Fair Market Rents for Fiscal Year 2001

AGENCY:

Office of the Secretary, HUD.

ACTION:

Notice of Final Fiscal Year (FY) 2001 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 to establish payment standards for the Housing Choice Voucher program; to determine initial contract rents in new commitments for Section 8 project-based assistance (e.g., the project-based voucher program); to determine whether comparability applies to adjustment of contract rents during the term of an existing HAP contract in the Section 8 new construction, substantial rehabilitation and moderate rehabilitation programs; and as a limit on renewal rents for certain Section 8 projects. The FMRs also apply to any other programs requiring their use. Today's notice establishes final FY 2001 FMRs for all areas. These FMRs reflect the estimated 40th percentile rent levels trended to April 1, 2001.

EFFECTIVE DATE:

The FMRs published in this notice are effective on October 1, 2000.

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 Lynn A. Rodgers, Economic and Market Analysis Division, Office of Economic Affairs, telephone (202) 708-0590, Extension 5735 (e-mail: Lynn_A._Rodgers @hud.gov). Hearing-or speech-impaired persons may use the Telecommunications Devices for the Deaf (TTY) by contacting the Federal Information Relay Service at 1-800-877-8339. (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 safe and habitable housing. Housing assistance payments are limited by FMRs established by HUD for different areas. In the voucher program, the FMR is used to determine the “payment standard” (the maximum monthly subsidy) for assisted families (see 24 CFR Section 982.503.) 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) 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 99 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.

State Minimum FMRs

FMRs are established at the higher of the local 40th percentile rent level 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.

Bedroom Size Adjustments

FMRs have been calculated separately for each bedroom size category. For areas whose FMRs are based on the State minimums, the rents for each bedroom size are the higher of the rent for the area or the Statewide average of nonmetropolitan counties for that bedroom size.

For all other FMR areas, the FMRs, including determination of the intervals between the FMRs for bedroom size category, are generally based on data for the specific area. Although intervals are generally based on data for the specific area, exceptions have been made for some areas with local bedroom size rent intervals below an acceptable range. For those areas the intervals used were the minimum bedroom intervals (determined after excluding outliers) from the distribution of bedroom intervals for all metropolitan areas.

Higher intervals continue to be used for three-bedroom and larger size units than would result from using the actual market relationships. This is done to assist the largest, most difficult to house families in finding program-eligible units. The FMRs for unit sizes larger than 4 bedroom are calculated by adding 15 percent to the 4 bedroom FMR for each extra bedroom. For example, the FMR for a 5 bedroom unit is 1.15 times the 4 bedroom FMR, and the FMR for a 6 bedroom unit is 1.30 times the 4 bedroom FMR. FMRs for single-room-occupancy (SRO) units are 0.75 times the 0 bedroom FMR.

Public Comments

In response to the April 28, 2000 proposed FMRs, HUD received public comments covering 33 FMR areas. Rental housing survey information was provided for 22 of those FMR areas. All of the survey information submitted was evaluated. Based on that review, HUD has revised the proposed FMRs for 16 areas. The information submitted for the other FMR areas was not considered sufficient to provide a basis for revising the FMRs. HUD has increased the proposed FMRs for the following areas.

Bennington County, VT

Brown County, SD

Caledonia County, VT

Clay County, SD

Codington County, SD

Davidson County, SD

Essex County, VT

Franklin County, VT

Grand Isle County, VT

Hughes County, SD

Reno, NV, MSA (Manufactured Home Space FMRs only)

Rutland County, VT

San Jose, CA PMSA

Vallejo-Fairfield-Napa, CA PMSA (Manufactured Home Space FMRs only)

Windham County, VT

Windsor County, VT

RDD Surveys

This notice makes effective the FMRs for 5 areas proposed with reductions based on RDD surveys conducted from January through April, 2000.

Of these five areas, comments were received from:

Lake Charles, LA MSA

Providence-Fall River-Warwick, RI—MA MSA

Springfield, MA MSA

None of the comments received pertaining to these three FMR areas contained sufficient rental housing survey information to provide a basis for revising the FMRs.

No comments were received from the other two areas with proposed decreases:

Brownsville-Harlingen-San Benito, TX MSA

Utica-Rome, NY MSA

Based on RDDs conducted by HUD in summer, 2000, FMRs for the following areas are being increased more than the normal inflation based increase:

Athens County, OH

Burlington, VT MSA

Burnet County, TX

Goldsboro, NC MSA

Jonesboro, AR MSA

Montcalm County, MI

Oakland, CA PMSA

Oklahoma City, OK MSA

Portland, ME MSA

Stamford-Norwalk, CT PMSA

Ventura, CA PMSA

Summer, 2000 RDDs were conducted for the following areas with no change in the FMRs indicated:

Boulder-Longmont, CO PMSA

Harrison County, OH

Los Angeles-Long Beach, CA PMSA

Rocky Mount, NC MSA

Santa Barbara-Santa Maria-Lompoc, CA MSA

A summer, 2000 RDD indicates a decrease of approximately 16 percent in the FMR for the Dutchess County, NY PMSA. This reduction will be proposed for the FY 2002 FMRs.

American Housing Survey

There were no applicable AHS surveys to include in the FY 2001 FMRs.

Calculation Errors

San Diego, CA and Orange County, CA FMRs have been increased by 2 percent and 1.1 percent, respectively, due to corrections of calculation errors in the proposed FMRs.

FMR Area Definition Changes

There were no changes in OMB metropolitan area definitions affecting the FY 2001 FMRs.

Three areas requested changes to their FMR areas: the Public Housing Agency (PHA) for Santa Barbara, CA requested a north/south split in the county, and the Fairfax County, VA and Rockland County, NY PHAs requested that they be removed from their respective FMR areas and made separate FMR areas. HUD does not support splitting FMR areas for these areas. FMR areas are intended to correspond to housing market areas, which HUD defines based on the Office of Management and Budget's metropolitan area definitions. While many FMR areas have large differentials of market rent between the highest and lowest cost parts of an FMR area, current rules for the Section 8 Voucher Program provide that a PHA may establish a separate payment standard for a designated part of an FMR area up to 110 percent of the published standard amounts that exceed this limit. In specified circumstances, with sufficient justification, HUD headquarters may even approve a voucher payment standard amount that exceeds 120 percent of the published FMR—the maximum subsidy limit in the old Section 8 certificate program. These exceptions are sufficient to account for market rent differentials.

Manufactured Home Space Surveys

FMRs for the rental of manufactured home spaces in the Housing Choice Voucher program are 40 percent of the applicable Section 8 existing housing program FMR for a two-bedroom unit. HUD accepts public comments requesting modifications of these FMRs where the 40 percent FMRs are thought to be inadequate. In order to be accepted as a basis for revising the FMRs, comments must contain statistically valid survey data that show the 40th percentile space rent (including the cost of utilities) for the entire FMR area. 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 other 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 local rents are thought to be significantly different than the FMR proposed by HUD. In addition, HUD has developed a simplified 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 Housing Agencies in Preparing Fair Market Rent Comments.” Smaller PHAs should obtain “Rental Housing Surveys; A Guide to Assist Smaller Housing Agencies in Preparing Fair Market Rent Comments.” These guides are also available on the Internet at http://www.huduser.org/datasets/fmr.html.

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 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.

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.

Federalism Impact

The General Counsel, as the Designated Official under section 6(a) of Executive Order 13132, 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.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance program number is 14.156, Lower-Income Housing Assistance Program (Section 8).

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 Housing Choice Voucher Program Schedules B and D—General Explanatory Notes

1. Geographic Coverage

a. Metropolitan Areas—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. The FMRs shown in Schedule B incorporate OMB's 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.

b. Exceptions to OMB Definitions—The exceptions are counties deleted from several large metropolitan areas whose revised OMB metropolitan area 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

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. Nonmetropolitan Area FMRs—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. Virginia Independent Cities—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:

2. Bedroom Size Adjustments

Schedule B shows the FMRs for 0-bedroom through 4-bedroom units. The FMRs for unit sizes larger than 4 bedrooms are calculated by adding 15 percent to the 4-bedroom FMR for each extra bedroom. For example, the FMR for a 5-bedroom unit is 1.15 times the 4-bedroom FMR, and the FMR for a 6-bedroom unit is 1.30 times the 4 bedroom FMR. FMRs for single-room-occupancy (SRO) units are 0.75 times the 0 bedroom FMR.

3. FMRs for Manufactured Home Spaces

FMRs for manufactured home spaces in the Housing Choice Voucher program are 40 percent of the two-bedroom Housing Choice Voucher program FMRs, with the exception of the areas listed in Schedule D whose manufactured home space FMRs have been modified on the basis of public comments. Once approved, the revised manufactured home space FMRs establish new base-year estimates that are updated annually using the same data used to estimate the Housing Choice Voucher program FMRs. The FMR area definitions used for the rental of manufactured home spaces are the same as the area definitions used for the other FMRs.

4. 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.