[Federal Register Volume 59, Number 145 (Friday, July 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18496]


[[Page Unknown]]

[Federal Register: July 29, 1994]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner

24 CFR Part 888

[Docket No. R-94-1697; FR-3598-F-02]
RIN 2502-AG17

 

Section 8 Housing Assistance Payments Program: Contract Rent 
Annual Adjustment Factors--Revision to ``Rounding'' Factor

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD

ACTION: Final rule.

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SUMMARY: This final rule revises the method for ``rounding'' contract 
rents. Before issuance of this rule, the applicable HUD regulations 
provided for adjustment to be made to the contract rent of a dwelling 
unit by rounding the computed monthly contract rent that contains a 
fractional dollar amount to the next higher whole dollar amount. (The 
monthly contract rent was rounded to the next higher whole dollar 
amount even when the dollar fraction was as low as .01.) Through this 
final rule, HUD revises this adjustment procedure by providing for 
contract rents that contain fractional dollar amounts of .01 to .49 to 
be rounded to the next lower dollar amount, and for contract rents that 
contain fractional dollar amounts of .50 to .99 to be rounded to the 
next higher dollar amount. The purpose of this rule is to provide for a 
``rounding'' procedure that is more consistent with standard industry 
practices, and that more accurately reflects actual rent adjustments.

EFFECTIVE DATE: August 29, 1994.

FOR FURTHER INFORMATION CONTACT: Barbara Hunter, Acting Director, 
Planning and Procedures Division, Office of Housing, Department of 
Housing and Urban Development, 451 Seventh Street, S.W., Room 6180, 
Washington, D.C. 20410. Telephone (202) 708-3944 (voice) or (202) 708-
4594 (TDD). (These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

I. Background--The Former ``Rounding'' Procedure

    Before issuance of this final rule, 24 CFR 888.203(b) provided as 
follows:

    The adjusted monthly amount of the Contract Rent of a dwelling 
unit shall be determined by multiplying the Contract Rent in Effect 
on the anniversary date of the contract by the applicable Automatic 
Annual Adjustment Factor (see paragraph (a) of this section) and 
rounding the result to the next higher whole dollar amount.

    The former rounding procedure provided for all contract rents that 
contain fractional dollar amounts to be rounded to the next higher 
whole dollar, regardless of the fractional amount. HUD determined that 
there are approximately two million dwelling units receiving section 8 
assistance, and the former rounding procedure (a procedure that 
provides for a dollar fraction as low as .01 to be rounded up) costs 
about $24 million in annual section 8 subsidies (2,000,000 units  x  $1 
per unit  x  12 months = $24,000,000). Accordingly, HUD determined that 
a change was necessary to make its rounding procedure consistent with 
generally accepted mathematical principles, and to bring disbursement 
of section 8 subsidies more in line with a housing authority's or 
project owner's actual section 8 subsidy needs.

II. December 28, 1993 Proposed Rule

    On December 28, 1993 (58 FR 68615), HUD published a proposed rule 
that would have revised the rounding procedure in Sec. 888.203(b) to 
provide for fractional dollar amounts of .01 to .50 to be rounded down, 
and for fractional dollar amounts of .51 to .99 to be rounded up.
    In the preamble to the proposed rule, HUD acknowledged that the 
proposed change to the rounding procedure would adjust section 8 
contract rents by an average of fifty cents per-unit per-month less 
than contracts rents are adjusted under the procedure used to date. HUD 
also noted in the preamble that the rounding procedure used to date 
provided many housing authorities and owners with section 8 subsidies 
substantially beyond their section 8 assistance needs. Because HUD's 
resources are tightly constrained, even as the need for housing 
assistance intensifies, it is important that HUD use existing resources 
more efficiently. More efficient use of section 8 subsidies will help 
HUD meet increased demands for housing assistance. The anticipated 
savings in section 8 subsidies from the change in the rounding 
procedure can be used to help other low-income families who need 
housing assistance.
    The December 28, 1993 proposed rule provided for a 60-day public 
comment period. The comment period expired on February 28, 1994, and by 
this date, HUD received 12 comments. The public comments and HUD's 
response to these comments are discussed in Sections III and IV of the 
preamble.

III. Final Rule--A ``Rounding'' Procedure More Consistent With 
Standard Industry Practices

    In response to public comment, the final rule revises the rounding 
procedure set forth in the December 28, 1993 proposed rule. The final 
rule provides for fractional dollar amounts of .01 to .49 to be rounded 
down, and fractional dollar amounts of .50 to .99 to be rounded up.
    Three commenters supported HUD's proposal to change the rounding 
procedure, but stated that the proposed revision was not consistent 
with generally accepted mathematical principles. The commenters stated 
that under generally accepted mathematical principles, rounding occurs 
as follows: .01 to .49 DOWN, and .50 to .99 UP. The commenters 
expressed concern that HUD's departure from standard practice would 
lead to confusion, and result in increased time and expense for owners. 
Increased time would result from the need on the part of owners to be 
cognizant that HUD's rounding procedure is slightly different from that 
generally used. Increased expense would result from the need on the 
part of many owners to revise existing computer software programs to 
accommodate HUD's ``unique'' rounding procedure.
    HUD agreed with the commenters, and as noted above, the final rule 
adopts the standard ``rounding'' method. In the final rule, 
Sec. 888.203(b) provides as follows:

    The adjusted monthly amount of the Contract Rent of a dwelling 
unit shall be determined by multiplying the Contract Rent in effect 
on the anniversary date of the contract by the applicable Automatic 
Annual Adjustment Factor (see paragraph (a) of this section) and 
rounding the result as follows:
    (1) If the result contains a fractional dollar amount ranging 
from $0.01 to $0.49, round to the next lower whole dollar amount;
    (2) If the result contains a fractional dollar amount ranging 
from $0.50 to $0.99, round to the next higher whole dollar amount.

IV. Public Comment

    In addition to the commenters who supported a change to the 
rounding method, but not the change proposed by HUD, four commenters 
expressed their support for the proposed rule with no recommendations 
for change. Other comments, and HUD's response to these comments, are 
as follows:
    Comment. One commenter supported the change to the rounding factor 
but stated that it strongly opposed retroactive implementation of the 
rule.
    Response. The rule does not provide for retroactive application. 
The revised rounding procedure applies to only future rents as they are 
adjusted on the anniversary dates of the Housing Assistance Payment 
(HAP) contracts.
    Comment. Four commenters opposed the change to the rounding 
procedure, and stated that the savings anticipated by the change will 
be substantially less because of the increased rents allowed under 
requests for special adjustments.
    Response. Reduced rent increases that result from a change in the 
rounding procedure do not constitute an eligible justification for 
special adjustments. Special adjustments are available only when 
increases in expenses have resulted from substantial general increases 
in real property taxes, utility rates, or other similar costs. HUD does 
not believe that the reduction of rents resulting from a change in the 
rounding procedure will be so substantial as to adversely affect 
project owners.
    Comment. Three commenters stated that the application of a revised 
rounding factor to existing contracts is legally questionable.
    Response. As noted above, there is no retroactive application of 
the rule. Additionally, the HAP contracts and the section 8 regulations 
do not prohibit HUD from revising the ``rounding'' procedure for 
contract rents.
    Comment. One commenter stated that the preamble to the proposed 
rule made the assertion that many housing authorities and project 
owners are provided with section 8 subsidies substantially beyond their 
section 8 assistance needs. The commenter stated that HUD must take 
into consideration projects that need all of their section 8 
assistance.
    Response. HUD believes that the revised rounding factor, which is 
based on generally accepted mathematical principles, and is consistent 
with standard industry practices, presents a balanced approach to the 
former rounding method which did, in fact, provide many owners with 
section 8 subsidies beyond their needs. (Again, the previous procedure 
provided for a dollar fraction as low as .01 to be rounded up to the 
next whole dollar.) As noted earlier in this preamble, while the 
revised rounding method will result in some reduction in section 8 
subsidies, HUD does not believe that the reduction will be so 
substantial as to adversely affect project owners, including those that 
need all of their section 8 assistance.
    Comment. One commenter stated that the Automatic Annual Adjustment 
Factor has a built-in downward bias, which, together with the revision 
to the rounding factor, will substantially reduce section 8 assistance.
    Response. The Automatic Annual Adjustment Factors (AAFs) are 
computed so as to eliminate as many sources of bias as is practicable. 
There is no effort on the part of HUD to establish the AAFs in a way 
that would be detrimental to project owners.

V. Other Matters

Environmental Impact

    An environmental assessment is unnecessary because statutorily 
required establishment and review of rent schedules that do not 
constitute a development decision affecting the physical condition of 
specific project areas or building sites are categorically excluded 
from the Department's National Environmental Policy Act procedures 
under 24 CFR 50.20(1).

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this final rule before publication, and, 
by approving it, certifies that this final rule would not have a 
significant economic impact on a substantial number of small entities. 
The rule will result in reduced section 8 subsidies for a substantial 
number of housing authorities (the reduction in subsidies will extend 
to all housing authorities, and is not limited to small housing 
authorities) and project owners. However, the reduced section 8 
subsidies will not result in a significant economic impact on these 
entities because a substantial number of these authorities and project 
owners are currently receiving section 8 subsidies considerably beyond 
their actual section 8 housing assistance needs. The savings in section 
8 subsidies achieved by this rule will result in disbursement of 
section 8 subsidies to additional housing authorities and project 
owners. Thus, the rule would not result in a significant economic 
impact on a substantial number of small entities within the meaning of 
the order.

Federalism Impact

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order No. 12612, Federalism, has determined that this 
final rule would not have a substantial, direct effect on the States or 
their political subdivisions or on the relationship between the Federal 
government and the States, or on the distribution of power or 
responsibilities among the various levels of government. The rule 
relates solely to the method of determining Federal financial 
assistance--that is, the method of determining the amount of section 8 
assistance needed by a housing authority or project owner, based on the 
procedure for computing adjusted contract rent. This matter does not 
affect the States or their political subdivisions or the distribution 
of power or responsibilities among the various levels of government.

Impact on the Family

    The General Counsel, as the Designated Official under Executive 
Order 12606, The Family, has determined that this final rule will not 
have a potential significant impact on family formation, maintenance, 
and general well-being, and thus is not subject to review under the 
order. No significant change in existing HUD policies or programs will 
result from promulgation of this rule, as those policies and programs 
relate to family concerns.

Regulatory Agenda

    This rule was listed as sequence number 1608 in the Department's 
Semiannual Agenda of Regulations published on April 25, 1994 (59 FR 
20424, 20453) under Executive Order 12866 and the Regulatory 
Flexibility Act.

List of Subjects in 24 CFR Part 888

    Grant programs--housing and community development, Rent subsidies.

    Accordingly, 24 CFR part 888 is amended as follows:

PART 888--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--FAIR 
MARKET RENTS AND CONTRACT RENT ANNUAL ADJUSTMENT FACTORS

    1. The authority citation for part 888 continues to read as 
follows:

    Authority: 42 U.S.C. 1437c, 1437f, and 3535(d).

    2. In Sec. 888.203, paragraph (b) is revised to read as follows:


Sec. 888.203  Use of contract rent automatic annual adjustment factors.

* * * * *
    (b) The adjusted monthly amount of the Contract Rent of a dwelling 
unit shall be determined by multiplying the Contract Rent in effect on 
the anniversary date of the contract by the applicable Automatic Annual 
Adjustment Factor (see paragraph (a) of this section) and rounding the 
result as follows:
    (1) If the result contains a fractional dollar amount ranging from 
$0.01 to $0.49, round to the next lower whole dollar amount;
    (2) If the result contains a fractional dollar amount ranging from 
$0.50 to $0.99, round to the next higher whole dollar amount.

    Dated: July 20, 1994.
Jeanne K. Engel,
General Deputy Assistant Secretary for Housing--Federal Housing 
Commissioner.
[FR Doc. 94-18496 Filed 7-28-94; 8:45 am]
BILLING CODE 4210-27-P