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Notice

Fair Market Rents for the Housing Choice Voucher Program, Moderate Rehabilitation Single Room Occupancy Program, and Other Programs Fiscal Year 2021

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Start Preamble Start Printed Page 49666

AGENCY:

Office of the Assistant Secretary for Policy Development and Research, HUD.

ACTION:

Notice of Fiscal Year (FY) 2021 Fair Market Rents (FMRs).

SUMMARY:

Section 8(c)(1) of the United States Housing Act of 1937 (USHA), as amended by the Housing Opportunities Through Modernization Act of 2016 (HOTMA), requires the Secretary to publish FMRs not less than annually, adjusted to be effective on October 1 of each federal fiscal year (FFY). This notice describes the methods used to calculate the FY 2021 FMRs and enumerates the procedures for Public Housing Agencies (PHAs) and other interested parties to request reevaluations of their FMRs as required by HOTMA. The trend factors used in the FY 2021 FMRs include updated economic assumptions to reflect the economic downturn caused by the COVID-19 pandemic.

DATES:

Comment Due Date: September 30, 2020.

Applicable Date: October 1, 2020 unless HUD receives a valid request for reevaluation of specific area FMRs as described below.

ADDRESSES:

HUD invites interested persons to submit comments regarding the FMRs and to request reevaluation of the FY 2021 FMRs to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 Seventh Street SW, Room 10276, Washington, DC 20410-0001. Communications must refer to the above docket number and title and should contain the information specified in the “Request for Comments/Request for Reevaluation” section. There are two methods for submitting public comments.

1. Submission of Comments by Mail. Comments or requests for reevaluation 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. Due to security measures at all federal agencies, however, submission of comments by standard mail often results in delayed delivery. To ensure timely receipt of comments or reevaluation requests, HUD recommends that comments or requests submitted by standard mail be submitted at least two weeks in advance of the deadline. HUD will make all comments or reevaluation requests received by mail available to the public at https://www.regulations.gov.

2. Electronic Submission of Comments. Interested persons may submit comments or reevaluation requests electronically through the Federal eRulemaking Portal at https://www.regulations.gov. HUD strongly encourages commenters to submit comments or reevaluation requests electronically. Electronic submission of comments or reevaluation requests allows the author maximum time to prepare and submit a comment or reevaluation request, ensures timely receipt by HUD, and enables HUD to make them immediately available to the public. Comments or reevaluation requests submitted electronically through the https://www.regulations.gov website can be viewed by other submitters and interested members of the public. Commenters or reevaluation requestors should follow instructions provided on that site to submit comments or reevaluation requests electronically.

Note: To receive consideration as public comments or reevaluation requests, comments or requests must be submitted through one of the two methods specified above. Again, all submissions must refer to the docket number and title of the notice.

No Facsimile Comments or Reevaluation Requests. Facsimile (FAX) comments or requests for FMR reevaluation are not acceptable.

Public Inspection of Public Comments and Reevaluation Requests. All properly submitted comments and reevaluation requests and communications regarding this notice 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 and reevaluation requests 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 (toll-free number). Copies of all comments and reevaluation requests submitted are available for inspection and downloading at https://www.regulations.gov.

Start Further Info

FOR FURTHER INFORMATION CONTACT:

For technical information on the methodology used to develop FMRs or a listing of all FMRs, please call the HUD USER information line at 800-245-2691 or access the information on the HUD USER website https://www.huduser.gov/​portal/​datasets/​fmr.html. FMRs are listed at the 40th percentile in the Schedule of Metropolitan and Non-Metropolitan Area FMRs. For informational purposes, 50th percentile rents for all FMR areas will be published at https://www.huduser.gov/​portal/​datasets/​50per.html.

Questions related to use of FMRs or voucher payment standards should be directed to the respective local HUD program staff. Questions on how to conduct FMR surveys may be addressed to Marie L. Lihn or Peter B. Kahn of the Program Parameters and Research Division, Office of Economic Affairs, Office of Policy Development and Research at HUD headquarters, 451 7th Street SW, Room 8208, Washington, DC 20410; telephone number 202-402-2409 (this is not a toll-free number), or they may be reached at pprd@hud.gov. Persons with hearing or speech impairments may access HUD numbers through TTY by calling the Federal Relay Service at 800-877-8339 (toll-free number).

Electronic Data Availability. This Federal Register notice will be available electronically from the HUD User page at https://www.huduser.gov/​portal/​datasets/​fmr.html. Federal Register notices also are available electronically from https://www.federalregister.gov/​ the U.S. Government Printing Office website. Complete documentation of the methods and data used to compute each area's FY 2021 FMRs is available at https://www.huduser.gov/​portal/​datasets/​fmr.html#2021_​query. FY 2021 FMRs are available in a variety of electronic formats at https://www.huduser.gov/​portal/​datasets/​fmr.html. FMRs may be accessed in PDF as well as in Microsoft Excel. Small Area FMRs for all metropolitan FMR areas are available in Microsoft Excel format at: https://www.huduser.gov/​portal/​datasets/​fmr/​smallarea/​index.html.

End Further Info End Preamble Start Supplemental Information

SUPPLEMENTARY INFORMATION:

I. Background

Section 8 of the USHA (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 geographic areas. In the Housing Choice Start Printed Page 49667Voucher (HCV) program, the FMR is the basis for determining the “payment standard amount” used to calculate the maximum monthly subsidy for an assisted family. See 24 CFR 982.503. HUD also uses the FMRs to determine initial renewal rents for some expiring project-based Section 8 contracts, initial rents for housing assistance payment contracts in the Moderate Rehabilitation Single Room Occupancy program, rent ceilings for rental units in both the HOME Investment Partnerships program and the Emergency Solution Grants program, calculation of maximum award amounts for Continuum of Care recipients and the maximum amount of rent a recipient may pay for property leased with Continuum of Care funds, and calculation of flat rents in Public Housing units. 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 and is typically set at the 40th percentile of the distribution of gross rents. HUD's FMR calculations represent HUD's best effort to estimate the 40th percentile gross rent [1] paid by recent movers into standard quality units in each FMR area. In addition, all rents subsidized under the HCV program must meet reasonable rent standards.

II. Procedures for the Development of FMRs

Section 8(c)(1) of the USHA, as amended by HOTMA (Pub. L. 114-201, approved July 29, 2016), requires the Secretary of HUD to publish FMRs not less than annually. Section 8(c)(1)(A) states that each FMR “shall be adjusted to be effective on October 1 of each year to reflect changes, based on the most recent available data trended so the rentals will be current for the year to which they apply . . .” Section 8(c)(1)(B) requires that HUD publish, not less than annually, new FMRs on the World Wide Web or in any other manner specified by the Secretary, and that HUD must also notify the public of when it publishes FMRs by Federal Register notice. After notification, the FMRs “shall become effective no earlier than 30 days after the date of such publication,” and HUD must provide a procedure for the public to comment and request a reevaluation of the FMRs in a jurisdiction before the FMRs become effective. Consistent with the statute, HUD is issuing this notice to notify the public that FY 2021 FMRs are available at https://www.huduser.gov/​portal/​datasets/​fmr.html and will become effective on October 1, 2020. This notice also provides procedures for FMR reevaluation requests.

III. FMR Methodology

This section provides a brief overview of how HUD computes the FY 2021 FMRs. HUD is making no changes to the estimation methodology for FMRs as used by HUD for the FY 2020 FMRs. For complete information on how HUD derives each area's FMRs, see the online documentation at https://www.huduser.gov/​portal/​datasets/​fmr.html#2021_​query.

In conjunction with the use of 2018 American Community Survey (ACS) data, HUD has implemented the following geography change, the designation of the two counties comprising newly created Twin Falls, ID MSA as metropolitan counties. These two counties will be designated as Twin Falls County, ID HUD Metro FMR Area and Jerome County, ID HUD Metro FMR Area. Although the FMRs for these counties will be calculated separately, the metropolitan area designation impacts the FMR calculations since the areas will use the Idaho metropolitan state-based recent mover factor instead of the Idaho state non-metropolitan recent mover factor.

A. Base Year Rents

For FY 2021 FMRs, HUD uses the U.S. Census Bureau's 5-year ACS data collected between 2014 and 2018 and released in December 2019 as the base rents for the FMR calculations. The ACS data released at the end of 2019 is the most current ACS data available at the time the FY 2021 FMRs are calculated. HUD pairs a “margin of error” test [2] with an additional requirement based on the number of survey observations supporting the estimate to improve the statistical reliability of the ACS data used in the FMR calculations. The Census Bureau does not provide HUD with an exact count of the number of observations supporting the ACS estimate; rather, the Census Bureau provides HUD with categories of the number of survey responses underlying the estimate, including whether the estimate is based on more than 100 observations. Using these categories, HUD requires that, in addition to the “margin of error” test, ACS rent estimates must be based on at least 100 observations to be used as base rents.

For areas in which the 5-year ACS data for two-bedroom, standard quality gross rents do not pass the statistical reliability tests (i.e., have a margin of error ratio greater than 50 percent or fewer than 100 observations), HUD will use an average of the base rents over the three most recent years [3] (provided that there is data available for at least two of these years),[4] or if such data is not available, using the two-bedroom rent data within the next largest geographic area, which for a non-metropolitan area would be the state non-metro area rent data.

HUD has updated base rents each year using annually updated 5-year data made available since FY 2012. HUD also updates base rents for Puerto Rico FMRs using data collected between 2014 and 2018 through the Puerto Rico Community Survey (PRCS); HUD first updated the Puerto Rico base rents in FY 2014 based on 2007-2011 PRCS data collected through the ACS program.

HUD historically based FMRs on gross rents for recent movers (those who have moved into their current residence in the last 24 months) measured directly. However, due to the way Census constructs the 5-year ACS data, HUD developed a new method for calculating recent-mover FMRs in FY 2012, which HUD continues to use in FY 2021. Under this method, HUD assigns all areas a base rent, which is the two-bedroom standard quality 5-year gross rent estimate from the ACS; then, because HUD's regulations mandate that FMRs must be published as recent mover gross rents, HUD applies a recent-mover factor to the base rents assigned from the 5-year ACS data.[5] The calculation of the recent mover factor is described below.

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B. Recent-Mover Factor

Following the assignment of the standard quality two-bedroom rent described above, HUD applies a recent-mover factor to these rents. HUD calculates the recent-mover factor as the change between the 5-year 2014-2018 standard quality two-bedroom gross rent and the 1-year 2018 recent mover gross rent for the recent mover factor area. HUD does not allow recent-mover factors to lower the standard quality base rent; therefore, if the 5-year standard quality rent is larger than the comparable 1-year recent mover rent, the recent-mover factor is set to 1 so the base rent is updated and trended. When the recent-mover factor is greater than one, the base rent is effectively replaced with the recent-mover rent for that area and that is what is updated and trended. For virtually all metropolitan areas, one-year recent-mover data is the basis for the updated and trended FMRs.

The calculation of the recent-mover factor for FY 2021 continues to use statistical reliability requirements that are similar to those for base rents. That is, for a recent-mover gross rent estimate to be considered statistically reliable, the estimate must have a margin of error ratio that is less than 50 percent, and the estimate must be based on 100 or more observations.

When an FMR area does not have statistically reliable two-bedroom recent-mover data, the “all-bedroom” 1-year recent-mover ACS data for the FMR area is tested for statistical reliability.[6] An “all-bedroom” recent-mover factor from the FMR area will be used, if statistically reliable, before substituting a two-bedroom recent-mover factor from the next larger geography. Incorporating “all-bedroom” rents into the recent-mover factor calculation when statistically reliable two-bedroom data is not available preserves the use of local information to the greatest extent possible.

However, where statistically reliable “all-bedroom” data is not available, HUD will continue to base FMR areas' recent-mover factors on larger geographic areas, following the same procedures used historically: HUD tests data from differently sized geographic areas in the following order (from small to large), and bases the recent-mover factor on the first statistically reliable recent-mover rent estimate in the geographic hierarchy listed below.

  • For metropolitan areas that are sub-areas of larger metropolitan areas, the order is the FMR area, metropolitan area, aggregated metropolitan parts of the state, and state.
  • For metropolitan areas that are not divided, the order is the FMR area, aggregated metropolitan parts of the state, and state.
  • In non-metropolitan areas, the order is the FMR area, aggregated non-metropolitan parts of the state, and state.

The process for calculating each area's recent mover factor is detailed in the FY 2021 FMR documentation system available at:

https://www.huduser.gov/​portal/​datasets/​fmr.html#2021_​query. Applying the recent-mover factor to the standard quality base rent produces an “as of” 2018 recent mover two-bedroom gross rent for the FMR area.

C. Other Rent Survey Data

HUD calculated base rents for the insular areas using data collected during the 2010 decennial census of American Samoa, Guam, the Northern Mariana Islands, and the Virgin Islands beginning with the FY 2016 FMRs.[7] This 2010 base year data is updated through 2018 for the FY 2021 FMRs using the growth in national ACS data.

HUD does not use ACS data to establish the base rent or recent-mover factor for 21 areas where the FY 2021 FMRs are based on locally collected survey data which are more recent than the 2018 ACS. For larger metropolitan areas that have valid ACS one-year recent-mover data, survey data may not be any older than the mid-point of the calendar year for the ACS one-year data. Since the ACS one-year data used for the FY 2021 FMRs is from 2018, larger areas may not use survey data collected before June 30, 2018 for the FY 2021 FMRs. Smaller areas without statistically reliable 1-year ACS data may continue to use local survey data until the mid-point of the 5-year ACS data is more recent than the local survey. The following list enumerates the areas with local areas surveys and the year of the survey data:

  • Survey data from 2017 is used to adjust the FMRs for Hood River County, OR; Wasco County, OR; Hawaii County, HI; and Jonesboro, AR HMFA.
  • Survey data from 2018 is used to adjust the FMR for Portland-Vancouver-Hillsboro, OR-WA; Burlington-South Burlington, VT; Coos County, OR; Curry County, OR; Oakland-Fremont, CA HUD Metro FMR Area; San Francisco, CA HUD Metro FMR Area; San Jose-Sunnyvale-Santa Clara, CA HUD Metro FMR Area; Boston-Cambridge-Quincy, MA-NH HUD Metro FMR Area; Douglas County, OR; and San Diego-Carlsbad, CA MSA.
  • Survey data from 2019 is used to adjust the FMRs for Kauai County, HI; Asheville, NC HUD Metro FMR Area; Eugene-Springfield, OR MSA; Portland, ME HUD Metro FMR Area; Santa Maria-Santa Barbara, CA MSA; Worcester, MA HUD Metro FMR Area; and Guam.
  • Survey data from 2020 is used to calculate the FMRs for Santa Cruz-Watsonville, CA MSA.

D. Updates From 2018 to 2019

HUD updates the ACS-based “as of” 2018 rent through 2019 using the annual change in gross rents measured through the Consumer Price Index (CPI) from 2018 to 2019 (CPI update factor). As in previous years, HUD uses local CPI data coupled with Consumer Expenditure Survey data for FMR areas within Class A metropolitan areas covered by local CPI data. In 2018, the Bureau of Labor Statistics (BLS) changed the area definitions of its Class A metropolitan areas from the 1990 definition of Consolidated Metropolitan Statistical Areas (CMSA) to smaller Core-Based Statistical Area (CBSA) MSAs. In addition, BLS eliminated some areas from this Class A collection: Pittsburgh, PA MSA; Cleveland-Elyria, OH MSA; Cincinnati, OH-KY-IN MSA; Kansas City, MO-KS MSA; Milwaukee-Waukesha-West Allis, WI MSA; and Portland-Vancouver-Hillsboro, OR-WA MSA. HUD estimated these areas' FMRs using regional CPI beginning with the FY 2020 FMRs and continues the use of regional CPI factors in FY 2021. HUD uses CPI data aggregated at the Census region level for all Class B and C size metropolitan areas and non-metropolitan areas. Additionally, HUD uses CPI data collected locally in Puerto Rico as the basis for CPI adjustments from 2018 to 2019 for all Puerto Rico FMR areas.

E. Trend Factor Forecasts

Following the application of the appropriate CPI update factor, HUD trends the gross rent estimate from 2019 to FY 2021 using local and regional forecasts of the CPI gross rent data. Riverside-San Bernardino-Ontario, CA MSA as a newly designated Class A city (it was previously part of the Los Angeles-Riverside-Orange County, CA CMSA) has data for a CPI update factor, but does not have enough data for a trend factor forecast; therefore, until there is sufficient history to create a Start Printed Page 49669credible local trend factor forecast its trend factor is the regional (West) trend factor. The actual model used for each trend factor has been chosen based on which model generates the lowest Root Mean Square Error (RMSE) statistic. As detailed in the June 5, 2019 Federal Register notice (84 FR 26141), the trend factors were selected from a series of time series models based on national inputs (National Input Model or NIM), local inputs (Local Input Model or LIM) and historical values of the predicted series (Pure Time Series—PTS). HUD will hold the type of model selected (NIM, LIM, or PTS) constant for 5 years and will reassess the model selections during the calculation of the FY 2025 FMRs. For instances when HUD changes the functional form of the model (NIM, PTS, LIM) for a geographic area that is different from the previous model selection, HUD will ensure the change is not due to overfitting the model or outliers in the data. HUD will update and run the gross rent forecast models annually with updated actual data and newly created input forecasts. For FY 2021, in the NIM models, HUD is using economic projections that account for the COVID-19 impacts on the economy .[8]

E. Bedroom Rent Adjustments

HUD updates the bedroom ratios used in the calculation of FMRs annually. The bedroom ratios which HUD used in the calculation of FY 2021 FMRs have been updated using average data from three five-year ACS data series (2012-2016, 2013-2017, and 2014-2018). The bedroom ratio methodology used in this update is unchanged from previous calculations using 2000 Census data. HUD only uses estimates with a margin of error ratio of less than 50 percent. If an area does not have reliable estimates in at least two of the previous three ACS releases, bedroom ratios for the area's larger parent geography are used.

HUD uses two-bedroom units for its primary calculation of FMR estimates. This is generally the most common size of rental unit and, therefore, the most reliable to survey and analyze. After estimating two-bedroom FMRs, HUD calculates bedroom ratios for each FMR area which relate the prices of smaller and larger units to the cost of two-bedroom units. To ensure an adequate distributional fit in these bedroom ratio calculations in particular FMR areas, HUD establishes bedroom interval ranges which set upper and lower limits for bedroom ratios nationwide, based on an analysis of the range of such intervals for all areas with large enough samples to permit accurate bedroom ratio determinations.

In the calculation of FY 2021 FMR estimates, HUD set the bedroom interval ranges as follows: Efficiency FMRs are constrained to fall between 0.66 and 0.86 of the two-bedroom FMR; one-bedroom FMRs must be between 0.76 and 0.88 of the two-bedroom FMR; three-bedroom FMRs (prior to the adjustments described below) must be between 1.14 and 1.32 of the two-bedroom FMR; and four-bedroom FMRs (again, prior to adjustment) must be between 1.26 and 1.61 of the two-bedroom FMR. Given that these interval ranges partially overlap across unit bedroom counts, HUD further adjusts bedroom ratios for a given FMR area, if necessary, to ensure that higher bedroom-count units have higher rents than lower bedroom-count units within that area. The bedroom ratios for Puerto Rico follow these constraints.

HUD also further adjusts the rents for three-bedroom and larger units to reflect HUD's policy to set higher rents for these units.[9] This adjustment is intended to increase the likelihood that the largest families, who have the most difficulty in leasing units, will be successful in finding eligible program units. The adjustment adds 8.7 percent to the unadjusted three-bedroom FMR estimates and adds 7.7 percent to the unadjusted four-bedroom FMR estimates.

HUD derives FMRs for units with more than four bedrooms by adding 15 percent to the four-bedroom FMR for each extra bedroom. For example, the FMR for a five-bedroom unit is 1.15 times the four-bedroom FMR, and the FMR for a six-bedroom unit is 1.30 times the four-bedroom FMR. Similarly, HUD derives FMRs for single-room occupancy units by subtracting 25 percent from the zero-bedroom FMR (i.e., they are set at 0.75 times the zero-bedroom (efficiency) FMR).[10]

F. Limit on FMR Decreases

Within the Small Area FMR final rule published on November 16, 2016, HUD amended 24 CFR 888.113 to include a limit on the amount that FMRs may annually decrease. The current year's FMRs resulting from the application of the bedroom ratios, as discussed in section (E) above, may be no less than 90 percent of the prior year's FMRs for units with the same number of bedrooms. Accordingly, if the current year's FMRs are less than 90 percent of the prior year's FMRs as calculated by the above methodology, HUD sets the current year's FMRs equal to 90 percent of the prior year's FMRs. For areas where use of Small Area FMRs in the administration of their voucher programs is required, the FY 2021 Small Area FMRs may be no less than 90 percent of the FY 2020 Small Area FMRs. For all other metropolitan areas, for which Small Area FMRs are calculated so that they may be used for other allowable purposes if desired (e.g., exception payment standards, public housing flat rents), the FY 2021 Small Area FMRs may be no less than 90 percent of the greater of the FY 2020 metropolitan area-wide FMRs or the applicable FY 2020 Small Area FMR.

G. Other Limits on FMRs

All FMRs are subject to a state or national minimum. HUD calculates a population-weighted median two-bedroom 40th percentile rent across all non-metropolitan portions of each state, which, for the purposes of FMRs, is the state minimum rent. State-minimum rents for each FMR area are available in the FY 2021 FMR Documentation System, available at https://www.huduser.gov/​portal/​datasets/​fmr.html#2021_​query. HUD also calculates the population-weighted median two-bedroom 40th percentile rent across all non-metropolitan portions of the country, which, for the purposes of FMRs, is the national minimum rent. For FY 2021, the national minimum rent is $734. The applicable minimum rent for a particular area is the lower of the state or national minimum. Each area's two-bedroom FMR must be no less than the applicable minimum rent.

As in prior years, Small Area FMRs are subject to a maximum limit. HUD limits each two-bedroom Small Area FMR to be no more than 150 percent of the two-bedroom FMR for the metropolitan area where the ZIP code is located.

IV. Small Area FMRs

Small Area FMRs for all metropolitan areas are listed in the Small Area FMR Schedule. Other Metropolitan PHAs operating in areas where the Small Area FMR is not required to be used and interested in using Small Area FMRs in the operation of their Housing Choice Voucher program should contact their Start Printed Page 49670local HUD field office to request approval from HUD to do so.

HUD calculates Small Area FMRs directly from the standard quality gross rents provided to HUD by the Census Bureau for ZIP Code Tabulation Areas (ZCTAs), when such data is statistically reliable. The ZCTA two-bedroom equivalent 40th percentile gross rent is analogous to the standard quality base rents set for metropolitan areas and non-metropolitan counties. For each ZCTA with statistically reliable gross rent estimates, using the expanded test of statistical reliability first used in FY 2018 (i.e., estimates with margins of error ratios below 50 percent and based on at least 100 observations), HUD will calculate a two-bedroom equivalent 40th percentile gross rent using the first statistically reliable gross rent distribution data from the following data sets (in this order): Two-bedroom gross rents, one-bedroom gross rents, and three-bedroom gross rents. If either the one-bedroom or three-bedroom gross rent data is used because the two-bedroom gross rent data is not statistically reliable, the one-bedroom or three-bedroom 40th percentile gross rent will be converted to a two-bedroom equivalent rent using the bedroom ratios for the ZCTA's parent metropolitan area. To increase stability to these Small Area FMR estimates, HUD averages the latest three years of gross rent estimates.[11]

For ZCTAs without usable gross rent data by bedroom size, HUD will continue to calculate Small Area FMRs using the rent ratio method similar to that HUD has used in past Small Area FMR calculations. To calculate Small Area FMRs using a rent ratio, HUD divides the median gross rent across all bedrooms for the small area (a ZIP code) by the similar median gross rent for the metropolitan area of the ZIP code. If a ZCTA does not have reliable rent data at the all bedroom level, HUD will then check to see if the ZCTA is bordered by ZCTAs that themselves have reliable rent data. If at least half of a ZCTA's “neighbors” have such data, the weighted average of those estimates will be used as the basis for the SAFMR rather than a county proxy, where the weight is the length of the shared boundary between the ZCTA and its neighbor. In small areas where the neighboring ZCTA median gross rents are not statistically reliable, HUD continues to substitute the median gross rent for the county containing the ZIP code in the numerator of the rent ratio calculation. HUD multiplies this rent ratio by the current two-bedroom rent for the metropolitan area containing the small area to generate the current year two-bedroom rent for the small area.

HUD continues to use a rolling average of ACS data in calculating the Small Area FMR rent ratios. HUD believes coupling the most current data with previous year's data minimizes excessive year-to-year variability in Small Area FMR rent ratios due to sampling variance. Therefore, for FY 2021 Small Area FMRs, HUD has updated the rent ratios to use an average of the rent ratios calculated from the 2012-2016, 2013-2017, and 2014-2018 5-year ACS estimates.

V. Request for Public Comments and FMR Reevaluations

HUD will continue to accept public comments on the methods HUD uses to calculate FY 2021 FMRs, including Small Area FMRs, and the FMR levels for specific areas. Due to its current funding levels, HUD does not have sufficient resources to conduct local surveys of rents to address comments filed regarding the FMR levels for specific areas. PHAs may continue to fund such surveys independently, as specified below, using ongoing administrative fees or their administrative fee reserve if they so choose. HUD continually strives to calculate FMRs that meet the statutory requirement of using “the most recent available data” while also serving as an effective program parameter.

PHAs or other parties interested in requesting HUD's reevaluation of their area's FY 2021 FMRs, as provided for under section 8(c)(1)(B) of USHA, must follow the following procedures:

1. By the end of the comment period, such reevaluation requests must be submitted publicly through https://www.regulations.gov/​ or directly to HUD as described above. The area's PHA or, in multi-jurisdictional areas, PHA(s) representing at least half of the voucher tenants in the FMR area, must agree that the reevaluation is necessary.

2. For a re-evaluation to occur, the requestor(s) must supply HUD with data more recent than the 2018 ACS data used in the calculation of the FY 2021 FMRs. HUD requires data on gross rents paid in the FMR area for standard quality rental housing units occupied by recent movers. The data delivered must be sufficient for HUD to calculate a 40th and 50th percentile two-bedroom rent.[12] Should this type of data not be available, requestors may gather this information using the survey guidance available at https://www.huduser.gov/​portal/​datasets/​fmr/​NoteRevisedAreaSurveyProcedures.pdf and https://www.huduser.gov/​portal/​datasets/​fmr/​PrinciplesforPHA-ConductedAreaRentSurveys.pdf.

3. On or about October 2, 2020 HUD will post a list, at https://www.huduser.gov/​portal/​datasets/​fmr.html, of the areas requesting reevaluations and where FY 2020 FMRs remain in effect. 42 U.S.C. 1437f(c)(1)(B) includes the following: “The Secretary shall establish a procedure for public housing agencies and other interested parties to comment on such fair market rentals and to request, within a time specified by the Secretary, reevaluation of the fair market rentals in a jurisdiction before such rentals become effective.” Therefore, areas where valid reevaluation requests are submitted continue to use FY 2020 FMRs whether the FY 2021 FMRs are lower or higher than the FY 2020 FMRs.

4. Data for reevaluations must be supplied to HUD no later than Friday January 8, 2021. On Monday January 11, 2021, HUD will post at https://www.huduser.gov/​portal/​datasets/​fmr.html a listing of the areas that requested FMR reevaluations but did not deliver data and making the FY 2021 FMRs effective in these areas. All survey responses gathered as part of the survey efforts should be delivered to HUD. In addition to the survey data, HUD requires a current utility schedule in order to evaluate the survey responses. Finally, HUD encourages PHAs to evaluate their survey data to ensure the survey provides the expected results. Should PHAs or their contractors undertake this evaluation, HUD requests that this analysis also be submitted.

5. HUD will use the data delivered by January 8, 2021 to reevaluate the FMRs and following the reevaluation, will post revised FMRs with an accompanying Federal Register notice stating the revised FMRs are available, which will include HUD's responses to comments filed during the comment period for this notice.

6. Any data supporting a change in FMRs supplied after January 8, 2021 will be incorporated into FY 2022 FMRs.

7. PHAs operating in areas where the calculated FMR is lower than the published FMR (i.e., those areas where HUD has limited the decrease in the annual change in the FMR to 10 percent) may request payment standards below the basic range (24 CFR Start Printed Page 49671982.503(d)) and reference the “unfloored” rents (i.e., the unfinalized FMRs calculated by HUD prior to application of the 10-percent-decrease limit) depicted in the FY 2021 FMR Documentation System (available at: https://www.huduser.gov/​portal/​datasets/​fmr.html#2021_​query).

Questions on how to conduct FMR surveys may be addressed to Marie L. Lihn or Peter B. Kahn of the Program Parameters and Research Division, Office of Economic Affairs, Office of Policy Development and Research at HUD headquarters, 451 7th Street SW, Room 8208, Washington, DC 20410; telephone number 202-402-2409 (this is not a toll-free number), or they may be reached at pprd@hud.gov.

For small metropolitan areas without one-year ACS data and non-metropolitan counties, HUD has developed a method using mail surveys that is discussed on the FMR web page: https://www.huduser.gov/​portal/​datasets/​fmr.html#survey_​info. This method allows for the collection of as few as 100 one-bedroom, two-bedroom and three-bedroom recent mover (tenants that moved in last 24 months) units.

While HUD has not developed a specific method for mail surveys in areas with 1-year ACS data or in areas not covered by ACS data, HUD would apply the standard established for Random-Digit Dialing (RDD) telephone rent surveys. HUD will evaluate these survey results to determine whether they would establish a new FMR statistically different from the current FMR, which means that the survey confidence interval must not include the FMR. The survey should collect results based on 200 one-bedroom and two-bedroom eligible recent mover units to provide a small enough confidence interval for significant results in large market mail surveys. Areas with statistically reliable 1-year ACS data are not considered to be good candidates for local surveys due to the size and completeness of the ACS process.

Other survey methods are acceptable in providing data to support reevaluation requests if the survey method can provide statistically reliable, unbiased estimates of gross rents paid of the entire FMR area. In general, recommendations for FMR changes and supporting data must reflect the rent levels that exist within the entire FMR area and should be statistically reliable.

PHAs in non-metropolitan areas may survey three-bedroom units, in addition to one- and two-bedroom units and are only required to get 100 eligible survey responses. In certain circumstances, PHAs may conduct surveys of groups of non-metropolitan counties. HUD must approve all county-grouped surveys in advance. PHAs are cautioned that the resulting FMRs may not be identical for the counties surveyed; each individual FMR area will have a separate FMR based on the relationship of rents in that area to the combined rents in the cluster of FMR areas. In addition, PHAs are advised that in counties where FMRs are based on the combined rents in the cluster of FMR areas, HUD will not revise their FMRs unless the grouped survey results show a revised FMR statistically different from the combined rent level.

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 to be statistically representative of the entire rental housing stock of the FMR area. Surveys must include units at 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 current 5-year ACS data should be used as a means of verifying if a sample is representative of the FMR area's rental housing stock. Staff from HUD's Program Parameters and Research Division will work with PHAs in areas requesting reevaluations to provide the minimum number of survey cases required to ensure that data submitted for reevaluation represent a statistically valid sample.

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 may find it appropriate to relax normal sample size requirements, but in no case will fewer than 100 eligible cases be considered.

HUD has developed guidance on how to provide data-supported comments on Small Area FMRs using HUD's special tabulations of the distribution of gross rents by unit bedroom count for ZIP Code Tabulation Areas. This guidance is available at https://www.huduser.gov/​portal/​datasets/​fmr.html in the FY 2021 FMR section under the “Documents” tab and should be used by interested parties in commenting on whether or not the level of Small Area FMRs are too high or too low (i.e., Small Area FMRs that are larger than the gross rent necessary to make 40 percent of the units accessible for an individual zip code or that are smaller than the gross rent necessary to make 40 percent of the units accessible for a given zip code). HUD will post revised Small Area FMRs after confirming commenters' calculations.

As stated earlier in this notice, HUD is required to use the most recent data available when calculating FMRs. Therefore, in order to reevaluate an area's FMR, HUD requires more current rental market data than the 2018 ACS. HUD encourages a PHA or other interested party that believes the FMR in their area is incorrect to file a comment even if they do not have the resources to provide market-wide rental data. In these instances, HUD will use the comments, should survey funding be restored, when determining the areas HUD will select for HUD-funded local area rent surveys.

VI. Environmental Impact

This Notice involves the establishment of FMR schedules, which do not constitute a development decision affecting the physical condition of specific project areas or building sites. Accordingly, under 24 CFR 50.19(c)(6), this Notice is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Accordingly, the Fair Market Rent Schedules, which will not be codified in 24 CFR part 888, are available at https://www.huduser.gov/​portal/​datasets/​fmr.html.

Start Signature

Dated: August 10, 2020.

Seth D. Appleton,

Assistant Secretary for Policy Development and Research.

End Signature

Fair Market Rents for the Housing Choice Voucher Program Schedule B—General Explanatory Notes

1. Geographic Coverage

a. Metropolitan Areas—Most FMRs are 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 metropolitan CBSAs, which are made up of one or more counties, as defined by OMB, with some modifications. HUD is generally assigning separate FMRs to the component counties of CBSA Micropolitan Areas.

b. Modifications to OMB Definitions—Following OMB guidance, the estimation procedure for the FY 2021 FMRs incorporates the OMB definitions of metropolitan areas based on the CBSA standards as implemented with 2000 Census data and updated by the 2010 Census in February 28, 2013, including incremental adjustments through August 15, 2017. The adjustments made to the 2000 Start Printed Page 49672definitions to separate subparts of these areas where FMRs or median incomes would otherwise change significantly are continued. In addition, to limit FMR changes based solely on geography and to provide FMRs at the smallest possible area of geography, no counties were added to existing metropolitan areas beginning with changes to metropolitan area definitions from the 2010 Census and implemented in the FY 2016 FMRs. All counties added to existing metropolitan areas are treated as separate counties for FMR calculations and new metropolitan areas of more than one county will have separate FMRs for each county in that new MSA. Rents from a county that is a sub-area will not be used in the remaining metropolitan sub-area rent determination. All metropolitan areas that have been subdivided by HUD will use ACS data which conforms to HUD's area definition if statistically reliable information exists. If statistically reliable data for the HUD defined area is not available, HUD uses information from the average of the last three years. If that is not available, then the FMR of the larger encompassing geography is used, which is the MSA for a metropolitan county and the non-metropolitan portion of a State for a non-metropolitan county.

The specific counties and New England towns and cities within each state in MSAs and HMFAs were not changed by the August 2017 OMB metropolitan area definitions. These areas are listed in Schedule B, available online at https://www.huduser.gov/​portal/​datasets/​fmr.html.

2. Unit Bedroom Count Adjustments

The Metropolitan and Non-Metropolitan Area FMR Schedule s is available at https://www.huduser.gov/​portal/​datasets/​fmr.html and shows the FMRs for zero-bedroom through four-bedroom units. The Small Area FMR Schedule shows Small Area FMRs for all metropolitan areas. FMRs for unit sizes larger than four bedrooms may be calculated by adding 15 percent to the four-bedroom FMR for each extra bedroom. For example, the FMR for a five-bedroom unit is 1.15 times the four-bedroom FMR, and the FMR for a six-bedroom unit is 1.30 times the four-bedroom FMR. FMRs for single-room-occupancy (SRO) units are 0.75 times the zero-bedroom FMR.

3. Arrangement of FMR Areas and Identification of Constituent Parts

a. The Metropolitan and Non-Metropolitan FMR Area Schedule lists FMRs alphabetically by state, by metropolitan area and by non-metropolitan county within each state and are available at https://www.huduser.gov/​portal/​datasets/​fmr.html.

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 non-metropolitan counties are listed alphabetically on each line of the non-metropolitan county listings.

d. The New England towns and cities included in a non-metropolitan county are listed immediately following the county name.

End Supplemental Information

Footnotes

1.  HUD also calculates and posts 50th percentile rent estimates for the purposes of Success Rate Payment Standards as defined at 24 CFR 982.503(e) (estimates available at: https://www.huduser.gov/​portal/​datasets/​50per.html), which policy was not changed by the Small Area FMR rule.

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2.  HUD's margin of error test requires that the margin of error of the ACS estimate is less than half the size of the estimate itself.

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3.  For FY 2021, the three years of ACS data in question are 2016, 2017 and 2018. The 2016 data are adjusted to be denominated in 2018 dollars using the growth in Consumer Price Index (CPI)-based gross rents measured between 2016 and 2018. Similarly, the 2017 gross rent data is adjusted to 2018 denominated dollars using the growth in CPI-based gross rents measured between 2017 and 2018.

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4.  To be used in the three-year average calculation, the 5-year estimates must be minimally statistically qualified; that is, the margin of error of the estimates must be less than half the size of the estimate.

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5.  HUD's regulations at 24 CFR 888.113(a) incorporate recent-mover data into FMR calculations because the gross rents of those who most recently moved into their units likely depicts the most current market conditions observable through the ACS. Rents paid by renters renewing existing leases may not reflect the most current market conditions, in part because these renters may have clauses within their leases that predetermine the annual increases in rents paid (i.e., rent escalator clauses).

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6.  “All-bedroom” refers to estimates aggregated together regardless of the number of bedrooms in the dwelling unit.

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7.  The ACS is not conducted in the Pacific Islands (Guam, Northern Marianas and American Samoa) or the US Virgin Islands. As part of the 2010 Decennial Census, the Census Bureau conducted “long-form” sample surveys for these areas. The results gathered by this long form survey have been incorporated into the FY 2020 FMRs.

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8.  Congressional Budget Office (CBO) economic projections, May 2020.

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9.  As mentioned above, HUD applies the interval ranges for the three-bedroom and four-bedroom FMR ratios prior to making these adjustments. In other words, the adjusted three- and four-bedroom FMRs can exceed the interval ranges, but the unadjusted FMRs cannot.

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10.  As established in the interim rules implementing the provisions of the Quality Housing and Work Responsibility Act of 1998 (Title V of the FY 1999 HUD Appropriations Act; Pub. L. 105-276). In 24 CFR 982.604.

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11.  For example, for FY 2021 Small Area FMRs, HUD averages the gross rents from 2016, 2017, and 2018 5-Year ACS estimates. The 2016 and 2017 gross rent estimates would be adjusted to 2018 dollars using the metropolitan area's gross rent CPI adjustment factors.

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12.  Although there are no longer 50th percentile FMRs, HUD must calculate 50th percentile rents for the Success Rate Payment Standard under 24 CFR 982.503(e).

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[FR Doc. 2020-17717 Filed 8-13-20; 8:45 am]

BILLING CODE 4210-67-P