Proposed Changes to the Methodology Used for Calculating Fair Market Rents, 41118-41123 [2023-13395]
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Federal Register / Vol. 88, No. 120 / Friday, June 23, 2023 / Notices
(1) Evaluate whether the proposed
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(3) Enhance the quality, utility, and
clarity of the information to be
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collection of information on those who
are to respond, including through the
use of appropriate automated,
electronic, mechanical, or other
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e.g., permitting electronic submission of
responses.
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Overview of This Information
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Extension, Without Change, of a
Currently Approved Collection.
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the applicable component of the DHS
sponsoring the collection: G–884;
USCIS.
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Dated: June 16, 2023.
Samantha L. Deshommes,
Chief, Regulatory Coordination Division,
Office of Policy and Strategy, U.S. Citizenship
and Immigration Services, Department of
Homeland Security.
[FR Doc. 2023–13367 Filed 6–22–23; 8:45 am]
BILLING CODE 9111–97–P
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
[Docket No. FR–6401–N–01]
Proposed Changes to the Methodology
Used for Calculating Fair Market Rents
Office of the Assistant
Secretary for Policy Development and
Research, HUD.
ACTION: Notice of proposed changes for
calculating Fair Market Rents (FMRs).
AGENCY:
The United States Housing
Act of 1937 (USHA) requires the
Secretary to publish FMRs periodically,
but not less than annually, adjusted to
be effective on October 1 of each year.
The primary uses of FMRs are to
determine payment standards for the
Housing Choice Voucher (HCV)
program, to determine initial renewal
rents for some expiring project-based
Section 8 contracts, and to serve as rent
ceilings for rental units in both the
HOME Investment Partnerships Program
and the Emergency Solutions Grants
Program and a primary rent standard
option for the Housing for Opportunities
for Persons With AIDS (HOPWA)
program. HUD also uses FMRs in the
calculation of maximum award amounts
for Continuum of Care grantees and in
the calculation of flat rents for Public
Housing units. To better determine
payment standards and related
parameters for HUD programs, HUD
proposes changes in how FMRs are
calculated in this notice and seeks
public comment on the proposed
changes. This notice also responds to
public comments that were submitted
on the publication of Fiscal Year 2023
FMRs.
DATES: Comment Due Date: July 24,
2023.
SUMMARY:
HUD invites interested
persons to submit comments regarding
the proposed changes to the calculation
of the FMRs to the Regulations Division,
Office of General Counsel, Department
of Housing and Urban Development,
451 7th Street SW, Room 10276,
Washington, DC 20410–0001.
Communications must refer to the above
docket number and title and should
contain the information specified in the
‘‘Request for Comments’’ section.
ADDRESSES:
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There are two methods for submitting
public comments.
1. Submission of Comments by Mail.
Comments may be submitted by mail to
the Regulations Division, Office of
General Counsel, Department of
Housing and Urban Development, 451
7th Street SW, Room 10276,
Washington, DC 20410–0500. Due to
security measures at all Federal
agencies, however, submission of
comments by mail often results in
delayed delivery. To ensure timely
receipt of comments, HUD recommends
that comments submitted by mail be
submitted at least two weeks in advance
of the public comment deadline.
2. Electronic Submission of
Comments. Interested persons may
submit comments electronically through
the Federal eRulemaking Portal at
https://www.regulations.gov. HUD
strongly encourages commenters to
submit comments electronically.
Electronic submission of comments
allows the commenter maximum time to
prepare and submit a comment, ensures
timely receipt by HUD, and enables
HUD to make them immediately
available to the public. Comments
submitted electronically through the
https://www.regulations.gov website can
be viewed by other commenters and
interested members of the public.
Commenters should follow instructions
provided on that site to submit
comments electronically.
Note: To receive consideration as
public comments, comments must be
submitted 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. Facsimile
(FAX) comments are not acceptable.
Public Inspection of Public
Comments. All properly submitted
comments and communications
regarding this notice submitted to HUD
will be available for public inspection
and copying between 8 a.m. and 5 p.m.
weekdays at the above address. Due to
security measures at the HUD
Headquarters building, an advance
appointment to review the public
comments must be scheduled by calling
the Regulations Division at 202–708–
3055 (this is not a toll-free number).
HUD welcomes and is prepared to
receive calls from individuals who are
deaf or hard of hearing, as well as
individuals with speech or
communication disabilities. To learn
more about how to make an accessible
telephone call, please visit https://
www.fcc.gov/consumers/guides/
telecommunications-relay-service-trs.
Copies of all comments submitted are
available for inspection and
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downloading at https://
www.regulations.gov.
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 pprd@hud.gov.
HUD welcomes and is prepared to
receive calls from individuals who are
deaf or hard of hearing, as well as
individuals with speech or
communication disabilities. To learn
more about how to make an accessible
telephone call, please visit https://
www.fcc.gov/consumers/guides/
telecommunications-relay-service-trs.
This Federal Register notice 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.
SUPPLEMENTARY INFORMATION:
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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
project-based Section 8 contracts, rent
ceilings for rental units in both the
HOME Investment Partnerships program
and the Emergency Solution Grants
program, the primary rent standard for
the HOPWA 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. HUD’s FMR
calculations represent HUD’s best effort
to estimate the 40th percentile gross
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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.
II. Response to Comments on FY 2023
FMRs
On September 1, 2022, HUD
published a notice in the Federal
Register, at 86 FR 53761 entitled ‘‘Fair
Market Rents for the Housing Choice
Voucher Program, Moderate
Rehabilitation Single Room Occupancy
Program, and Other Programs Fiscal
Year 2023.’’ 2 This notice announced the
availability of FY 2023 Fair Market
Rents (FMRs), described the methods
used to calculate the FY 2023 FMRs,
responded to comments submitted on
proposed changes to the methodology
for calculating FMRs, and detailed how
Public Housing Agencies (PHAs) and
other interested parties could request
reevaluation of their FMRs. The public
comment period for the September 1,
2022, notice closed on October 3, 2022,
and HUD received 16 distinct comments
relating to the notice. The comments
were from PHAs, community
development agencies, and individuals.
General Support for the FY2023 FMRs
Some commenters generally
supported the proposed 2023 FMRs. A
commenter said they supported HUD’s
decision to change its methodology by
introducing private sector rental data
into the FMR calculation process to
obtain more accurate gross rents. This
commenter stated that calculating the
FY2023 FMRs with the methodological
change can ensure that FMRs accurately
reflect recent steep rent increases in
many communities and will make it
easier for households in those
communities to use their vouchers to
rent affordable homes. Another
commenter stated that the new
methodology closely aligns with the
aggregate rental housing market
behavior.
HUD Response: HUD appreciates the
supportive comments.
Insufficient or Decreasing FMRs Impose
Hardships
Commenters expressed their concerns
about rising rents. Many commenters
expressed that recipients of Housing
Choice Vouchers are facing decreasing
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).
2 See FR–6334–N–01, https://
www.federalregister.gov/documents/2022/07/13/
2022-14913/proposed-changes-to-the-methodologyused-for-calculating-fair-market-rents.
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success rates in finding housing at the
current FMR rates due to steep rent
increases. Some commenters stated that
the gaps between the FMR and market
rates are making it harder for assisted
families to find affordable housing
because FMRs fail to reflect actual rent
prices and, as a result, more voucher
holders are priced out of local rental
housing inventories.
Some commenters said that in 2022
some of their FMRs went down, but
prices in general are rising, including
the cost of utilities. One commenter said
in 2022 they had to obtain permission
from HUD to raise their payment
standard to 120 percent of the FMR to
get landlords to consider accepting
vouchers and that they are unable to
come close to the market rents that
landlords are currently getting. Another
commenter said that even though the
proposed FMR for their area is higher
than the 2022 FMR, the increase appears
to lag behind local conditions, driven by
landlords who are raising rents to make
up for their inability to do so throughout
the pandemic. A different commenter
said that between 2021 and 2022, for an
aggregate national two-bedroom, FMRs
lost ground to local markets by eight
percentage points. This commenter
further expressed that if local 2023
FMRs kept pace with local market rates
of change in 2022, those FMRs would
remain below rents in their respective
markets by a national average of eight
percentage points that accrued in 2021.
HUD Response: HUD understands the
concerns noted by the commenters and
the impact of steadily rising rent prices
on everyday Americans. By regulation,
HUD targets the 40th percentile of rents
within each market. HUD agrees that
measuring an accurate rate of rental
inflation for recent mover rents is very
important. In this Notice, HUD is
proposing to use private sources of rent
data in calculating the shelter rent
inflation rate as described below. HUD
is committed to addressing all aspects of
the program’s operation, including FMR
calculation.
FMR Calculation Suggestions
Some commenters recommended that
HUD continue its use of private sector
rental data in subsequent FMR
calculations in the future. Commenters
also suggested additional transparency
about the use of private data sources
when calculating the gross rent inflation
adjustment factors. These commenters
specifically recommended that HUD
publish reports documenting FY2023
FMRs that were adjusted using private
sector rental data as well as the
geographies and the prior inflation
adjustment where the private data are
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used. Additionally, these commenters
recommended that HUD evaluate the
accuracy of private sector rental data by
comparing them to future American
Community Survey (ACS) data to gauge
the accuracy of the inflationary factors
and trending methodology.
Another commenter suggested that
HUD use the approach outlined in PIH
Notice 2022–30 as a template to
determine eligible FMR areas, while
using private-market rental data to
quickly identify rapidly changing rental
markets on a rolling-basis throughout
the year, as opposed to identifying one
fixed point in time for the entire year.
One commenter said that the average
person cannot understand HUD’s
methodology for calculating rent and
that rents should be based on advertised
housing prices. Another commenter
stated that the FMR does not consider
actual rent prices and requested that
HUD abandon their current FMR
calculation method. The commenter
suggested that HUD calculate FMRs by
utilizing the average of the rent posted
in the local newspaper for the last two
years and adjust that number up for low
availability of rental units and stop
excluding new construction from the
FMR, which makes the voucher number
artificially low.
HUD Response: Transparency is
important to HUD. The Department
maintains an online lookup tool that
allows interested parties to view the
calculation steps that HUD uses to
determine each area’s FMR. This
includes viewing the shelter inflation
rate calculated from private sources of
rent data. HUD considers the
transparency of each source’s methods
in evaluating whether to use the data
and may make changes from year to year
in which sources it uses. HUD also
evaluates the data for accuracy,
including through retrospective analysis
and comparison with other sources of
data including the ACS. HUD is
committed to tracking the performance
of its programs and making changes
during the year in response to
circumstances, with one significant
example of this being PIH Notice 2022–
30.
In calculating each area’s FMR, HUD
uses actual market data on rents paid.
Respondents report their actual rent
through the ACS. Private sources of rent
inflation measure rents directly from
properties or through online listing
services. These sources are collectively
more comprehensive than relying on
any single source such as a newspaper.
FMR Payment Standards
Many commenters also supported
increasing the payment standard above
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its current 40th percentile rent limits as
a means for voucher holders to access
high-opportunity neighborhoods and
diminish concentrated poverty. A
commenter noted the stringent and
cumbersome process for PHAs to apply
for success rate payment standards and
recommended that HUD reduce the
administrative burden imposed on
PHAs to meet the stringent requirements
considering the uptick of PHAs seeking
approval for success rate payment
standards. This commenter also
suggested that HUD provide PHAs with
discretion and flexibility to incorporate
the use of 50th percentile rent levels to
advance access to a broader range of
housing opportunities throughout a
metropolitan area. Another commenter
suggested that HUD incorporate privatemarket rental data on a rolling basis for
timely or automatic approval of
exception payment standards. Another
commenter suggested that HUD simplify
the process for establishing payment
standards between 110 and 120 percent
on a permanent basis in recognition of
systemic market issues confronting
voucher holders.
A commenter encouraged HUD to
seek statutory changes to give PHAs
additional flexibility in setting payment
standards.
HUD Response: HUD extended the
period for PHAs to receive expedited
waivers of payment standard regulations
in PIH Notice 2022–30. This allows for
many PHAs to use payment standards of
up to 120 percent of FMR in operating
the Housing Choice Voucher program
through December 31, 2023. HUD will
continue monitoring outcomes in the
program and determine whether
regulatory changes, such as setting the
FMR at a higher percentile, publishing
FMRs more frequently, or changing
success rate payment standard criteria,
are appropriate.
Requests for Reevaluations and More
Time To Make Requests
Some commenters also objected to
HUD’s FMR reevaluation process. A
commenter stated that HUD’s
reevaluation process leads to PHAs’
maintaining their previous year’s FMRs,
which tend to be substantially lower
than what HUD’s proposed FMRs are for
the current year. To help PHAs that are
in areas with rapidly rising rents, this
commenter recommended that HUD
allow PHAs or other parties to request
that the higher proposed FMRs take
effect on the same scheduled effective
date as all other FMRs without
reevaluations, while the PHA and HUD
are undergoing the FMR reevaluation
process. Another commenter requested
additional funding for FMR
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reevaluations as rental cost surveys are
costly and time-consuming.
A commenter asked that HUD
consider extending the January 6, 2023,
reevaluation data submission due date
to allow sufficient time for localities to
conduct a local rent survey in the
manner recommended by HUD. This
commenter said ordinarily HUD
publishes the FMRs in early August,
however, this year they were published
September 1, but the data due date
remained the same. This commenter
also stated that the timeframe does not
allow for the required procurement
processes to obtain an outside survey
entity, nor does it really allow for
adequate survey time given that mail
surveys are now taking anywhere
between 2–3 months to allow for
printing delays and slowed mail due to
staffing and holidays.
A commenter opposed the 2023 FMR
as the methodology is not consistent
with the demand on rental housing,
though that commenter did not
expressly request a reevaluation.
Another commenter said they were
writing to preserve the option to
challenge the 2023 FMR for their FMR
areas and that they are working on a
study that would allow HUD to
calculate updated 40th percentile rate
calculations.
HUD Response: The deadline of
January 6 is intended to allow for
revision of FMRs with enough time
remaining in the current fiscal year such
that the revision is useful and can be
taken into account in determining an
agency’s renewal funding. PHAs may
submit data to HUD at any point in the
year and are not required to file a
comment formally requesting
reevaluation of an area’s FMR and
preventing a new FMR from going into
effect in order to submit data. The costs
for performing rental market surveys are
driven by the market for such services.
Congress determines the funding
available to PHAs through its annual
appropriations and has not allocated
specific funds for use in local ad hoc
rent surveys. HUD continues to allow
the use of administrative fees for such
surveys.
Section 8 Voucher Reform Act (SEVRA)
A commenter suggested HUD revise
the proposed legislation known as
SEVRA, and the commenter noted
several concerns regarding HUD’s
previously proposed FMR statutory
amendment including: striking the
statutory language from SEVRA
requiring HUD to define market areas in
areas sufficiently distinct as is necessary
to avoid concentration of voucher
holders; taking into consideration
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factors such as the efficient
administration of the program by PHAs
and the administrative costs of HUD in
establishing additional areas; the
availability of data for a sufficient
number of dwelling units to establish
accurate fair market rentals; and the
ability of PHAs to adjust the payment
standard to more accurately reflect
typical rental costs. This commenter
also expressed concern about what the
commenter said was HUD’s proposed
FMR statutory amendment to SEVRA
that would remove a requirement for
HUD to establish procedures to permit
a PHA to request the establishment of
separate market areas for either all or
contiguous parts of the areas under the
jurisdiction of such agency.
HUD Response: HUD’s annual
calculations of FMRs represent the
Department’s best estimate of an
accurate 40th percentile gross rent for
recent movers within each market area.
In this notice, HUD proposes
modifications to its recent mover and
inflation adjustments to improve this
accuracy. Since FY 2017 HUD has
allowed for the use of Small Area FMRs
to allow for a wider range of payment
standards within metropolitan market
areas. HUD monitors the overall success
of the Housing Choice Voucher program
and recommends legislative or
regulatory changes as circumstances
dictate.
III. FMR Calculation Methodology
Changes
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A. Current Methodology
From FY 2012 to FY 2022, HUD’s
methodology for calculating FMRs
consisted of several steps (see: https://
www.huduser.gov/portal/datasets/fmr/
fmrs/FY2022_code/select_
Geography.odn for the calculations
underlying each FY 2022 FMR). These
steps were retained for FY 2023 FMRs
but modified as described below. FY
2024 FMRs are proposed to follow the
same multistep process, with further
modification described subsequently.
1. Base Rent. First, HUD establishes a
‘‘base rent’’ for two-bedroom units from
the 5-year 40th percentile estimates of
gross rent from the ACS.
2. Recent Mover Adjustments. HUD
then adjusts the base rent using a
‘‘recent mover adjustment factor’’ that is
based on the ratio of the estimate of
gross rent paid by recent movers from
the 1-year ACS to the estimate of gross
rent paid by all renters from the 5-year
ACS for the smallest level of geography
containing the FMR area that contains
statistically reliable 1-year data.
The results of these two steps are
estimates of 40th percentile rents for
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recent movers in two-bedroom units
that are ‘‘as of’’ the current ACS year.
3. Inflation Adjustment. HUD then
accounts for inflation from the ACS year
by applying a ‘‘gross rent inflation
factor,’’ which is calculated from the
Consumer Price Index (CPI) as produced
by the Bureau of Labor Statistics (BLS).
4. Trend Factor. Because it calculates
FMRs ahead of each fiscal year, HUD
provides a further inflation adjustment
in the form of a ‘‘trend factor.’’ The
trend factor represents the expected
future level of the gross rent CPI for the
upcoming fiscal year compared to the
most recent actual gross rent CPI.
5. State minimum FMRs.
Additionally, HUD calculates state
minimum FMRs based on the median
FMR for non-metropolitan portions of
each state.
6. Bedroom Ratios. HUD calculates
FMRs for unit sizes other than two
bedrooms by applying ‘‘bedroom ratios’’
calculated from the relationships
between rents for units of different sizes
according to the 5-year ACS.
7. Limit on Decreases. Finally, HUD
does not allow an area’s FMR to decline
by more than 10 percent.
For FY 2023, HUD implemented
several changes to its FMR
methodology. This was done in part in
response to the Census Bureau’s
decision not to release ACS 2020 1-year
data, which HUD would ordinarily have
used in FY 2023. HUD retained ACS
2019 1-year data and inflated those
estimates using rent inflation factors to
synthesize 2020 recent mover
adjustment data. These inflation factors
consisted of a weighted average of the
CPI rent of primary residence series that
HUD has traditionally used in FMR
calculation, along with additional
measures of rent inflation as produced
by several private companies for
markets where such data were available.
HUD produced similar rent inflation
factors calculated from CPI rent of
primary residence data and private
company rent data for the inflation
adjustment through 2021 of the
synthesized 2020 recent mover-adjusted
rents.
B. Proposed Changes
HUD is proposing two material
changes to the calculation of FMRs. The
first would be a change in the definition
of ‘‘recent mover’’ as used in the recent
mover adjustment described in Section
A. The second would be to retain and
expand the use of rent inflation factors
calculated by private sector sources as
was first done for FY 2023 FMRs.
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C. Definition of Recent Movers
Because the 2021 ACS was not
adversely affected by the COVID–19
pandemic in the way the 2020 ACS data
collection was, the Census Bureau has
released the usual full spectrum of 2021
ACS 1-year tabulations, and HUD does
not need to synthesize recent mover
adjustment data as in the FY 2023
FMRs. The discussion of the proposed
change to the definition of ‘‘Recent
Mover’’ below is in the context of
restored normal data availability.
Prior to the creation of the American
Community Survey, HUD relied in part
on data collected through the ‘‘long
form’’ of the decennial Census. This
survey measured gross rents paid as of
April 1 each year. HUD’s definition of
recent mover was a household that had
moved into their unit in either the
current decennial Census year or the
year prior. This meant that the
maximum length of time for a
household to have lived in its current
unit and still be considered a recent
mover was 15 months.
When it first used ACS estimates in
its FMR calculation, HUD retained the
same definition of recent mover as a
household that had moved into the unit
in either the current ACS year or the
year prior. However, unlike the
decennial Census, the ACS is conducted
throughout the year on a rolling basis.
This meant that the maximum length of
time for a household to have lived in its
current unit and still be considered a
recent mover was 23 months (for
example, in ACS 2021 data, a household
might have taken the survey in
December 2021 and moved into their
unit in January 2020).
To make its recent mover adjustment
as reflective of current market
conditions as possible, HUD is
proposing to consider the rents of
households who moved into their unit
only in the current ACS year. For ACS
2021, this means that the maximum
length of time for a household to have
lived in its current unit and still be
considered a recent mover under this
definition would be 11 months.
However, restricting the ACS universe
to recent movers limits the sample size
supporting the resulting estimates,
potentially harming the statistical
reliability of those estimates. HUD
applies two statistical reliability checks
to each ACS estimate. First, the estimate
must be supported by at least 100
sample cases from the ACS. Second, the
estimate must have a margin of error
that is smaller than half the estimate
itself. HUD would maintain these
criteria for the new, single-year
definition of recent movers. For areas
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without an ACS estimate meeting these
criteria, HUD would then check the
estimate tabulated from two-year recent
movers, following its prior
methodology.
D. Using Private Sector Rent Data To
Update Rent Estimates
HUD has historically updated the
latest ACS-based rent estimates with
one year of gross rent inflation
measured with the 24 local and 4
regional CPI components rent of
primary residence and household fuels
and utilities, depending on the location
of the FMR area. Unlike the gross rent
estimates HUD uses from the ACS, the
CPI is produced by measuring the
change in rents across all types of
renters, ranging from households that
have recently moved into their unit to
those that have lived in their current
unit for many years. Recent research has
examined the difference between the
overall CPI for shelter rent (overall rent
CPI) and an alternative CPI constructed
using only survey responses from
households that are new tenants (new
tenant CPI).3 The research shows that
the two indices tracked closely over the
period from 2005 to 2020; however, they
diverged significantly since then as rent
increases for new tenants outpaced
overall rent inflation. The research
further shows that the new tenant CPI
tracks closely with the reported rent
inflation as produced by two
companies, CoreLogic and Zillow,
despite the differences in scope and
methodology among the three sources.
Finally, the researchers quantify the
difference between the new tenant CPI
and the overall rent CPI and find that
the overall rent CPI lags rent inflation
for new tenants by one year.
HUD has replicated the correlation
between the new tenant CPI and private
sources using the additional private rent
data available to the Department and the
results confirm that rent inflation factors
derived from these data track the new
tenant CPI closely. HUD is completing
further analysis to determine if the use
of rent inflation factors derived from
these private data is the best course of
action. Additionally, based on the
lagged nature of the overall rent CPI,
HUD is considering alternatives to
including the CPI rent inflation factor
alongside the private inflation factors as
it did for FY 2023. One option HUD
proposes is to calculate a shelter rent
inflation factor consisting only of the
average of multiple sources of private
rent data. Alternatively, HUD could
3 Adams, Loewenstein, Montag, and Verbrugge.
‘‘Disentangling Rent Index Differences: Data,
Methods, and Scope’’, 2022.
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18:01 Jun 22, 2023
Jkt 259001
develop a new adjustment procedure for
the CPI rent inflation factor based on
private inflation factors. HUD proposes
to maintain the FY 2023 requirement
that an area must be covered by at least
three private sources of rent data to use
such an average. The average shelter
rent inflation factor would be combined
with the CPI fuels and utilities subindex
to produce an overall gross rent
inflation factor. This factor would be
applied to the recent mover-adjusted
ACS rent as in the Inflation Adjustment
described in Section A.
Although the data available to HUD
would allow it to produce local inflation
factors for a large majority of the
country by population, not every area is
represented individually in the private
rent data. In FY 2023, HUD continued
its practice of applying a Census Region
based CPI rent inflation factor to these
areas. For FY 2024, HUD proposes to
use a rental unit weighted average of the
private inflation factors for these areas,
rather than the CPI rent inflation for the
region. This would ensure the rent
estimates for these areas are not subject
to the bias of the lag associated with the
CPI rent as described above. As an
example of calculating a weighted
average, if a given region contained
areas A, B, and C with 4,000; 3,000; and
1,000 rental units respectively, and
private inflation factors of 10 percent, 5
percent, and 1 percent, the regional
inflation factor would be 10% * 0.5 +
5% * 0.375 + 1% * 0.125 = 7 percent.
E. Aspects of FMR Methodology Not
Proposed To Be Changed by This Notice
HUD is not proposing any additional
changes to the FMR calculation,
meaning it would still use the 5-year
ACS data to establish the base rent, and
use forecasts of gross rent CPI as the
trend factor. Similarly, the ‘‘bedroom
ratio’’ methodology used to produce
FMRs for unit sizes other than two
bedrooms would remain unchanged.
F. Small Area Fair Market Rents
HUD calculates FMRs for
metropolitan areas, which comprise one
or more counties (or towns, in the case
of New England), and single, nonmetropolitan counties. Within
metropolitan areas, HUD also publishes
Small Area FMRs, which are delineated
by ZIP Code and are required for use in
the Housing Choice Voucher program in
certain metropolitan areas. The
proposed changes to FMR calculation
would affect Small Area Fair Market
Rents (SAFMRs) as well.
Under its current SAFMR
methodology, HUD calculates the
SAFMR for areas with a statistically
reliable ZIP Code-level base rent for
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Frm 00056
Fmt 4703
Sfmt 4703
1-, 2-, or 3-bedroom units by adjusting
the base rent with the recent mover
adjustment factor and gross rent
adjustment factor. Therefore, changes to
those factors as described above would
apply to SAFMRs as well. For areas
without statistically reliable 1-, 2-, or 3bedroom rent estimates, HUD calculates
the SAFMR using the ratio of the allbedroom ZIP Code median rent (or the
median rent for the larger county
containing the ZIP Code) to the median
rent for the FMR area, then multiplies
this ratio by the metropolitan area FMR.
The proposed changes, by affecting the
metropolitan FMR, would affect this
step as well.
IV. Request for Public Comment on
Changes
HUD is requesting public comment on
the proposed changes to the FMR
calculation methodology. HUD invites
general comments on the
appropriateness of changing the
definition of recent movers as described
above as well as the continued use of
private rent data in calculating rent
inflation factors. Additionally, HUD
invites comments on the following
questions:
• Should HUD continue to use overall
rent CPI to control for possible selection
bias in the private rent inflation data by
scaling the local private rent inflation
factors, using for example a national
statistic like BLS’s New Tenant Repeat
Rent index currently under
development so that the rental-unit
weighted average inflation factor would
match the national statistic?
• Should HUD adopt additional
criteria beyond having at least 3 sources
of private rent inflation data, such as a
minimum population or rental unit
count, to minimize undue volatility in
year-to-year changes in private rent
inflation factors? Should HUD consider
altering the criteria of having at least 3
sources of private rent inflation data?
• For the inflation adjustment (step
3), HUD proposes calculating Census
Region-wide rental unit weighted
average private inflation factors for areas
without a local private factor. Is this the
appropriate level of geography, or
should HUD consider other weighting
procedures such as a nearest neighbor
approach? 4
4 Under HUD’s proposed approach, private
inflation factors are given more weight for the
regional calculation if area contains more rental
units. In the nearest-neighbor alternative, you could
assign higher weights to areas that are a closer
‘‘distance’’ to the location for which you want to
calculate an inflation factor, where ‘‘distance’’
could mean geographic proximity or other
observable characteristics (for example, similar
median incomes).
E:\FR\FM\23JNN1.SGM
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Federal Register / Vol. 88, No. 120 / Friday, June 23, 2023 / Notices
V. Environmental Impact
This notice proposes changes in the
way FMRs are calculated. The
establishment and review of Fair Market
Rent schedules 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).
Solomon Greene,
Principal Deputy Assistant Secretary, Office
of Policy Development and Research.
[FR Doc. 2023–13395 Filed 6–22–23; 8:45 am]
BILLING CODE 4210–67–P
DEPARTMENT OF THE INTERIOR
Fish and Wildlife Service
[FWS–R2–ES–2023–N032;
FXES11160200000–234–FF02ENEH00]
Candidate Conservation Agreement
With Assurances for the Texas
Pimpleback (Cyclonaias petrina),
Texas Fawnsfoot (Truncilla macrodon),
Texas Fatmucket (Lampsilis bracteata),
and Balcones Spike (Fusconaia
iheringi) in the Lower Colorado River
Basin Below O.H. Ivie Reservoir
Fish and Wildlife Service,
Interior.
ACTION: Notice of availability; request
for public comments.
AGENCY:
This notice advises the public
that the Lower Colorado River Authority
(LCRA) and Lower Colorado River
Authority Transmission Services
Corporation (LCRA TSC), have applied
for an enhancement of survival (EOS)
permit supported by the Candidate
Conservation Agreement with
Assurances for the Texas pimpleback
(Cyclonaias petrina), Texas fawnsfoot
(Truncilla macrodon), Texas fatmucket
(Lampsilis bracteata), and Balcones
spike (Fusconaia iheringi) in the Lower
Colorado River Basin below O.H. Ivie
Reservoir (CCAA). LCRA is a
conservation and reclamation district in
the State of Texas that provides multiple
services in the Colorado River basin,
including managing water supplies,
managing floods along the Highland
Lakes, producing and delivering power,
managing parks and recreation areas,
and supporting community
development. LCRA TSC is a nonprofit
corporation conducting electric
transmission operations within Texas.
They own and operate 5,500 circuit
miles of electric transmission lines and
lotter on DSK11XQN23PROD with NOTICES1
SUMMARY:
VerDate Sep<11>2014
18:01 Jun 22, 2023
Jkt 259001
maintain and operate equipment at
approximately 430 electric substations
across the state. The requested EOS
permit, if approved, would authorize
incidental take of four proposed
freshwater mussel species, Texas
pimpleback, Texas fawnsfoot, Texas
fatmucket, and Balcones spike resulting
from activities covered by the CCAA,
including freshwater mussel
conservation actions, operations,
inspections, repairs, construction, and
maintenance activities in the Colorado
River basin in Texas. We have made a
preliminary determination that the
CCAA is eligible for categorical
exclusion under the National
Environmental Policy Act (NEPA). The
basis for this determination is contained
in a draft NEPA screening form to
support the use of a categorical
exclusion under NEPA, which evaluates
the impacts of EOS permit issuance and
implementation of the proposed CCAA.
The documents available for comment
include the NEPA screening form, the
CCAA, and the EOS permit application.
DATES: We will accept comments
received on or before July 24, 2023.
ADDRESSES: Accessing Documents:
Internet: The NEPA screening form,
CCAA, and EOS permit application:
You may obtain electronic copies of
these documents on the Service’s
website at https://www.fws.gov/office/
austin-ecological-services/news.
U.S. Mail: You may obtain the
documents at the following addresses.
In your request for documents, please
reference Lower Colorado River
Authority CCAA.
• NEPA screening form and CCAA: A
limited number of CD–ROM and printed
copies of the NEPA screening form and
CCAA are available, by request, from
Karen Myers, Field Supervisor, Austin
Ecological Services Field Office, Austin,
TX, 78754, telephone 512–937–7371.
• EOS permit application: The EOS
permit application is available by mail
from the Regional Director, U.S. Fish
and Wildlife Service, P.O. Box 1306,
Room 6034, Albuquerque, NM 87103,
Attention: Environmental Review
Branch.
Submitting Comments: Regarding any
of the documents available for review,
you may submit written comments by
one of the following methods. In your
comments, please reference the Lower
Colorado River Authority CCAA.
• Email: Submit comments to karen_
myers@fws.gov.
• U.S. Mail: Karen Myers, Field
Supervisor, Austin Ecological Services
Field Office, 1505 Ferguson Lane,
Austin, TX 78754.
PO 00000
Frm 00057
Fmt 4703
Sfmt 4703
41123
We request that you send comments
by only one of the methods described
above.
FOR FURTHER INFORMATION CONTACT:
Karen Myers, Field Supervisor, by mail
at U.S. Fish and Wildlife Service, 1505
Ferguson Lane, Austin, TX 78754; via
phone at 512–937–7371. Individuals in
the United States who are deaf,
deafblind, hard of hearing, or have a
speech disability may dial 711 (TTY,
TDD, or TeleBraille) to access
telecommunications relay services.
Individuals outside the United States
should use the relay services offered
within their country to make
international calls to the point-ofcontact in the United States.
SUPPLEMENTARY INFORMATION: We, the
U.S. Fish and Wildlife Service (Service),
announce the availability of a draft
screening form supporting a categorical
exclusion, under the National
Environmental Policy Act of 1969
(NEPA; 42 U.S.C. 4321 et seq.), that
evaluates the impacts of implementation
of the proposed Candidate Conservation
Agreement with Assurances for the
Texas pimpleback (Cyclonaias petrina),
Texas fawnsfoot (Truncilla macrodon),
Texas fatmucket (Lampsilis bracteata),
and Balcones spike (Fusconaia iheringi)
in the Lower Colorado River Basin below
O.H. Ivie Reservoir (CCAA) and issuance
of an associated enhancement of
survival (EOS) permit under section
10(a)(1)(A) of the Endangered Species
Act of 1973, as amended (ESA; 16
U.S.C. 1531 et seq.) to the Lower
Colorado River Authority (LCRA) and
Lower Colorado River Authority
Transmission Services Corporation
(LCRA TSC).
This notice advises the public that
we, the Service, have gathered the
information necessary to determine
effects of the proposed CCAA and the
associated EOS permit on the four Texas
mussels. We are accepting comments on
the proposed CCAA, NEPA screening
form, and the EOS permit application.
Background
Section 9 of the Endangered Species
Act (ESA; 16 U.S.C. 1531 et seq.) and its
implementing regulations prohibit the
‘‘take’’ of animal species listed as
endangered or threatened. Take is
defined under the ESA as to ‘‘harass,
harm, pursue, hunt, shoot, wound, kill,
trap, capture, or collect listed animal
species, or to attempt to engage in such
conduct’’ (16 U.S.C. 1538). However,
under section 10(a) of the ESA, in
accordance with our CCAA policy (81
FR 95164) we may issue permits for the
enhancement of survival (EOS) of
candidate species. ‘‘Incidental take’’ is
E:\FR\FM\23JNN1.SGM
23JNN1
]]>Agencies
[Federal Register Volume 88, Number 120 (Friday, June 23, 2023)]
[Notices]
[Pages 41118-41123]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-13395]
=======================================================================
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-6401-N-01]
Proposed Changes to the Methodology Used for Calculating Fair
Market Rents
AGENCY: Office of the Assistant Secretary for Policy Development and
Research, HUD.
ACTION: Notice of proposed changes for calculating Fair Market Rents
(FMRs).
-----------------------------------------------------------------------
SUMMARY: The United States Housing Act of 1937 (USHA) requires the
Secretary to publish FMRs periodically, but not less than annually,
adjusted to be effective on October 1 of each year. The primary uses of
FMRs are to determine payment standards for the Housing Choice Voucher
(HCV) program, to determine initial renewal rents for some expiring
project-based Section 8 contracts, and to serve as rent ceilings for
rental units in both the HOME Investment Partnerships Program and the
Emergency Solutions Grants Program and a primary rent standard option
for the Housing for Opportunities for Persons With AIDS (HOPWA)
program. HUD also uses FMRs in the calculation of maximum award amounts
for Continuum of Care grantees and in the calculation of flat rents for
Public Housing units. To better determine payment standards and related
parameters for HUD programs, HUD proposes changes in how FMRs are
calculated in this notice and seeks public comment on the proposed
changes. This notice also responds to public comments that were
submitted on the publication of Fiscal Year 2023 FMRs.
DATES: Comment Due Date: July 24, 2023.
ADDRESSES: HUD invites interested persons to submit comments regarding
the proposed changes to the calculation of the FMRs to the Regulations
Division, Office of General Counsel, Department of Housing and Urban
Development, 451 7th Street SW, Room 10276, Washington, DC 20410-0001.
Communications must refer to the above docket number and title and
should contain the information specified in the ``Request for
Comments'' section.
There are two methods for submitting public comments.
1. Submission of Comments by Mail. Comments may be submitted by
mail to the Regulations Division, Office of General Counsel, Department
of Housing and Urban Development, 451 7th Street SW, Room 10276,
Washington, DC 20410-0500. Due to security measures at all Federal
agencies, however, submission of comments by mail often results in
delayed delivery. To ensure timely receipt of comments, HUD recommends
that comments submitted by mail be submitted at least two weeks in
advance of the public comment deadline.
2. Electronic Submission of Comments. Interested persons may submit
comments electronically through the Federal eRulemaking Portal at
https://www.regulations.gov. HUD strongly encourages commenters to
submit comments electronically. Electronic submission of comments
allows the commenter maximum time to prepare and submit a comment,
ensures timely receipt by HUD, and enables HUD to make them immediately
available to the public. Comments submitted electronically through the
https://www.regulations.gov website can be viewed by other commenters
and interested members of the public. Commenters should follow
instructions provided on that site to submit comments electronically.
Note: To receive consideration as public comments, comments must be
submitted 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. Facsimile (FAX) comments are not acceptable.
Public Inspection of Public Comments. All properly submitted
comments and communications regarding this notice submitted to HUD will
be available for public inspection and copying between 8 a.m. and 5
p.m. weekdays at the above address. Due to security measures at the HUD
Headquarters building, an advance appointment to review the public
comments must be scheduled by calling the Regulations Division at 202-
708-3055 (this is not a toll-free number). HUD welcomes and is prepared
to receive calls from individuals who are deaf or hard of hearing, as
well as individuals with speech or communication disabilities. To learn
more about how to make an accessible telephone call, please visit
https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs. Copies of all comments submitted are available for inspection and
[[Page 41119]]
downloading at https://www.regulations.gov.
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]. HUD welcomes and is prepared to receive calls from
individuals who are deaf or hard of hearing, as well as individuals
with speech or communication disabilities. To learn more about how to
make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.
This Federal Register notice 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.
SUPPLEMENTARY INFORMATION:
I. Background
Section 8 of the USHA (42 U.S.C. 1437f) authorizes housing
assistance to aid lower-income families in renting safe and decent
housing. Housing assistance payments are limited by FMRs established by
HUD for different geographic areas. In the 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 project-based Section 8 contracts, rent
ceilings for rental units in both the HOME Investment Partnerships
program and the Emergency Solution Grants program, the primary rent
standard for the HOPWA 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.
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
II. Response to Comments on FY 2023 FMRs
On September 1, 2022, HUD published a notice in the Federal
Register, at 86 FR 53761 entitled ``Fair Market Rents for the Housing
Choice Voucher Program, Moderate Rehabilitation Single Room Occupancy
Program, and Other Programs Fiscal Year 2023.'' \2\ This notice
announced the availability of FY 2023 Fair Market Rents (FMRs),
described the methods used to calculate the FY 2023 FMRs, responded to
comments submitted on proposed changes to the methodology for
calculating FMRs, and detailed how Public Housing Agencies (PHAs) and
other interested parties could request reevaluation of their FMRs. The
public comment period for the September 1, 2022, notice closed on
October 3, 2022, and HUD received 16 distinct comments relating to the
notice. The comments were from PHAs, community development agencies,
and individuals.
---------------------------------------------------------------------------
\2\ See FR-6334-N-01, https://www.federalregister.gov/documents/2022/07/13/2022-14913/proposed-changes-to-the-methodology-used-for-calculating-fair-market-rents.
---------------------------------------------------------------------------
General Support for the FY2023 FMRs
Some commenters generally supported the proposed 2023 FMRs. A
commenter said they supported HUD's decision to change its methodology
by introducing private sector rental data into the FMR calculation
process to obtain more accurate gross rents. This commenter stated that
calculating the FY2023 FMRs with the methodological change can ensure
that FMRs accurately reflect recent steep rent increases in many
communities and will make it easier for households in those communities
to use their vouchers to rent affordable homes. Another commenter
stated that the new methodology closely aligns with the aggregate
rental housing market behavior.
HUD Response: HUD appreciates the supportive comments.
Insufficient or Decreasing FMRs Impose Hardships
Commenters expressed their concerns about rising rents. Many
commenters expressed that recipients of Housing Choice Vouchers are
facing decreasing success rates in finding housing at the current FMR
rates due to steep rent increases. Some commenters stated that the gaps
between the FMR and market rates are making it harder for assisted
families to find affordable housing because FMRs fail to reflect actual
rent prices and, as a result, more voucher holders are priced out of
local rental housing inventories.
Some commenters said that in 2022 some of their FMRs went down, but
prices in general are rising, including the cost of utilities. One
commenter said in 2022 they had to obtain permission from HUD to raise
their payment standard to 120 percent of the FMR to get landlords to
consider accepting vouchers and that they are unable to come close to
the market rents that landlords are currently getting. Another
commenter said that even though the proposed FMR for their area is
higher than the 2022 FMR, the increase appears to lag behind local
conditions, driven by landlords who are raising rents to make up for
their inability to do so throughout the pandemic. A different commenter
said that between 2021 and 2022, for an aggregate national two-bedroom,
FMRs lost ground to local markets by eight percentage points. This
commenter further expressed that if local 2023 FMRs kept pace with
local market rates of change in 2022, those FMRs would remain below
rents in their respective markets by a national average of eight
percentage points that accrued in 2021.
HUD Response: HUD understands the concerns noted by the commenters
and the impact of steadily rising rent prices on everyday Americans. By
regulation, HUD targets the 40th percentile of rents within each
market. HUD agrees that measuring an accurate rate of rental inflation
for recent mover rents is very important. In this Notice, HUD is
proposing to use private sources of rent data in calculating the
shelter rent inflation rate as described below. HUD is committed to
addressing all aspects of the program's operation, including FMR
calculation.
FMR Calculation Suggestions
Some commenters recommended that HUD continue its use of private
sector rental data in subsequent FMR calculations in the future.
Commenters also suggested additional transparency about the use of
private data sources when calculating the gross rent inflation
adjustment factors. These commenters specifically recommended that HUD
publish reports documenting FY2023 FMRs that were adjusted using
private sector rental data as well as the geographies and the prior
inflation adjustment where the private data are
[[Page 41120]]
used. Additionally, these commenters recommended that HUD evaluate the
accuracy of private sector rental data by comparing them to future
American Community Survey (ACS) data to gauge the accuracy of the
inflationary factors and trending methodology.
Another commenter suggested that HUD use the approach outlined in
PIH Notice 2022-30 as a template to determine eligible FMR areas, while
using private-market rental data to quickly identify rapidly changing
rental markets on a rolling-basis throughout the year, as opposed to
identifying one fixed point in time for the entire year.
One commenter said that the average person cannot understand HUD's
methodology for calculating rent and that rents should be based on
advertised housing prices. Another commenter stated that the FMR does
not consider actual rent prices and requested that HUD abandon their
current FMR calculation method. The commenter suggested that HUD
calculate FMRs by utilizing the average of the rent posted in the local
newspaper for the last two years and adjust that number up for low
availability of rental units and stop excluding new construction from
the FMR, which makes the voucher number artificially low.
HUD Response: Transparency is important to HUD. The Department
maintains an online lookup tool that allows interested parties to view
the calculation steps that HUD uses to determine each area's FMR. This
includes viewing the shelter inflation rate calculated from private
sources of rent data. HUD considers the transparency of each source's
methods in evaluating whether to use the data and may make changes from
year to year in which sources it uses. HUD also evaluates the data for
accuracy, including through retrospective analysis and comparison with
other sources of data including the ACS. HUD is committed to tracking
the performance of its programs and making changes during the year in
response to circumstances, with one significant example of this being
PIH Notice 2022-30.
In calculating each area's FMR, HUD uses actual market data on
rents paid. Respondents report their actual rent through the ACS.
Private sources of rent inflation measure rents directly from
properties or through online listing services. These sources are
collectively more comprehensive than relying on any single source such
as a newspaper.
FMR Payment Standards
Many commenters also supported increasing the payment standard
above its current 40th percentile rent limits as a means for voucher
holders to access high-opportunity neighborhoods and diminish
concentrated poverty. A commenter noted the stringent and cumbersome
process for PHAs to apply for success rate payment standards and
recommended that HUD reduce the administrative burden imposed on PHAs
to meet the stringent requirements considering the uptick of PHAs
seeking approval for success rate payment standards. This commenter
also suggested that HUD provide PHAs with discretion and flexibility to
incorporate the use of 50th percentile rent levels to advance access to
a broader range of housing opportunities throughout a metropolitan
area. Another commenter suggested that HUD incorporate private-market
rental data on a rolling basis for timely or automatic approval of
exception payment standards. Another commenter suggested that HUD
simplify the process for establishing payment standards between 110 and
120 percent on a permanent basis in recognition of systemic market
issues confronting voucher holders.
A commenter encouraged HUD to seek statutory changes to give PHAs
additional flexibility in setting payment standards.
HUD Response: HUD extended the period for PHAs to receive expedited
waivers of payment standard regulations in PIH Notice 2022-30. This
allows for many PHAs to use payment standards of up to 120 percent of
FMR in operating the Housing Choice Voucher program through December
31, 2023. HUD will continue monitoring outcomes in the program and
determine whether regulatory changes, such as setting the FMR at a
higher percentile, publishing FMRs more frequently, or changing success
rate payment standard criteria, are appropriate.
Requests for Reevaluations and More Time To Make Requests
Some commenters also objected to HUD's FMR reevaluation process. A
commenter stated that HUD's reevaluation process leads to PHAs'
maintaining their previous year's FMRs, which tend to be substantially
lower than what HUD's proposed FMRs are for the current year. To help
PHAs that are in areas with rapidly rising rents, this commenter
recommended that HUD allow PHAs or other parties to request that the
higher proposed FMRs take effect on the same scheduled effective date
as all other FMRs without reevaluations, while the PHA and HUD are
undergoing the FMR reevaluation process. Another commenter requested
additional funding for FMR reevaluations as rental cost surveys are
costly and time-consuming.
A commenter asked that HUD consider extending the January 6, 2023,
reevaluation data submission due date to allow sufficient time for
localities to conduct a local rent survey in the manner recommended by
HUD. This commenter said ordinarily HUD publishes the FMRs in early
August, however, this year they were published September 1, but the
data due date remained the same. This commenter also stated that the
timeframe does not allow for the required procurement processes to
obtain an outside survey entity, nor does it really allow for adequate
survey time given that mail surveys are now taking anywhere between 2-3
months to allow for printing delays and slowed mail due to staffing and
holidays.
A commenter opposed the 2023 FMR as the methodology is not
consistent with the demand on rental housing, though that commenter did
not expressly request a reevaluation. Another commenter said they were
writing to preserve the option to challenge the 2023 FMR for their FMR
areas and that they are working on a study that would allow HUD to
calculate updated 40th percentile rate calculations.
HUD Response: The deadline of January 6 is intended to allow for
revision of FMRs with enough time remaining in the current fiscal year
such that the revision is useful and can be taken into account in
determining an agency's renewal funding. PHAs may submit data to HUD at
any point in the year and are not required to file a comment formally
requesting reevaluation of an area's FMR and preventing a new FMR from
going into effect in order to submit data. The costs for performing
rental market surveys are driven by the market for such services.
Congress determines the funding available to PHAs through its annual
appropriations and has not allocated specific funds for use in local ad
hoc rent surveys. HUD continues to allow the use of administrative fees
for such surveys.
Section 8 Voucher Reform Act (SEVRA)
A commenter suggested HUD revise the proposed legislation known as
SEVRA, and the commenter noted several concerns regarding HUD's
previously proposed FMR statutory amendment including: striking the
statutory language from SEVRA requiring HUD to define market areas in
areas sufficiently distinct as is necessary to avoid concentration of
voucher holders; taking into consideration
[[Page 41121]]
factors such as the efficient administration of the program by PHAs and
the administrative costs of HUD in establishing additional areas; the
availability of data for a sufficient number of dwelling units to
establish accurate fair market rentals; and the ability of PHAs to
adjust the payment standard to more accurately reflect typical rental
costs. This commenter also expressed concern about what the commenter
said was HUD's proposed FMR statutory amendment to SEVRA that would
remove a requirement for HUD to establish procedures to permit a PHA to
request the establishment of separate market areas for either all or
contiguous parts of the areas under the jurisdiction of such agency.
HUD Response: HUD's annual calculations of FMRs represent the
Department's best estimate of an accurate 40th percentile gross rent
for recent movers within each market area. In this notice, HUD proposes
modifications to its recent mover and inflation adjustments to improve
this accuracy. Since FY 2017 HUD has allowed for the use of Small Area
FMRs to allow for a wider range of payment standards within
metropolitan market areas. HUD monitors the overall success of the
Housing Choice Voucher program and recommends legislative or regulatory
changes as circumstances dictate.
III. FMR Calculation Methodology Changes
A. Current Methodology
From FY 2012 to FY 2022, HUD's methodology for calculating FMRs
consisted of several steps (see: https://www.huduser.gov/portal/datasets/fmr/fmrs/FY2022_code/select_Geography.odn for the calculations
underlying each FY 2022 FMR). These steps were retained for FY 2023
FMRs but modified as described below. FY 2024 FMRs are proposed to
follow the same multistep process, with further modification described
subsequently.
1. Base Rent. First, HUD establishes a ``base rent'' for two-
bedroom units from the 5-year 40th percentile estimates of gross rent
from the ACS.
2. Recent Mover Adjustments. HUD then adjusts the base rent using a
``recent mover adjustment factor'' that is based on the ratio of the
estimate of gross rent paid by recent movers from the 1-year ACS to the
estimate of gross rent paid by all renters from the 5-year ACS for the
smallest level of geography containing the FMR area that contains
statistically reliable 1-year data.
The results of these two steps are estimates of 40th percentile
rents for recent movers in two-bedroom units that are ``as of'' the
current ACS year.
3. Inflation Adjustment. HUD then accounts for inflation from the
ACS year by applying a ``gross rent inflation factor,'' which is
calculated from the Consumer Price Index (CPI) as produced by the
Bureau of Labor Statistics (BLS).
4. Trend Factor. Because it calculates FMRs ahead of each fiscal
year, HUD provides a further inflation adjustment in the form of a
``trend factor.'' The trend factor represents the expected future level
of the gross rent CPI for the upcoming fiscal year compared to the most
recent actual gross rent CPI.
5. State minimum FMRs. Additionally, HUD calculates state minimum
FMRs based on the median FMR for non-metropolitan portions of each
state.
6. Bedroom Ratios. HUD calculates FMRs for unit sizes other than
two bedrooms by applying ``bedroom ratios'' calculated from the
relationships between rents for units of different sizes according to
the 5-year ACS.
7. Limit on Decreases. Finally, HUD does not allow an area's FMR to
decline by more than 10 percent.
For FY 2023, HUD implemented several changes to its FMR
methodology. This was done in part in response to the Census Bureau's
decision not to release ACS 2020 1-year data, which HUD would
ordinarily have used in FY 2023. HUD retained ACS 2019 1-year data and
inflated those estimates using rent inflation factors to synthesize
2020 recent mover adjustment data. These inflation factors consisted of
a weighted average of the CPI rent of primary residence series that HUD
has traditionally used in FMR calculation, along with additional
measures of rent inflation as produced by several private companies for
markets where such data were available. HUD produced similar rent
inflation factors calculated from CPI rent of primary residence data
and private company rent data for the inflation adjustment through 2021
of the synthesized 2020 recent mover-adjusted rents.
B. Proposed Changes
HUD is proposing two material changes to the calculation of FMRs.
The first would be a change in the definition of ``recent mover'' as
used in the recent mover adjustment described in Section A. The second
would be to retain and expand the use of rent inflation factors
calculated by private sector sources as was first done for FY 2023
FMRs.
C. Definition of Recent Movers
Because the 2021 ACS was not adversely affected by the COVID-19
pandemic in the way the 2020 ACS data collection was, the Census Bureau
has released the usual full spectrum of 2021 ACS 1-year tabulations,
and HUD does not need to synthesize recent mover adjustment data as in
the FY 2023 FMRs. The discussion of the proposed change to the
definition of ``Recent Mover'' below is in the context of restored
normal data availability.
Prior to the creation of the American Community Survey, HUD relied
in part on data collected through the ``long form'' of the decennial
Census. This survey measured gross rents paid as of April 1 each year.
HUD's definition of recent mover was a household that had moved into
their unit in either the current decennial Census year or the year
prior. This meant that the maximum length of time for a household to
have lived in its current unit and still be considered a recent mover
was 15 months.
When it first used ACS estimates in its FMR calculation, HUD
retained the same definition of recent mover as a household that had
moved into the unit in either the current ACS year or the year prior.
However, unlike the decennial Census, the ACS is conducted throughout
the year on a rolling basis. This meant that the maximum length of time
for a household to have lived in its current unit and still be
considered a recent mover was 23 months (for example, in ACS 2021 data,
a household might have taken the survey in December 2021 and moved into
their unit in January 2020).
To make its recent mover adjustment as reflective of current market
conditions as possible, HUD is proposing to consider the rents of
households who moved into their unit only in the current ACS year. For
ACS 2021, this means that the maximum length of time for a household to
have lived in its current unit and still be considered a recent mover
under this definition would be 11 months.
However, restricting the ACS universe to recent movers limits the
sample size supporting the resulting estimates, potentially harming the
statistical reliability of those estimates. HUD applies two statistical
reliability checks to each ACS estimate. First, the estimate must be
supported by at least 100 sample cases from the ACS. Second, the
estimate must have a margin of error that is smaller than half the
estimate itself. HUD would maintain these criteria for the new, single-
year definition of recent movers. For areas
[[Page 41122]]
without an ACS estimate meeting these criteria, HUD would then check
the estimate tabulated from two-year recent movers, following its prior
methodology.
D. Using Private Sector Rent Data To Update Rent Estimates
HUD has historically updated the latest ACS-based rent estimates
with one year of gross rent inflation measured with the 24 local and 4
regional CPI components rent of primary residence and household fuels
and utilities, depending on the location of the FMR area. Unlike the
gross rent estimates HUD uses from the ACS, the CPI is produced by
measuring the change in rents across all types of renters, ranging from
households that have recently moved into their unit to those that have
lived in their current unit for many years. Recent research has
examined the difference between the overall CPI for shelter rent
(overall rent CPI) and an alternative CPI constructed using only survey
responses from households that are new tenants (new tenant CPI).\3\ The
research shows that the two indices tracked closely over the period
from 2005 to 2020; however, they diverged significantly since then as
rent increases for new tenants outpaced overall rent inflation. The
research further shows that the new tenant CPI tracks closely with the
reported rent inflation as produced by two companies, CoreLogic and
Zillow, despite the differences in scope and methodology among the
three sources. Finally, the researchers quantify the difference between
the new tenant CPI and the overall rent CPI and find that the overall
rent CPI lags rent inflation for new tenants by one year.
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\3\ Adams, Loewenstein, Montag, and Verbrugge. ``Disentangling
Rent Index Differences: Data, Methods, and Scope'', 2022.
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HUD has replicated the correlation between the new tenant CPI and
private sources using the additional private rent data available to the
Department and the results confirm that rent inflation factors derived
from these data track the new tenant CPI closely. HUD is completing
further analysis to determine if the use of rent inflation factors
derived from these private data is the best course of action.
Additionally, based on the lagged nature of the overall rent CPI, HUD
is considering alternatives to including the CPI rent inflation factor
alongside the private inflation factors as it did for FY 2023. One
option HUD proposes is to calculate a shelter rent inflation factor
consisting only of the average of multiple sources of private rent
data. Alternatively, HUD could develop a new adjustment procedure for
the CPI rent inflation factor based on private inflation factors. HUD
proposes to maintain the FY 2023 requirement that an area must be
covered by at least three private sources of rent data to use such an
average. The average shelter rent inflation factor would be combined
with the CPI fuels and utilities subindex to produce an overall gross
rent inflation factor. This factor would be applied to the recent
mover-adjusted ACS rent as in the Inflation Adjustment described in
Section A.
Although the data available to HUD would allow it to produce local
inflation factors for a large majority of the country by population,
not every area is represented individually in the private rent data. In
FY 2023, HUD continued its practice of applying a Census Region based
CPI rent inflation factor to these areas. For FY 2024, HUD proposes to
use a rental unit weighted average of the private inflation factors for
these areas, rather than the CPI rent inflation for the region. This
would ensure the rent estimates for these areas are not subject to the
bias of the lag associated with the CPI rent as described above. As an
example of calculating a weighted average, if a given region contained
areas A, B, and C with 4,000; 3,000; and 1,000 rental units
respectively, and private inflation factors of 10 percent, 5 percent,
and 1 percent, the regional inflation factor would be 10% * 0.5 + 5% *
0.375 + 1% * 0.125 = 7 percent.
E. Aspects of FMR Methodology Not Proposed To Be Changed by This Notice
HUD is not proposing any additional changes to the FMR calculation,
meaning it would still use the 5-year ACS data to establish the base
rent, and use forecasts of gross rent CPI as the trend factor.
Similarly, the ``bedroom ratio'' methodology used to produce FMRs for
unit sizes other than two bedrooms would remain unchanged.
F. Small Area Fair Market Rents
HUD calculates FMRs for metropolitan areas, which comprise one or
more counties (or towns, in the case of New England), and single, non-
metropolitan counties. Within metropolitan areas, HUD also publishes
Small Area FMRs, which are delineated by ZIP Code and are required for
use in the Housing Choice Voucher program in certain metropolitan
areas. The proposed changes to FMR calculation would affect Small Area
Fair Market Rents (SAFMRs) as well.
Under its current SAFMR methodology, HUD calculates the SAFMR for
areas with a statistically reliable ZIP Code-level base rent for 1-, 2-
, or 3-bedroom units by adjusting the base rent with the recent mover
adjustment factor and gross rent adjustment factor. Therefore, changes
to those factors as described above would apply to SAFMRs as well. For
areas without statistically reliable 1-, 2-, or 3-bedroom rent
estimates, HUD calculates the SAFMR using the ratio of the all-bedroom
ZIP Code median rent (or the median rent for the larger county
containing the ZIP Code) to the median rent for the FMR area, then
multiplies this ratio by the metropolitan area FMR. The proposed
changes, by affecting the metropolitan FMR, would affect this step as
well.
IV. Request for Public Comment on Changes
HUD is requesting public comment on the proposed changes to the FMR
calculation methodology. HUD invites general comments on the
appropriateness of changing the definition of recent movers as
described above as well as the continued use of private rent data in
calculating rent inflation factors. Additionally, HUD invites comments
on the following questions:
Should HUD continue to use overall rent CPI to control for
possible selection bias in the private rent inflation data by scaling
the local private rent inflation factors, using for example a national
statistic like BLS's New Tenant Repeat Rent index currently under
development so that the rental-unit weighted average inflation factor
would match the national statistic?
Should HUD adopt additional criteria beyond having at
least 3 sources of private rent inflation data, such as a minimum
population or rental unit count, to minimize undue volatility in year-
to-year changes in private rent inflation factors? Should HUD consider
altering the criteria of having at least 3 sources of private rent
inflation data?
For the inflation adjustment (step 3), HUD proposes
calculating Census Region-wide rental unit weighted average private
inflation factors for areas without a local private factor. Is this the
appropriate level of geography, or should HUD consider other weighting
procedures such as a nearest neighbor approach? \4\
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\4\ Under HUD's proposed approach, private inflation factors are
given more weight for the regional calculation if area contains more
rental units. In the nearest-neighbor alternative, you could assign
higher weights to areas that are a closer ``distance'' to the
location for which you want to calculate an inflation factor, where
``distance'' could mean geographic proximity or other observable
characteristics (for example, similar median incomes).
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[[Page 41123]]
V. Environmental Impact
This notice proposes changes in the way FMRs are calculated. The
establishment and review of Fair Market Rent schedules 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).
Solomon Greene,
Principal Deputy Assistant Secretary, Office of Policy Development and
Research.
[FR Doc. 2023-13395 Filed 6-22-23; 8:45 am]
BILLING CODE 4210-67-P
