[Federal Register Volume 64, Number 248 (Tuesday, December 28, 1999)]
[Rules and Regulations]
[Pages 72730-72754]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33502]



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Part IV





Department of Housing and Urban Development





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24 CFR Part 888



Section 8 Housing Assistance Payments Program-Contract Rent Annual 
Adjustment Factors, Fiscal Year 2000; Final Rule

  Federal Register / Vol. 64, No. 248 / Tuesday, December 28, 1999 / 
Rules and Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 888


Section 8 Housing Assistance Payments Program-Contract Rent 
Annual Adjustment Factors, Fiscal Year 2000

AGENCY: Office of the Secretary, HUD.

ACTION: Notice of Revised Contract Rent Annual Adjustment Factors; 
correction.

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SUMMARY: This document corrects the Schedule C area definitions for 
metropolitan statistical areas (MSAs) in the following States: Alabama 
(Auburn-Opelika), Arizona (Flagstaff), Colorado (Grand Junction), Idaho 
(Pocatello), Maine (Portland), Mississippi (Hattiesburg), New Hampshire 
(Boston), New York (Buffalo-Niagara Falls), Oregon (Corvallis), 
Tennessee (Jackson), and Utah. It also clarifies the names of selected 
places in Connecticut and Florida. All had been incorrectly categorized 
or named in Schedule C of the document published in the Federal 
Register on September 24, 1999.
    None of the AAFs published in the September 24, 1999 document are 
being changed by this document; however, for clarity the entire 
document is being reprinted, and the September 24, 1999 document should 
be replaced with this one. The Annual Adjustment Factors (AAFs) 
contained in this document are for adjustment of Section 8 contract 
rents on housing assistance payment contract anniversaries from October 
1, 1999. The AAFs 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's Random 
Digit Dialing (RDD) rent change surveys.

EFFECTIVE DATE: October 1, 1999.

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; Allison Manning, Office of Special Needs 
Assistance Programs, Office of Community Planning and Development 
[(202) 708-1234], for questions regarding the Single Room Occupancy 
Moderate Rehabilitation program; Frank M. Malone, Acting Director, 
Office of Asset Management and Disposition, Office of Housing [(202) 
708-3730], for questions relating to all other Section 8 programs; and 
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'' TTY number, 
the above-listed telephone numbers are not toll-free.)

SUPPLEMENTARY INFORMATION: This Notice explains how AAFs are applied. 
The first section identifies to which programs and under what 
circumstances AAFs apply. The second section provides an explanation of 
when and how the statutory 1 percent reduction to AAFs should be 
applied. The third section describes the actual adjustment procedures. 
For this purpose, Section 8 programs affected by AAFs are grouped into 
three categories, each of which uses AAFs differently:
    Category 1.--The Section 8 new construction and substantial 
rehabilitation programs and the moderate rehabilitation program.
    Category 2.--The Section 8 loan management (LM) and property 
disposition (PD) programs.
    Category 3.--The Section 8 certificate program and the project-
based voucher program.
    Next the Notice explains the content and applicability of the two 
AAF tables included in this Notice and provides detailed information on 
the geographical coverage of each AAF area. The Notice then explains 
how to apply AAFs to manufactured home space rentals in the Section 8 
tenant-based certificate program.
    The Notice closes with a brief explanation of how HUD calculates 
AAFs.

I. Applicability of AAFs to Various Section 8 Programs

    AAFs established by this Notice are used to adjust contract rents 
for units assisted in certain Section 8 housing assistance payments 
programs, during the term of the HAP contract. 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 tenant-based voucher program.
    AAFs are not used for budget-based rent adjustments. Contract rents 
for 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 budget-based adjustments in accordance with 24 CFR 207.19(e). 
Budget-based adjustments are used for most Section 8/202 projects.
    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.

II. Use of Reduced AAF

    In accordance with Section 8(c)(2)(A) of the United States Housing 
Act of 1937 (42 U.S.C. 1437f(c)(2)(A)), the AAF is reduced by .01:

--For regular tenancy in the Section 8 certificate program, for all 
units.
--In other Section 8 programs, for a unit occupied by the same family 
at the time of the last annual rent adjustment (and where the rent is 
not reduced by application of comparability (rent reasonableness)).

    The law provides that:

    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. 42 U.S.C. 
1437f(c)(2)(A).

    This statutory language is now permanent law. Section 2004 of the 
Balanced Budget Act of 1997 provides that these provisions are in 
effect through fiscal year 2000 and thereafter (Pub. L. 105-33, 
approved August 5, 1997).
    To implement the law, HUD is again publishing two separate AAF 
Tables, contained in Schedule C, Tables 1 and 2 of this notice. Each 
AAF in Table 2 is computed by subtracting 0.01 from the annual 
adjustment factor in Table 1.

III. Adjustment Procedures

    The discussion in this Federal Register Notice is intended to 
provide a broad orientation on adjustment procedures. Technical details 
and requirements will be described in HUD notices (issued by the Office 
of Housing

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and the Office of Public and Indian Housing).
    Because of statutory and structural distinctions among the various 
Section 8 programs, there are separate rent adjustment procedures for 
three program categories:

--The Section 8 new construction and substantial rehabilitation 
programs (including the Section 8 state agency program); and the 
moderate rehabilitation programs (including the moderate rehabilitation 
single room occupancy program).
--The Section 8 loan management (LM) Program (Part 886, Subpart A) and 
property disposition (PD) Program (Part 886 Subpart C).
--The Section 8 certificate program (including the project-based 
certificate [PBC] program) and the project-based voucher program.

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 
allowance 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 (LM; Part 886, Subpart A) and 
Property Disposition Program (PD; Part 886 Subpart C)

    At this time, rent adjustment by the AAF 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 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 the 
tenant-based certificate program, in the project-based certificate 
program, and the project-based voucher program. The following 
procedures are used:

--The Table 2 AAF is always used; the Table 1 AAF is not used.
--The Table 2 AAF is always applied before determining comparability 
(rent reasonableness).
--Comparability always applies. If the comparable rent level is lower 
than the rent to owner (contract rent) as adjusted by application of 
the Table 2 AAF, the comparable rent level will be the new rent to 
owner.

AAF Tables

    The AAFs are contained in Schedule C, Tables 1 and 2 of this 
notice. There are two columns in each table. The first column is used 
to adjust contract rent for units where the highest cost utility is 
included in the contract rent. The second column is used where the 
highest cost utility is not included in the contract rent--i.e., where 
the tenant pays for the highest cost utility.

AAF Areas

    Each AAF applies to a specified geographic area and to units of all 
bedroom sizes. AAFs are provided:

--For the metropolitan parts of the ten HUD regions exclusive of CPI 
areas;
--For the nonmetropolitan parts of these regions; and
--For 96 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

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 
indicates 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 
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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.

Corrected AAF Area Definitions

    Alabama: Lee County (which constitutes the newly-designated Auburn-
Opelika, Alabama MSA) is now listed as a metropolitan county and 
removed from the list of nonmetropolitan counties.
    Arizona: Coconino County (Flagstaff, Arizona MSA) is now listed as 
a metropolitan county and removed from the list of nonmetropolitan 
counties.
    Colorado: Mesa County (which constitutes the Grand Junction, 
Colorado MSA) is now listed as a metropolitan county and removed from 
the list of nonmetropolitan counties.
    Connecticut: The following place names have been changed from 
``town'' to ``city:'' Ansonia, Bridgeport, Danbury, Derby, Hartford, 
Middletown, Milford, New Britain, New London, Norwich, Shelton, and 
Waterbury. Naugatuck is now listed as a borough. Newington town and 
Plainville town in Hartford County, and Colchester town and Lebanon 
town in New London County are now listed as metropolitan.
    Florida: Dade County has been renamed Miami-Dade.
    Idaho: Bannock County (the Pocatello, Idaho MSA) is now listed as a 
metropolitan county and removed from the list of nonmetropolitan 
counties.
    Maine: Long Island town, a part of the Portland, Maine MSA, has 
been added to the Cumberland County metropolitan part.
    Mississippi: Forrest and Lamar Counties (the Hattiesburg, 
Mississippi MSA) are now listed as metropolitan and removed from the 
list of nonmetropolitan counties.
    New Hampshire: The Rockingham County towns of Seabrook and South 
Hampton which are part of the Boston MA-NH PMSA are now listed among 
the CPI areas.
    New York: The Buffalo-Niagara Falls, New York PMSA has been removed 
from the list of CPI areas, and its component counties, Erie and 
Niagara, are listed as metropolitan counties. This results from the 
Bureau of Labor Statistics removing the Buffalo-Niagara Falls MSA from 
its Consumer Price Index survey sample.
    Oregon: Benton County (which constitutes the newly-designated 
Corvallis, Oregon MSA) is now listed as a metropolitan county and 
removed from the list of nonmetropolitan counties.
    Tennessee: Chester County (which is part of the Jackson, Tennessee 
MSA) is now listed as a metropolitan county and removed from the list 
of nonmetropolitan counties.
    Utah: Kane County (a HUD-designated metropolitan county) is now 
listed as a metropolitan county and removed from the list of 
nonmetropolitan counties.

Section 8 certificate program AAFs for manufactured home spaces

    For a manufactured home space rental in the old Section 8 tenant-
based certificate program, (under a HAP contract entered before the 
``merger date'' (10/1/99)), the AAFs in this publication identified as 
``Highest Cost Utility Excluded'' are to be used to adjust the rent to 
owner for the manufactured home space. The applicable AAF is determined 
by reference to the geographic listings contained in Schedule C, as 
described in the preceding section. AAFs are not used for the Section 8 
housing choice voucher program.

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 Included'' column in Schedule C was 
calculated by weighting the rent and utility components with the 
corresponding components from the 1990 Census.
    (3) 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 in the CPI surveys.

For Areas Without CPI Surveys

    (1) HUD used random digit dialing (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 with the highest cost utility included in 
the rent was calculated using the average of the ratios of gross rent 
in the current year RDD survey divided by the previous year's for the 
respective metropolitan or nonmetropolitan parts of the HUD region.
    (3) The change in rent with the highest cost utility excluded 
(i.e., paid separately by the tenant) was calculated in the same 
manner, after subtracting the median values of utilities costs from the 
gross rents in the two years. The median cost of utilities was 
determined from the units in the RDD sample which reported that all 
utilities were paid by the tenant.

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 50.19(c)(6).
Executive Order 13132, Federalism
    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 13132, 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.
Catalog of Federal Domestic Assistance
    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 17, 1999.
Andrew Cuomo,
Secretary.
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[FR Doc. 99-33502 Filed 12-27-99; 8:45 am]
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