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Notice

Fair Market Rents for the Housing Choice Voucher Program and Moderate Rehabilitation Single Room Occupancy Program-Fiscal Year 2004

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AGENCY:

Office of the Secretary, HUD.

ACTION:

Notice of proposed fiscal year (FY) 2004 Fair Market Rents (FMRs).

SUMMARY:

Section 8(c)(1) of the United States Housing Act of 1937 (the Act) 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 Single Room Occupancy (SRO) program. Other programs may require use of FMRs for other purposes. Today's notice proposes revised FMRs that reflect estimated 40th and 50th percentile rent levels trended to April 1, 2004.

DATES:

Comments Due Date: June 27, 2003.

ADDRESSES:

Interested persons are invited to submit comments regarding HUD's estimates of the FMRs as published in this Notice to the Office of the General Counsel, Rules Docket Clerk, Room 10276, Department of Housing and Urban Development, 451 Seventh Street, SW., Washington, DC 20410-0001. Communications should refer to the above docket number and title and should contain the information specified in the “Request for Comments” section. To ensure that the information is fully considered by all of the reviewers, each commenter is requested to submit two copies of its comments, one to the Rules Docket Clerk and the other to the Economic and Market Analysis Staff in the appropriate HUD Field Office. A copy of each communication submitted will be available for public inspection and copying during regular business hours (7:30 a.m.—5:30 p.m. Eastern Time) at the above address.

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FOR FURTHER INFORMATION CONTACT:

Gerald Benoit, Director, Housing Voucher Management and Operations Division, Office of Public Housing and Voucher Programs, telephone (202) 708-0477, responsible for decisions on how fair market rents are used; or Allison Manning, Community Assistance Division, telephone (202) 708-1234, responsible for administration of the Mod Rehab Single Room Occupancy 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 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) by contacting the Federal Information Relay Service at 1-800-877-8339. (Other than the “800” TTY number, telephone numbers are not toll free.)

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SUPPLEMENTARY INFORMATION:

Section 8 of the United States Housing Act of 1937 (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 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 CFR 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.

Lower Than Normal Increases for Proposed FY 2004 FMRs: It should be noted that proposed FMR increases in many parts of the country, especially nonmetropolitan areas, were modest or non-existent. This is due to two factors. One is relatively modest increases in shelter rents (i.e., total rents excluding utilities). The other and more significant factor is reductions in utility costs from the previous year.

Electronic Data Availability: This Federal Register notice is available electronically from the HUD news page: http://www.hudclips.org/​cgi/​index.cgi. Federal Register notices also are available electronically from the U.S. Government Printing Office Web site: http://www.access.gpo.gov/​su_​docs/​aces/​aces140.html.

Publication of FMRs

Section 8(c) of the Act requires the Secretary of HUD to publish FMRs periodically, but not less frequently than annually. HUD's regulations provide that HUD will develop FMRs by publishing proposed FMRs for public comment and publish final FMRs after evaluating public comments (see 24 CFR 888.115).

Schedule B of the proposed FY 2003 FMR schedules at the end of this document lists the fair market rents for existing housing, including housing assisted under the housing choice voucher program.

Schedule D lists FMRs for the rental of manufactured home spaces in the housing choice voucher program for areas where HUD has approved a manufactured home space FMR greater than 40 percent of the 2-bedroom FMR, based on public comments (see 24 CFR 888.113(e) and 982.623(e)).

In the Moderate Rehabilitation SRO program, the fair market rent is 90 percent of the 0-bedroom existing housing fair market rent in Schedule B. (This is equivalent to 75 percent of the moderate rehabilitation 0-bedroom fair market rent (See 24 CFR 882.408(a).) The FMR for the moderate rehabilitation SRO program is the maximum initial gross rent (gross rent at the beginning of the HAP contract term).

Units are no longer developed under the regular moderate rehabilitation program. For the purpose of determining renewal gross rents for a HAP contract under the regular moderate rehabilitation program, the applicable FMR is 120 percent of the existing housing fair market rent in Schedule B.

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 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.

FMRs are set at a percentile within the rent distribution for standard quality rental housing units in each FMR areas (see 24 CFR 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 Start Printed Page 3187140 percent of standard rental housing units is at or below this dollar amount. FMRs have been increased to the 50th percentile rent in those metropolitan areas where a FMR increase is most needed to promote residential choice, help families move closer to areas for job growth, and deconcentrate poverty (See 24 CFR 888.113(c)). The rent for 50 percent of standard rental housing units is at or below this dollar amount. An asterisk in Schedule B identifies each of the 39 FMR areas for which HUD has set 50th percentile FMRs.

Data Sources

HUD used the most accurate and current data available to develop the FMR estimates. The following sources of survey data are used to develop the base-year estimates:

(1) The 1990 Census provides statistically reliable rent data for all FMR areas;

(2) The Bureau of the Census' American Housing Survey (AHS) is used to develop between-Census revisions for the largest metropolitan areas. The revised FMRs have accuracy comparable to the decennial Census; and

(3) Random Digit Dialing (RDD) telephone surveys of individual FMR areas. The RDD surveys 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 the 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 contract rent and residential utility cost data are available individually for 99 metropolitan FMR areas and for the four Census Regions. RDD regional rent change factors are developed annually for the metropolitan and nonmetropolitan parts of each of the 10 HUD regions. The utility component of RDD surveys is updated using CPI regional utility cost change factors. 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 level or a state minimum equal to the statewide average 40th percentile rent for nonmetropolitan counties. The state minimum 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 of rent intervals between bedroom sizes was determined from a distribution of bedroom intervals for all metropolitan areas. For areas with rent intervals outside these standard ranges, the rent intervals between bedroom sizes 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 a 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.

Area RDD Rent Survey Adjustments

RDD surveys are used to obtain statistically reliable FMR estimates for selected FMR areas. This telephone survey technique involves drawing random samples of renter units occupied by recent movers. RDD surveys exclude public housing units, other assisted units for which the market rent cannot be determined, units built in the past two years, seasonal units, non-cash rental units, and units owned by relatives of the unit occupants.

A HUD analysis has shown that the slight downward RDD survey bias caused by including some rental units that are in substandard condition is almost exactly offset by the slight upward bias that results from surveying only units with telephones.

Approximately 15,000-20,000 telephone numbers need to be contacted to achieve the target survey sample level of 200 eligible recent mover responses. 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 estimates are within 5 percent of the actual value.

Today's notice includes proposed FMR decreases below the normal update factor based on RDD surveys conducted in July 2002 for the following areas:

Oklahoma City, OK MSA

San Francisco, CA PMSA

Unlike past years, HUD did not complete any RDDs this winter for the FY 2004 FMRs.

FMR Area Definition Changes

This notice includes FMRs for two nonmetropolitan counties (boroughs) in Alaska not previously listed separately: Denali and Yakutat. Denali comes from the Yukon-Koyukuk area and Yakutat comes from the former area of Skagway-Yakutat-Angoon, now renamed Skagway-Hoonah-Angoon.

Request for Comments

HUD seeks public comments on FMR levels for specific areas. Comments on FMR levels must include sufficient information (including local data and a full description of the rental housing survey methodology used) to justify any proposed changes. Changes may be proposed in all or any one or more of the bedroom-size categories on the schedule. Recommendations and supporting data must reflect the rent levels that exist within the entire FMR area.

For the supporting data, 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 about $20,000. Areas with 500 or more program units usually meet this cost criterion, and areas with fewer units may meet it if actual 2-bedroom rents are significantly different from the FMRs 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 $5,000 or less.

PHAs in nonmetropolitan areas may, in certain circumstances, do surveys of groups of counties. HUD must approve all county-grouped surveys in advance. 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 Start Printed Page 31872the relationship of rents in that area to the combined rents in the cluster of FMR areas. In addition, PHAs are advised that counties whose FMRs are based on the state minimum will not have their FMRs revised unless the grouped survey results show a revised FMR above the state minimum level.

PHAs that plan to use the RDD survey technique should obtain a copy of the appropriate survey guide. Larger PHAs should request HUD's survey guide entitled “Random Digit Dialing Surveys; A Guide to Assist Larger Public Housing Agencies in Preparing Fair Market Rent Comments.” Smaller PHAs should obtain a guide entitled “Rental Housing Surveys; A Guide to Assist Smaller Public Housing Agencies in Preparing Fair Market Rent Comments.” These guides are available from HUD USER on 1-800-245-2691, or from HUD's Worldwide website, in Microsoft Word or Adobe Acrobat format, at the following address: http://www.huduser.org/​datasets/​fmr.html.

Other survey methodologies are acceptable in providing data with comments as long as the surveys submitted provide statistically reliable, unbiased estimates of the 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 to verify whether the sample is representative of the FMR area's rental housing stock.

Most surveys cover only 1- and 2-bedroom units, in which case HUD will make the adjustments for other size units consistent with the differentials established on the basis of the decennial Census data for the FMR area. When 3- and 4-bedroom units are surveyed separately to determine FMRs for these unit size categories, the commenter should multiply the 40th percentile survey rents by 1.087 and 1.077, respectively, to determine the FMRs. The use of these factors will produce the same upward adjustments in the rent differentials as those used in the HUD methodology.

HUD will consider increasing manufactured home space FMRs where public comment demonstrates that 40 percent of the 2-bedroom FMR is not adequate. In order to be accepted as a basis for revising the manufactured home space FMRs, comments must include a pad rental survey of the mobile home parks in the area (and note the utilities included in this rental fee) along with a copy of the applicable public housing authority utility schedule.

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

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Dated: May 20, 2003.

Mel Martinez,

Secretary.

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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 are determined for the same areas as 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.

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. Nonmetropolitan area FMRs are set at the higher of the local 40th percentile rent level or the statewide average of nonmetropolitan counties. (The state minimum also affects a small number of metropolitan areas whose rents would otherwise fall below the state minimum.)

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 complete definitions of these areas including the independent cities are as follows:

Virginia Nonmetropolitan County FMR Area and Independent Cities Included

CountyCities
AlleghanyClifton Forge and Covington
AugustaStaunton and Waynesboro
CarrollGalax
FrederickWinchester
GreensvilleEmporia
HenryMartinsville
MontgomeryRadford
RockbridgeBuena Vista and Lexington
RockinghamHarrisonburg
SouthhamptonFranklin
WiseNorton

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 existing housing program FMRs, with the exception of the areas listed in Schedule D whose manufactured home space FMRs have been modified on the basis Start Printed Page 31873of 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 existing housing FMRs. The FMR area definitions used for the rental of manufactured home spaces in the housing choice voucher program are the same as the area definitions used for other FMRs.

4. Arrangement of FMR Areas and Identification of Constituent Parts

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.

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.

Two nonmetropolitan counties are listed alphabetically on each line of the nonmetropolitan county listings.

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[FR Doc. 03-13269 Filed 5-27-03; 8:45 am]

BILLING CODE 4210-62-C