Number 105 (Tuesday, June 2, 2015)]
[Proposed Rules]
[Pages 31332-31336]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-13430]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 888

[Docket No. FR-5855-A-01]
RIN 2501-AD74


Establishing a More Effective Fair Market Rent (FMR) System; 
Using Small Area Fair Market Rents (SAFMRs) in Housing Choice Voucher 
Program Instead of the Current 50th Percentile FMRs; Advanced Notice of 
Proposed Rulemaking

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

ACTION: Advanced notice of proposed rulemaking.

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SUMMARY: Section 8(c)(1) of the United States Housing Act of 1937 
(USHA) requires HUD to publish Fair Market Rents (FMRs) periodically, 
but not less than annually, adjusted to be effective on October 1 of 
each year. Some examples of uses of FMRs are to determine payment 
standard amounts for the Housing Choice Voucher (HCV) program, to 
establish a limit on the amount of rent to owner for project-based 
vouchers, to determine initial and renewal rents for some new and 
expiring project-based Section 8 contracts, to determine initial rents 
for housing assistance payment (HAP) contracts in the Moderate 
Rehabilitation Single Room Occupancy program (Mod Rehab), and to serve 
as a rent ceiling in the HOME rental assistance program.
    This document announces HUD's intention to amend HUD's FMR 
regulations applicable to the HCV program (24 CFR part 888) to provide 
HCV tenants with subsidies that better reflect the localized rental 
market, including subsidies that would be relatively higher if they 
move into areas that potentially have better access to jobs, 
transportation, services, and educational opportunities. Specifically, 
this document requests public comments on the use of small area FMRs 
(SAFMRs) for the HCV program within certain metropolitan areas. Small 
areas FMRs vary by ZIP code and support a greater range of payment 
standards than can be achieved under existing regulations.

DATES: Comments Due Date: July 2, 2015.

ADDRESSES: Interested persons are invited to submit comments to the 
Office of the General Counsel, Rules Docket Clerk, Department of 
Housing and Urban Development, 451 Seventh Street SW., Room 10276, 
Washington, DC 20410-0001. Communications should refer to the above 
docket number and title and should contain the information specified in 
the ``Request for Comments'' section. There are two methods for 
submitting public comments.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW., Room 10276, 
Washington, DC 20410-0500. Due to security measures at all federal 
agencies, however, submission of comments by mail often results in 
delayed delivery. To ensure timely receipt of comments, HUD recommends 
that comments submitted by mail be submitted at least two weeks in 
advance of the public comment deadline.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at  
https://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make comments 
immediately available to the public. Comments submitted electronically 
through the https://www.regulations.gov Web site can be viewed by other 
commenters and interested members of the public. Commenters should 
follow instructions provided on that site to submit comments 
electronically.

    Note: To receive consideration as public comments, comments must 
be submitted using one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
notice.

    No Facsimile Comments. Facsimile (fax) comments are not acceptable.
    Public Inspection of Comments. All comments and communications 
submitted to HUD will be available, for public inspection and copying 
between 8 a.m. and 5 p.m. weekdays at the above address. Due to 
security measures at the HUD Headquarters building, an advance 
appointment to review the public comments must be scheduled by calling 
the Regulations Division at (202) 708-3055 (this is not a toll-free 
number). Copies of all comments submitted are available for inspection 
and downloading at https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Marie L. Lihn, Senior Economist, 
Economic Market Analysis Division, Office of Economic Affairs, Office 
of Policy Development and Research, U.S. Department of Housing and 
Urban Development, 451 7th Street SW., Washington, DC 20410, telephone 
(202) 402-5866; email: marie.l.lihn@hud.gov. Hearing- or speech-
impaired persons may use the Telecommunications Devices for the Deaf 
(TTY) by contacting the Federal Relay Service at 1-800-877-8339. (Other 
than the ``800'' TTY number, telephone numbers are not toll free.)
    Electronic Data Availability. This Federal Register notice will be 
available electronically from the HUD User page at https://www.huduser.org/datasets/fmr.html. Federal Register notices also are 
available electronically from https://www.gpoaccess.gov/fr/, 
the U.S. Government Publishing Office Web site. SAFMRs based on Final 
Fiscal Year (FY) 2015 Metropolitan Area Rents are available in 
Microsoft Excel format at the same HUD web address https://www.huduser.org/portal/datasets/fmr/smallarea/.

SUPPLEMENTARY INFORMATION: 

I. Background

    HUD's HCV program helps low-income households obtain standard 
rental housing and reduces the share of their income that goes toward 
rent. Vouchers issued under the HCV program provide subsidies that 
allow individuals and families to rent eligible units in the private 
market. A key parameter in operating the HCV program is the FMR.

[[Page 31333]]

    In the HCV program, the FMR is the basis for determining the 
``payment standard amount'' used to calculate the maximum monthly 
subsidy for a voucher household (see 24 CFR 982.503). Public Housing 
Agencies (PHAs) may establish payment standards between 90 and 110 
percent of the FMR. Voucher program households receive a housing 
assistance payment equal to the difference between the payment standard 
established by the PHAs and the family's Total Tenant Payment (TTP), 
which is generally 30 percent of the household's adjusted monthly 
income. Participants in the voucher program can choose to live in units 
with gross rents higher than the payment standard, but they must then 
pay the full cost of the difference between the gross rent and the 
payment standard, in addition to their TTP. Please note that at initial 
occupancy the family's share cannot exceed 40 percent of monthly 
adjusted income.
    HUD establishes FMRs for different geographic areas. Because 
payment standards are based on FMRs, housing assistance payments on 
behalf of the voucher household are limited by the geographic area in 
which the voucher household resides. 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 rent reasonableness 
standards. Rent reasonableness is determined by PHAs with reference to 
rents for comparable unassisted units.
    Currently, HUD calculates FMRs for all nonmetropolitan counties and 
metropolitan areas. The same FMR is applicable throughout a 
nonmetropolitan county or metropolitan area, which generally is 
comprised of several metropolitan counties. FMRs in a metropolitan area 
represent the 40th percentile (or in special circumstances the 50th 
percentile) gross rent for typical non-substandard rental units 
occupied by recent movers in a local housing market.\1\
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    \1\ See https://www.huduser.org/periodicals/USHMC/winter98/summary-2.html.
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    As noted earlier, PHAs may set a payment standard between 90 
percent and 110 percent (inclusive) of the FMR. PHAs may determine that 
payment standards that are higher than 110 percent, or lower than 90 
percent, are appropriate for subareas of their market; in this 
instance, a PHA would request HUD approval for a payment standard below 
90 percent or an exception payment standard above 110 percent. The 
total population of a HUD-approved exception payment area (i.e., an 
area covered by a payment standard that exceeds 110 percent of the FMR) 
may not include more than 50 percent of the population of the FMR area 
(see 24 CFR 982.503).
    For eligible areas, HUD establishes the FMR at the 50th percentile 
rather than at the 40th percentile of gross rent. For an FMR area to 
qualify to use the 50th percentile FMR, the following conditions must 
be met (see 24 CFR 888.113(c)):
    1. Minimum Area Size--the FMR area must be a metropolitan area 
containing at least 100 Census tracts;
    2. Concentration of Participants--25 percent or more of voucher 
program participants in the FMR area must be located in the 5 percent 
of Census tracts with the highest number of voucher participants; and
    3. Concentration of Affordable Units--70 percent or fewer of the 
FMR area's Census tracts containing 10 or more rental units have at 
least 30 percent of rental units at or below the 40th percentile FMR.
    The main objective of the 50th percentile program was to provide a 
broad range of housing opportunities that would enable voucher holders 
to de-concentrate from low opportunity areas. However, research 
indicates that 50th percentile FMRs are not an effective tool in 
increasing HCV tenant moves from areas of low opportunity to higher 
opportunity areas; specifically, it appears that much of the benefit of 
increased FMRs simply accrues to landlords in lower rent submarket 
areas in the form of higher rents rather than creating an incentive for 
tenants to move to units in communities with more and/or better 
opportunities. To determine the 50th percentile program's 
effectiveness, HUD must measure the reduction in concentration of HCV 
tenants (measure 2 above) presumably from high poverty areas, over a 
three-year period. If there is no measureable reduction in the 
concentration of HCV tenants, the FMR area loses the use of 50th 
percentile FMRs for a three-year period. A large number of areas have 
been disqualified from the program for failure to show measurable 
reduction in voucher concentration of HCV tenants \2\ since 2001 when 
the program started, strongly suggesting that the de-concentration 
objective is not being met.
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    \2\ Areas may subsequently requalify for 50th percentile status 
after a three-year period.
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    Since the establishment of the 50th percentile program, HUD has 
developed SAMFRs to reflect rents in ZIP code-based areas with a goal 
to improve HCV tenant outcomes. SAFMRs have been shown to be a more 
direct approach to encouraging tenant moves to housing in lower poverty 
areas by increasing the subsidy available to support such moves.\3\ 
Since 2010, when the Census Bureau made available data collected over 
the first 5 years of the American Community Survey (ACS), HUD has 
considered various methodologies that would set FMRs at a more granular 
level. HUD's goal in pursuing the SAFMR methodology is to create more 
effective means for HCV tenants to move into higher opportunity, lower 
poverty areas by providing them with subsidy adequate to make such 
areas accessible and to thereby help reduce the number of voucher 
families that reside in areas of high poverty concentration. Toward 
this end, on May 18, 2010, at 75 FR 27808, HUD announced a SAFMR 
demonstration project to ascertain the efficacy of FMRs which are 
published using U.S. Postal Service ZIP codes as FMR areas within 
metropolitan areas. On August 4, 2010, at 75 FR 46958, HUD mandated the 
use of SAFMRs in place of metropolitan-area-wide-FMRs to settle 
litigation in the Dallas, TX, HUD Metro FMR Area. HUD began a SAFMR 
demonstration on November 20, 2012, at 77 FR 69651, with the following 
PHAs: the Housing Authority of the County of Cook (IL), the City of 
Long Beach (CA) Housing Authority, the Chattanooga (TN) Housing 
Authority, the Town of Mamaroneck (NY) Housing Authority, and the 
Housing Authority of Laredo (TX).
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    \3\ Please see Collinson and Ganong, ``The Incidence of Housing 
Voucher Generosity'', available at: https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2255799.
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    Based on HUD's research and experience with the SAFMR 
demonstration, HUD believes that amending its current FMR regulation to 
enable adoption of the SAFMR methodology could provide HCV tenants 
greater access to higher opportunity, lower poverty neighborhoods. As a 
part of this change, HUD would eliminate the use of 50th percentile 
FMRs as a means to reduce HCV tenant concentration. Before publication 
of a proposed rule, however, HUD is soliciting public comment on 
several pivotal issues, as described in section IV of this notice. As 
described in this notice, HUD is only considering such a change in its 
tenant-based HCV program, but is also specifically seeking comments on 
whether using the SAFMRs for new project-based voucher (PBV) projects 
is advisable. All other programs that use FMRs would continue

[[Page 31334]]

to use area-wide FMRs. HUD is also considering whether regulations 
governing the use the 50th percentile FMR for success rate payment 
standards (under 24 CFR 982.503(e)) should be eliminated or changed. 
Success rate payment standards, which are set between 90 and 110 
percent of the 50th percentile rent, are established for the entire FMR 
area when that area is having considerable lease-up issues in areas, 
both metropolitan and nonmetropolitan, that do not have 50th percentile 
FMRs. HUD will use public comments received in response to this notice 
in developing a proposed rule.

II. Methodology for SAFMRs

    In general, SAFMRs are calculated using a rent ratio determined by 
dividing the median gross rent across all standard quality units for 
the small area (a ZIP code) by the similar median gross rent for the 
metropolitan area (the Core Based Statistical Area (CBSA)) of the ZIP 
code. ZIP codes were chosen because they localize rental rates, and a 
unit's ZIP code is easily identified by both PHAs and tenants.
    The rent ratio is calculated using median gross rents provided by 
the Census Bureau for both the small area and its encompassing 
metropolitan area. HUD restricts the use of ZIP code level median gross 
rents to those areas for which the margin of error of the ACS estimate 
is smaller than the estimate itself. The rent relationship is 
calculated in the following manner for those ZIP codes within the 
metropolitan area that have a sufficiently small margin of error:

Rental Rate Ratio = Median Gross Rent for ZIP Code Area/Median Gross 
Rent for CBSA

    The rent relationship is capped at 150 percent for areas that would 
otherwise be greater. This cap was instituted as a mechanism for 
ensuring that HCV program funds are used as judiciously as possible. At 
the time of the institution of the SAFMR demonstration program, 2000 
Census data showed that only one percent of all metropolitan ZIP codes 
had rents above this 150 percent.
    If the gross rent estimate for a ZIP code within the CBSA has a 
margin of error that is greater than the estimate, then the median 
gross rent for the county within the state containing the ZIP code is 
divided by the similar median gross rent for the CBSA of the ZIP code; 
the rent relationship is calculated as:

Rental Rate Ratio = Median Gross Rent of the County/Median Gross Rent 
of the CBSA

    For metropolitan areas, FMRs will be calculated and published for 
each small area.
    HUD multiplies this rent ratio by the current estimate of the 40th 
percentile two-bedroom rent for recent movers into standard quality 
units for the entire metropolitan area containing the small area to 
estimate the current year two-bedroom rent for the small area. For FY 
2015 SAFMRs, HUD continues to use the rent ratios developed in 
conjunction with the calculation of FY 2013 FMRs based on 2006-2010 5-
year ZIP Code Tabulation Area (ZCTA) median gross rent data. The Census 
Bureau requires the use of ZCTAs to report data for ZIP codes, because 
ZCTAs are a standard Census geography. In addition to ZCTAs defined by 
the Census Bureau, HUD produces SAFMR estimates for ZIP codes obtained 
from the U.S. Postal Service where the number of residential addresses 
is greater than zero. The rent ratio set for these ZIP codes is based 
on the county-to-metropolitan relationship for the ZIP code in 
question.
    To set the floor for SAFMRs in a metropolitan area, HUD compares 
two-bedroom SAFMR estimates to the state nonmetropolitan minimum two-
bedroom rent for the state in which the area is located that is 
established as a floor for all FMRs. If the ZIP code rent determined 
using the rental rate ratio is less than the state minimum, the ZIP 
code rent is set at this state nonmetropolitan minimum. SAFMRs for 
bedroom counts other than two-bedroom are based on the bedroom-size 
relationships estimated for the metropolitan area. The final calculated 
rents are then rounded to the nearest $10. SAFMRs for all metropolitan 
areas are available for viewing and download on the Internet at (https://www.huduser.org/portal/datasets/fmr/smallarea/). There are 
also detailed calculations for each ZIP code area in participating 
jurisdictions at this Web site.

III. Current Problems With 50th Percentile FMR Areas and Proposed 
Replacement With Small Area FMRs

    The 50th percentile FMR allows payment standards set between 90 
percent and 110 percent of the 50th percentile FMR across the entire 
qualifying area, whereas Small Area FMRs better differentiate between 
higher and lower rent areas within a metropolitan area. As mentioned 
earlier, the use of 50th percentile FMRs has several limitations with 
respect to the goal of providing tenants more choice in the 
neighborhoods where they can rent and reducing HCV household 
concentration.
    There is a regulatory requirement to reevaluate the designations 
after three years to gauge progress in alleviating HCV tenant 
concentration in the designated FMR area. If an area does not show an 
improvement in its voucher tenant concentration level after a three-
year period, then the area loses its 50th percentile FMR for a period 
of three years. After the three-year period, these areas may, and 
generally do, return to the 50th percentile FMR. While there are a 
couple of FMR areas that graduated from the 50th percentile FMRs (which 
means they no longer have at least 25 percent of the voucher holders 
living in the five percent of the Census tracts with the most voucher 
participants), most of the remaining FMR areas have cycled in and out 
of the 50th percentile FMR program at least once. Originally, in 2001, 
there were 39 areas that qualified to use 50th percentile FMRs. With 
the change in FMR area definitions and the use of 2000 Decennial Census 
data to determine the concentration of affordable units (criteria 3), 
only 21 FMR areas remained eligible, while an additional 10 areas 
became newly eligible. In FY 2008, there were 28 50th percentile FMR 
areas, the most since FY 2006. Only three of the original and two of 
the new areas have never lost the use of 50th percentile FMRs; most of 
the remaining areas lost the 50th percentile FMR for failure to de-
concentrate, though a few have cycled in and out as they hover around 
the HCV tenant concentration threshold (three areas) and a few areas 
have only had reporting issues (two areas), meaning that their 
exclusion from the program is reassessed annually instead of every 3 
years. The cycling in and out of the 50th percentile FMRs over a three 
year period for failure to reduce HCV concentration by the majority of 
program participant areas shows that the program is not meeting its de-
concentration goals. In addition, a loss of 50th percentile FMRs is 
disruptive both to the HCV program and to other non-HCV programs (where 
payment standard flexibility to modify assistance payments does not 
exist), such as the Shelter Plus Care program, the Low Income Housing 
Tax Credit program, and other state and local programs tied to HUD's 
FMRs.
    HUD's analysis of the FY 2015 FMRs indicates that the 50th 
percentile FMRs provide a rent that is on average, weighted by 
population, 7.3 percent higher than the 40th percentile FMR for

[[Page 31335]]

those sixteen areas that currently use 50th percentile FMRs. Even with 
the use of a 110 percent payment standard authority, the FMR in 50th 
percentile areas would not reach a gross rent that is 120 percent above 
the 40th percentile rent (it would on average be 110 percent of 1.073 
or 118 percent higher). This average 50th percentile FMR rent 
differential is generally not high enough to provide HCV households 
with access to higher opportunity neighborhoods. Also, by providing the 
same FMR for the entire FMR area, 50th percentile FMRs fail to provide 
tenants sufficient means to move to areas of higher opportunity while 
also unnecessarily raising subsidies in neighborhoods with lower rents.
    Alternatively, SAFMRs may provide voucher families with subsidies 
that better reflect the localized rental market, including subsidies 
that would be relatively higher if they move into areas that 
potentially have better access to jobs, transportation, services, and 
educational opportunities. More importantly, SAFMRs vary within an FMR 
area, and they can go as high as 165 percent of the 40th percentile FMR 
(using 110 percent payment standard authority when the SAFMR is at 150 
percent of the metropolitan area rent).
    A third issue with the current 50th percentile FMRs is that they 
only measure the degree to which vouchers are concentrated in a small 
share of neighborhoods but do not take poverty rates into account. In 
moving to SAFMRs, HUD will have an opportunity to reconsider the 
criteria for identifying areas with undue voucher concentration and 
make sure the SAFMRs are also available in areas where vouchers are 
concentrated in high-poverty areas. Measuring whether vouchers are 
concentrated in high-poverty areas will enable HUD to target SAFMRs to 
areas where voucher concentration likely has the most severe adverse 
effects.
    In addition, HUD would limit application to FMR areas where there 
are a substantial number of units in neighborhoods where SAFMRs are 
significantly above or below the 40th percentile FMR. This will ensure 
that the SAFMR program is targeted to FMR areas where PHAs' normal 
authority to set payment standards between 90 and 110 percent of the 
FMR would not allow access to opportunity areas but SAFMRs would.

IV. Request for Public Comments on Replacing the 50th Percentile FMRs 
With the Use of Small Area FMRs

    This notice seeks comments on the use of SAFMRs to provide HCV 
tenants with access to better housing and better neighborhoods and to 
reduce poverty concentration. The SAFMRs would be limited to 
metropolitan areas with significant rent differentials in areas with 
adequate housing, since these are the areas in which SAFMRs have the 
greatest potential to improve the housing options available to HCV-
assisted households. HUD plans to limit the use of SAFMRs to the HCV 
program only and to a limited number or percentage of vouchers, 
especially now while the demonstration program is under way. HUD also 
wants to eliminate the cycling in and out of FMR areas; once an area 
qualifies for the use of SAFMRs, the area would not be subject to 
losing the use of SAFMRs. To assist HUD in framing the issues involved 
in moving to SAFMRs, HUD seeks public comment on this topic, but 
specifically on the following questions:
    1. Measurement of undue voucher concentration: What poverty rate 
and concentration level should be used in determining the criteria for 
selecting SAFMR areas? Measuring the extent to which vouchers are 
concentrated in high-poverty areas will enable HUD to target SAFMRs to 
areas where voucher concentration likely has the most severely adverse 
effects. Poverty concentration levels of 20 percent and 40 percent have 
been identified as particularly significant thresholds for adverse 
impacts.\4\ However, simply measuring the share of voucher holders in 
areas with poverty rates above these levels may be inadequate since 
this share will tend to be higher in metropolitan areas with generally 
high poverty rates regardless of the performance of the voucher 
program. Should the Department attempt to target areas where 
concentration of voucher tenants in high-poverty census tracts, however 
defined, is generally higher than the concentration of rental units? 
Should the Department target some higher threshold of relative poverty 
concentration?
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    \4\ Thresholds, or tipping points, also prove important. In a 
recent review of research, Galster notes that studies suggest ``that 
the independent impacts of neighborhood poverty rates in encouraging 
negative outcomes for individuals like crime, school leaving, and 
duration of poverty spells appear to be nil unless the neighborhood 
exceeds about 20 percent poverty, whereupon the externality effects 
grow rapidly until the neighborhood reaches approximately 40 percent 
poverty; subsequent increases in the poverty population appear to 
have no marginal effect.'' George C. Galster, ``The Mechanism(s) of 
Neighborhood Effects: Theory, Evidence, and Policy Implications.'' 
Presentation at the ESRC Seminar, St. Andrews University, Scotland, 
UK, 4-5 February 2010 as footnoted in the HUD publication at: https://www.huduser.org/portal/periodicals/em/winter11/highlight2.html.
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    2. SAFMR effectiveness: What percentage of an area's rental stock 
should be above and below the FMR? SAFMRs will only be an effective 
means of reducing HCV tenant concentration in high-poverty 
neighborhoods in metropolitan areas where there are sufficient numbers 
of rental units in ZIP codes with rents substantially above or below 
metropolitan area-wide FMRs. PHAs may establish voucher payment 
standards up to 10 percent above or below the FMR, so SAFMRs must be 
substantially above or below this range. What is the appropriate 
``sufficient'' threshold proportion of units in ZIP codes with rents 
substantially different from metropolitan-area-wide FMRs? What is the 
appropriate threshold for defining ``substantial'' variation in SAFMRs 
above and below the 90 to 110 payment standard basic range around 
metropolitan area-wide FMRs?
    3. Program scale: In terms of number or percentage of metropolitan-
area vouchers (which is roughly 1.9 million), what should be the size 
of the SAFMR program? Based on rental housing stock limitations, SAFMR 
estimations are limited to metropolitan areas. Because SAFMRs are more 
complex to administer for PHAs serving a territory containing many ZIP 
codes, HUD does not wish to impose too high an administrative burden on 
PHAs by moving to SAFMRs in place of 50th percentile FMRs. The current 
50th percentile FMRs account for about 10 percent of the vouchers in 
all metropolitan areas, or less than 175,000 vouchers, and affect about 
150 PHAs. For areas that have ever been 50th percentile areas, the 
number of vouchers shows a program size of just over 350,000 vouchers, 
with more than 300 PHAs serving these vouchers. Would SAFMRs of similar 
size (in terms of number of vouchers used) to the current or the 
maximum (ever) 50th percentile FMR be appropriate? Note that the 
selection of the thresholds described in 1 and 2 above will necessarily 
affect the size of the SAFMR program in terms of the number of voucher 
holders or PHAs that administer the program, and that the selected 
areas will not necessarily include areas currently statistically 
eligible for the 50th percentile FMR.
    4. PHA or metropolitan-wide: Should SAFMRs apply to all PHAs in a 
metropolitan area, or only to PHAs that display a pattern of HCV tenant 
concentration in high-poverty census tracts? Limiting the application 
of SAFMRs to individual PHAs would reduce overall administrative 
burden; however, might it be too confusing to have PHAs that service 
the same area not use the same set of FMRs. HUD

[[Page 31336]]

seeks comments on the relative value of limiting the use of SAFMRs to 
those agencies exhibiting a pattern of HCV tenant concentration in 
high-poverty areas versus using SAFMRs for all PHAs servicing an area 
where HCV tenants are concentrated in high-poverty areas.
    5. Voluntary participation: Should a PHA be allowed to use SAFMRs 
even if the PHA or the underlying metropolitan area would not qualify 
for the use of SAFMRs? Qualification thresholds as discussed above will 
invariably result in ``near misses'' of areas or PHAs falling just 
below qualification thresholds, but where PHAs may see value in the 
SAFMR approach for addressing voucher concentration, or providing 
better access to opportunity. HUD seeks comment on whether the choice 
to use SAFMRs should be entirely up to individual PHAs, or if 
participation should be limited in some way.
    6. PBV Use of SAFMRs: Should SAFMRs be applied to PBVs at least for 
future PBV projects? HUD seeks comment on whether the SAFMRs should be 
applied to PBV assistance as well as tenant-based rental assistance. 
Under the PBV program, one of the limitations on the amount of subsidy 
that may be paid is that the rent to owner may not exceed 110 percent 
of the applicable FMR (or an exception payment standard approved by the 
Secretary) for the unit bedroom size minus any utility allowance. As a 
result, the use of SAFMRs for future PBV projects could potentially 
increase the number of PBV units that are located in areas of 
opportunity, because the SAFMRs would recognize the higher rents that 
are prevalent in more desirable neighborhoods, rather than applying the 
same 110 percent FMR limitation to all PBV projects throughout the 
entire metro area, regardless of the project's location.
    Because the 110 percent FMR rent limitation applies not only to the 
initial rent to owner but also to the re-determined rent to owner 
during the term of the HAP contract, a change to SAFMRs could impact 
the rents for existing PBV projects and could have an adverse impact on 
some PBV projects. Should the applicability of SAFMRs to PBV be limited 
to future PBV projects (or limited in some other manner) so that the 
change would not potentially impact the rents of existing PBV projects?
    7. Success Rate Payment Standards: In addition to using Small Area 
FMRs as a tool to alleviate concentrations of voucher tenants in high 
poverty areas, should Small Area FMRs also be used in areas that 
qualify for success rate payment standards? HUD seeks comment on 
whether the Success Rate Payment Standard regulations (24 CFR 
982.503(e)) should continue to use 50th percentile FMRs or if these 
areas would also benefit from operating under Small Area FMRs. Raising 
the level of rents across an entire FMR area to the 50th percentile may 
be necessary in areas where current success rates are low; 
consequently, the Department could continue to produce 50th percentile 
rents for this purpose. Such an area may not have enough of a rent 
differential and/or may not be in a metropolitan area and may benefit 
from the higher payment standard, up to 110 percent of the 50th 
percentile rent.
    8. Relevant PHA Experience: What information do PHAs currently 
using SAFMRs (Dallas area and SAFMR Demonstration PHAs), or other PHAs 
that have used SAFMRs for helping set Housing Choice Voucher payment 
standards (such as PHAs in the Moving to Work Demonstration) have 
regarding their use of Small Area FMRs? HUD is seeking information 
about the impacts of implementing Small Area FMRs, including (but not 
limited to) administrative burden, tenant outcomes and landlord 
participation.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
as required by the National Environmental Policy Act (42 U.S.C. 4321-
4374) is unnecessary, since the Housing Choice Voucher Program is 
categorically excluded from the Department's National Environmental 
Policy Act procedures under 24 CFR 50.19(c)(d).

Regulatory Review--Executive Orders 12866 and 13563

    Executive Order 12866 (Regulatory Planning and Review), a 
determination must be made whether a regulatory action is significant 
and therefore, subject to review by the Office of Management and Budget 
(OMB) in accordance with the requirements of the order. Executive Order 
13563 (Improving Regulations and Regulatory Review) directs executive 
agencies to analyze regulations that are ``outmoded, ineffective, 
insufficient, or excessively burdensome, and to modify, streamline, 
expand, or repeal them in accordance with what has been learned. 
Executive Order 13563 also directs that, where relevant, feasible, and 
consistent with regulatory objectives, and to the extent permitted by 
law, agencies are to identify and consider regulatory approaches that 
reduce burdens and maintain flexibility and freedom of choice for the 
public. This advance notice of proposed rulemaking was reviewed by OMB 
and determined to likely result in a ``significant regulatory action,'' 
as defined in section 3(f) of Executive Order 12866, and potentially an 
``economically significant action,'' as provided in section 3(f)(1) of 
that Order.
    The docket file is available for public inspection in the 
Regulations Division, Office of the General Counsel, 451 7th Street 
SW., Room 10276, Washington, DC 20410-0500. Due to security measures at 
the HUD Headquarters building, please schedule an appointment to review 
the docket file by calling the Regulations Division at 202-708-3055 
(this is not a toll-free number). Individuals with speech or hearing 
impairments may access this number via TTY by calling the Federal Relay 
Service at 800-877-8339.

    Dated: May 27, 2015.
Katherine M. O'Regan,
Assistant Secretary for Policy Development and Research.
[FR Doc. 2015-13430 Filed 6-1-15; 8:45 am]
 BILLING CODE 4210-67-P