Fair Market Rents for the Housing Choice Voucher Program, Moderate Rehabilitation Single Room Occupancy Program, and Other Programs, Fiscal Year 2023, 53761-53773 [2022-18905]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 87, Number 169 (Thursday, September 1, 2022)]
[Notices]
[Pages 53761-53773]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-18905]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6343-N-01]


Fair Market Rents for the Housing Choice Voucher Program, 
Moderate Rehabilitation Single Room Occupancy Program, and Other 
Programs, Fiscal Year 2023

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

ACTION: Notice of Fiscal Year (FY) 2023 Fair Market Rents (FMRs).

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SUMMARY: The United States Housing Act of 1937 (USHA), as amended by 
the Housing Opportunities Through Modernization Act of 2016 (HOTMA), 
requires the Secretary to publish FMRs not less than annually, adjusted 
to be effective on October 1 of each year. This notice announces the 
availability of FY 2023 FMRs, describes the methods used to calculate 
the FY 2023 FMRs, responds to comments submitted on the notice of 
Proposed Changes to the Methodology Used for Calculating Fair Market 
Rents, and enumerates the procedures for Public Housing Agencies (PHAs) 
and other interested parties to request reevaluations of their FMRs as 
required by HOTMA.

DATES: 
    Comment Due Date: October 3, 2022.
    FY 2023 Fair Market Rents Effective Date: October 1, 2022, unless 
HUD receives a valid request for reevaluation of specific area FMRs as 
described below.

ADDRESSES: HUD invites interested persons to submit comments regarding 
the FMRs and to request reevaluation of the FY 2023 FMRs. 
Communications must refer to the above docket number and title and 
should contain the information specified in the ``Request for Public 
Comments and FMR Reevaluations'' section. There are two methods for 
submitting public comments:
    1. Electronic Submission of Comments. Interested persons may submit 
comments or reevaluation requests electronically through the Federal 
eRulemaking Portal at https://www.regulations.gov. HUD strongly 
encourages commenters to submit comments or reevaluation requests 
electronically. Electronic submission of comments or reevaluation 
requests allows the author maximum time to prepare and submit a comment 
or reevaluation request, ensures timely receipt by HUD, and enables HUD 
to make them immediately available to the public. Comments or 
reevaluation requests submitted electronically through the https://www.regulations.gov website can be viewed by other submitters and 
interested members of the public. Commenters or reevaluation requestors 
should follow instructions provided on that site to submit comments or 
reevaluation requests electronically.
    2. Submission of Comments by Mail. Members of the public may submit 
comments or requests for reevaluation 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 standard mail often results in delayed delivery. To 
ensure timely receipt of comments or reevaluation requests, HUD 
recommends that comments or requests submitted by standard mail be 
submitted at least two weeks in advance of the deadline. HUD will make 
all comments or reevaluation requests received by mail available to the 
public at https://www.regulations.gov.

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

    No Facsimile Comments or Reevaluation Requests. HUD does not accept 
facsimile (FAX) comments or requests for FMR reevaluation.

FOR FURTHER INFORMATION CONTACT: Questions on this notice may be 
addressed to Adam Bibler, Director, Program Parameters and Research 
Division, Office of Economic Affairs, Office of Policy Development and 
Research, HUD Headquarters, 451 7th Street SW, Room 8208, Washington, 
DC 20410, telephone number (202)-402-6057; or via email at 
[email protected]. Persons with hearing or speech impairments may access HUD 
numbers through TTY by calling the Federal Relay Service at 800-877-
8339 (toll-free number). For technical information on the methodology 
used to develop FMRs or a listing of all FMRs, please call the HUD USER 
information line at 800-245-2691 or access the information on the HUD 
USER website at https://www.huduser.gov/portal/datasets/fmr.html.
    Questions related to the use of FMRs or voucher payment standards 
should be directed to the respective local HUD program staff or the 
Office of Public and Indian Housing Customer Service Center at https://www.hud.gov/program_offices/public_indian_housing/about/css. Questions 
on how to conduct FMR surveys may be addressed to the electronic 
mailbox for the Program Parameters and Research Division at 
[email protected].
    Electronic Data Availability. This Federal Register notice and 
files containing FMR values will be available electronically from the 
HUD User page at https://www.huduser.gov/portal/datasets/fmr.html. 
Federal Register notices also are available electronically from https://www.federalregister.gov/, the U.S. Government Printing Office website. 
Complete documentation of the methods and data used to compute each 
area's FY 2023 FMRs is available at https://www.huduser.gov/portal/datasets/fmr.html#2023_query. FY 2023 FMRs are available in a variety 
of electronic formats at https://www.huduser.gov/portal/datasets/fmr.html, including in PDF and Microsoft Excel. Small Area FMRs for all 
metropolitan FMR areas are available in Microsoft Excel format at: 
https://www.huduser.gov/portal/datasets/fmr/smallarea/. For 
informational purposes, HUD also publishes 50th percentile rents for 
all FMR areas at https://www.huduser.gov/portal/datasets/50per.html.

SUPPLEMENTARY INFORMATION: Section 8(c)(1) of the United States Housing 
Act of 1937 (USHA), as amended by the Housing Opportunities Through 
Modernization Act of 2016 (HOTMA), requires the Secretary to publish 
FMRs not less than annually, adjusted to be effective on October 1 of 
each year.

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 Housing Choice Voucher (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. HUD also uses the FMRs to determine initial 
renewal rents for some expiring

[[Page 53762]]

project-based Section 8 contracts, initial rents for housing assistance 
payment contracts in the Moderate Rehabilitation Single Room Occupancy 
program, rent ceilings for rental units in both the HOME Investment 
Partnerships program and the Emergency Solution Grants program, 
calculation of maximum award amounts for Continuum of Care recipients 
and the maximum amount of rent a recipient may pay for property leased 
with Continuum of Care funds, and calculation of flat rents in Public 
Housing units. In general, the FMR for an area is the amount that a 
tenant would need 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. The FMR is also used to 
determine the Performance Based Contract Administration Fee in 
Multifamily Housing. HUD's FMR calculations represent HUD's best effort 
to estimate the 40th percentile gross rent \1\ paid by recent movers 
into standard quality units in each FMR area. In addition, all rents 
subsidized under the HCV program must meet reasonable rent standards.
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    \1\ HUD also calculates and posts 50th percentile rent estimates 
for the purposes of Success Rate Payment Standards as defined at 24 
CFR 982.503(e) (estimates available at: https://www.huduser.gov/portal/datasets/50per.html).
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    On July 13, 2022, HUD published a notice of Proposed Changes to the 
Methodology Used for Calculating Fair Market Rents.\2\ For FY 2023 
FMRs, HUD is implementing the two proposed changes described in that 
notice. The first affects how HUD determines the ``recent mover 
adjustment factor'' to meet its regulatory objective of setting the FMR 
from the distribution of rental units occupied by recent movers. The 
second change affects how HUD inflates the recent mover rent to the 
most recent full calendar year using a Gross Rent Inflation Adjustment 
Factor. The methodology used in each of these steps is described in 
more detail in the following section and will apply only to FY 2023 
FMRs.
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    \2\ 87 FR 41739.
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II. Procedures for the Development of FMRs

    Section 8(c)(1) of the USHA,\3\ as amended by HOTMA (Pub. L. 114-
201, enacted July 29, 2016), requires the Secretary of HUD to publish 
FMRs not less than annually. Section 8(c)(1)(A) states that each FMR 
``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. . . .'' 
Section 8(c)(1)(B) requires that HUD publish, not less than annually, 
new FMRs on the World Wide Web or in any other manner specified by the 
Secretary, and that HUD must also notify the public of when it 
publishes FMRs by Federal Register notice. After notification, the FMRs 
``shall become effective no earlier than 30 days after the date of such 
publication,'' and HUD must provide a procedure for the public to 
comment and request a reevaluation of the FMRs in a jurisdiction before 
the FMRs become effective. Consistent with the statute, HUD is issuing 
this notice to notify the public that FY 2023 FMRs are available at 
https://www.huduser.gov/portal/datasets/fmr.html and will become 
effective on October 1, 2022. This notice also provides procedures for 
FMR reevaluation requests.
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    \3\ 42 U.S.C. 1437f.
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III. FMR Methodology

    This section provides a brief overview of how HUD computes the FY 
2023 FMRs. For complete information on how HUD derives each area's 
FMRs, see the online documentation at https://www.huduser.gov/portal/datasets/fmr.html#2023_query.

A. Geographic Area Definitions

    The FY 2023 FMRs are based on the updated metropolitan area 
definitions published by the Office of Management and Budget (OMB) on 
September 14, 2018 and first incorporated by the Census Bureau into the 
2019 American Community Survey (ACS) data, and the corresponding FY 
2022 FMRs. The FY 2023 FMRs include two newly created non-metropolitan 
county-equivalents in Alaska: Chugach Census Area and Copper River 
Census Area; and the corresponding abolishment of the Valdez-Cordova 
Census Area, AK.

B. Base Year Rents

    For FY 2023 FMRs, HUD uses the U.S. Census Bureau's 5-year ACS data 
collected between 2016 and 2020 as the ``base rents'' for the FMR 
calculations. These data are the most current ACS data available at the 
time that HUD calculates the FY 2023 FMRs. HUD pairs a ``margin of 
error'' test \4\ with an additional requirement based on the number of 
survey observations supporting the estimate to improve the statistical 
reliability of the ACS data used in the FMR calculations. The Census 
Bureau does not provide HUD with an exact count of the number of 
observations supporting the ACS estimate; rather, the U.S. Census 
Bureau provides HUD with categories of the number of survey responses 
underlying the estimate, including whether the estimate is based on 
more than 100 observations. Using these categories, HUD requires that, 
in addition to the ``margin of error'' test, ACS rent estimates must be 
based on at least 100 observations to be used as base rents.
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    \4\ HUD's margin of error test requires that the margin of error 
of the ACS estimate is less than half the size of the estimate 
itself.
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    For areas in which the 5-year ACS data for two-bedroom, standard 
quality gross rents do not pass the statistical reliability tests 
(i.e., have a margin of error ratio greater than 50 percent or fewer 
than 100 observations), HUD will use an average of the base rents over 
the three most recent years \5\ (provided that there is data available 
for at least two of these years),\6\ or if such data are not available, 
using the two-bedroom rent data within the next largest geographic 
area. For a metropolitan subarea, the next largest area is its 
containing metropolitan area. For a non-metropolitan area, the next 
largest area is the state non-metropolitan portion.
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    \5\ For FY 2023, the three years of ACS data in question are 
2018, 2019 and 2020. HUD adjusts the 2018 and 2019 data to be 
denominated in 2020 dollars using the growth in Consumer Price Index 
(CPI)-based gross rents measured between 2018 and 2020.
    \6\ To be used in the three-year average calculation, the 5-year 
estimates must be minimally statistically qualified; that is, the 
margin of error of the estimates must be less than half the size of 
the estimate.
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C. Measures of Rent Inflation Calculated From Private-Sector Data

    As described in the following sections, HUD attempts to make the 
FMRs ``as of'' the current fiscal year by accounting for inflation from 
the vintage of the ACS estimates to the present. In previous years, HUD 
has only used rent inflation as measured by the Consumer Price Index, 
as reported by the Bureau of Labor Statistics. In its calculation of FY 
2023 FMRs, however, HUD is using the CPI in conjunction with measures 
of rent as reported by several private companies to better capture 
local rent inflation dynamics, as the CPI is only available at the 
metropolitan level for the nation's largest metropolitan areas. The 
measures of rent used by HUD are the RealPage (formerly Axiometrics) 
average effective rent per unit, Moody's Analytics REIS average market 
rent, CoStar Group average effective rent, CoreLogic, Inc. single-
family combined 3-bedroom median rent, ApartmentList Rent Estimates, 
and Zillow Observed Rent Index.
    In calculating a measure of inflation from these data, HUD first 
takes the annual average of each statistic, then its year-to-year 
change. HUD then takes the

[[Page 53763]]

mean of changes from all available sources for each area. Next, HUD 
takes an average of this private-sector measure of rent inflation with 
rent inflation as captured by the CPI for the area, where the private-
sector measure is weighted at 60 percent and the CPI rent inflation 
measure is weighted at 40 percent. Finally, HUD averages the result of 
this step with the year-to-year change in the CPI housing fuels and 
utilities index for the area in order to make the resulting inflation 
measure reflective of gross rents.

D. Recent-Mover Factors

    Following the assignment of the standard quality two-bedroom rent 
described above, HUD applies a recent-mover factor to these rents. HUD 
traditionally calculates the recent-mover factor as the change between 
the 5-year ACS standard quality two-bedroom gross rent and the 1-year 
ACS recent mover gross rent for the recent mover factor area. HUD has 
changed the calculation of the FY 2023 recent mover factor from 
previous years due to the unavailability of ACS2020 1-year estimates. 
The U.S. Census Bureau did not release standard 1-year estimates from 
the 2020 American Community Survey (ACS) due to the impacts of the 
COVID-19 pandemic on data collection.
    To replace missing 2020 ACS 1-year rent data, HUD uses a multi-
prong approach. While the U.S. Census Bureau will not provide 1-year 
tabulations of 2020 ACS data at the FMR-area level, the U.S. Census 
Bureau does provide a special tabulation of the 5-year ACS data for 
2020 of the rents paid for standard quality units by persons who moved 
into their units in 2019 and 2020 and responded to the 2019 or 2020 ACS 
surveys. This differs from the usual recent mover tabulation of 1-year 
ACS data as in the regular tabulation, in which all respondents come 
from a single ACS year and are included if they had moved into their 
unit during the prior 2 years. While the 40th percentile rents 
estimated from these two samples are similar, the estimates from the 5-
year ACS sample tend to be slightly lower than those from the usual 1-
year tabulations.
    To correct for the tendency for the recent mover estimate derived 
from ACS 5-year data to be lower than that derived from ACS one-year 
data, as well as any error that may be introduced by relying heavily on 
the part of the 5-year ACS collected in 2020, HUD takes the average of 
the recent mover factor calculated with 2019 1-year ACS recent mover 
rent inflated by the 2019-2020 gross rent change, and the recent mover 
factor from the 2020 5-year ACS recent mover rent. HUD calculates the 
2019-2020 gross rent change in different ways depending on the 
availability of data. For example, in areas where private sources of 
rental data provide sufficient coverage (3 or more sources), HUD uses 
the composite private sector and CPI inflation measure described in the 
previous section. For areas without private data coverage, HUD uses the 
2019-2020 gross rent CPI change.
    The ACS rent estimates used in the recent mover factor calculation 
must meet the same statistical quality checks used in evaluating the 
base rent estimate, specifically, it must have a margin of error of 
less than half the estimate, and a sample size of at least 100 survey 
cases. If an area's recent mover estimate does not meet these criteria, 
HUD uses the estimate for the next larger area of geography containing 
the FMR area.
    HUD does not allow recent-mover factors to lower the standard 
quality base rent; therefore, the recent mover factor cannot be less 
than 1. Applying the recent-mover factor to the standard quality base 
rent produces an ``as of'' 2020 recent mover two-bedroom gross rent for 
the FMR area.

E. Other Rent Survey Data

    HUD calculates base rents for the insular areas using data 
collected during the 2010 decennial census of American Samoa, the 
Northern Mariana Islands, and the Virgin Islands beginning with the FY 
2016 FMRs.\7\ HUD updates the 2010 base year data to 2020 using the 
growth in national ACS data for the FY 2023 FMRs. Note that while the 
2010 decennial census also included Guam, HUD uses the result of a more 
recent rent survey in calculating the FMRs for Guam, as discussed in 
the following paragraph.
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    \7\ The ACS is not conducted in the Pacific Islands (Guam, 
Northern Mariana Islands and American Samoa) or the US Virgin 
Islands. As part of the 2010 Decennial Census, the Census Bureau 
conducted ``long-form'' sample surveys for these areas. HUD uses the 
results gathered by this long form survey for the FY 2023 FMRs.
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    HUD does not use ACS data to establish the base rent or recent-
mover factor in cases where it has locally collected survey data which 
are more recent than the 2019 ACS. For larger metropolitan areas that 
have valid ACS one-year recent-mover data, survey data may not be any 
older than the mid-point of the calendar year for the ACS one-year 
data. Since the ACS one-year data used for the FY 2023 FMRs is from 
2019, larger areas with valid one-year recent mover data may not use 
other survey data collected before June 30, 2019 for the FY 2023 FMRs. 
Areas without statistically reliable 1-year ACS data may continue to 
use local survey data until the mid-point of the 5-year ACS data is 
more recent than the local survey. For FY 2023 FMRs, the following are 
Metropolitan Statistical Areas (MSAs), HUD Metro FMR Areas, or non-
metropolitan counties that have FMRs based on local ad hoc surveys:
     HUD uses survey data from 2018 to calculate the FMRs for 
Coos County, OR; Curry County, OR; and Douglas County, OR.
     HUD uses survey data from 2019 to calculate the FMRs for 
Kauai County, HI; Eugene-Springfield, OR MSA; Worcester, MA HUD Metro 
FMR Area; and Guam.
     HUD uses survey data from 2020 to calculate the FMRs for 
Houston-The Woodlands-Sugar Land, TX HUD Metro FMR Area, Knox County, 
ME; Lincoln County, ME; and Waldo County, ME.
     HUD uses survey data from 2021 to calculate the FMRs for 
Asheville, NC HUD Metro FMR Area; Boston-Cambridge-Quincy, MA-NH HUD 
Metro FMR Area; Bremerton-Silverdale, WA MSA; Iron County, UT; New 
York, NY HUD Metro FMR Area; Portland, ME HUD Metro FMR Area; Portland-
Vancouver-Hillsboro, OR-WA MSA; San Diego-Carlsbad, CA MSA; Santa 
Maria-Santa Barbara, CA MSA; Seattle-Bellevue, WA HUD Metro FMR Area; 
and Transylvania County, NC.
     HUD uses survey data from 2022 to calculate the FMRs for 
Salinas, CA MSA; San Benito County, CA HUD Metro FMR Area; and Santa 
Cruz-Watsonville, CA MSA.

F. Gross Rent Inflation Adjustment Factors

    HUD ordinarily updates the latest ACS-based rent estimates with one 
year of gross rent inflation measured with the 23 local and 4 regional 
CPI components rent of primary residence and household fuels and 
utilities depending on the location of the FMR area. For FY 2023, HUD 
augments the CPI methodology by including available private data 
sources along with CPI data in calculating a weighted average gross 
rent inflation factor that is used to update the ACS-based ``as of'' 
2020 rent through 2021. HUD applies a weight of 60 percent to the 
average of the change in private data sources and 40 percent to the 
annual change in CPI gross rents. For example, in areas without Bureau 
of Labor Statistics (BLS) metro CPI data but that do have a sufficient 
number of private sector data sources (at least 3), the calculation of 
the gross rent inflation factor includes the weighted average change in 
private rent data (60 percent) along with regional CPI data (40

[[Page 53764]]

percent). In areas covered by BLS Class A metropolitan CPI data, HUD 
calculates the inflation adjustment as the weighted average of changes 
in rents from all available private data sources for the area (60 
percent) and the change in rents measured by the metropolitan CPI (40 
percent). In places without sufficient private rent data sources, the 
actual inflation adjustment process using regional CPI data is 
unchanged from FY 2022 and prior FMR vintages. In all cases, rent 
change information is blended with CPI fuels and utilities changes to 
estimate changes in gross rents.

G. Trend Factor Forecasts

    Following the application of the appropriate gross rent inflation 
factor, HUD trends the gross rent estimate from 2021 to FY 2023 using a 
trend factor which is based on local or regional forecasts of CPI gross 
rent data. HUD derived a trend factor for each Class A CPI area and 
Class B/C CPI region using time series models based on national inputs 
(National Input Model or NIM), local inputs (Local Input Model or LIM) 
and historical values of the predicted series (Pure Time Series--PTS). 
HUD chose the actual model used for each CPI area's trend factor based 
on which model generates the lowest Root Mean Square Error (RMSE) 
statistic and applied the trend factors to the corresponding FMR areas. 
HUD established the type of model for each forecast (NIM, LIM, or PTS) 
for the FY 2020 FMRs and is keeping it constant for 5 years. HUD will 
reassess the model selections during the calculation of the FY 2025 
FMRs. More details on the trend factor forecasts are available in the 
June 5, 2019 Federal Register notice (84 FR 26141) and are available at 
https://www.federalregister.gov/documents/2019/06/05/2019-11763/proposed-changes-to-the-methodology-used-for-estimating-fair-market-rents.

H. Bedroom Rent Adjustments

    HUD updates the bedroom ratios used in the calculation of FMRs 
annually. The bedroom ratios HUD uses in the calculation of FY 2023 
FMRs are calculated from three, five-year ACS data series (2014-2018, 
2015-2019, and 2016-2020). HUD only uses estimates with a margin of 
error ratio of less than 50 percent. If an area does not have reliable 
estimates in at least two of the previous three ACS releases, HUD uses 
the bedroom ratios for the area's larger parent geography.
    HUD uses two-bedroom units for its primary calculation of FMR 
estimates. This is generally the most common size of rental unit and, 
therefore, the most reliable to survey and analyze. After estimating 
two-bedroom FMRs, HUD calculates bedroom ratios for each FMR area which 
relate the prices of smaller and larger units to the cost of two-
bedroom units. To ensure an adequate distributional fit in these 
bedroom ratio calculations for individual FMR areas, HUD establishes 
bedroom interval ranges which set upper and lower limits for bedroom 
ratios nationwide, based on an analysis of the range of such intervals 
for all areas with large enough samples to permit accurate bedroom 
ratio determinations.
    In the calculation of FY 2023 FMR estimates, HUD sets the bedroom 
interval ranges as follows: efficiency FMRs are constrained to fall 
between 0.67 and 0.87 of the two-bedroom FMR; one-bedroom FMRs must be 
between 0.76 and 0.89 of the two-bedroom FMR; three-bedroom FMRs (prior 
to the adjustments described below) must be between 1.12 and 1.31 of 
the two-bedroom FMR; and four-bedroom FMRs (again, prior to adjustment) 
must be between 1.25 and 1.58 of the two-bedroom FMR. Given that these 
interval ranges partially overlap across unit bedroom counts, HUD 
further adjusts bedroom ratios for a given FMR area, if necessary, to 
ensure that higher bedroom-count units have higher rents than lower 
bedroom-count units within that area.
    HUD also further adjusts the rents for three-bedroom and larger 
units to reflect HUD's policy to set higher rents for these units.\8\ 
This adjustment is intended to increase the likelihood that the largest 
families, who have the most difficulty in leasing units, will be 
successful in finding eligible program units. The adjustment adds 8.7 
percent to the unadjusted three-bedroom FMR estimates and adds 7.7 
percent to the unadjusted four-bedroom FMR estimates.
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    \8\ As mentioned above, HUD applies the interval ranges for the 
three-bedroom and four-bedroom FMR ratios prior to making these 
adjustments. In other words, the adjusted three- and four-bedroom 
FMRs can exceed the interval ranges but the unadjusted FMRs cannot.
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    HUD derives FMRs for units with more than four bedrooms 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. 
Similarly, HUD derives FMRs for single-room occupancy units by 
subtracting 25 percent from the zero-bedroom FMR (i.e., they are set at 
0.75 times the zero-bedroom (efficiency) FMR).\9\
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    \9\ As established in the interim rules implementing the 
provisions of the Quality Housing and Work Responsibility Act of 
1998 (Title V of the FY 1999 HUD Appropriations Act; Pub. L. 105-
276) in 24 CFR 982.604.
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I. Minimum FMRs

    All FMRs are subject to a minimum rent based on state or national 
non-metropolitan area median rent. HUD calculates a population-weighted 
median two-bedroom FMR across all non-metropolitan counties or county-
equivalents of each state, which, for the purposes of FMRs, is the 
state minimum rent. State-minimum rents for each FMR area are available 
in the FY 2023 FMR Documentation System, available at https://www.huduser.gov/portal/datasets/fmr.html#2023_query. HUD also 
calculates the population-weighted median FMR rent across all non-
metropolitan areas of the country, which, for the purposes of FMRs, is 
the national non-metropolitan rent. For FY 2023, the national non-
metropolitan rent is $826. The applicable minimum rent for a particular 
area is the lower of the state or national non-metropolitan median. 
Each area's two-bedroom FMR must be no less than the applicable minimum 
rent.

J. Limit on FMR Decreases

    Within the Small Area FMR final rule published on November 16, 
2016,\10\ HUD amended 24 CFR 888.113 to include a limit on the amount 
that FMRs may annually decrease. The current year's FMRs resulting from 
the application of the bedroom ratios, as discussed in section (E) 
above, may be no less than 90 percent of the prior year's FMRs for 
units with the same number of bedrooms. Accordingly, if the current 
year's FMRs are less than 90 percent of the prior year's FMRs as 
calculated by the above methodology, HUD sets the current year's FMRs 
equal to 90 percent of the prior year's FMRs. For areas where use of 
Small Area FMRs in the administration of their voucher programs is 
required, the FY 2023 Small Area FMRs may be no less than 90 percent of 
the FY 2022 Small Area FMRs. For all other metropolitan areas, the FY 
2023 Small Area FMRs may be no less than 90 percent of the greater of 
the FY 2022 metropolitan area wide FMRs or the applicable FY 2022 Small 
Area FMR.
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    \10\ 81 FR 80567.
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    PHAs operating in areas where the calculated FMR is lower than the 
published FMR (i.e., those areas where HUD has limited the decrease in 
the annual change in the FMR to 10

[[Page 53765]]

percent) may request payment standards below the basic range (24 CFR 
982.503(d)) and reference the ``unfloored'' rents (i.e., the 
unfinalized FMRs calculated by HUD prior to application of the 10-
percent-decrease limit) depicted in the FY 2023 FMR Documentation 
System (available at: https://www.huduser.gov/portal/datasets/fmr.html#2023_query).

IV. Small Area FMRs

    HUD lists Small Area FMRs for all metropolitan areas in the Small 
Area FMR Schedule. Metropolitan PHAs operating in areas where the use 
of Small Area FMRs is not mandated should contact their local HUD field 
office to request approval for using Small Area FMRs in the operation 
of their Housing Choice Voucher program.
    HUD calculates Small Area FMRs directly from the standard quality 
gross rents provided to HUD by the Census Bureau for ZIP Code 
Tabulation Areas (ZCTAs) when such data are statistically reliable. The 
ZCTA two-bedroom equivalent 40th percentile gross rent is analogous to 
the standard quality base rents set for metropolitan areas and non-
metropolitan counties. For each ZCTA with statistically reliable gross 
rent estimates, using the expanded test of statistical reliability 
first used in FY 2018 (i.e., estimates with margins of error ratios 
below 50 percent and based on at least 100 observations), HUD 
calculates a two-bedroom equivalent 40th percentile gross rent using 
the first statistically reliable gross rent distribution data from the 
following data sets (in this order): two-bedroom gross rents, one-
bedroom gross rents, and three-bedroom gross rents. If either the one-
bedroom or three-bedroom gross rent data are used because the two-
bedroom gross rent data are not statistically reliable, HUD converts 
the one-bedroom or three-bedroom 40th percentile gross rent to a two-
bedroom equivalent rent using the bedroom ratios for the ZCTA's parent 
metropolitan area. To increase stability to these Small Area FMR 
estimates, HUD averages the latest three years of gross rent 
estimates.\11\
---------------------------------------------------------------------------

    \11\ For example, for FY 2023 Small Area FMRs, HUD averages the 
gross rents from 2018, 2019, and 2020 5-Year ACS estimates. The 2018 
and 2019 gross rent estimates would be adjusted to 2020 dollars 
using the metropolitan area's gross rent CPI adjustment factors.
---------------------------------------------------------------------------

    For ZCTAs without usable gross rent data by bedroom size, HUD 
calculates Small Area FMRs using the rent ratio method. To calculate 
Small Area FMRs using a rent ratio, HUD divides the median gross rent 
across all bedrooms for the ZCTA by the similar median gross rent for 
the metropolitan area of the ZCTA. If a ZCTA does not have reliable 
rent data at the all-bedroom level, HUD will then check to see if the 
ZCTA borders other ZCTAs that themselves have reliable rent data. If at 
least half of a ZCTA's ``neighbors'' have such data, HUD will use the 
weighted average of those estimates as the basis for the Small Area FMR 
rather than a county proxy, where the weight is the length of the 
shared boundary between the ZCTA and its neighbor. In small areas where 
the neighboring ZCTA median gross rents are not statistically reliable, 
HUD substitutes the median gross rent for the county containing the ZIP 
code in the numerator of the rent ratio calculation. HUD multiplies 
this rent ratio by the current two-bedroom FMR for the metropolitan 
area containing the small area to generate the current year two-bedroom 
FMR for the small area.
    HUD continues to use a rolling average of ACS data in calculating 
the Small Area FMR rent ratios. HUD believes coupling the most current 
data with previous year's data minimizes excessive year-to-year 
variability in Small Area FMR rent ratios due to sampling variance. 
Therefore, for FY 2023 Small Area FMRs, HUD has updated the rent ratios 
to use an average of the rent ratios calculated from the 2014-2018, 
2015-2019, and 2016-2020 5-year ACS estimates.
    HUD limits each two-bedroom Small Area FMR to be no more than 150 
percent of the two-bedroom FMR for the metropolitan area where the ZIP 
code is located.

V. Response to Comments on Proposed Changes to FMR Calculation

    In response to HUD's July 13, 2022, notice of Proposed Changes to 
the Methodology Used for Calculating Fair Market Rents, HUD received 67 
public comments. HUD responds to the public comments received below.

A. Public Comments Supporting the Proposed Changes to the Methodology 
Used for Calculating FMRs

    Numerous commenters expressed support of the proposed changes to 
utilize private data sources in the methodology used for calculating FY 
2023 FMRs, with some commenters supporting the use of private data 
sources in subsequent FMR calculations after FY 2023. Other commenters 
expressed general support of changing the methodology used for 
calculating FMRs without commenting substantively on the proposed 
methodology used for calculating FMRs.
    Some commenters expressly stated their belief that private data 
sources more accurately reflect the current prices in the rental 
market. Other commenters supported the proposed changes to the 
methodology used for calculating FMRs because the commenters believe 
that current calculation methods cause FMR amounts to consistently lag 
behind actual rent amounts. Multiple commenters recommended that HUD 
use the proposed inflation adjustment of the average of changes in 
rents from all available private data sources for the area and the 
change in rents measured by the Bureau of Labor Statistics (BLS) 
metropolitan CPI.
    One commenter expressed agreement with HUD's proposed strategy to 
replace the missing 2020 ACS 1-year rent data. The commenter also 
expressed that the 5-year ACS sample tends to be lower than the usual 
1-year tabulation and that private data sources can provide sufficient 
coverage to more accurately track changes in certain types of rental 
markets than CPI. The commenter further stated its agreement with HUD's 
proposed strategy to augment the CPI methodology by including private 
data sources, along with CPI, in the calculation of the average gross 
rent inflation factor in the limited situations proposed by HUD.
    HUD Response: For the calculation of FY 2023 FMRs, HUD is 
augmenting inflation data from the CPI with measures of rent inflation 
calculated from private-sector data. HUD is making this change in 
response to the lack of availability of ACS 2020 data and the changes 
in rental markets that have occurred following the COVID-19 pandemic. 
HUD feels that inflation factors based on the CPI and, where available, 
at least three and up to six of the private-sector data sources 
previously mentioned will provide the best estimate of the 40th 
percentile gross rent paid by recent movers for FY 2023. HUD will 
continue to evaluate both the impacts of these specific changes and its 
overall FMR calculation methodology and determine the best methodology 
to use in future years.

B. Public Comments Recommending Additional Changes or Alterations to 
the Proposed Changes to the Methodology Used for Calculating FMRs

i. Suggestions To Use Additional Private Data Sources
    Multiple commenters expressed support for the use of additional 
private data sources beyond those proposed in the Notice of Proposed 
Changes for Calculating Fair Market Rents. Some commenters specifically 
requested that HUD consider using additional private

[[Page 53766]]

data sources for both large metropolitan statistical areas (MSA) and 
submarkets to MSAs.
    HUD Response: The six sources considered by HUD represent a range 
of metrics which, when taken together and augmented with the CPI, 
should provide a reasonable measure of rent inflation. The measures of 
rent used by HUD are the RealPage (formerly Axiometrics) average 
effective rent per unit, Moody's Analytics REIS average market rent, 
CoStar Group average effective rent, CoreLogic, Inc. single-family 
combined 3-bedroom median rent, ApartmentList Rent Estimates, and 
Zillow Observed Rent Index. HUD requires at least three private data 
sources to ensure that no single source unduly influences the FMR 
calculation.
ii. Suggestions To Use Alternative Private Data Sources
    One commenter, citing a study conducted by 2M Research (2019), 
suggested that HUD use Axiometrics (RealPage) data, rather than Zillow 
data, to estimate the Autoregressive Integrated Moving Average. The 
commenter advised that this approach lends more geographic resolution 
to trend factors and could lead to more accurate FMRs. Further citing 
the 2M Research study, the commenter stated that the Axiometrics 
(RealPage) data, compared to American Community Survey (ACS) data, 
provided results that indicate the Axiometrics (Real Page) measure 
``erent'' is a viable option for estimating trends in FMR.
    One commenter recommended the use of data produced by Zillow for 
setting FMR amounts, while another commenter suggested that data from 
Zillow be excluded from use with FMR calculations. One commenter 
recommended the use of data sourced from Craigslist for calculating FMR 
amounts.
    Commenters stated that each year several HCV programs conduct local 
rental housing costs surveys to contest HUD's published FMRs. The 
commenter suggested that HUD allow these studies to be used for FMR 
calculation methodology. Commenters also encouraged HUD to assess the 
feasibility of using observed CPI data or private data sources to 
adjust rents forward from the 2020 ACS to 2022, rather than 2021.
    Another commenter stated that HUD should consider using the 
commenter's data in the methodology used for calculating FMRs. The 
commenter stated that it collects extensive data that includes hundreds 
of data points that corroborate all nine factors required for 
comparability in determining if rent is reasonable, as described in 24 
CFR 982. The commenter also advised that its data is used by hundreds 
of public housing agencies in determining rent reasonableness in the 
HCV Program.
    HUD Response: As previously stated, the six sources HUD uses in its 
FY 2023 FMR calculation should provide a broad measure of rent 
inflation. HUD will continue to evaluate these and other sources of 
rent data to assess the accuracy of its FMR calculation, although it 
should be noted Craigslist does not make available aggregate rent 
statistics based on its rental listings to HUD.
    HUD continues to use PHA-sponsored survey data in FMR calculation 
and PHAs may continue to submit such data. HUD is committed to 
continuing to assess its FMR calculation and make improvements when 
warranted; however, at this time HUD is not including the private 
measures of rent inflation in the trend factor component of FMR 
calculation, as the forecasting of rent levels is a complex process and 
HUD does not have an evidenced-based method for doing so. In addition, 
when HUD established the practice of forecasting local and regional CPI 
data for the FY 2020 FMRs, it committed to using the same model 
structure initially selected for each area through the FY 2024 FMRs. 
Estimating new forecasting models including private rent data would not 
be consisten with HUD's previous commitment.
iii. Suggestions Regarding Changes That Should Be Made Based on the 
Data in the Private Data Sources Identified in the Proposed Changes to 
the Methodology Used for Calculating FMRs
    One commenter stated that HUD must calculate utilities in FMRs the 
way it has done previously because utility data is not listed within 
the private data sources. Another commenter stated that, for each 
private data source that uses ACS data that is not available for 2020, 
HUD should account for this lag in accurately capturing rising rent 
costs.
    One commenter expressed concern that HUD's forecast of gross 
Consumer Price Index (CPI) as the trend factor should also be augmented 
by private data sources. The commenter stated that the private data 
sources being used are limited to data using 2020 and 2021 data but not 
factoring 2022 and 2023 forecast. The commenter expressed concern that 
this lack of factoring will not reflect the necessary increase in FMRs.
    Another commenter stated that private data sources may introduce 
more volatility in annual FMR changes. The commenter encouraged HUD to 
protect participants from the loss of housing due to dramatic declines 
of FMRs. One commenter recommended that HUD could use private data 
sources, which are collected in real time, to monitor the performance 
of the published FMRs. HUD could then use that monitoring data to 
update FMRs more frequently than annually, if market data crossed set 
thresholds.
    HUD Response: Each inflation-adjustment portion of the FMR 
calculation is a gross rent adjustment, meaning it is a weighted 
average of shelter rent inflation and utility inflation as reported by 
the CPI fuels and utilities series. As previously stated, HUD is not 
including the private measures of rent inflation in the trend factor 
component of FMR calculation as it does not have an evidenced-based 
method for doing so. Per HUD regulations, FMRs may not decline by more 
than 10 percent from the prior year, in order to protect against 
dramatic declines. Additionally, Public Housing Agencies administering 
the Housing Choice Voucher program may adopt policies that limit a 
decline in payment standards for in-place households.
iv. Suggestions and Comments Regarding Recommendations Related to the 
Use of American Community Survey (ACS) Data
    One commenter recommended that HUD use more localized data for 
calculating FMRs because it provides more accurate information than 
that provided by ACS. Some commenters expressed that 5-year ACS data 
does not sufficiently capture current rental prices. One commenter 
recommended the use of an additional inflation multiplier to account 
for the lagged inflationary data. Another commenter stated that the 1-
year ACS adjusted for inflation using the CPI consistently understates 
the 40th percentile for gross rents in their locality.
    HUD Response: HUD's changes to its calculation methodology 
incorporate more local rental market inflation data than it has used in 
the past. As described previously, HUD performs a ``recent mover 
adjustment'' to all areas to account for the time lag of the 5-year 
ACS. The cumulative inflation adjustments used in the FMR calculation 
process make the FMRs the best estimate of rents ``as of'' FY 2023; 
therefore, HUD feels no further inflation adjustment is warranted.
v. Comments Regarding the Reduction of or Recipient Disagreement With 
Calculated FMR Amounts
    One commenter encouraged HUD to consider increasing the hold 
harmless

[[Page 53767]]

provision to 100 percent of the prior year FMR because of the current 
uncertainty in the rental market. Another commenter stated that, for 
any areas where the use of private data sources would result in 
inflation adjustments lower than the standard CPI adjustment, HUD 
should continue to use the CPI data in those instances for FY 2023. A 
separate commenter urged HUD to limit any year to year decreases in 
FMRs to 5 percent.
    Another commenter stated that HUD should consider revisiting the 
amount by which FMRs can decrease year over year, but that the 
commenter believes that FMR accuracy is the primary concern of HCV 
program sponsors. Another commenter stated that HUD should consider 
ways to account for the added volatility that could be introduced by 
private data sources. The commenter recommended that HUD consider 
further tightening the 10 percent yearly FMR decrease floor or to 
introduce an additional multi-year limit on the amount an FMR may 
decrease.
    One commenter expressed concerns that new development properties 
placed into service in FY 2023 will not be eligible for the hold 
harmless policy, and therefore will see a corresponding decrease in Low 
Income Housing Tax Credit rent limits should Income Limits decrease. 
One commenter encouraged HUD to allow communities to use private sector 
data to supplement FMR survey results when appealing HUD calculated 
FMR, while another commenter asked HUD to verify that PHAs will 
continue to have the opportunity to use the same FMR reevaluation 
process, under 24 CFR 888.115(a), notwithstanding the use of the 
proposed methodology. The commenter stated that to evaluate whether an 
FMR is accurate, localities will need increased transparency into the 
coverage of the private data sources used in calculating the FMR.
    HUD Response: Per HUD regulations, FMR may not decline by more than 
10 percent from the prior year, in order to protect against dramatic 
declines; however, HUD must consider the most recent data available and 
may reduce FMRs by up to 10 percent should the data warrant it. 
Additionally, Public Housing Agencies administering the Housing Choice 
Voucher program may adopt policies that limit a decline in payment 
standards for in-place tenants. For the calculation of FY 2023 FMRs, 
HUD is using an average of both private sources and CPI to avoid any 
undue volatility in the resulting FMR.
    With respect to Low Income Housing Tax Credit Rent Limits, HUD 
believes that the changes to its FMR methodology for FY 2023 will 
produce the best estimate of 40th percentile gross rents paid by recent 
movers to support high- and low- housing cost adjustments to income 
limits.
    PHAs may continue to submit ad hoc rental market surveys in support 
of reevaluation requests as described in section VI of this Notice. Ad 
hoc surveys provide a measure of the 40th percentile gross rent paid by 
recent movers, while the private sources HUD uses in its FY 2023 FMR 
calculation provide a measure of rental market inflation.

C. Public Comments Regarding Suggestions for the Methodology Used for 
Calculating FMRs After FY 2023

    When updating recent mover calculations after FY 2023, commenters 
recommend that HUD work with other federal agencies to explore the 
feasibility of using existing public data sources as an alternative to 
the CPI. Another commenter asked HUD to consider changing the 
methodology used for calculating FMRs after FY 2023 in a way that is 
more reflective of local realities and the current rental market, such 
as using different rental data sets used in private data sources.
    Beyond FY 2023, one commenter does not support the use of private 
data sources as an alternative to the CPI-based inflation adjustments 
because of concerns over the lack of methodological transparency 
inherent in the private data sources. Should HUD adopt the use of 
private data sources beyond 2023, the commenter stated that the 
methodology and estimates of the private data sources should be made 
readily available by either HUD or the data provider.
    One commenter stated that it did not understand HUD's decision to 
make these changes only effective for FY 2023 because the issues 
leading to HUD's decision to propose the changes to the methodology 
used for calculating FMRs is likely to continue past FY 2023.
    HUD Response: HUD will continue to evaluate its FMR calculation and 
determine the best methodology and data sources to use each year. This 
includes examining current data sources and working with public and 
private partners to obtain new data sources. HUD is committed to 
transparency in its FMR calculation and maintains a website where 
interested parties may see the calculation steps for any area's FMR. 
For FY 2023, this includes the average of the private measures of rent 
inflation where applicable. HUD is presenting the average in order to 
protect the proprietary data of those companies that do not make their 
data publicly available.

D. Public Comments Opposing or Expressing Concerns With the Proposed 
Changes to the Methodology Used for Calculating FMRs

i. Comments Regarding the Lack of Transparency of Private Data Sources
    One commenter expressed skepticism of the utility of the listed 
private data sources because of the high cost and lack of transparency 
involved with the use of private data, which make it impossible for 
industry stakeholders to evaluate the data. According to the commenter, 
this lack of transparency means that the statistical reliability is 
unknown and data validation is not possible with the private data 
proposed for use. Due to the lack of control and transparency of 
private data sources, another commenter stated that HUD should work 
with other federal agencies to identify and evaluate novel 
methodologies to estimate recent mover rents.
    One commenter expressed that HUD should make available an 
explanation of its criteria on how the private data sources were 
selected and will be selected in the future. Commenters encouraged HUD 
to increase public access to the private data sources if the private 
data sources will continue to be used past FY 2023. One commenter urged 
HUD to negotiate data transparency with each of the private data 
sources.
    Other commenters do not necessarily support the use of private data 
indefinitely after FY 2023 because of the lack of transparency and a 
lack of public oversight. One commenter expressed concerns with the 
lack of transparency of what private data sources are being considered 
and how HUD is defining various factors involved in HUD's intentions in 
utilizing private data sources, including how ``narrowly,'' how 
``limited,'' and what is the meaning of ``statistically valid'' is for 
HUD's purpose. The commenter also questions how HUD will determine the 
accuracy of private data sources in estimating rental market changes. 
Another commenter encouraged HUD to develop transparent, comprehensive 
public sources of up-to-date recent mover data to eventually take the 
place of private data sources.
    A commenter stated that HUD should announce exactly how it plans to 
use private sector datasets, how it will apply changes to estimation 
and trending approaches, which datasets it plans to use, which 
geographic areas these changes may affect, and at least a

[[Page 53768]]

sample of FMRs produced by these changes. One commenter urged HUD to 
harmonize the private data sources used in terms of anomalies such as 
rent concessions and control for differences that may appear in the 
various sources, as well as share publicly how it adjusts for the 
differences.
    HUD Response: Both HUD's research and external research has shown 
that the private sources of data HUD is using for FY 2023 are a 
reasonable measure of rent inflation. There are limitations in each 
data source, including that they may not cover the entirety of a given 
market in terms of geographic area, type of unit, or unit quality. For 
these reasons, HUD requires an area to be covered by at least three 
private data sources before incorporating any private data sources in 
the FMR estimates. Further, HUD takes the average of the private data 
sources along with the CPI in constructing a shelter rent inflation 
factor. HUD cannot guarantee the accuracy of its FMR calculations as 
there is no universally accepted benchmark to compare the FY 2023 FMRs 
against. However, HUD feels the methodology it is adopting for FY 2023 
FMRs is fundamentally sound and appropriate for producing the best 
estimate of the 40th percentile rent paid by recent movers. HUD has 
selected the data sources it uses in the FY 2023 FMRs in part by its 
past use of such data by HUD field economists, which includes 
evaluating the methodology of the data sources and using them to 
evaluate rental market conditions throughout the country. HUD is 
committed to transparency in its FMR calculation and maintains a 
website where interested parties may see the calculation steps for any 
area's FMR. For FY 2023, this includes the average of the private 
measures of rent inflation where applicable. HUD is presenting the 
average in order to protect the proprietary data of those companies 
that do not make their data publicly available.
ii. Comments Recommending Alternative Approaches and Expressing 
Concerns Regarding the Proposed Changes to the Methodology Used for 
Calculating FMRs
    Commenters recommended use of the CPI without the private data 
sources to trend FMRs to the current year and to calculate Recent-Mover 
factors without using private data sources. The commenters recommend 
two alternative methodology approaches from that proposed. First, the 
commenters said one method to calculate FMRs is to take the Recent-
Mover rent from the previous year, 2019 (i.e., the rent obtained by 
applying the 2019 Recent-Mover factor to the 2019 base rent) and adjust 
it forward to 2020 using a CPI-based inflation factor. Alternatively, 
the commenters said FMRs could be determined by calculating base rents 
from the 2016-2020 5-year ACS estimates in the usual way, apply a 
Recent-Mover factor calculated from the 5-year data, then compensate 
for the tendency of 5-year Recent-Mover factors to be lower with data 
from the previous year. The Commenters stated that this would mean 
multiplying the 2020 Recent-Mover rent by the ratio of the 1-year 
Recent-Mover factor to the 5-Year Recent-Mover factor from the previous 
year.
    Another commenter stated that a proposed implementation of 
localized rent inflation could potentially increase the number of areas 
that have been deemed ``lower opportunity areas,'' leading to lower 
payment standards and remove rental options in those areas.
    HUD Response: With respect to the recent mover factor, HUD is 
addressing the lack of the typical 1-year ACS data by using both 
inflated 2019 ACS 1-year recent-mover data, and 2020 ACS 5-year recent-
mover data. While HUD is using private sources of rent inflation data 
where available, it is always doing so in conjunction with the CPI to 
capture as broad a measure as possible of rental market inflation.
    HUD is making no designation of ``high'' or ``low'' opportunity 
areas in this Notice.
iii. Comments Expressing Concerns That the Private Source Data Is Not 
Reflective of the Relevant Rental Markets
    One commenter stated that any private data sources selected for use 
should be representative of the entire rental housing market. 
Commenters expressed concern that the selected data sources may only be 
representative of single-family homes or rental listings representative 
of the higher end of the rental market.
    Another commenter stated their concern that the use of the private 
data sources introduces biases into FMRs that may affect HUD's relative 
distribution of housing assistance payments. The commenter referenced a 
study by the University of Puerto Rico titled ``The Effects of HUD's 
Area Median Income and Fair Market Rent Limits on Puerto Rico's Rental 
Market, Workforce and Economy'' that the commenter stated the study 
determined that the current method for calculating FMRs has had a 
positive effect on reducing rent burdens for low-income households. The 
commenter stated that the proposed private data sources do not reflect 
the rental market of their territory because the percentage of 
households classified as non-cash paying renters varies significantly 
from many other states. Further, the commenter claimed that a higher 
percentage of landlords in their territory own one or two rental units, 
meaning these rental units are less likely be captured in private data 
sources.
    Commenters expressed skepticism over the use of private data 
sources in the calculation of FMRs; however, the commenters indicated 
their support of the proposal within the Notice of Proposed Changes for 
Calculating Fair Market Rents if HUD could demonstrate persuasively 
that the use of private data produces a significantly more accurate 
estimate of market-based rents.
    Commenters expressed concerns with how representative the private 
data is of the entirety of rental markets. One commenter identified 
that CoreLogic's data does not include multifamily data and should be 
combined with other data; Zillow's data is weighted based on how often 
properties are viewed on Zillow and the commenter advises that HUD 
should adjust for this weighting; and ApartmentList's Rent Estimates 
does not make clear if it uses price tiers and HUD should ensure that 
low priced units are usually excluded so as to not lead to an 
underestimation of rent costs.
    Another commenter expressed that the proposed changes to the 
methodology used for calculating FMRs will not help voucher recipients 
in their area because the private data sources do not include data on 
the commenter's rental market.
    HUD Response: HUD recognizes the concern that any single measure of 
rent inflation may be based on an unrepresentative sample of a market 
and may therefore introduce bias into the FMR calculation. HUD attempts 
to address this in the calculation of FY 2023 FMRs by requiring at 
least three private data sources to ensure that no single source unduly 
influences the FMR calculation, and by averaging rent inflation 
captured by private sources with the CPI to capture as broad a measure 
as possible of rental market inflation.
    For Puerto Rico, HUD does not use any private measures of rent 
inflation, and instead uses gross rent inflation reported by the Puerto 
Rico Department of Labor and Human Resources (DTRH), Bureau of 
Statistics.
    With respect to the representativeness of the private sources of 
rent inflation data, HUD attempts to address this in the calculation of 
FY 2023 FMRs by requiring at least three private data sources to ensure 
that no single source

[[Page 53769]]

unduly influences the FMR calculation, and by averaging rent inflation 
captured by private sources with the CPI to capture as broad a measure 
as possible of rental market inflation.
iv. Comments Concerning the Effect of Private Source Data on Flat Rents
    Some commenters expressed concern about the effect on Flat Rents 
from the use of private data sources for calculating FMRs. The 
commenters requested that PHAs be given the ability to freeze Flat 
Rents based on the 2022 FMRs/SAFMRs until the ACS is updated and the 
impacts of the pandemic have waned from the rental market.
    HUD Response: HUD believes that the methodology it is adopting for 
the calculation of FY 2023 FMRs produces the best estimates of 40th 
percentile gross rents paid by recent movers. PHAs may continue to 
apply for exception flat rents as described in PIH Notice 2021-27.

E. Public Comments Concerning the Effective Date and Evaluations

i. Request for Analysis and Evaluation of the Effectiveness of the 
Proposed Changes
    Some commenters requested that HUD retrospectively evaluate the FY 
2023 FMR data to determine if the proposed changes provided more 
accurate information on rental markets. One commenter urged HUD to do a 
historical comparison of rent trends shown in the private data sources 
that are eventually set for FY 2023 with those documented by the 2010 
and 2020 Census.
    A commenter stated that HUD should assess the effectiveness of the 
use of private data sources used in FY 2023 and should discontinue the 
use of any private data source that does not further the goal of 
improving the accuracy of FMRs. The commenter expressed that the 
assessment of the effectiveness of the private data should focus on the 
accuracy of the private data sources and the improvement of the leasing 
experience for voucher holders. Commenters stated that HUD should make 
its assessment of the accuracy of data in setting FMRs public. One 
commenter stated that HUD should annually produce a public report 
regarding the accuracy of private data sources in setting FMRs. Other 
commenters requested that HUD provide funding to PHAs to conduct local 
studies on rental data.
    HUD Response: Given that FMRs are calculated ahead of each fiscal 
year, there is inherent uncertainty in the FMR calculation process. HUD 
is committed to assessing the accuracy of its FMR calculations 
including through the use of retrospective analysis, backtesting of new 
methods and data, and independent research.
    HUD's ability to provide funds to PHAs for local rental market 
surveys is dependent on the availability of funds and their authorized 
uses specified in annual appropriations statutes.
ii. Comments Regarding Impacts to Grant Recipients From the Timing of 
the Effective Date of the FY 2023 FMRs
    Commenters stated concerns about the timeliness of the publication 
of the Notice of Proposed Changes for Calculating Fair Market Rents, 
encouraging HUD to implement the proposed changes to the methodology 
for calculating FY 2023 FMRs no later than October 1, 2022. One 
commenter indicated that, should the FY 2023 FMRs be finalized after 
October 1, 2022, FMR amounts should be applied retroactively to the 
start of the HUD FY. Another commenter encouraged HUD to publish any 
future changes to its FMR methodology in time to permit both thoughtful 
public comments and input concerning those comments, to allow for HUD's 
consideration of those comments along with potential changes to its 
proposals.
    One commenter stated that the October 1, 2022 effective date of the 
FY 2023 FMRs would generally not allow grants with an application 
deadline prior to October 1, 2022 to receive an increase in FMR amounts 
caused by the proposed changes. The commenter indicated that grant 
awards could be increased based on FMR levels; but said HUD's scoring 
system in the Continuum of Care (CoC) competitive process encourages 
reallocation of funds. According to the commenter, this scoring process 
discourages communities from seeking the full FMR levels because the 
community is incentivized to reduce total budget per project. The 
commenter also stated that, while grant recipients can seek increases 
in FMR levels, the grant awards are based on increases that HUD allows 
and sometimes are not raised to the actual FMR levels.
    Other commenters stated that the yearly change of FMR amounts in 
October does nothing to assist grant recipients for programs that have 
already submitted budgets based on a previous year's FMRs. The 
commenters encouraged HUD to correct for this situation. One commenter 
urged HUD to announce changes to its methodology for FY 2024 in the 
first half of calendar year 2023.
    HUD Response: This Notice announces new FMRs for 2023 in line with 
previous years' publication of FMR updates. HUD is committed to 
allowing for public input in future changes to its FMR calculation, 
including through comment on this Notice.
    Additionally, this Notice is limited to the announcement of new 
FMRs, and the methodology used in their calculation. HUD is required by 
statute to update FMRs not less than annually and strives to make these 
updates effective at the start of each federal fiscal year. Grants 
programs, including the Continuum of Care grant program, will provide 
separate guidance on the use of FMRs within those programs, and will 
consider the appropriate timing of budget submissions with respect to 
the annual update of FMRs.

F. Public Comments That Address Alternative FMR Calculations and the 
Determination of FMR Amounts

i. Comments Concerning the FMR Amounts
    Multiple commenters indicated that FMR values are currently too 
low, causing individuals and families to be unable to find housing or 
requiring displacement of people, potentially to unsafe and unhealthy 
areas.
    HUD Response: In the Housing Choice Voucher program, PHAs may set 
payment standard amounts at up to 110 percent of the FMR as part of 
their normal program operations. Additionally, PHAs have a variety of 
options beyond setting payment standards at 110 percent of the FMR. 
PHAs may pursue exception payment standards above 110 percent of FMR, 
including through the expedited waiver process described in PIH Notice 
2021-34. PHAs may apply for success rate payment standards, which allow 
for setting payment standards using the 50th percentile estimates of 
rent. PHAs may, with HUD approval, establish an exception payment 
standard of more than 120 percent of the published FMR if required as a 
reasonable accommodation in accordance with 24 CFR part 8 for a family 
that includes a person with a disability after approval from HUD. 
Finally, PHAs may adopt Small Area FMRs (or use Small Area FMRs as the 
basis for exception payment standards), which may allow for payment 
standards of up to 160 percent of the metropolitan FMR in high-rent ZIP 
Codes.
ii. Comments Suggesting Alternative FMR Calculation Methodology
    One commenter stated that HUD should increase the flexibilities 
given to

[[Page 53770]]

public housing agencies because local agencies can better match rental 
prices than any national methodology. Another commenter recommended 
that HUD utilize its regulatory authority or recommend the issuance of 
an Executive Order or legislation to declare an emergency 20 percent 
increase to all current FMR schedules as they apply to HCV programs. 
The commenter advised that this emergency action could be discontinued 
after the rental market crisis abates.
    One commenter encouraged the use of a ``rent reasonableness'' 
approach in the setting of FMR amounts, rather than the method 
currently used to set FMR rates.
    Some commenters recommended that HUD should consider vacancy rates 
as part of the methodology used to calculate FMRs to address adverse 
rental housing market conditions, as defined by HUD. Another commenter 
recommended that FMRs be calculated based on a combination of the 
number of persons in a household, number of bedrooms in the household, 
the household income, and then multiplied by a percentage of the 
household income. One commenter recommended that within every ZIP code, 
each PHA should reserve a certain percentage of housing for Section 8 
tenants.
    Another commenter submitted numerous recommendations for 
calculating FMRs and improving housing services for residents, 
including: considering household incomes in real time; creating 
information for rental programs that detail who is eligible for 
programs; establishing diversity in renting rates versus properties 
available for rent; establishing market rental rates corelated with the 
average income of the state or territory; allocating HUD funding based 
on region rather than nationwide; creating affordable housing 
opportunities for low and moderate income tenants who are single 
parents or young; identifying more viable properties for affordable 
housing inventory; creating and promoting educational opportunities for 
diverse populations on topics of budget management, student loans, 
renting and homeownership; increasing rental program assistance 
reflective of actual market conditions; requiring renting counseling as 
an eligibility requirement for rental assistance programs; requiring 
evidence of job placement searches to receive assistance; promoting job 
placement opportunities; establishing specific funds for rental 
programs for victims of domestic violence; creating programs that 
support local residents by providing tools for rental and 
homeownership.
    One commenter suggested that entire ZIP codes not be deemed as 
``lower opportunity areas'' and that a more defined concept be used to 
allow for census tracts to be considered as an option specifically in 
these areas so that affordable housing opportunities are not lost. 
Another commenter recommended that the methodology used for calculating 
FMRs be simplified.
    One commenter recommended that, in addition to the number of 
bedrooms, FMR calculations should also consider square footage of the 
rental unit. The commenter also recommended that there be greater 
flexibility for the tenants in making unit selections. Finally, the 
commenter stated that setting FMR amounts by ZIP code can lead to 
unusual results in that ZIP codes that are geographically next to each 
other and contain comparable housing quality will have FMR amounts that 
are greatly different.
    Another commenter recommended revising FMR and HUD Income Limit 
calculation methods by basing the amounts on the current minimum wage 
of the respective jurisdiction. A separate commenter urged HUD to 
explore more responsive and accurate FMR calculation methodologies that 
would consider additional factors, such as vacancy rates. A separate 
commenter stated that the current method for calculating FMRs unfairly 
punishes housing authorities and tenants who work.
    One commenter recommended that HUD revise the FMR methodology to 
use more months of actual inflation data and fewer months of trend 
factor-based projects. Separately, the commenter stated that HUD should 
modify the trend factor to project changes in recent mover rents rather 
than rents overall. Finally, the commenter advised that HUD should 
allow FMR revisions when new inflation data show that trend factor-
based projections were inaccurate.
    One commenter stated that, beginning with FY 2023, HUD should 
include internet services in FMR calculations. The commenter expressed 
that this change would be in line with the priorities of the current 
presidential administration and congress.
    HUD Response: With respect to the suggested programmatic changes, 
this Notice is limited to the announcement of new FMRs, and the 
methodology used in their calculation. HUD will continue to assess the 
overall performance of its housing assistance programs and make any 
necessary regulatory or policy changes to ensure success of its 
mission.
    ``Rent reasonableness'' generally means comparing the rent of one 
unit to comparable units based on unit characteristics. By contrast, 
the FMR is meant to be the 40th percentile rent of the distribution of 
all units.
    While low vacancy rates may be associated with higher rent growth, 
HUD believes that its direct calculation of gross rent inflation 
adjustment factors is the best approach for FY 2023. HUD will continue 
to evaluate its FMR calculation in the future including the use of 
other variables.
    HUD's regulations allow for separate FMRs for units of different 
bedroom counts. Given the heterogeneous nature of housing, units will 
necessarily differ by a range of other features, including square 
footage. HUD believes that setting the FMR at the 40th percentile of 
gross rents will allow for an adequate selection of units by size.
    In its calculation of ``trend factors,'' HUD uses the most recent 
available inflation data at the time of calculation, which for FY 2023 
is the second quarter of 2022.
    With respect to ZIP code-level variation in rents for areas 
required to use Small Area FMRs, it is possible for rents to vary by 
ZIP code even with similar unit quality, as rents often capture other 
location amenities. HUD provides the same payment standard 
flexibilities for PHAs for areas mandated to use Small Area FMRs as it 
does for PHAs not subject to the mandatory use of Small Area FMRs.
    The FMR is meant to be a gross rent, and therefore to measure the 
cost of the shelter plus the necessary utilities to live in the home. 
Internet services are not defined as a utility in HUD's regulations, 
nor are the costs included in the gross rent data provided by the 
Census Bureau and Bureau of Labor Statistics.
iii. Comments Urging Additional HUD Actions
    Commenters encouraged HUD to respond to congressional concerns 
regarding the volatility of rents and lagging FMRs by publishing and 
responding to the studies that HUD has commissioned to recommend 
alternative strategies. A commenter recommended that HUD work in 
collaboration with people who are directly impacted by FMR calculations 
when addressing FMR calculations for the long term.
    HUD Response: HUD is committed to constantly evaluating its FMR 
methodology and making all such research available to the public, 
including its grant-funded reports. HUD routinely responds to 
congressional

[[Page 53771]]

concerns concerning its FMR calculations. HUD is also committed to 
working with people who are directly impacted by its FMR calculations, 
including by soliciting comments through this Notice.

G. Public Comments Regarding the Methodology Used for Calculating FMRs 
in Small Area FMRs, Non-Metropolitan Areas, and Rural Areas

i. Concerns Regarding the Lack of Available Private Data Sources for 
Small Area FMRs, Non-Metropolitan Areas, and Rural Communities
    One commenter stated that HUD does not adequately describe how the 
proposed methodology will be adapted for smaller rural FMR areas, and 
that HUD's proposed approach is concerning because the private data 
sources are not available for rural geographies and 1-year ACS data 
consistently underestimates rent for rural areas.
    Other commenters stated that the proposed private data sources will 
likely not include rental data for Small Area FMR P.O. Box-only, this 
lack of data limits the information to the physical address where the 
rental unit exists.
    Other commenters stated their concern that they were not able to 
vet the proposed private data sources. One commenter said that, except 
for one source, all the data were ``pay-walled.'' For the one source 
the commenter was able to review, the commenter said that the source 
did not provide data even for the largest metropolitan area in the 
commenter's state and that worried the commenter.
    One commenter encouraged HUD to explore alternative methods for 
supplementing the ACS in nonmetro areas where private data sources are 
unavailable or scarce, such as modifying the inflation adjustment 
calculation to account for the reduced reliability of the private data 
or finding ways to incorporate rental data collected by PHAs.
    Another commenter stated that data produced by the Census Bureau 
and HUD for rural communities in states with concentrations of rural 
poverty is not reflecting the reality in these places.
    One commenter stated that for Small Area FMRs it is important for 
HUD to use data that is both highly accurate and granular to further 
strengthen confidence in the final Small Area FMR calculations.
    HUD Response: For FY 2023, HUD is using measures of rent inflation 
calculated from private-sector sources in conjunction with the CPI as 
part of the recent-mover factor and gross rent inflation adjustment 
factor portions of the FMR calculation. In areas without at least three 
such sources, HUD will use the CPI alone. The CPI remains a reasonable 
measure of rent inflation calculated from repeat rents of a 
representative sample of housing units.
    Assessing the accuracy of FMRs is difficult because at any given 
time the true 40th percentile rent paid by recent movers is unknown. 
Survey-based estimates of rent are subject to sampling and non-sampling 
error, a challenge which is true in both urban and rural areas. For the 
Voucher program, HUD's policy addresses these sources of uncertainty by 
allowing the payment standard to be set from 90 to110 percent of the 
FMR, as well as above 110 percent of the FMR through the use of 
exception payment standards.
ii. Comments Suggesting That HUD Employ Alternative Methodology for 
Calculating FMRs for Small Area FMRs, Non-Metropolitan Areas, and Rural 
Communities
    One commenter suggested that HUD engage in a longer term, more 
robust project to update the FMR methodology for small metropolitan and 
rural FMR areas.
    One commenter expressed concern that the proposed changes to the 
methodology used for calculating FMRs will have little or no impact on 
rural places and that HUD is proposing solutions that only benefit 
densely populated portions of America. The commenter was concerned that 
the private data will only benefit densely populated cities and may not 
even capture all MSAs, let alone more rural regions. The commenter also 
stated that the State Nonmetropolitan Median is a specific issue that 
impacts disadvantaged rural, persistently impoverished places. 
According to the commenter, nonmetropolitan counties, because of the 
State Nonmetropolitan Median, are prevented from having dramatically 
lower FMRs compared to their neighbors by a state-floor mechanism, 
causing states with a concentrated rural poverty to have a depressed 
median. The commenter encouraged HUD to review the methodology used for 
calculating FMRs with a lens toward rural parity, which the commenter 
stated is in line with Executive Order 13987 on Advancing Racial Equity 
and Support for Underserved Communities.
    HUD Response: HUD is committed to improving the accuracy of its FMR 
calculation for all areas, including for rural areas. For FY 2023, HUD 
is using inflation factors based on private sources of rental data in 
the calculation of recent mover factors and gross rent inflation 
factors in cases where at least three of the six data sources provide 
data for the FMR area, in conjunction with the area's inflation factor 
from the CPI. In cases without such sources, HUD is using a CPI-based 
inflation factor for the area's region alone. HUD is using the private 
sources of inflation where available because it believes it will 
produce a more accurate FMR on average; however, it is not the case 
that this ``benefits'' areas with private sources of data, as whether 
the resulting FMR is higher or lower than it would be with the CPI 
alone depends on the specific rental market dynamics in the area. HUD 
has no control over the availability of rental data from the public and 
private sources used in FMR calculation and no longer receives a 
designated appropriation to conduct its own rent surveys in support of 
FMR estimates.
iii. Concerns Regarding the Methodology Used for Calculating FMR 
Amounts in Rural Communities That Are Geographically Near Public Lands 
or Amenity Regions
    One commenter expressed concerns that FMR calculations for non-
metropolitan towns that are located near public lands or amenity 
regions that draw large amounts of visitors (described as ``gateway 
towns'' by the commenter) are not calculated properly. The commenter 
indicated that areas of a county that are less accessible to public 
lands or amenities artificially deflate the rent values for gateway 
towns, which are more accessible to public lands or amenities and 
typically possess higher property values. The commenter stated that 
this situation creates an affordability burden on persons who work at 
the public lands or amenities regions because they are not able to live 
close to their jobs. The commenter expressed that this problem is 
further exacerbated because properties in gateway towns are in high 
demand and are disproportionately purchased by non-resident wealthy 
persons as vacation homes. In addition to concerns over the setting of 
the appropriate FMR value in gateway towns, the commenter expressed 
environmental justice concerns for residents of gateway towns. The 
commenter said that gateway towns located near public lands are 
perceived as more climate safe. Commenter said this perception leads to 
the displacement of low- and middle-income residents to areas perceived 
as less climate safe. To address both the FMR values methodology 
calculation concern and the climate justice issues,

[[Page 53772]]

the commenter suggested that the methodology used for calculating FMRs 
be altered to include the layering of (1) data related to the year-
over-year growth and/or real estate value increase and (2) the type of 
economy that exists in the non-metropolitan county (e.g., mining, 
recreation, agriculture). The commenter said the layering of this data 
could then be used to apply an FMR boost for certain counties while the 
5-year and new move-in data catches up with the actual market 
realities.
    HUD Response: HUD is changing its methodology for calculating FMRs 
for FY 2023 partly in response to the rental market disruptions caused 
by the COVID-19 pandemic. HUD remains interested in improving the 
accuracy of its FMR calculations, including by evaluating whether land 
values and community characteristics are useful indicators of changes 
and rents; however, at this time, HUD does not have research indicating 
such variables would improve its FMR calculation.

H. Public Comments Regarding Altering the Requirement To Use Mailed 
Surveys To Collect FMR Data

    Commenters suggested the removal of the requirement to use a mail 
survey to collect FMR data, as modern survey collection does not rely 
upon mail. Commenters stated that the expense of mail surveys and that 
cost savings from removing the mail survey requirement would increase 
the number of FMR areas that can afford to embark on a reevaluation and 
successfully collect and submit the required data. One commenter 
advised that paper post cards could be mailed that directs individuals 
to an online survey, rather than mailing the survey itself. 
Alternatively, a commenter said HUD could allow each state to develop a 
methodology for establishing FMRs in their states, subject to HUD's 
approval. The commenter said this approach would allow for local 
expertise on the unique rental situations in each state.
    HUD Response: HUD requires ad hoc rental market surveys to be 
conducted using best practices of survey methodology and based on a 
statistically representative sample of households. HUD does not require 
a single manner of data collection. Parties interested in conducting ad 
hoc rental market surveys should consult the following section of this 
Notice for additional information.

VI. Request for Public Comments and FMR Reevaluations

    HUD accepts public comments on the methods HUD uses to calculate FY 
2023 FMRs and requests for reevaluation of FMRs for specific areas for 
30 days after the publication of this notice. HUD lacks the resources 
to conduct local surveys of rents to address comments filed regarding 
the FMR levels for specific areas. PHAs may continue to fund such 
surveys independently, as specified below, using ongoing administrative 
fees or their administrative fee reserve if they so choose. HUD 
continually strives to calculate FMRs that meet the statutory 
requirement of using ``the most recent available data'' while also 
serving as an effective program parameter.

FMR Reevaluations

    42 U.S.C. 1437f(c)(1)(B) includes the following: ``The Secretary 
shall establish a procedure for public housing agencies and other 
interested parties to comment on such fair market rentals and to 
request, within a time specified by the Secretary, reevaluation of the 
fair market rentals in a jurisdiction before such rentals become 
effective.''
    PHAs or other parties interested in requesting HUD's reevaluation 
of their area's FY 2023 FMRs, as provided for under section 8(c)(1)(B) 
of USHA, must follow the following procedures:
    1. By the end of the 30-day comment period, PHAs or other parties 
must submit reevaluation requests through https://www.regulations.gov/ 
or directly to HUD as described in the Addresses section above. The 
area's PHA or, in multi-jurisdictional areas, PHA(s) representing at 
least half of the voucher tenants in the FMR area, must agree that the 
reevaluation is necessary.
    2. The requestor(s) must supply HUD with data more recent than the 
2019 ACS data used in the calculation of the FY 2023 FMRs. HUD requires 
data on gross rents paid in the FMR area for occupied standard quality 
rental housing units. Occupied recent mover units (defined as those who 
moved in the past 24 months) provide the best data. The data delivered 
must be sufficient for HUD to calculate a 40th and 50th percentile two-
bedroom gross rent.\12\ Should this type of data not be available, 
requestors may gather this information using the survey guidance 
available at https://www.huduser.gov/portal/datasets/fmr/NoteRevisedAreaSurveyProcedures.pdf and https://www.huduser.gov/portal/datasets/fmr/PrinciplesforPHA-ConductedAreaRentSurveys.pdf.
---------------------------------------------------------------------------

    \12\ Although there are no longer 50th percentile FMRs, HUD must 
calculate 50th percentile rents for the Success Rate Payment 
Standard under 24 CFR 982.503(e).
---------------------------------------------------------------------------

    3. Areas where valid reevaluation requests are submitted must 
continue to use FY 2022 FMRs whether the FY 2023 FMRs are lower or 
higher than the FY 2022 FMRs. Following the comment period, HUD will 
post a list, at https://www.huduser.gov/portal/datasets/fmr.html, of 
the areas requesting reevaluations and where FY 2022 FMRs remain in 
effect.
    4. PHAs or other parties must supply data for reevaluations to HUD 
no later than Friday January 6, 2023. All survey responses of rental 
units gathered as part of the survey efforts should be delivered to 
HUD. In addition to the survey data, HUD requires a current utility 
schedule to evaluate the survey responses. Finally, HUD encourages PHAs 
to evaluate their survey data to ensure the survey supports their 
request. Should PHAs or their contractors undertake this evaluation, 
HUD requests that this analysis also be submitted.
    HUD will use the data delivered by January 6, 2023 to reevaluate 
the FMRs and following the reevaluation, will post revised FMRs in 
April of 2023 with an accompanying Federal Register notice stating the 
revised FMRs are available, which will include HUD's responses to 
comments filed during the comment period for this notice. On Monday, 
January 9, 2023, HUD will post at https://www.huduser.gov/portal/datasets/fmr.html a listing of the areas that requested FMR 
reevaluations but did not deliver data, making the FY 2023 FMRs 
effective in these areas. HUD will incorporate any data supporting a 
change in FMRs supplied after January 7, 2023 into FY 2023 FMRs. 
Questions on how to conduct FMR surveys may be addressed to the Program 
Parameters and Research Division at [email protected].
    For small metropolitan areas without one-year ACS data and non-
metropolitan counties, HUD has developed a method using mail surveys 
that is discussed on the FMR web page: https://www.huduser.gov/portal/datasets/fmr.html#survey_info. This method allows for the collection of 
as few as 100 one-bedroom, two-bedroom, and three-bedroom units.
    Other survey methods are acceptable in providing data to support 
reevaluation requests if the survey method can provide statistically 
reliable, unbiased estimates of gross rents paid of the entire FMR 
area. In general, recommendations for FMR changes and supporting data 
must reflect the rent levels that exist within the entire FMR area and 
should be statistically reliable.
    PHAs in non-metropolitan areas are required to get 100 eligible 
survey responses which means they should have at least 5,000 rental 
units. PHAs may conduct surveys of groups of non-

[[Page 53773]]

metropolitan counties to increase the number of rental units that are 
surveyed, but HUD must approve all county-grouped surveys in advance. 
HUD cautions 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, HUD advises that in counties 
where FMRs are based on the combined rents in the cluster of FMR areas, 
HUD will not revise their FMRs unless the grouped survey results show a 
revised FMR statistically different from the combined rent level.
    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 current 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. Staff from HUD's Program 
Parameters and Research Division will work with PHAs in areas 
requesting re-evaluations to provide the minimum number of survey cases 
required to ensure that data submitted for re-evaluation represent a 
statistically valid sample.
    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, but in no case 
will fewer than 100 eligible cases be considered.

Calculating Small Area FMRs Using Rent Distributions

    HUD has developed guidance on how to provide data-supported 
comments on Small Area FMRs using HUD's special tabulations of the 
distribution of gross rents by unit bedroom count for ZIP Code 
Tabulation Areas. This guidance is available at https://www.huduser.gov/portal/datasets/fmr.html in the FY 2023 FMR section 
under the ``Documents'' tab and should be used by interested parties in 
commenting on whether or not the level of Small Area FMRs are too high 
or too low (i.e., Small Area FMRs that are larger than the gross rent 
necessary to make 40 percent of the units accessible for an individual 
ZIP code or that are smaller than the gross rent necessary to make 40 
percent of the units accessible for a given ZIP code). HUD will post 
revised Small Area FMRs after confirming commenters' calculations.

VII. Environmental Impact

    This notice involves the statutorily required establishment of FMR 
schedules and related procedures, which does not constitute a 
development decision affecting the physical condition of specific 
project areas or building sites. Accordingly, under 24 CFR 50.19(c)(6), 
this notice is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).
    Accordingly, the Fair Market Rent Schedules, which will not be 
codified in 24 CFR part 888, are available at https://www.huduser.gov/portal/datasets/fmr.html.

Solomon Greene,
Principal Deputy Assistant Secretary for Policy Development and 
Research.

Fair Market Rents for the Housing Choice Voucher Program Schedule B--
General Explanatory Notes

Arrangement of FMR Areas and Identification of Constituent Parts

    a. The Metropolitan and Non-Metropolitan FMR Area Schedule lists 
FMRs alphabetically by state, by metropolitan area and by non-
metropolitan county within each state and are available at https://www.huduser.gov/portal/datasets/fmr.html.
    b. The schedule lists the constituent counties (and New England 
towns and cities) included in each metropolitan FMR area 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. The schedule lists two non-metropolitan counties alphabetically 
on each line of the non-metropolitan county listings.
    d. Similarly, the schedule lists the New England towns and cities 
included in a non-metropolitan county immediately following the county 
name.

[FR Doc. 2022-18905 Filed 8-31-22; 8:45 am]
BILLING CODE 4210-67-P