[Federal Register Volume 61, Number 184 (Friday, September 20, 1996)] [Rules and Regulations] [Pages 49576-49635] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 96-24068] [[Page 49575]] _______________________________________________________________________ Part IV Department of Housing and Urban Development _______________________________________________________________________ Office of the Secretary _______________________________________________________________________ 24 CFR Part 888 Fair Market Rents for the Section 8 Housing Assistance Payments Program--Fiscal Year 1997; Final Rule Federal Register / Vol. 61, No. 184 / Friday, September 20, 1996 / Rules and Regulations [[Page 49576]] DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Office of the Secretary 24 CFR Part 888 [Docket No. FR-4134-N-01] Fair Market Rents for the Section 8 Housing Assistance Payments Program--Fiscal Year 1997 AGENCY: Office of the Secretary, HUD. ACTION: Notice of final Fiscal Year (FY) 1997 Fair Market Rents (FMRs). ----------------------------------------------------------------------- SUMMARY: Section 8(c)(1) of the United States Housing Act of 1937 requires the Secretary to publish FMRs annually to be effective on October 1 of each year. FMRs are used for the Section 8 Rental Certificate Program (including space rentals by owners of manufactured homes under that program); the Moderate Rehabilitation Single Room Occupancy program; housing assisted under the Loan Management and Property Disposition programs; payment standards for the Rental Voucher program; and any other programs whose regulations specify their use. Today's notice provides final FY 1997 FMRs for all areas. It includes increased FMRs for 21 areas as a result of HUD-contracted Random Digit Dialing (RDD) surveys conducted through August, 1996. It also includes increased FMRs in 8 areas that submitted public comments, plus 4 areas that submitted manufactured home space rent comments. Today's notice also makes effective FMR reductions for 9 areas that were proposed for reduction in the May 8, 1996 notice (61 FR 20982), based on the results of recent RDD and American Housing Surveys (AHSs). EFFECTIVE DATE: The FMRs published in this notice are effective on October 1, 1996. FOR FURTHER INFORMATION CONTACT: Gerald Benoit, Operations Division, Office of Rental Assistance, telephone (202) 708-0477. For technical information on the development of schedules for specific areas or the method used for the rent calculations, contact Alan Fox, Economic and Market Analysis Division, Office of Economic Affairs, telephone (202) 708-0590, Extension 328. Hearing- or speech-impaired persons may contact the Federal Information Relay Service at 1-800-877-8339 (TTY). (Other than the ``800'' TTY number, telephone numbers are not toll free.) SUPPLEMENTARY INFORMATION: Section 8 of the United States Housing Act of 1937 (the Act) (42 U.S.C. 1437f) authorizes housing assistance to aid lower income families in renting decent, safe, and sanitary housing. Assistance payments are limited by FMRs established by HUD for different areas. In general, the FMR for an area is the amount that would be needed to pay the gross rent (shelter rent plus utilities) of privately owned, decent, safe, and sanitary rental housing of a modest (non-luxury) nature with suitable amenities. Method Used to Develop FMRs FMR Standard: FMRs are gross rent estimates; they include shelter rent and the cost of utilities, except telephone. HUD sets FMRs to assure that a sufficient supply of rental housing is available to program participants. To accomplish this objective, FMRs must be both high enough to permit a selection of units and neighborhoods and low enough to serve as many families as possible. The level at which FMRs are set is expressed as a percentile point within the rent distribution of standard quality rental housing units. The current definition used is the 40th percentile rent, the dollar amount below which 40 percent of standard quality rental housing units rent. The 40th percentile rent is drawn from the distribution of rents of units which are occupied by recent movers (renter households who moved into their unit within the past 15 months). Newly built units less than two years old are excluded, and adjustments have been made to correct for the below market rents of public housing units included in the data base. Data Sources: HUD used the most accurate and current data available to develop the FMR estimates. The sources of survey data used for the base-year estimates are: (1) The 1990 Census, which provides statistically reliable rent data for all FMR areas; (2) The Bureau of the Census' American Housing Surveys (AHSs), which are used to develop between-Census revisions for the largest metropolitan areas and which have accuracy comparable to the decennial Census; and (3) The Random Digit Dialing (RDD) telephone surveys of individual FMR areas, which are based on a sampling procedure that uses computers to select statistically random samples of rental housing. The base-year FMRs are updated using trending factors based on Consumer Price Index (CPI) data for rents and utilities, or HUD regional rent change factors developed from RDD surveys. Annual average CPI data are available individually for 102 metropolitan FMR areas. RDD Regional rent change factors are developed annually for the metropolitan and nonmetropolitan parts of each of the 10 HUD regions. The RDD factors are used to update the base year estimates for all FMR areas that do not have their own local CPI survey. RDD surveys have a high degree of statistical accuracy; there is a 95 percent likelihood that the recent mover rent estimates developed using this approach are within 3 to 4 percent of the actual rent value. Virtually all of the RDD survey FMR estimates will be within 5 percent of the actual value. State Minimum FMRs: Starting with the FY 1996 FMRs, HUD implemented a new minimum FMR policy in response to concerns that FMRs in rural areas were too low to operate the program successfully. As a result, FMRs are established at the higher of the local FMR or the Statewide average of nonmetropolitan counties, subject to a ceiling rent cap. The State minimum also affects a small number of metropolitan areas whose rents would otherwise fall below the State minimum. Public Comments In response to the May 8, 1996 proposed FMRs, HUD received 53 public comments covering 37 FMR areas. Rental housing survey information was provided for 20 of the FMR areas covered by comments, including the 4 requests for manufactured home space rent changes only. HUD carefully evaluated all of the survey data submitted and, based on that review, is revising the FMRs for 12 of the 20 areas. The information submitted for the other 17 FMR areas that did not submit rental housing surveys was not considered sufficient to provide a basis for revising the FMRs. The 8 FMR areas with approved FMR revisions are as follows: Dover, DE MSA Sussex County, DE Reno, NV MSA Preble County, OH Box Elder County, UT Cache County, UT Iron County, UT Fond du Lac County, WI The 4 manufactured home space survey areas with approved revisions are: Mendocino County, CA Rochester, NY MSA Utica-Rome, NY MSA Portland-Vancouver, OR-WA MSA PHAs and other interested parties should be aware that FMR comments [[Page 49577]] may be sent to HUD at any time during the year, not just during the 60- day comment period. Comments received too late for adjusting the current year's Final FMRs will be held for use in the following year, in which case HUD will trend the survey results to the date of the FMR estimate using its standard trending factor. If the PHA is concerned that rents are changing rapidly, surveys should be timed to be received as close as possible to HUD's deadline for processing, which is usually around July 30. AHS and RDD Surveys This notice makes effective the FMRs for 9 areas proposed with reductions based on recent RDD or AHS surveys. One of these areas, the Portland, ME MSA, submitted information that caused HUD to reduce the FMRs less than had been proposed. For the other areas, the lower proposed FMRs are, by this notice, being made final. FMR areas with reductions based on AHS surveys are Orange County, CA PMSA, and Riverside-San Bernardino, CA PMSA. The areas with reductions based on RDD surveys include: Danbury, CT PMSA, Portland, ME MSA (see note, above), Portsmouth-Rochester, NH-ME PMSA, and Aguadilla, PR MSA, Arecibo, PR PMSA, Ponce, PR MSA, and Nonmetropolitan Puerto Rico. In addition, by this notice HUD is increasing FMRs for the following 21 areas, based on RDDs that were completed after the date of the proposed FMR notice; they are: Abilene, TX MSA Bloomington-Normal, IL MSA Boston, MA-NH PMSA Charlottesville, VA MSA Fayetteville-Springdale-Rogers, AR MSA Gary, IN PMSA Greenville, NC MSA Huntington-Ashland, WV-KY-OH MSA Iowa City, IA MSA Kokomo, IN MSA Lafayette, IN MSA Lansing-East Lansing, MI MSA Nashville, TN MSA Richmond-Petersburg, VA MSA Sioux City, IA-NE MSA Springfield, MA MSA Hall County, NE Grant County, NM Luna County, NM Knox County, OH Pike County, OH FMR Area Definition Change The May 8, 1996 publication invited comments on HUD's proposal to include St. Landry and St. Martin Parishes with the Lafayette, LA FMR area, in accordance with OMB's practice. No comments were received on this proposed change, and therefore the proposal is being put into effect. Manufactured Home Space Surveys HUD also received public comments and survey data from 4 FMR areas concerning the manufactured home space FMRs. As a result of a review of the data, increased FMRs have been approved for Portland-Vancouver, OR- WA MSA, Rochester, NY MSA, Utica-Rome, NY MSA, and Mendocino County, CA. Manufactured home space FMRs are 30 percent of the applicable Section 8 Rental Certificate Program two-bedroom FMR. HUD accepts public comments requesting modifications of manufactured home space FMRs. In order to be accepted as a basis for revising the FMRs, such comments must contain statistically valid survey data that show the 40th percentile space rent (excluding the cost of utilities) for the entire FMR area. However, the sampling requirements for manufactured home space rent surveys are easier to meet than for regular FMR comments, and interested parties should contact HUD for suggestions. This program uses the same FMR area definitions as the Section 8 Rental Certificate Program. Manufactured home space FMR revisions are published as final FMRs in Schedule D. Once approved, the revised manufactured home space FMRs establish new base year estimates that are updated annually using the same data used to update the Rental Certificate program FMRs. HUD Rental Housing Survey Guides HUD recommends the use of professionally-conducted RDD telephone surveys to test the accuracy of FMRs for areas where there is a sufficient number of Section 8 units to justify the survey cost of $10,000-$12,000. Areas with 500 or more program units usually meet this criterion, and areas with fewer units may meet it if the actual two- bedroom FMR rent standard is significantly different than that proposed by HUD. In addition, HUD has developed a version of the RDD survey methodology for smaller, nonmetropolitan PHAs. This methodology is designed to be simple enough to be done by the PHA itself, rather than by professional survey organizations, at a cost of about $5,000. PHAs in nonmetropolitan areas may, in certain circumstances, do surveys of groups of counties. All grouped county surveys must be approved in advance by HUD. PHAs are cautioned that the resulting FMRs will not be identical for the counties surveyed; each individual FMR area will have a separate FMR based on its relationship to the combined rent of the group of FMR areas. PHAs that plan to use the RDD survey technique may obtain a copy of the appropriate survey guide by calling HUD USER on 1-800-245-2691. Larger PHAs should request ``Random Digit Dialing Surveys; A Guide to Assist Larger Public Housing Agencies in Preparing Fair Market Rent Comments.'' Smaller PHAs should obtain ``Rental Housing Surveys; A Guide to Assist Smaller Public Housing Agencies in Preparing Fair Market Rent Comments.'' HUD prefers, but does not mandate, the use of RDD telephone surveys, or the more traditional method described in the small PHA survey guide. Other survey methodologies are acceptable as long as they provide statistically reliable, unbiased estimates of the 40th percentile gross rent. Survey samples should preferably be randomly drawn from a complete list of rental units for the FMR area. If this is not feasible, the selected sample must be drawn so as to be statistically representative of the entire rental housing stock of the FMR area. In particular, surveys must include units of all rent levels and be representative by structure type (including single-family, duplex and other small rental properties), age of housing unit, and geographic location. The decennial Census should be used as a starting point and means of verification for determining whether the sample is representative of the FMR area's rental housing stock. All survey results must be fully documented. The cost of an RDD survey may vary, depending on the characteristics of the telephone system used in the FMR area. RDDs (and simplified telephone surveys) of some non-metropolitan areas have been unusually expensive because of telephone system characteristics. A PHA or PHA contractor that cannot obtain the recommended number of sample responses after reasonable efforts should consult with HUD before abandoning its survey; in such situations HUD is prepared to relax normal sample size requirements. FMRs for Federal Disaster Areas Under the authority granted in 24 CFR part 899, the Secretary of HUD finds good cause to waive the regulatory requirements that govern requests for geographic area FMR exceptions for areas that are declared disaster areas by the Federal Emergency Management Agency (FEMA) during FY 1997. HUD field offices are authorized to approve exceptions up to 10 percent above the applicable FMRs for: (1) Single-county [[Page 49578]] FMR areas and for individual county parts of multi-county FMR areas that qualify as disaster areas under the Robert T. Stafford Disaster Relief and Emergency Assistance Act; if (2) the PHA certifies that damage to the rental housing stock as a result of the disaster is so substantial that it has increased the prevailing rent levels in the affected area. Such exceptions must be requested in writing by the responsible PHAs. Once approved by HUD, they will remain in effect until superseded by the publication of the final FY 1999 FMRs. Puerto Rico FMRs The May 8, 1996 notice proposed 4 areas in Puerto Rico for reductions, based on RDD surveys begun in 1995 and completed in 1996. HUD has received several written comments on those proposed reductions, but no survey data with which to adjust them. Having received no comments with valid survey data, FMRs for the following areas are being made final: the Aguadilla, Arecibo, and Ponce MSAs, and the nonmetropolitan parts of Puerto Rico. Technical Correction: Santa Rosa, CA In the May 8, 1996 notice of proposed FMRs, the full schedule for the Santa Rosa, CA PMSA was wrong, although the 2 bedroom figure was correct. The corrected final FMRs for FY 1997 are listed in Schedule B. Other Matters Environmental Impact A Finding of No Significant Impact with respect to the environment as required by the National Environmental Policy Act (42 U.S.C. 4321- 4374) is unnecessary, since the Section 8 Rental Certificate Program is categorically excluded from the Department's National Environmental Policy Act procedures under 24 CFR 50.20(d). Regulatory Flexibility Act The undersigned, in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), hereby certifies that this notice does not have a significant economic impact on a substantial number of small entities, because FMRs do not change the rent from that which would be charged if the unit were not in the Section 8 Program. Impact on the Family The General Counsel, as the Designated Official under Executive Order No. 12606, The Family, has determined that this notice will not have a significant impact on family formation, maintenance, or well- being. The notice amends Fair Market Rent schedules for various Section 8 assisted housing programs, and does not affect the amount of rent a family receiving rental assistance pays, which is based on a percentage of the family's income. Federalism Impact The General Counsel, as the Designated Official under section 6(a) of Executive Order No. 12611, Federalism, has determined that this notice will not involve the preemption of State law by Federal statute or regulation and does not have Federalism implications. The Fair Market Rent schedules do not have any substantial direct impact on States, on the relationship between the Federal government and the States, or on the distribution of power and responsibility among the various levels of government. The Catalog of Federal Domestic Assistance program number is 14.156, Lower-Income Housing Assistance Program (Section 8). Dated: September 13, 1996. Henry G. Cisneros, Secretary. Accordingly, the Fair Market Rent Schedules, which will not be codified in 24 CFR Part 888, are amended as follows: Fair Market Rents for the Section 8 Housing Assistance Payments Program Schedules B and D--General Explanatory Notes 1. Geographic Coverage a. The FMRs shown in Schedule B incorporate the Office of Management and Budget's (OMB) most current definitions of metropolitan areas, with the exceptions discussed in paragraph (b). HUD uses the OMB Metropolitan Statistical Area (MSA) and Primary Metropolitan Statistical Area (PMSA) definitions for FMR areas because they closely correspond to housing market area definitions. FMRs are housing market- wide rent estimates that are intended to provide housing opportunities throughout the geographic area in which rental housing units are in direct competition. b. The exceptions are counties deleted from seven large metropolitan areas whose revised OMB definitions were determined by HUD to be larger than the housing market areas. The FMRs for the following counties (shown by the metropolitan area) are calculated separately and are shown in Schedule B within their respective States under the ``Metropolitan FMR Areas'' listing: Metropolitan Area and Counties Deleted Atlanta, GA--Carroll, Pickens, and Walton Counties. Chicago, IL--DeKalb, Grundy and Kendall Counties. Cincinnati-Hamilton, OH-KY-IN--Brown County, Ohio; Gallatin, Grant and Pendleton Counties in Kentucky; and Ohio County, Indiana. Dallas, TX--Henderson County. Flagstaff, AZ-UT--Kane County, UT. New Orleans, LA--St. James Parish. Washington, DC-MD--VA-WV--Berkeley and Jefferson Counties in West Virginia; and Clarke, Culpeper, King George and Warren Counties in Virginia. c. FMRs also are established for nonmetropolitan counties and for county equivalents in the United States, for nonmetropolitan parts of counties in the New England States and for FMR areas in Puerto Rico, the Virgin Islands and the Pacific Islands. d. FMRs for the areas in Virginia shown in the table below were established by combining the census data for the nonmetropolitan counties with the data for the independent cities that are located within the county borders. Because of space limitations, the FMR listing in Schedule B includes only the name of the nonmetropolitan county. The full definitions of these areas, including the independent cities, are as follows: Virginia Nonmetropolitan County FMR Area and Virginia Independent Cities Included With County ------------------------------------------------------------------------ County Cities ------------------------------------------------------------------------ Allegheny................................. Clifton Forge and Covington. Augusta................................... Staunton and Waynesboro. Carroll................................... Galax. Frederick................................. Winchester. Greensville............................... Emporia. Henry..................................... Martinsville. Montgomery................................ Radford. Rockbridge................................ Buena Vista and Lexington. Rockingham................................ Harrisonburg. Southhampton.............................. Franklin. Wise...................................... Norton. ------------------------------------------------------------------------ e. FMRs for Section 8 manufactured home spaces are established at 30 percent of the two-bedroom Section 8 Rental Certificate program FMRs, with the exception of the areas listed in Schedule D whose FMRs have been revised on the basis of public comments. Once approved, the revised manufactured home space FMRs establish new base-year estimates that will be updated annually using the same data used to estimate the Rental Certificate program FMRs. The FMR area definitions used for manufactured [[Page 49579]] home spaces are the same as for the Section 8 Certificate program. 2. Arrangement of FMR Areas and Identification of Constituent Parts a. The FMR areas in Schedule B are listed alphabetically by metropolitan FMR area and by nonmetropolitan county within each State. The exception FMRs for manufactured home spaces in Schedule D are listed alphabetically by State. b. The constituent counties (and New England towns and cities) included in each metropolitan FMR area are listed immediately following the listings of the FMR dollar amounts. All constituent parts of a metropolitan FMR area that are in more than one State can be identified by consulting the listings for each applicable State. c. Two nonmetropolitan counties are listed alphabetically on each line of the nonmetropolitan county listings. d. The New England towns and cities included in a nonmetropolitan part of a county are listed immediately following the county name. e. The FMRs are listed by dollar amount on the first line beginning with the FMR area name. 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