[Federal Register Volume 61, Number 242 (Monday, December 16, 1996)]
[Rules and Regulations]
[Pages 66132-66156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31641]



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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, Fiscal Year 1997; Final Rule

  Federal Register / Vol. 61, No. 242 / Monday, December 16, 1996 / 
Rules and Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Secretary

24 CFR Part 888

[Docket No. FR-4157-N-01]


Section 8 Housing Assistance Payments Program; Contract Rent 
Annual Adjustment Factors Fiscal Year 1997

AGENCY: Office of the Secretary, HUD.

ACTION: 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 
(FMRs) 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, 1996. 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) survey and from HUD Random Digit Dialing 
(RDD) rent change surveys.

EFFECTIVE DATE: October 1, 1996.

FOR FURTHER INFORMATION CONTACT: Gerald J. Benoit, Rental Assistance 
Division, Office of Public and Indian Housing [(202) 708-0477], for 
questions relating to the Section 8 Voucher, Certificate, and Moderate 
Rehabilitation programs; Barbara D. Hunter, Program Management 
Division, Office of Multifamily Asset Management and Disposition [(202) 
708-4162], for questions relating to all other Section 8 programs; Alan 
Fox, Economic and Market Analysis Division, Office of Policy 
Development and Research [(202) 708-0590; e-mail [email protected]], 
for technical information regarding the development of the schedules 
for specific areas or the methods used for calculating the AAFs. 
Mailing address for above persons: Department of Housing and Urban 
Development, 451 Seventh Street SW, Washington, DC 20410. Hearing-or 
speech-impaired persons may contact the Federal Information Relay 
Service at 1-800-877-8339 (TTY) (Other than the ``800'' TDD number, the 
above-listed telephone numbers are not toll-free.)

SUPPLEMENTARY INFORMATION:
    A special requirement for determining the AAF used for the 
adjustment of Section 8 contract rents is applicable in Federal Fiscal 
Year 1997 (October 1, 1996 to September 30, 1997.) In FY 1997, the law 
provides (42 U.S.C. 1437f(c)(2)(A), as amended in 108 Stat. 2315 (9/28/
94) and 110 Stat 2874 (9/26/96)):

    Except for assistance under the certificate program, 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. 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 shall 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 market area.

    This provision was amended by the FY 1997 appropriation 
(Departments of Veterans Affairs and Housing and Urban Development, and 
Independent Agencies Appropriations Act of 1997, Pub. L. 104-204, 
approved September 26, 1996, 110 Stat. 2874). To implement the law, HUD 
is again publishing two separate AAF tables, contained in Schedule C, 
tables 1 and 2 of this document. Each AAF in table 2 is computed by 
subtracting 0.01 from the annual adjustment factor in table 1.

Applicability of AAFs to Various Section 8 Programs

    AAFs established by this document are used to adjust contract rents 
for Section 8 Housing Assistance Payments Program units. However, the 
specific application of the AAFs is determined by the law, the HAP 
contract, and 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 program (24 CFR part 886, subpart A) and for 
projects receiving Section 8 subsidies under the property disposition 
program (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 (both the 
regular program and the single room occupancy program), the public 
housing agency (PHA) applies the AAF to the base rent component of the 
contract rent, not the full contract rent.

Adjustment Procedures Under Fiscal Year 1997 Appropriation

    The discussion in this Federal Register document is intended to 
provide a broad orientation on procedures for adjustment under the FY 
1997 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, separate procedures are used for three 
program categories:

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

    In the Section 8 New Construction and Substantial Rehabilitation 
programs, the published AAF factor is applied to the pre-adjustment 
contract rent. In the Section 8 Moderate Rehabilitation program, the 
published AAF is applied to the pre-adjustment base rent.
    For category 1 programs, the Table 1 AAF factor is applied before 
determining comparability (rent reasonableness.) Comparability applies 
if the pre-adjustment gross rent (pre-adjustment contract rent plus any 
allowances for tenant-paid utilities) is above the published FMR.
    If the comparable rent level (plus any initial difference) is lower 
than the contract rent as adjusted by application of the table 1 AAF, 
the comparable rent level (plus any initial difference) will be the new 
contract rent. 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 as at 
the time of the last annual contract 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

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the applicable AAF under this document.
    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 as at 
the time of the last annual contract anniversary.

Category 3: Section 8 Certificate Program

    The same adjustment procedure is used for rent adjustment in both 
the tenant-based and project-based certificate programs. The following 
procedures are used:

--The Table 2 factor is always used in the Section 8 certificate 
program; the Table 1 factor is not used in this program.
--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 contract rent as adjusted (by application of the Table 2 AAF), 
the comparable rent level will be the new contract rent. However, under 
the old form of HAP contract the housing authority may not reduce the 
rent below the initial rent.

AAF Tables

    The AAFs for fiscal year 1996 are contained in Schedule C, tables 1 
and 2 of this document. Two columns are shown in this table. The first 
column is to be used for units where the highest cost utility is 
included in the contract rent. The second column is to be used where it 
is excluded from the contract rent.

AAF Areas

    Each AAF applies to a specified geographic 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 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 certain large metropolitan areas, where HUD 
considers the area covered by the OMB definition to be larger than 
appropriate for use as a housing market area definition. In those 
areas, HUD has deleted 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 and 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 (*) next to the area name. The asterisk 
denotes that there is a difference between the OMB metropolitan area 
and the HUD AAF area definition for these areas.
    To make certain that they are using the correct AAFs, users should 
refer to the area definitions section at the end of Schedule C. For 
units located in metropolitan areas with a local CPI survey, AAFs are 
listed separately. For units located in areas without a local CPI 
survey, the appropriate HUD regional Metropolitan or Nonmetropolitan 
AAFs are used.
    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 metropolitan CPI areas have separate AAF 
schedules and are shown with their corresponding county definitions or 
as metropolitan counties. Listed after the metropolitan CPI areas (in 
those states that have such areas) are the non-CPI 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

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 ``Highest Cost Utility Excluded'' column in Schedule C 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.
    (3) The Highest Cost Utility Included'' column in Schedule C was 
calculated by weighing the rent and utility components with the 
corresponding components from the 1990 Census.

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 rent including the highest cost utility was 
calculated using the ratio of the most recent RDD survey median gross 
rents for the respective metropolitan or nonmetropolitan parts of the 
HUD region.
    (3) The change in rent excluding the highest cost utility was 
calculated by subtracting the median value of utilities costs from the 
median gross rent. The median cost of utilities was determined from the 
units in the RDD sample which reported that all utilities were paid by 
the tenant.

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Other Matters

Environmental Impact
    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).
Executive Order 12612, Federalism
    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that the policies 
contained in this document do not have federalism implications and, 
thus, are not subject to review under the Order. The document 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.
Executive Order 12606, The Family
    The General Counsel, as the Designated Official under Executive 
Order 12606, The Family, has also determined that this document 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 document 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: December 2, 1996.
Henry Cisneros,
Secretary.

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[FR Doc. 96-31641 Filed 12-13-96; 8:45 am]
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