[Federal Register Volume 59, Number 80 (Tuesday, April 26, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-9886]


[[Page Unknown]]

[Federal Register: April 26, 1994]


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Part V





Department of Housing and Urban Development





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Office of the Secretary



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24 CFR Part 888




Section 8 Housing Assistance Payments Program--Contract Rent Annual 
Adjustment Factors; Rule
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Secretary

24 CFR Part 888

[Docket No. N-94-3741; FR-3686-N-01]

 
Section 8 Housing Assistance Payments Program--Contract Rent 
Annual Adjustment Factors

AGENCY: Office of the Secretary, HUD.

ACTION: Notice of revised contract rent annual adjustment factors.

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SUMMARY: The United States Housing Act of 1937 (1937 Act) requires that 
the assistance contracts signed by owners participating in the 
Department's section 8 Housing Assistance Payments programs provide for 
annual or more frequent adjustment in the maximum monthly rentals for 
units covered by the contract to reflect changes based on fair market 
rents prevailing in a particular market area, or on a reasonable 
formula. This Notice announces revised Annual Adjustment Factors 
(AAFs), which are based on a formula using data on residential rent and 
utilities cost changes from the Bureau of Labor Statistics Consumer 
Price Index (CPI) and the HUD Random Digit Dialing (RDD) rent change 
surveys.

EFFECTIVE DATE: April 26, 1994.

FOR FURTHER INFORMATION CONTACT: Gerald J. Benoit, Rental Assistance 
Division, Office of Public and Indian Housing (202) 708-0477 (TDD: 
(202) 708-0850), for questions relating to the section 8 Voucher, 
Certificate, and Moderate Rehabilitation programs; James Tahash, 
Program Planning Division, Office of Multifamily Housing Management 
(202) 708-3944 (TDD: (202) 708-4594), for questions relating to all 
other section 8 programs; for technical information regarding the 
development of the schedules for specific areas or the method used for 
calculating the AAFs, Michael R. Allard, Economic and Market Analysis 
Division, Office of Policy Development and Research (202) 708-0577 
(TDD: (202) 708-0770). Mailing address for above persons: Department of 
Housing and Urban Development, 451 Seventh Street SW., Washington, DC 
20410. (Telephone numbers are not toll-free.)

SUPPLEMENTARY INFORMATION: Section 8(c)(2)(A) of the United States 
Housing Act of 1937 (42 U.S.C. 1437f(c)(2)(A)) requires HUD to provide 
for adjustments in the maximum monthly rents for units covered by the 
section 8 Housing Assistance Payments (HAP) Contracts. Adjustments must 
reflect changes in the Fair Market Rents (FMRs) prevailing in 
particular market areas, or they must be based on a reasonable formula.
    HUD has elected to establish the AAFs using the formula-based 
alternative. HUD regulations provide that the AAFs will be published 
annually in the Federal Register (24 CFR 888.202). These revised AAFs 
are applicable (subject to the limitations on applicability discussed 
below) for adjusting Contract Rents on or after November 8, 1993, the 
anniversary date for this publication.

Applicability of AAFs to Various Section 8 Programs

    AAFs established by this Notice are used to adjust Contract Rents 
for section 8 program units. The following provides a general 
description of how AAFs apply under the several section 8 Housing 
Assistance Payments programs. The specific application of the AAFs 
should be determined by reference to the HAP Contract and to 
appropriate program regulations or requirements.
    In certain cases, AAFs are not used to adjust Contract Rents. AAFs 
are not used for the section 8 Voucher program. In addition, AAFs are 
not used for section 8 Certificate program units subject to 24 CFR 
882.110(d), which applies to units in certain otherwise subsidized 
projects that are rented to section 8 Certificate program families. 
(The housing assistance payment for such a unit is equal to the 
difference between the subsidized rent and the rent payable by the 
eligible family. Adjustments to the subsidized rents are made in 
accordance with rules and procedures governing the particular 
subsidized housing program involved.) In addition, AAFs are not used 
for units placed under HAP contract in recent years under the section 
202/section 8 program. Instead, those rents are based on a HUD-approved 
budget for the project.
    Contract Rents for many projects receiving section 8 subsidies 
under the Loan Management provisions of 24 CFR part 886, subpart A, and 
for projects receiving section 8 subsidies under the Property 
Disposition provisions of 24 CFR part 886, subpart C, are adjusted, at 
HUD's option, either by applying the AAFs or by adjusting rents in 
accordance with 24 CFR 207.19(e).
    Under the section 8 Moderate Rehabilitation program, the public 
housing agency (PHA) should use the base rent, not the Contract Rent, 
to select the correct AAF to apply to the base rent.

AAF Areas

    This year's AAF areas incorporate the Office of Management and 
Budget's (OMB) revised definitions of metropolitan areas. OMB released 
revised definitions based on 1990 Census data, effective as of December 
31, 1992 and further modified on June 30, 1993 (OMB Bulletins Nos. 93-
05 and 93-17). Last year, HUD announced in the January 13, 1993 
publication of AAFs that the OMB definitions were being evaluated to 
determine their use in the next round of published AAFs. HUD conducted 
this evaluation in conjunction with the FY 1994 section 8 Existing 
Program Fair Market Rent (FMR) cycle, and, with the few exceptions 
discussed in the following paragraphs, accepted the OMB definitions.
    The HUD exceptions for AAF purposes are for six large metropolitan 
areas, where HUD considers the area covered by the revised OMB 
definitions to be larger than appropriate for use as a housing market 
area definition. HUD therefore modified the definitions for these areas 
by deleting some of the counties that OMB had added to its revised 
definitions. The following counties are deleted from the HUD 
definitions of AAF areas: 

------------------------------------------------------------------------
Metropolitan area                                                       
                                      Deleted counties                  
------------------------------------------------------------------------
Atlanta, GA......  Carroll, Pickens, Spalding, and Walton Counties.     
Chicago, IL......  DeKalb, Grundy and Kendall Counties.                 
Cincinnati-        Brown County, Ohio; Gallatin, Grant and Pendleton    
 Hamilton, OH-KY-   Counties in Kentucky; and Ohio County, Indiana.     
 IN.                                                                    
Dallas, TX.......  Henderson County.                                    
New Orleans, LA..  St. James Parish.                                    
Washington, DC...  Berkeley and Jefferson Counties in West Virginia; and
                    Clarke, Culpeper, King George and Warren counties in
                    Virginia.                                           
------------------------------------------------------------------------

    Separate AAF schedules are listed in this publication for the above 
counties and are identified with an asterisk (*) next to the area name. 
The asterisk denotes that there is a difference between the OMB 
metropolitan area and the HUD AAF area definitions for these areas.
    Each AAF applies to a specified geographical area and to units of 
all bedroom sizes. AAFs are provided for the metropolitan parts 
(exclusive of CPI areas) and the nonmetropolitan parts of the ten HUD 
Regions. AAFs, developed from local CPI surveys, are provided for 103 
separate areas.
    Program participants should refer to the Area Definitions at the 
end of Schedule C to make certain that they are using the correct AAFs. 
Units located in metropolitan areas with a local CPI survey must use 
the corresponding AAFs listed separately for those metropolitan areas. 
Units that are located in metropolitan areas without a local CPI survey 
must use the appropriate HUD Region Metropolitan AAFs. Units located in 
nonmetropolitan counties must use the appropriate HUD Region 
Nonmetropolitan AAFs.
    The AAF Area Definitions shown in Schedule C are listed in 
alphabetical order by State. The associated HUD Region is shown next to 
each State name. Within each State, areas whose AAFs are determined by 
local CPI surveys are listed first. All CPI defined areas have separate 
AAF schedules and are shown with their corresponding county definitions 
or as metropolitan counties. Listed after the CPI defined areas (in 
those states that have such areas) are the metropolitan and 
nonmetropolitan counties of each State. In the six New England states, 
the listings are for counties or parts of counties as defined by towns 
or cities.
    Puerto Rico and the Virgin Islands use the HUD Region IV AAFs. All 
areas in Hawaii use the AAF schedule for Hawaii, which is based on the 
CPI survey for the Honolulu metropolitan area. The Pacific Islands use 
the HUD Region IX Nonmetropolitan AAFs. The Anchorage metropolitan area 
has its own AAFs based on a local CPI survey; all other areas in Alaska 
use the HUD Region X Nonmetropolitan AAFs.
    Reflecting a decrease in the local CPI survey, AAFs that are less 
than 1.00 are being published for the St. Louis, MO-IL MSA. However, 
section 8(c)(2)(C) of the 1937 Act prohibits the reduction of contract 
rents for newly constructed and substantially rehabilitated projects 
(including projects assisted under section 8 as in effect prior to 
November 30, 1983), unless the project has been refinanced in a manner 
that reduces the periodic payments of the owner. Therefore, contract 
rents for units in such projects will not be reduced as a result of the 
reduction in the factors.

Section 8 Certificate Program AAFs for Manufactured Home Spaces

    The AAFs in this publication identified as ``Highest Cost Utility 
Excluded'' are to be used for updating manufactured home space contract 
rents. The applicable AAF is determined by reference to the geographic 
listings contained in Schedule C, as described in the preceding 
section.

Retroactivity

    Retroactivity is permitted to avoid any detriment to owners because 
of HUD's delay in the annual publication, as required by 24 CFR 
888.202, of the factors. For units assisted under the Section 8 
Certificate, Moderate Rehabilitation (both regular and SRO), Project-
based Assistance Certificates, and the FmHA programs, the factors are 
not applied retroactively; the annual adjustments, as of any 
anniversary date, are determined using the AAFs most recently published 
in the Federal Register (see 24 CFR 882.108(a)(1)(i) and 
884.109(b)(2)).
    Owners of Section 8 units (other than units assisted under the 
Section 8 Certificate, Moderate Rehabilitation, regular and SRO, 
Project-based Assistance Certificates, and FmHA programs) who have HAP 
Contracts with anniversary dates falling on November 8, 1993 through 
April 26, 1994 may request that the AAFs be applied retroactively to 
the anniversary date of their HAP Contracts.

RDD Factors

    Last year's AAFs, published on January 13, 1993, were the first to 
use the RDD regional surveys for calculating AAFs. The RDD survey 
method is based on a sampling procedure that uses computers to select a 
statistically random sample of rental housing, dial and keep track of 
the telephone calls and process the responses. The RDD surveys are 
conducted for the metropolitan parts (exclusive of CPI areas) and 
nonmetropolitan parts of the 10 HUD Regions, a total of 20 surveys. The 
results of those 20 surveys replaced the previous AAFs which were based 
on CPI data for the four Census Regions that comprise the United 
States. The increased number of rent change factors covering the much 
smaller and more homogeneous HUD Regions represents a significant 
improvement over the previous system.

AAF Formula

    This year, HUD has modified the procedure for calculating the AAFs. 
Data from the National American Housing Survey (AHS) were used in past 
years to adjust the AAFs to account for rent change differences by rent 
range, e.g. the AHS showed that units in the higher rent ranges had 
smaller percentage rent increases than low rent units. This adjustment 
worked well when rental inflation rates were high, however, as rates 
have declined, it is no longer significant. Further, continuation of 
the adjustment would result in the use of data that do not have 
sufficient precision to capture the small differentials that are 
occurring among the various rent ranges. Therefore, HUD now is 
providing only two AAFs for each area--one for units including and one 
for units excluding the highest cost utility--replacing the tables of 
AAFs by rent ranges that appeared in previous publications.
    The formula for calculating the AAFs for each area is as follows:

For Areas with CPI Surveys

    (1) Changes in the shelter rent and utilities components were 
calculated based on the most recent CPI annual average change data;
    (2) The shelter rent factor was calculated by eliminating the 
effect of heating costs that are included in the rent of some of the 
units included in the CPI surveys; and
    (3) The gross rent factors were calculated by weighing the rent and 
utility components with the 1990 Census corresponding components.

For Areas Using the HUD Regional RDD Surveys

    (1) The change in gross rent was calculated using the most recent 
RDD survey median gross rent for the respective metropolitan or 
nonmetropolitan parts of the HUD Region; and
    (2) The change in shelter rent was calculated by subtracting median 
value of utilities costs from the median gross rent. The median cost of 
utilities was determined from the units in the RDD sample reporting 
that all utilities were paid by the tenant.

HUD Field Reorganization

    Effective in April, 1994, HUD is beginning implementation of a 
reorganization which will eliminate the Regional Office function. In 
the future the areas formerly designated Regions will be referred to as 
follows:

Region I (Boston) will now be New England;
Region II (New York) will now be New York, New Jersey;
Region III (Philadelphia) will now be Mid-Atlantic;
Region IV (Atlanta) will now be Southeast;
Region V (Chicago) will now be Midwest;
Region VI (Fort Worth) will now be Southwest;
Region VII (Kansas City) will now be Great Plains;
Region VIII (Denver) will now be Rocky Mountain;
Region IX (San Francisco) will now be Pacific/Hawaii;
Region X (Seattle) will now be Northwest/Alaska.

    The change in name will not effect the application of these factors 
to the areas as they existed before the reorganization.

Other Matters

    An environmental assessment is unnecessary, since revising Annual 
Adjustment Factors is categorically excluded from the Department's 
National Environmental Policy Act procedures under 24 CFR 50.200(l).
    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that the policies 
contained in this Notice do not have federalism implications and, thus, 
are not subject to review under the Order. The Notice merely announces 
the adjustment factors to be used to adjust contract rents in the 
Section 8 Housing Assistance Payments programs, as required by the 
United States Housing Act of 1937.
    The General Counsel, as the Designated Official under Executive 
Order 12606, The Family, has also determined that this Notice does not 
have potential significant impact on family formation, maintenance, and 
general well-being and, thus, is not subject to review under the Order. 
The Notice merely announces the adjustment factors to be used to adjust 
contract rents in the Section 8 Housing Assistance Payments programs, 
as required by the United States Housing Act of 1937.

The Catalog of Federal Domestic Assistance program number for Lower 
Income Housing Assistance programs (section 8) is 14.156.

    Accordingly, the Department publishes these Contract Rent Annual 
Adjustment Factors for the Section 8 Housing Assistance Payments 
Program as set forth in the following tables:

    Dated: April 15, 1994.
Henry G. Cisneros,
Secretary.
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[FR Doc. 94-9886 Filed 4-25-94; 8:45 am]
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