[Federal Register Volume 81, Number 142 (Monday, July 25, 2016)]
[Proposed Rules]
[Pages 48366-48369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17567]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 578
[Docket No. FR-5476-N-04]
RIN 2506-AC29
Continuum of Care Program: Solicitation of Comment on Continuum
of Care Formula
AGENCY: Office of the Assistant Secretary for Community Planning and
Development, HUD.
ACTION: Notice; request for comments.
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SUMMARY: On July 31, 2012, HUD published an interim rule, for public
comment, entitled ``Homeless Emergency Assistance and Rapid Transition
to Housing: Continuum of Care Program,'' a program designed to address
the critical problem of homelessness through a coordinated community-
based process of identifying needs and building a system of housing and
services to address those needs. HUD received 551 public comments on
the interim rule. Approximately 42 of the public comments addressed the
Continuum of Care formula, with the majority of these commenters
seeking changes to the formula. With the interim rule now in place for
3 years, HUD seeks additional comment on the Continuum of Care formula.
Comment Due Date: September 23, 2016.
ADDRESSES: Interested persons are invited to submit comments regarding
this rule to the Regulations Division, Office of General Counsel, 451
7th Street SW., Room 10276, Department of Housing and Urban
Development, Washington, DC 20410-0500. Communications must refer to
the above docket number and title. There are two methods for submitting
public comments. All submissions must refer to the above docket number
and title.
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.
2. Electronic Submission of Comments. Interested persons may submit
comments electronically through the Federal eRulemaking Portal at
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
www.regulations.gov Web site can be viewed by other commenters and
interested members of the public. Commenters should follow the
instructions provided on that site to submit comments electronically.
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 document.
No Facsimile Comments. Facsimile (fax) comments are not acceptable.
Public Inspection of Public Comments. All properly submitted
comments and communications submitted to HUD will be available for
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the
above address. Due to security measures at the HUD Headquarters
building, an advance appointment to review the public comments must be
scheduled by calling the Regulations Division at 202-708-3055 (this is
not a toll-free number). Individuals with speech or hearing impairments
may access this number through TTY by calling the Federal Relay Service
at 800-877-8339. Copies of all comments submitted are available for
inspection and downloading at www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Norm Suchar, Director, Office of
Special Needs Assistance Programs, Office of Community Planning and
Development, Department of Housing and Urban Development, 451 7th
Street SW., Washington, DC 20410-7000; telephone number 202-708-4300
(this is not a toll-free number). Hearing- and speech-impaired persons
may access this number through TTY by calling the Federal Relay Service
at 800-877-8339 (this is a toll-free number).
SUPPLEMENTARY INFORMATION:
I. Background
Continuum of Care (CoC) Interim Rule
On July 31, 2012, at 77 FR 45422, HUD published in the Federal
Register an interim rule to implement the CoC authorized amendments to
the McKinney-Vento Homeless Assistance Act in the Homeless Emergency
Assistance and Rapid Transition to Housing Act of 2009 (HEARTH Act).
The purpose of the CoC program is to promote communitywide commitment
to the goal of ending homelessness; provide funding for efforts by
nonprofit providers, and State and local governments to quickly rehouse
homeless individuals and families while minimizing the trauma and
dislocation caused to homeless individuals, families, and communities
by homelessness; promote access to and effective utilization of
mainstream programs by homeless individuals and families; and optimize
self-sufficiency among individuals and families experiencing
homelessness.
Section 427 of the McKinney Vento Act, as amended by the HEARTH
Act, directs the Secretary to establish, by regulation, a funding
formula that is based upon factors that are appropriate to allocate
funds to meet the goals and objectives of the CoC program. As part of
the interim rule, HUD codified the formula for establishing a CoC's
Preliminary Pro Rata Need (PPRN formula) that had been used for many
years prior to the interim rule to establish a CoC's PPRN. The PPRN
formula is a combination of the formula used to award Emergency
Solutions Grants (ESG) Program grant funds and Community Development
Block Grant (CBDG) funds. Under the current PPRN formula, after a .2
percent set-aside for U.S. territories and insular areas, 75 percent of
the total CoC allocation is distributed to ESG entitlement communities,
generally comprised of large metropolitan cities and urban counties
where homelessness is more concentrated, according to the CDBG formula.
The remaining 25 percent of the CoC allocation is distributed to ESG
non-entitlement communities according to the CDBG formula. Within this
framework, the current CDBG formula is structured as a ``dual formula''
system. As set forth below, Formula A allocates funds to communities
based on the following weighted factors: population, poverty, and
overcrowding. Formula B assigns a different weighting scheme to an
alternative menu of factors: population growth lag,\1\ poverty, and
pre-1940s housing.\2\ Specifically, the existing CDBG formulas \3\ are
weighted as follows.
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\1\ Population growth lag identifies slower growing communities
or communities experiencing population loss as potential indicators
of communities in decline and in need of development assistance.
\2\ The share of housing units built before 1940 reflects the
age of a community's housing stock, a potential indicator of blight.
\3\ For non-entitlement communities, Formula B uses population
instead of population growth lag.
[[Page 48367]]
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Formula A Formula B
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25% * population.......................... 20% * population growth lag.
50% * poverty............................. 30% * poverty.
25% * overcrowding........................ 50% * pre-1940 housing.
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Pursuant to this dual formula system, HUD calculates the funding
amounts for each jurisdiction under both Formulas A and B and assigns
the larger of the two grant calculations, less a pro rata reduction to
ensure the total amount allocated is within the amount appropriated for
funding.
Section 427 of the McKinney Vento Act, as amended by the HEARTH Act
also allows HUD to adjust a CoC's formula to ensure that the formula
amount is sufficient to renew existing projects in each CoC for one
year, which is known as the Annual Renewal Demand (ARD). In the FY 2015
Continuum of Care Program NOFA, and in several previous Continuum of
Care Program NOFAs, the amount of funding that CoCs were eligible to
receive was based primarily on their ARD and the PPRN formula had
little impact on the amount they were eligible to apply for. Only for a
minority of CoCs that had a PPRN that was larger than their ARD did the
PPRN formula affect funding, and in these cases, it only affected the
amount available for new projects. The PPRN formula would only have a
more significant impact on CoC funding if the amount of funding
available for the CoC program nationally is significantly larger than
the amount needed to renew existing projects for one year.
Several stakeholders indicated that the existing PPRN formula was
not representative of the number of individuals and families
experiencing homelessness in their geographic area. Therefore, the
interim rule specifically sought comment on the PPRN formula and the
process for determining a CoC's maximum award amount. HUD solicited
public comment through November 16, 2012 and of the 551 public comments
that HUD received, approximately 42 public comments were directed to
the PPRN formula. The majority of the comments on the PPRN formula were
from western States, counties, and cities, and indicated that the CDBG
formula was not the appropriate basis for the PPRN formula because the
CDBG formula utilizes urban blight, as reflected in the age of housing
stock, and population growth lag factors to allocate funds, which may
measure community development needs generally, but are not specifically
tailored to measure homelessness. Other commenters stated that they
opposed reductions in funding for renewal projects.
As a result of the comments received, HUD has explored several
alternative factors relevant to homelessness for potential inclusion in
the PPRN formula and is re-opening the public comment period on the
PPRN formula established in 24 CFR 578.17(a) of the interim rule for
the purpose of seeking broader input on four proposed changes to the
PPRN formula described in this section of the Notice before HUD selects
the formula to include in the final rule. In developing the following
proposals, HUD considered the many comments received in response to the
formula in the interim rule, including those stating that the current
formula utilizes factors that are not necessarily correlated with
homelessness such as urban blight and population growth lag, and the
request that the PPRN formula be based on updated factors that are
intended to specifically measure homelessness.
In developing proposals for alternative factors to be included in
the final formula, HUD sought to maintain the basic structure of the
current PPRN formula, while investigating alternative data sources and
measures to be included as formula factors. The characteristics of the
data sources for the four proposed alternative formula factors were
determined to be consistent with HUD's 2001 Report to Congress \4\ on
measuring need for homeless grant funding. Namely, the data sources for
the proposed factors \5\ are: (1) Relevant to measuring homelessness,
(2) accurate, (3) timely, and (4) readily available for every
jurisdiction. HUD chose not to incorporate the point-in-time count data
into the formula because not all CoCs use the same methodology to
conduct their counts--with some CoCs having stronger methodology than
others--and because not all CoCs conduct annual PIT counts. Instead,
HUD used an average of two years of PIT count data to compare how
highly a factor being considered for the formula correlated with rates
of homelessness. In this way, PIT counts helped quantify the relevance
of potential formula factors to measuring homelessness, while
insulating potential formulas from the limitations of directly
including PIT counts. Further, by using factors correlated with the PIT
count, the proposed formulas mitigate the risk of data fluctuations in
PIT counts that may be less prevalent in large Census datasets.
Finally, since PIT counts are locally-generated and self-reported by
jurisdictions seeking funding under the CoC program, direct inclusion
of PIT counts into an allocation formula may create perverse incentives
against objective PIT count methodologies.
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\4\ See ``Report to Congress: Measuring ``Need'' for HUD's
McKinney-Vento Homeless Competitive Grants,'' January 2001 at
https://www.hudexchange.info/resources/documents/MeasuringNeed.pdf.
\5\ Including the decennial Census (population), American
Community Survey 5-Year Data (poverty, overcrowding, pre-1940
housing, renter-occupied units, average gross rent, rent-to-income
ratio, vacant rental units, and hybrid factor), and Comprehensive
Housing Affordability Strategy 5-Year Data (affordability gap, rent-
burdened extremely low-income households, and hybrid factor).
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Before considering any new factors, HUD reviewed the factors
included in the existing PPRN formula--overcrowding, poverty, pre-1940s
housing, and population--and their correlation to rates of
homelessness. HUD conducted Pearson's Correlation analyses \6\ and
found that three of these factors had a positive and statistically
significant correlation with rates of homelessness. These were: (1)
Overcrowding, with a .277 correlation; (2) poverty, with a .153
correlation; and (3) pre-1940s housing, with a .113 correlation.
Population was not shown to have a significant correlation with rates
of homelessness in a community. In addition to analyzing factors
included in the current PPRN formula, HUD also considered several other
potential factors related to housing markets, affordability, and
demographics, as well as a hybrid factor that combined housing market
and affordability measures. Understanding these factors, along with
their correlation, is necessary to understanding the formulas being
proposed for consideration.
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\6\ Pearson's correlation coefficients range from -1 to 1. A
correlation coefficient of -1 or 1 indicates a perfect linear
relationship (negative or positive, respectively) between two
variables, while a correlation coefficient of 0 indicates a random
relationship or no linear relationship between two variables.
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Broadly speaking, the potential formula factors chosen by HUD for
analysis, and described more fully below, represent important
community-level determinants of homelessness identified in the research
literature. Together, these factors represent three related categories
of known determinants of homelessness: housing market factors, economic
conditions, and housing affordability (which combines housing market
and economic factors). Other categories of known community-level
determinants of homelessness, such as climate factors or the robustness
and quality of a community's safety net of social services for
vulnerable populations, were found to lack the type of data
[[Page 48368]]
measures (e.g., timely and readily available for each jurisdiction)
necessary to be included as potential formula factors. Similarly, some
demographic factors identified as possible correlates to homelessness
were excluded from consideration due to data limitations. For example,
population growth lag could not be readily calculated for every
jurisdiction due to changes in geographic boundaries since 1960 that
artificially affect population counts.
Potential Housing Market Factors: HUD considered the following
potential housing market factors:
Renter-occupied units--HUD explored this factor because
renters generally experience higher housing instability than
inhabitants of owner-occupied units. They are also more vulnerable to
steep or sudden increases in rent, may be more economically unstable,
and are subject to evictions as a result of non-payment of rent which
tend to happen more quickly than the foreclosure process. For this
factor, HUD found a .444 correlation between renter-occupied units as a
percentage of all occupied housing units and rates of homelessness.
Average gross rent--HUD explored this factor because
several studies have found measures of ``rent level'' to be
significantly correlated to higher rates of homelessness. However, this
aggregate measure encompasses the entire rental market and may not be a
good indicator of the rent pressures specifically faced by individuals
and families experiencing homelessness or at risk of homelessness. For
this factor, HUD found a .248 correlation between average gross rent
(calculated by dividing aggregate gross rent by the number of renter-
occupied housing units) and rates of homelessness.
Vacant rental units--HUD explored this factor because some
studies have theorized that people are at higher risk of homelessness
in tight rental markets; however, HUD found no significant correlation
between rental vacancy rates (calculated by dividing the number of
vacant rental units by total rental units) and rates of homelessness.
Therefore, it was not used in any of the proposed formulas for
consideration.
Affordability gap--This factor was created to measure the
gap between the demand for and supply of rental units that are both
affordable and available to Extremely Low-Income (ELI) \7\ renter
households. HUD considered this factor because ELI households have been
shown to be at a greater risk of housing instability and homelessness.
For this factor, HUD found a .310 correlation between this factor as a
percentage of total housing units and rates of homelessness.
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\7\ ELI households consist of families with incomes that do not
exceed 30 percent of the area median income.
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Potential Affordability Factors: HUD considered the following
potential factors related to the cost of housing combined with renters'
ability to pay:
Rent-to-income ratio is the comparison of how much rent
people pay when compared to their income in the designated geographic
area. HUD found a .288 correlation with rates of homelessness.
Rent-burdened ELI households are those ELI households that
pay more than 30% of their gross income for housing. HUD found a .336
correlation with rates of homelessness.
Hybrid Factor: HUD considered one factor, developed specifically
for the purposes of this formula, that weighted an affordability factor
(rent-burdened ELI households) by a housing market factor (renter-
occupied units), two variables found to be correlated with homelessness
(with correlations of .336 and .444, respectively). This factor was
calculated by multiplying the number of rent-burdened ELI households by
the ratio of: the jurisdiction's percentage of renter-occupied units
divided by the national percentage of renter-occupied units. HUD found
that this hybrid factor had a .393 correlation with rates of
homelessness.
II. Proposed PPRN Formula Options for Public Comment
After reviewing the simple (bivariate) Pearson's correlations
between rates of homelessness and each of the above factors, HUD
considered many different options for leveraging a combination of these
factors into a formula that would better capture pro-rata need than any
single factor on its own. HUD considered various factor weights as
representing the relative magnitude of each factor's effect on need
within a particular formula combination. The proposed weights represent
what HUD views to be reasonable options for weighting the relative
magnitudes of factors within each formula option based on its simple
correlational analyses and the theoretical relationships between sets
of factors and homelessness documented in established research
literature.
HUD seeks comment on the four formula options set out in the table
below. HUD believes these options are better correlated with rates of
homelessness at the local level than the current PPRN formula.
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Formula A Formula B Formula C Formula D
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10% * population..................... 25% * poverty.......... 25% * population....... 25% * poverty
15% * poverty........................ 25% * affordability gap 25% * poverty.......... 25% * affordability gap
25% * affordability gap.............. 25% * rent-burdened ELI 50% * hybrid factor.... 50% * hybrid factor
households.
25% * rent-burdened ELI households... 25% * rental units.....
25% * rental units...................
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None of these proposed PPRN formula options include the 75%/25%
split between entitlement and non-entitlement communities that is a
part of the current formula. In addition to comments on the proposed
formulas set forth above, HUD welcomes comments on factors and
corresponding weights that will target formula funding to urban and
rural areas most in need of homeless assistance, whether by ESG
entitlement designation, population density considerations, or
otherwise. In addition, HUD welcomes comments on whether any of the
four proposed options should be combined into a dual or multi-formula
system similar to the dual calculation system utilized under the
current PPRN formula.
HUD has posted, on its Web site, a listing of each CoC's existing
PPRN amount (as determined using the existing formula) as well as the
amount that each CoC's PPRN would be using each of these four proposed
formulas. HUD has also published a tool on its
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Web site that stakeholders can use to adjust the weights of the
proposed factors and determine the resulting PPRN. This tool can be
used to explore formula options, using the factors listed above, other
than the four formula options already published by HUD on its Web site.
Using all of this information, HUD seeks comment on the proposed
formulas made available as well as any new formulas and factors
relevant to the goals and objectives of the CoC program for HUD to
consider.
Additionally, HUD acknowledges that each of the proposed formula
options will result in the PPRN amounts of some CoCs decreasing. To
prevent against a CoC losing a substantial amount of PPRN in a given
year, HUD is considering including language that would prevent a CoC
from losing more than a certain portion of their PPRN. For example, if
a CoC's current PPRN amount is $2.5 million and a newly adopted PPRN
formula would result in the CoC's PPRN amount being reduced to $1.7
million, HUD could consider language that would provide the CoC with
more than $1.7 million in PPRN, but less than $2.5 million. HUD seeks
comment on this proposal and also, what the appropriate amount or
portion to be protected should be.
HUD welcomes other comments on how the CoC formula may be improved.
Dated: July 19, 2016.
Harriet Tregoning,
Principal Deputy Assistant Secretary for Community Planning and
Development.
[FR Doc. 2016-17567 Filed 7-22-16; 8:45 am]
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