[Federal Register Volume 60, Number 213 (Friday, November 3, 1995)]
[Rules and Regulations]
[Pages 55934-55957]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27262]




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Part IV





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; Final Rule

  Federal Register / Vol. 60, No. 213 / Friday, November 3, 1995 / 
Rules and Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Secretary

24 CFR Part 888

[Docket No. FR-3952-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 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 document announces revised Annual Adjustment Factors (AAFs) for 
assistance contract anniversaries from October 1, 1995. The factors are 
based on a formula using data on residential rent and utilities cost 
changes from the most current Bureau of Labor Statistics Consumer Price 
Index (CPI) and the HUD Random Digit Dialing (RDD) rent change surveys.

EFFECTIVE DATE: October 1, 1995.

FOR FURTHER INFORMATION CONTACT: Gerald J. Benoit, Rental Assistance 
Division, Office of Public and Indian Housing [(202) 708-0477 (TDD) or 
(202) 708-0850 (voice)], for questions relating to the Section 8 
Voucher, Certificate, and Moderate Rehabilitation programs; Barbara 
Hunter, Program Management Division, Office of Multifamily Asset 
Management and Disposition [(202) 708-3944 (TDD) or (202) 708-4594 
(voice)], 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) or (202) 708-0770 
(voice)]. Mailing address for above persons: Department of Housing and 
Urban Development, 451 Seventh Street SW, Washington, DC 20410. (The 
above-listed telephone numbers are not toll-free.)

SUPPLEMENTARY INFORMATION: The fiscal year 1995 Department of Housing 
and Urban Development Appropriations Act (Pub. L. 103-327, approved 
September 28, 1994) contained special requirements for adjustment of 
Section 8 contract rents. Congress stipulated that,

    For any unit occupied by the same family at the time of the last 
annual rental adjustment, where the assistance contract provides for 
the adjustment of the maximum monthly rent by applying an annual 
adjustment factor and where the rent for a unit is otherwise 
eligible for an adjustment based on the full amount of the factor, 
0.01 shall be subtracted from the amount of the factor, except that 
the factor shall not be reduced to less than 1.0.

    Under the terms of the fiscal year 1995 appropriation, these 
amendments modified requirements for adjustment of Section 8 contract 
rents (under Section 8(c)(2)(A) of the United States Housing Act of 
1937, 42 U.S.C. 1437f(c)(2)(A)) in fiscal year 1995 (i.e., until 
September 30, 1995). Thus these amendments sunset at the end of fiscal 
year 1995. At this time, the Congress has not yet enacted the regular 
HUD appropriation for fiscal year 1996. However, the Congress has 
enacted a continuing resolution to provide temporary funding for 
continuation of government activities carried out during fiscal year 
1996 (until November 13 or enactment of a regular appropriation).
    During the period of the continuing resolution, funds must be used 
in accordance with the same ``authority and conditions'' provided in 
the HUD appropriation act for fiscal year 1995.
    Since the special rent adjustment requirements were contained in 
HUD's fiscal year 1995 appropriation act, and affect the use of 
available funds under the continuing resolution, the adjustment 
requirements are extended during the period of the continuing 
resolution. The legislative history of the fiscal year 1996 continuing 
resolution specifically confirms that the fiscal year 1995 adjustment 
requirements apply during the period of the fiscal year 1996 continuing 
resolution. (Colloquy of Senators Feinstein and Hatfield at 
Congressional Record, p. S 14638, September 29, 1995.)
    For all Section 8 programs other than the Section 8 certificate 
program, HUD expects that the fiscal year 1996 appropriation, when 
enacted, will probably include the same Section 8 rent adjustment 
requirements in fiscal year 1996 that applied in fiscal year 1995 (and 
which were extended during the period of the fiscal year 1996 
continuing resolution). For the Section 8 certificate program (both the 
tenant-based certificate program (24 CFR Part 982) and the project-
based certificate program (24 CFR Part 983)), adjustment requirements 
may be amended to provide that:

    In the case of assistance under the certificate program, 0.01 
shall be subtracted from the amount of the annual adjustment factor 
(except that the factor may not be reduced to less than 1.0), and 
the adjusted rent shall not exceed the rent for a comparable 
unassisted unit of similar quality, type, and age in the same market 
area.

(Section 204(b) of H.R. 2099 as passed by the Senate, September 27, 
1995.)
    During the continuing resolution period, rents will be adjusted by 
applying the fiscal year 1996 AAFs published in this notice. However, 
contract rents will be adjusted under the same procedures that were 
used in fiscal year 1995 under the terms of the fiscal year 1995 
appropriation act. These procedures will be used for HAP contract 
anniversaries that fall during the period of the fiscal year 1996 
continuing resolution--the period of fiscal year 1996 before enactment 
of the regular appropriation. For contract anniversaries that fall 
after enactment of the regular HUD appropriation for fiscal year 1996, 
contract rents will be adjusted in accordance with requirements of the 
appropriation as enacted.
    In fiscal year 1995 HUD published two separate AAF tables. In this 
AAF notice for fiscal year 1996, HUD is again publishing two separate 
AAF tables. The AAFs for fiscal year 1996 are contained in Schedule C, 
tables 1 and 2 of this notice. Each AAF in table 2 is computed by 
subtracting 0.01 from the amount of the annual adjustment factors in 
table 1.

Applicability of AAFs to Various Section 8 Programs

    AAFs established by this Notice are used to adjust contract rents 
for Section 8 Housing Assistance Payments Program units. However, the 
specific application of the AAFs should be determined by reference to 
the HAP contract and to appropriate program regulations or 
requirements.
    AAFs are not used for the Section 8 voucher program. Contract rents 
for some 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) applies the AAF to the base rent component of the 
contract rent, not the full contract rent. 

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Adjustment Procedures Under Fiscal Year 1996 Appropriation

    This section briefly summarizes procedures for contract rent 
adjustment:
    (1) During the period of the fiscal year 1996 continuing 
resolution, and
    (2) Under the appropriation for fiscal year 1996, when enacted.
    The discussion of adjustment under the fiscal year 1996 
appropriation assumes that:

--Except for the certificate program, the fiscal year 1996 
appropriation will extend to fiscal year 1996 the same adjustment 
requirements that were contained in the fiscal year 95 appropriations 
(108 Stat. 2315).
--For the Section 8 certificate program, the fiscal year 96 
appropriation will enact the special certificate program adjustment 
requirements as quoted above (from the Senate-passed appropriation 
bill).

    If the enacted appropriation differs from these assumptions, 
contract rent adjustments will be made in accordance with requirements 
of the law as enacted.
    The discussion in this Federal Register notice is intended to 
provide a broad orientation on procedures for adjustment under the 
fiscal year 1996 appropriations. Technical details and requirements 
will be described in HUD notices (by the HUD office of housing and the 
HUD office of public and Indian housing).
    Because of statutory and structural distinctions between the 
various Section 8 programs, there are separate procedures for three 
program categories:

Category 1: Section 8 New Construction, Substantial Rehabilitation and 
Moderate Rehabilitation Programs

    For category 1 programs, comparability applies if the pre-
adjustment gross rent is above the published FMR. The Table 1 AAF 
factor is applied before determining comparability (rent 
reasonableness). If the comparable rent level (plus any initial 
difference) is lower than the adjusted contract rent amount (by 
application of the table 1 AAF), the comparable rent level (plus any 
initial difference) will be applied. (However, the pre-adjustment 
contract rent will not be decreased by application of comparability.)
    In all other cases (i.e., unless contract rent is reduced by 
comparability):

--The table 1 AAF is used for a unit occupied by a new family since the 
last annual contract anniversary.
--The table 2 AAF is used for a unit occupied by the same family since 
the last annual anniversary.

Category 2: The Loan Management Program (Part 886, Subpart A) or 
Property Disposition Program (Part 886 Subpart C), Where Rents Are 
Adjusted by Applying the AAF

    At this time, rent adjustment in the Category 2 programs is not 
subject to comparability. (Comparability will again apply if HUD 
establishes regulations for conducting comparability studies under 42 
U.S.C. 1437f(c)(2)(C).) Rents are adjusted by applying the full amount 
of the applicable AAF under this notice.

    The applicable AAF is determined as follows:
--The table 1 AAF is used for a unit occupied by a new family since the 
last annual contract anniversary.
--The table 2 AAF is used for a unit occupied by the same family since 
the last annual anniversary.

Category 3: Section 8 Certificate Program

3.A  Adjustment During Period of Continuing Resolution: Tenant-Based 
Certificate Program (Part 982)

    In the tenant-based certificate program:

--Comparability always applies, and
--The unit is always occupied by the same family since the last annual 
anniversary of the HAP contract (since a separate HAP contract is 
executed for each family).

    In the tenant-based certificate program, the following procedures 
are used for adjustment of contract rents for anniversaries that fall 
during the period of the continuing resolution:
--The table 1 AAF factor is applied before determining comparability 
(rent reasonableness). If the comparable rent level is lower than the 
adjusted amount (by application of the table 1 AAF), the comparable 
rent level will be applied.
--The table 2 AAF is used in all other cases (i.e., unless contract 
rent is reduced by comparability).

3.B  Adjustment During Period of Continuing Resolution: Project-Based 
Certificate Program

    During the period of the continuing resolution, use same adjustment 
procedures as Category 2.

3.C  Adjustment After Enactment of Regular Appropriation Tenant-Based 
and Project-Based Certificate Programs

    After the enactment of the regular appropriation, the same 
adjustment procedure is used for rent adjustment in the tenant-based 
and project-based certificate programs. The following procedures are 
used:

--The table 2 AAF factor is always applied before determining 
comparability (rent reasonableness).
--Comparability always applies.

    If the comparable rent level is lower than the adjusted amount (by 
application of the table 2 AAF), the comparable rent level will be 
applied.

AAF Tables

    The AAFs for fiscal year 1996 are contained in Schedule C, tables 1 
and 2 of this notice.

AAF Areas

    Each AAF applies to a specified geographical area and to units of 
all bedroom sizes. AAFs are provided:
    (1) for the metropolitan parts of the ten HUD regions exclusive of 
CPI areas;
    (2) for the nonmetropolitan parts of these regions, and
    (3) for 102 separate metropolitan AAF areas for which local CPI 
survey data are available.
    With the several exceptions discussed below, the AAFs shown in 
Schedule C use the Office of Management and Budget's (OMB) most current 
definitions of metropolitan areas. HUD uses the OMB Metropolitan 
Statistical Area (MSA) and Primary Metropolitan Statistical Area (PMSA) 
definitions for AAF areas because of their close correspondence to 
housing market area definitions.
    The exceptions are for large metropolitan areas, where HUD 
considers the area covered by the 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, and Walton Counties.
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-VA-MD-WV--Berkeley and Jefferson Counties in West 
Virginia; and Clarke, Culpeper, King George and Warren counties in 
Virginia.

    Separate AAFs are listed in this publication for the above 
counties. They and the metropolitan area of which they are a part are 
identified with an asterisk 

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(*) 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.
    Program participants should refer to the area definitions section 
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 areas without a local CPI 
survey must use the appropriate HUD regional Metropolitan or 
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. 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 Southeast AAFs. All 
areas in Hawaii use the AAFs identified in the table as STATE: Hawaii, 
which are based on the CPI survey for the Honolulu metropolitan area. 
The Pacific Islands use the Pacific/Hawaii Nonmetropolitan AAFs. The 
Anchorage metropolitan area uses the AAFs based on the local CPI 
survey. All other areas in Alaska use the Northwest/Alaska 
Nonmetropolitan AAFs.

Section 8 Certificate Program AAFs for Manufactured Home Spaces

    The AAFs in this publication identified as ``Highest Cost Utility 
Excluded'' are to be used to adjust 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.

How Factors Are Calculated

AAF Formula

    AAFs for each area were calculated 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 Without CPI Surveys:
    (1) HUD used RDD regional surveys to calculate 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. RDD surveys are 
conducted to determine the rent change factors for the metropolitan 
parts (exclusive of CPI areas) and nonmetropolitan parts of the 10 HUD 
regions, a total of 20 surveys.
    (2) 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
    (3) 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.

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 Payment 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 Payment 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 Annual Adjustment 
Factors for the Section 8 Housing Assistance Payments Programs as set 
forth in the following tables:

    Dated: September 21, 1995.
Henry Cisneros,
Secretary.

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[FR Doc. 95-27262 Filed 11-2-95; 8:45 am]
BILLING CODE 4210-32-C