Fair Market Rents for the Housing Choice Voucher Program and Moderate Rehabilitation Single Room Occupancy Program Fiscal Year 2003

Federal RegisterSep 30, 2002

67 Fed. Reg. 61381 (Sep. 30, 2002)

AGENCY:

Office of the Secretary, HUD.

ACTION:

Notice of final fiscal year (FY) 2003 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 determine payment standard amounts for the Housing Choice Voucher program, to determine initial renewal rents for some expiring project-based Section 8 contracts, and to determine initial rents for housing assistance payments (HAP) contracts in the Moderate Rehabilitation (Mod Rehab) Single Room Occupancy (SRO) program. Other programs may require use of FMRs for other purposes. Today's notice provides final FY 2003 FMRs for all areas that reflect the estimated 40th and 50th percentile rent levels trended to April 1, 2003.

EFFECTIVE DATE:

The FMRs published in this notice are effective on October 1, 2002.

FOR FURTHER INFORMATION CONTACT:

Gerald Benoit, Director, Real Estate and Housing Performance Division, Office of Public and Assisted Housing Delivery, telephone (202) 708-0477, responsible for decisions on how fair market rents are used. Allison Manning, Community Assistance Division, telephone (202) 708-1234, responsible for administration of the Mod Rehab Single Room Occupancy (SRO) program. For technical information on the methodology used to develop fair market rents or a listing of all fair market rents, please call HUD USER at 1-800-245-2691 or access the information on the HUD Web site, http://www.huduser.org/datasets/fmr.html. Further questions on the methodology may be addressed to Marie L. Lihn, Economic and Market Analysis Division, Office of Economic Affairs, telephone (202) 708-0590, (e-mail: marie_l._lihn@hud.gov). Hearing- or speech-impaired persons may use the Telecommunications Devices for the Deaf (TTY) at 1-800-927-7589. (Other than the “800” HUD User and TTY numbers, 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 decent housing. Housing assistance payments are limited by FMRs established by HUD for different areas. In the Housing Choice Voucher program, the FMR is used to determine the “payment standard amount” used to calculate the maximum monthly subsidy for an assisted family (see 24 Code of Federal Regulations 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 and safe rental housing of a modest (non-luxury) nature with suitable amenities.

How HUD Sets FMRs

HUD Standard for Setting the FMR

FMRs are gross rent estimates that include both shelter rent paid by the tenant to the landlord and the cost of tenant-paid 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 in various neighborhoods and low enough to serve as many families as possible.

FMRs are set at a percentile within the rent distribution for standard quality rental housing units in each FMR area (see 24 Code of Federal Regulations 888.113). FMRs are based on the distribution of rents for units that are occupied by recent movers—renter households who moved into their units within the past 15 months. The distribution does not include rents for units less than two years old or for public housing units. Rents for subsidized housing units are adjusted by adding back the amount of the subsidy.

HUD sets FMRs either at the 40th percentile rent or at the 50th percentile rent. For most FMR areas, the FMR is set at the 40th percentile rent, the rent for 40 percent of standard rental housing units is at or below this dollar amount. For some FMR areas, the FMR is set at the 50th percentile rent, the median rent for 50 percent of standard units is at or below this dollar amount. An asterisk in Schedule B identifies each of the 39 FMR areas for which HUD Public Housing Agencies (PHAs) set 50th percentile FMRs.

Data Sources

HUD PHAs 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 (AHS), 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 on HUD regional rent change factors developed from regional RDD surveys. Area-specific annual average CPI data are available 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

With the exception of areas with FMRs set at the 50th percentile, FMRs are established at the higher of the local 40th percentile rent or a State minimum equal to the Statewide average 40th percentile rent for nonmetropolitan counties. The State minimum also affects a small number of metropolitan areas whose rents would otherwise fall below the State minimum.

Bedroom Size Adjustments

FMRs are calculated separately for each bedroom size category. In FMR areas where FMRs are based on the State minimums, the FMR for each bedroom size category is the higher of the 40th percentile rent for that bedroom size category (1) for the FMR area or (2) for the Statewide average of nonmetropolitan counties. For all other FMR areas, the bedroom intervals are based on 1990 census data indicating the rent for that bedroom size for the specific FMR area.

There are some areas where the bedroom intervals were adjusted because the rent intervals between bedroom sizes were above or below an acceptable range. The acceptable range for intervals between bedroom intervals was determined from a distribution of bedroom intervals for all metropolitan areas. Areas where the intervals were outside these standard ranges were increased or decreased to bring them back within the range. Higher ratios continue to be used for 3-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 SRO units are 0.75 times the 0 bedroom FMR.

Public Comments

In response to the May 23, 2002, proposed FMRs, HUD received 10 public comments covering 10 FMR areas. Rental housing survey information of some form was provided for four of those FMR areas. The Housing Authority of the County of Merced notified us that a survey was being conducted, but the survey was not submitted. All survey information submitted was evaluated and, based on that review, the FMRs for one area are being revised upward. The information submitted for the other FMR areas was not considered sufficient to provide a basis for revising the FMRs. The area with an approved FMR increase is:

Adams County, PA (Manufactured Home Space FMRs only)

Most of the commenters requested higher FMRs for their area. Some (Lebanon Housing Authority and the Housing Authority of the City of Los Angeles) suggested that FMRs be set at the 50th percentile for all areas. HUD conducted RDD surveys this summer for three areas (Los Angeles, CA, Washington, DC, and Oklahoma City, OK) that stated that the proposed FMRs were inadequate. The RDDs resulted in FMR increases for Los Angeles and Washington, DC; the RDD for Oklahoma City, OK, showed a slight decline in rents that will be incorporated into the proposed FMRs for FY 2004.

The Housing Authority of the City of Santa Barbara again requested that its FMR area be split into North and South Santa Barbara, or that HUD immediately approve its 146 percent exception for the southern area with the institution of the new FMRs on October 1. HUD agreed last year and continues to agree that the 146 percent exception rent for southern Santa Barbara should be effective October 1, 2002.

RDD Surveys

Summer RDDs

Based on RDDs conducted by HUD during the summer of 2002, FMRs for the following areas are being increased by more than the normal adjustments:

Fresno, CA

Los Angeles, CA

Sacramento, CA

Salinas, CA

Bridgeport, CT

Hartford, CT

Washington, DC

Pocatello, ID

Brockton, MA

Lawrence, MA

Lowell, MA

Rochester, MN

St Louis, MO

Middlesex-Somerset-Hunterdon, NJ

Eugene-Springfield, OR

Summer 2002 RDDs also were done for the following areas, but they resulted in no change in the FMRs:

Birmingham, AL

Riverside-San Bernardino, CA

Jacksonville, FL

Rocky Mount, NC

Philadelphia, PA-NJ

Pittsburgh, PA

Tacoma, WA

Two summer 2002 RDDs produced lower FMR estimates than those proposed in the May 23, 2002, publication. These areas will receive the proposed FY 2003 FMRs, but reductions will be in the Federal Register publication that contains proposed FY 2004 FMRs. The two areas are:

San Francisco, CA

Oklahoma City, OK

American Housing Survey

There were no AHS surveys with results that alter proposed FY 2003 FMRs.

FMR Area Definition Changes

There were no changes in Office of Management Budget (OMB) metropolitan area definitions affecting the FY 2003 FMRs. Although a new county has been formed in Colorado, Broomfield County, this new area definition will not be incorporated into an FMR area until OMB decides which Metropolitan Statistical Area (MSA) (Denver or Boulder) will include this county. OMB will not make this decision until it finishes its review of the 2000 Census data. The area that makes up the new county of Broomfield was split between the Denver and Boulder MSAs, and will remain split until Broomfield County is assigned to the Boulder or Denver metropolitan area.

Manufactured Home Space Surveys

The FMR used to establish payment standard amounts for the rental of manufactured home spaces in the Housing Choice Voucher program is 40 percent of the FMR for a 2-bedroom unit. HUD will consider modification of the manufactured home space FMRs where public comments present statistically valid survey data showing the 40th percentile manufactured home 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 are sufficient numbers of Section 8 units to justify the survey cost of $14,000-$20,000. 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 PHAs 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.

A PHA that plans 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 if 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.

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.

Accordingly, the Fair Market Rent Schedules, which will not be codified in 24 CFR part 888, are amended as follows:

Dated: September 20, 2002.

Mel Martinez,

Secretary.

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.

HUD uses the OMB Metropolitan Statistical Area (MSA) and Primary Metropolitan Statistical Area (PMSA) definitions. Schedule B FMRs are issued for the metropolitan areas as defined by OMB, with the exceptions discussed in paragraph (b). The OMB-defined metropolitan areas 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:

Virginia Nonmetropolitan County FMR Area and 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

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 2-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.

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BILLING CODE 4210-62-P

[FR Doc. 02-24619 Filed 9-27-02; 8:45 am]

BILLING CODE 4210-62-C