[Federal Register Volume 69, Number 151 (Friday, August 6, 2004)]
[Notices]
[Pages 48040-48099]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17884]



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Part IV





Department of Housing and Urban Development





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Proposed Fair Market Rents for the Housing Choice Voucher Program and 
Moderate Rehabilitation Single Room Occupancy Program Fiscal Year 2005; 
Notice

  Federal Register / Vol. 69, No. 151 / Friday, August 6, 2004 / 
Notices  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4937-N-01]


Proposed Fair Market Rents for the Housing Choice Voucher Program 
and Moderate Rehabilitation Single Room Occupancy Program Fiscal Year 
2005

AGENCY: Office of the Secretary, HUD.

ACTION: Notice of Proposed Fiscal Year (FY) 2005 Fair Market Rents 
(FMRs).

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SUMMARY: Section 8(c)(1) of the United States Housing Act of 1937 
(USHA) requires the Secretary to publish Fair Market Rents (FMRs) 
annually to be effective on October 1 of each year. The Department's 
regulations at 24 CFR part 888 provide a notice and comment process for 
developing FMRs. Today's notice proposes FMRs for FY2005. The proposed 
numbers would amend FMR schedules used to determine payment standard 
amounts for the Housing Choice Voucher program, to determine initial 
renewal rents for some expiring project-based section 8 contracts, and 
to determine initial rents for housing assistance payment (HAP) 
contracts in the Moderate Rehabilitation Single Room Occupancy program. 
Other programs may require use of FMRs for other purposes.
    Proposed FY2005 FMRs are based on 40th percentile recent mover FMR 
estimates for most areas, but FMRs for 38 metropolitan areas are shown 
at the 50th percentile FMR standard. The 50th percentile FMRs were 
initiated in 2001 to increase housing choice opportunities in 
metropolitan areas where high percentages of vouchers were being used 
in high poverty census tracts. For informational purposes, 40th 
percentile FMRs for the 38 areas that currently have 50th percentile 
FMRs are also listed.
    The proposed FY2005 FMRs in this notice are the first to utilize 
new Office of Management and Budget (OMB) area definitions and 2000 
Census data (which became available in September 2003). The FMR 
estimates have been trended to April 2005, the mid-point of FY2005.

DATES: Comments Due Date: September 7, 2004. Due to a number of 
technical and policy issues associated with rebenchmarking the FY2004 
FMRs with 2000 Census data, the proposed FY2005 FMRs are being 
published later than usual. HUD is required to publish FMRs for effect 
by October 1, 2004. To meet this requirement, HUD is allowing a 30-day 
comment submission period for the FMRs proposed in this notice. Reviews 
of these comments will be reflected in a Federal Register notice issued 
on or about October 1, 2004. HUD will accept comments during the 60-day 
period following the initial 30-day comment period. Comments received 
during the 60-day period will be considered for inclusion in a 
subsequent FY2005 Federal Register FMR notice.

ADDRESSES: Interested persons are invited to submit comments regarding 
HUD's estimates of the FMRs as published in this notice to the Office 
of the General Counsel, Rules Docket Clerk, Room 10276, Department of 
Housing and Urban Development, 451 Seventh Street, SW., Washington, DC 
20410-0001. Communications should refer to the above docket number and 
title and should contain the information specified in the ``Request for 
Comments'' section. To ensure that the information is fully considered 
by all of the reviewers, each commenter is requested to submit two 
copies of its comments, one to the Rules Docket Clerk and the other to 
the Economic and Market Analysis Staff in the appropriate HUD field 
office. A copy of each communication submitted will be available for 
public inspection and copying during regular business hours (8 a.m. to 
5 p.m. eastern time) at the above address.

FOR FURTHER INFORMATION CONTACT: Deborah Hernandez, Director, Office of 
Housing Voucher Programs, telephone (202) 708-2934, responsible for 
decisions on how fair market rents are used; or Mark Johnston, Office 
of Special Needs Assistance Programs, telephone (202) 708-4300, 
responsible for administration of the Mod Rehab Single Room Occupancy 
program. For technical information on the methodology used to develop 
fair market rents or a listing of all fair market rents, please call 
the HUD USER information line at 800-245-2691 or access the information 
on the HUD Web site, http://www.huduser.org/datasets/fmr.html. Further 
questions on the methodology may be addressed to Marie L. Lihn, 
Economic and Market Analysis Division, Office of Economic Affairs, 
telephone (202) 708-0590, e-mail [email protected]. Hearing- or 
speech-impaired persons may use the Telecommunications Device for the 
Deaf (TTY) at (800) 927-7589. (Other than the HUD USER and TTY numbers, 
telephone numbers are not toll-free.)

SUPPLEMENTARY INFORMATION:

I. Background

    Section 8 of the USHA (42 U.S.C. 1437f) authorizes housing 
assistance to aid lower income families in renting safe and decent 
housing. Housing assistance payments are limited by FMRs established by 
HUD for different areas. In the Housing Choice Voucher program, the FMR 
is the basis for determining the ``payment standard amount'' used to 
calculate the maximum monthly subsidy for an assisted family (see 24 
CFR 982.503). In general, the FMR for an area is the amount that would 
be needed to pay the gross rent (shelter rent plus utilities) of 
privately owned, decent, and safe rental housing of a modest (non-
luxury) nature with suitable amenities. The interim rule published on 
October 2, 2000 (65 FR 58870), established 50th percentile FMRs for 
certain areas.
    Electronic Data Availability: This Federal Register notice is 
available electronically from the HUD news page: http://www.hudclips.org. Federal Register notices also are available 
electronically from the U.S. Government Printing Office Web site: 
http://www.gpoaccess.gov/fr/index.html.

II. Procedures for the Development of FMRs

    Section 8(a) of the USHA requires the Secretary of HUD to publish 
FMRs periodically, but not less frequently than annually. The 
Departments regulations provide that HUD will develop proposed FMRs, 
publish them for public comment, analyze the comments, and publish 
final FMRs. (See 24 CFR 888.115.) Final FY2005 FMRs will be published 
on or before October 1, 2004, as required by section 8(c)(1) of the 
USHA.

III. Fair Market Rent Schedules

    This notice proposes revised FMRs for FY2005. These are the first 
FMRs calculated using 2000 Census data, which only recently became 
available in the level of detail (recent mover, standard-quality unit 
rents by number of bedrooms) necessary to calculate FMRs. The 
Department refers to the use of new decennial census data to revise 
FMRs as ``rebenchmarking.'' This process involves replacing the base 
year FMR estimates with those developed from new Census data and then 
updating the Census-based estimates from the date of the Census to the 
midpoint of the program year during which the FMRs will be in effect. 
The proposed FY2005 FMRs for all areas in the country have been 
rebenchmarked, either with Census data or with Random Digit Dialing 
surveys or American Housing Surveys conducted after the date of the 
2000 Census.
    In addition to the use of Census 2000 data for FMRs, these FMRs 
also reflect a change in metropolitan area definitions. Please see the 
following

[[Page 48041]]

section on Metropolitan Area Definitions for a discussion of housing 
market areas and HUD's use of OMB-defined metropolitan area. Due to the 
rebenchmarking and the changes in area definitions, the proposed FMRs 
for many areas differ from the normal updating of last year's FMRs.
    Schedules B(1) and B(2) at the end of this document list the 
proposed FMR levels for rental housing. Schedule B(1) lists the 
proposed 2005 FMRs for all areas using the estimated 40th or 50th 
percentile FMR standard. An asterisk in Schedule B(1) identifies the 
FMR areas where use of 50th percentile FMRs had been authorized. There 
are some metropolitan areas and parts of metropolitan areas that 
previously qualified for 50th percentile FMRs but no longer do so 
because of OMB area definitional changes.
    Schedule B(1) contains 40th percentile FMRs for most areas, but 
provides 50th percentile FMRs for the following metropolitan FMR areas:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Albuquerque, NM........................  Atlanta-Sandy Springs-Marietta,
                                          GA.
Austin-Round Rock, TX..................  Baton Rouge, LA.
Buffalo-Niagara Falls, NY..............  Chicago-Naperville-Joliet, IL.
Cleveland-Elyria-Mentor, OH............  Dallas-Plano-Irving, TX.
Denver-Aurora, CO......................  Detroit-Livonia-Dearborn, MI.
Fort Lauderdale-Pompano Beach-Deerfield  Fort Worth-Arlington, TX.
 Beach, FL.
Grand Rapids-Wyoming, MI...............  Houston-Baytown-Sugar Land, TX.
Kansas City, MO-KS.....................  Las Vegas-Paradise, NV.
Miami-Miami Beach-Kendall, FL..........  Minneapolis-St. Paul-
                                          Bloomington, MN-WI.
Newark-Union, NJ-PA....................  Oakland-Fremont-Hayward, CA.
Oklahoma City, OK......................  Oxnard-Thousand Oaks-Ventura,
                                          CA.
Philadelphia, PA.......................  Phoenix-Mesa-Scottsdale, AZ.
Richmond-Petersburg, VA................  Sacramento-Arden-Arcade-
                                          Roseville, CA.
St. Louis, MO-IL.......................  Salt Lake City-Ogden, UT.
San Antonio, TX........................  San Diego-Carlsbad-San Marcos,
                                          CA.
San Jose-Sunnyvale-Santa Clara, CA.....  Santa Ana-Anaheim-Irvine, CA.
Tampa-St. Petersburg-Clearwater, FL....  Tulsa, OK.
Virginia Beach-Norfolk-Newport News, VA- Washington-Arlington-
 NC.                                      Alexandria, DC-VA-MD-WV.
West Palm Beach-Boca Raton-Boynton       Wichita, KS.
 Beach, FL.
------------------------------------------------------------------------

    For informational purposes, Schedule B(2) of this document provides 
the 40th percentile FMR standard for the 38 areas that have a 50th 
percentile rent shown in Schedule B(1). FMR areas are listed by State; 
a FMR area that covers parts of two States will be shown under each 
State listing.
    FMRs for the Moderate Rehabilitation program are 120 percent of the 
Schedule B(1) Fair Market Rents (see 24 CFR 882.408(a) and 
888.113(e)(1)). The payment standard amount for a single-room occupancy 
unit in the Rental Voucher program is 75 percent of the efficiency FMR 
listed in Schedule B(1).
    Manufactured home space rents are set at 40 percent of the Schedule 
B(1) FMR and include utilities. Exceptions to this calculated rent are 
based on surveys of space rents plus utilities and are shown on 
Schedule D.

IV. Metropolitan Area Definitions

    A housing market area is a geographic area where housing units of 
similar characteristics are in competition with each other. With a few 
exceptions identified below, HUD uses OMB-defined metropolitan areas as 
the geographic basis for defining housing markets because of the 
correspondence that typically exists between these definitions and 
housing market area definitions.
    As part of the 2000 Census process, OMB released new metropolitan 
area definitions on June 6, 2003, and updated them on February 18, 
2004. The new 2000 Census-based metropolitan area standards use 
somewhat different terminology than previously in use. The 1980 and 
1990 Census-based standards identified two types of metropolitan areas: 
(1) Metropolitan Statistical Areas (MSAs), and (2) Consolidated 
Metropolitan Statistical Areas (CMSAs). CMSAs were large metropolitan 
areas that had two or more large, distinct subparts referred to as 
Primary Metropolitan Statistical Areas (PMSAs). For instance, the 
Baltimore-Washington metropolitan area was categorized as a CMSA, and 
it was split into a Baltimore PMSA and a Washington, DC PMSA. Counties 
were the building blocks for metropolitan area definitions except in 
New England, where aggregations of townships were used to define 
metropolitan areas. HUD FMR areas were defined using MSA and PMSA 
definitions.
    The terms ``Consolidated Metropolitan Statistical Area'' and 
``Primary Metropolitan Statistical Area'' are now obsolete. Under the 
2000 standards, the term ``Metropolitan Statistical Area'' is used for 
all metropolitan areas. These areas are also referred to as Core-Based 
Statistical Areas (CBSAs). A large metropolitan CBSA area may be 
divided into ``Metropolitan Divisions,'' which consist of a county or 
group of counties within a Metropolitan Statistical Area that has a 
population core of at least 2.5 million. A Metropolitan Division is 
similar in concept to the now obsolete Primary Metropolitan Statistical 
Area concept. Special note should be made of the fact that the new 
metropolitan area definitions are county-based. This results in 
significant changes in how some New England metropolitan areas are 
defined.
    While a Metropolitan Division is a subdivision of a large 
Metropolitan Statistical Area, it functions as a distinct social, 
economic, and cultural area within the larger region. Metropolitan 
Divisions are given separate statistical identities (e.g., Census 
reports will provide separate estimates for these areas). Federal 
agencies that had been using Primary Metropolitan Statistical Areas for 
program administrative and fund allocation purposes were directed by 
OMB to consider replacing them with Metropolitan Divisions because of 
the conceptual similarities.
    Many metropolitan areas have been revised to include counties 
previously designated as nonmetropolitan areas. Some of these formerly 
nonmetropolitan counties will find that the proposed FY2005 FMRs are 
substantially higher. Counties with substantial increases in the FMR 
may find program implementation difficult because of insufficient 
funding. These counties should apply to the Office of Public and Indian 
Housing for exception rents below 90 percent of the FMR standard (See 
24 CFR 982.503) when appropriate.
    The revised OMB definitions identify two types of nonmetropolitan 
areas. A ``Micropolitan Area'' consists of one or

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more counties that meet certain population size and other criteria. 
Remaining nonmetropolitan areas consist of individual nonmetropolitan 
counties that lack the ``Micropolitan Area'' designation.
    HUD has made two changes to OMB area definitions in establishing 
proposed FY2005 FMR areas. One change is legislatively mandated, and 
requires establishing separate FMRs for Westchester County, New York, 
even though it is part of the New York City Metropolitan Area. The 
other change relates to Virginia independent cities, which are treated 
as county-equivalents by the Census but which are too small to be 
considered distinct housing market areas. For FMR program purposes, 
Virginia independent cities are associated with a metropolitan area or 
nonmetropolitan county. Independent cities that fall within 
metropolitan or micropolitan areas are considered a part of those areas 
and will be listed in their respective metropolitan, micropolitan, or 
nonmetropolitan area.

Virginia Nonmetropolitan County FMR Area and Independent Cities Included
                               With County
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                  County                               Cities
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Allegheny.................................  Clifton Forge, Covington.
Carroll...................................  Galax.
Greensville...............................  Emporia.
Rockbridge................................  Buena Vista and Lexington.
Southhampton..............................  Franklin.
Wise......................................  Norton.
------------------------------------------------------------------------

    Fiftieth percentile FMRs were originally assigned to 39 areas. 
Current OMB definitions split four of these areas into metropolitan 
divisions: Chicago, Detroit, Philadelphia and Washington, DC. The core 
part of these areas remains qualified for 50th percentile FMRs, but the 
parts put into separate metropolitan divisions are no longer qualified. 
In addition, the merger of Bergen-Passaic into the New York City 
Division means that those counties are no longer qualified to have 50th 
percentile FMRs. Therefore, under the new metropolitan area 
definitions, only 38 areas have 50th percentile FMRs.

V. Method Used To Develop FMRs

    FMR Standard: FMRs are gross rent estimates that include both 
shelter rent paid by the tenant to the landlord, and the cost of 
tenant-paid utilities, except telephones. HUD sets FMRs to assure that 
a sufficient supply of rental housing is available to program 
participants. To accomplish this objective, FMRs must be both high 
enough to permit a selection of units in neighborhoods and low enough 
to serve as many families as possible.
    FMRs are set at a percentile within the rent distribution of 
standard quality rental housing units in each FMR area (see 24 CFR 
888.113). FMRs are based on the distribution of rents for units that 
are occupied by recent movers. The distribution does not include rents 
for units less than two years old and is adjusted for public housing 
units.
    Attached FMR Schedule B(1) provides FY2005 FMRs at the 40th or 50th 
percentile of rents paid by recent movers for all areas. The 50th 
percentile FMRs were assigned to large metropolitan areas that had high 
program concentrations in high poverty areas. Schedule B(2) provides 
FY2005 FMRs at the 40th percentile for the 38 areas that are currently 
set at the 50th percentile. The 40th percentile rent standard means 
that 40 percent of all standard-quality rental housing units rented by 
recent movers have rents at or below this dollar amount. Public Housing 
Authorities (PHAs) have discretion to increase their payment standards 
to 110 percent of published FMRs. Because the variation in rents 
between the 40th and 60th percentiles is so small, a 10 percent 
increase in a rent set at the 40th percentile produces a rent standard 
that is, on average, equal to the 55th percentile of rents paid by 
recent movers (i.e., 55 percent of all recent mover rents are below 
this rent level).

Data Sources

    HUD has used the most accurate and current data available to 
develop the FMR estimates. The sources of survey data used for the 
base-year estimates are:
    (1) The 2000 Census, which provides statistically reliable rent 
data for all FMR areas,
    (2) Random Digit Dialing (RDD) telephone surveys of individual FMR 
areas, which are based on a sampling procedure that uses computers to 
select statistically random samples of rental housing, and
    (3) American Housing Surveys (AHS) of the largest metropolitan 
areas and have statistical accuracy comparable to the decennial Census.
    The base-year FMRs are updated using trending factors based on 
Consumer Price Index (CPI) data for rents and utilities or on HUD 
regional rent-change factors developed from regional RDD surveys. There 
are 76 metropolitan areas that are covered by metropolitan CPI surveys. 
For all other areas, RDD regional rent-change factors are developed 
annually for the metropolitan and nonmetropolitan parts of each of the 
10 HUD regions. The RDD factors are used to update the base-year 
estimates for all FMR areas that are not covered by a metropolitan CPI 
survey.
    The decennial Census provides statistically reliable rent data for 
use in establishing base-year FMRs. The RDD telephone survey technique 
is based on a sampling procedure that uses computers to select 
statistically random samples of telephone numbers that are then 
contacted to seek information on rental housing. RDD surveys are 
conducted for two purposes: (1) For developing FMR estimates for 
selected individual FMR areas, and (2) for developing HUD regional 
gross rent-change factors. The HUD Regional surveys are conducted 
annually. Contingent on funding, HUD conducts 60 to 80 individual FMR 
area surveys each year. In late 2005, Census American Community Survey 
(ACS) data will begin to become available that will provide highly 
reliable annual rent estimates for most metropolitan areas, and 
eliminate the need for HUD regional RDD surveys as well as most local 
RDD surveys. The ACS will collect the same type of rent data as the 
decennial Census. ACS data will be used to replace HUD regional RDD 
surveys in FY 2006 FMRs, and area-specific ACS FMR estimates will also 
become available for use. The AHS is used to develop between Census 
revisions for the largest metropolitan areas on a four-year cycle. 
Those surveys used in the FY2005 FMRs were conducted in 2002.

Areas With FMRs Based on 2000 Census Data

    For areas where the base-year estimates were developed from the 
2000 Census, the 40th and, where appropriate, 50th percentile gross 
rent of standard-quality units occupied by recent movers was calculated 
separately for each number of bedrooms. The rent distributions were 
modified to eliminate public housing units, so that only market-rent 
units are considered. FMRs are calculated for all metropolitan areas or 
divisions, and all nonmetropolitan counties or micropolitan areas.
    The rents for three-bedrooms units continue to reflect HUD's policy 
to set higher rents for three-bedroom and larger units than would 
result from using normal market rents. This adjustment was intended to 
increase the likelihood that the largest families, who have the most 
difficulty leasing units, will be successful in finding eligible 
program units. The adjustment added 8.7 percent to the three-bedroom 
FMRs

[[Page 48043]]

and corresponding increases for four-bedroom and larger units.
    The FMR for unit sizes larger than four bedrooms were calculated by 
adding 15 percent to the four-bedroom FMR for each extra bedroom. For 
example, the FMR for a five-bedroom unit is 1.15 times the four-bedroom 
FMR, and the FMR for a six-bedroom unit is 1.30 times the four-bedroom 
FMR. FMRs for single-room occupancy units are 0.75 times the zero-
bedroom (efficiency) FMR.
    A further adjustment was made for areas with local bedroom-size 
intervals above or below what are considered to be reasonable ranges. 
Experience has shown that highly unusual bedroom ratios typically 
reflect inadequate sample sizes or peculiar local circumstances that 
HUD would not want to recognize in setting FMRs (e.g., luxury 
efficiency apartments in New York City). Bedroom interval ranges were 
established based on an analysis of the range of such intervals for all 
metropolitan areas. The final ranges used were: efficiency units must 
be between .66 and .84 of the two-bedroom FMR, one-bedroom units must 
be between .78 and .89 of the two-bedroom unit, three-bedroom units 
must be between 1.21 and 1.42 of the two-bedroom unit and four-bedroom 
units must be between 1.23 and 1.66 of the two-bedroom unit. Rents were 
then adjusted if they were non-sequential (e.g., efficiency rents were 
not allowed to be higher than one-bedroom rents).
    State minimum FMRs will no longer be used. Instead, for low-
population nonmetropolitan counties with small Census recent-mover rent 
samples, Census-defined county group data were used as the basis for 
determining rents for each bedroom size. (Census county groups consist 
of an aggregation of counties with similar social and economic 
characteristics.) This adjustment was made to protect against 
unrealistically high or low FMRs due to insufficient sample sizes. The 
areas covered by this new estimation method have less than 33 two-
bedroom Census sample observations.
    After base 2000 Census estimates were established for each FMR area 
and bedroom size, they were updated from the estimated Census date of 
April 1, 2000, to April 1, 2005, the midpoint of FY2005, the year in 
which these FMRs will be in effect. Update factors were based either on 
the area-specific CPI survey data that were available for the largest 
metropolitan areas or on HUD regional RDD survey data.
    For areas with local CPI surveys, CPI annual data on rents and 
utilities were used to update the Census rent estimates. Three-quarters 
of the 2000 CPI change factor was used to bring the FMR estimates 
forward from April to December of 2000, followed by the annual CPI data 
for 2001, 2002, and 2003. An annual trending factor of three percent, 
based on the average annual increase in the median gross rent as 
measured in the 1990 and 2000 Census, was used to update estimates from 
the last date for which CPI data were available until the midpoint of 
the fiscal year in which the estimates were used. Trending to cover the 
period from January 1, 2004, to April 1, 2005, was needed. The 15-month 
trending factor was 3.75 percent (3 percent times 15/12).
    For areas without local CPI surveys, the same process was used 
except that regional RDD survey data were substituted for CPI data. 
Regional RDD surveys were done for 20 areas--the metropolitan and 
nonmetropolitan part of each of the 10 HUD regions. Areas covered by 
CPI metropolitan surveys were excluded from the RDD metropolitan 
regional surveys.
    The use of the 2000 Census rent data and the change in OMB area 
definitions resulted in significant revisions for a large number of FMR 
areas this year. The availability of more detailed local information on 
public housing, which is excluded from FMR estimates, also affected 
these estimates. Because of extensive metropolitan geographical 
definitional changes, FMRs for many old and new areas cannot be 
directly compared. Counties offer the best unit of comparison, but 
don't work well in New England. Approximately 22 percent of all 
counties have proposed FY2005 FMRs that are less than their final 
FY2004 FMRs, and 36 percent of counties had increases of more than 10 
percent over the FY2004 FMRs as a result of rebenchmarking. A 
disproportionate number of areas with increases are small 
nonmetropolitan counties.
    A number of RDDs will be conducted in the summer of 2004 for 
metropolitan areas with unusual changes to ensure that their FY2005 
FMRs are accurate. Areas where completed surveys show that an increase 
over proposed FMR levels is warranted will be given higher FMRs in the 
final FMR publication.

Areas With FMRs Based on Local RDD Survey Data

    HUD uses RDD telephone surveys to obtain statistically reliable FMR 
estimates for selected areas. The RDD technique involves use of large, 
randomly selected samples to obtain data on current rents paid for one- 
and two-bedroom rental units occupied by recent movers. Both one- and 
two-bedroom units are used because there usually are consistent 
relationships between one- and two-bedroom rents in local housing 
markets, and use of data on one-bedroom rents can be used to improve 
the accuracy of two-bedroom FMR estimates. One-bedroom survey rents are 
converted into two-bedroom equivalent rents using the average Census 
differential between one- and two-bedroom rents.
    RDD surveys exclude public housing units, newly built units and 
non-cash rental units. They do not exclude substandard units because 
there is no practical way to determine housing quality from telephone 
interviews. Such surveys, however, also exclude units without a 
telephone, and past analysis has shown that the slightly downward rent 
estimate bias caused by including some substandard units is almost 
exactly offset by the slightly upward bias that results from only 
surveying units with telephones. This relationship held true across a 
variety of areas.
    RDD surveys that meet HUD criteria have a high degree of 
statistical accuracy. There is a 95 percent likelihood that the 40th or 
50th percentile recent mover contract rent estimates developed using 
this approach are within three to four percent of the actual 40th or 
50th percentile. Virtually all of the estimates will be within five 
percent of the actual 40th or 50th percentile value.
    A number of RDD surveys were conducted after the 2000 Census. 
Approximately one-half of these could not be used because of large 
changes in the OMB-defined geographic area. Of the areas which did not 
change or changed very little under the new OMB definitions, RDD survey 
results are used to replace FMR estimates rebenchmarked using the 2000 
Census only when the Census-based estimate is outside the 95 percent 
confidence interval of the RDD survey estimate (i.e., there is only a 
five percent likelihood that the Census-based estimate is correct). For 
areas where the RDD survey results are determined to have a 
statistically significant difference, RDD surveys are used to provide a 
rebenchmarked FMR instead of the Census. These estimates are updated in 
essentially the same manner as Census estimates.
    The proposed FMRs include RDD surveys completed in 2001 and 2002. 
Survey results for surveys conducted in 2000 produced contract rent 
estimates very similar to the Census estimates, so they are not used. 
The survey estimate confidence intervals are partly dependent on the 
FMR standard

[[Page 48044]]

selected. The RDD surveys used in place of Census data for Schedule 
B(1) were for the following areas:
    2001 Surveys: Muncie, IN; New Orleans, LA; Orlando, FL; Riverside, 
CA; San Jose, CA; Payne County, OK; Jackson County, NC; McDowell 
County, NC; and Polk County, NC.
    2002 Surveys: Baltimore, MD; Jacksonville, FL; Pittsburgh, PA; 
Norfolk, VA; St. Louis, MO; and Salinas, CA.
    The RDD surveys used in place of Census-based estimates for 
Schedule B(2) were for the following areas:
    2001 Surveys: Buffalo, NY; Minneapolis, MN; and San Jose, CA.
    2002 Surveys: Norfolk, VA and St. Louis, MO.

Areas With FMRs Based on AHS Data

    HUD used AHS data to calculate rents from the distributions of two-
bedroom units occupied by recent movers. Public housing units, newly 
constructed units, and units that fail a housing quality test are 
excluded from the rental housing distributions before the FMRs are 
calculated.
    Thirteen areas were covered by AHS surveys conducted in 2002. Two 
of these surveys could not be used because of differences in AHS and 
new OMB metropolitan area definitions. Another two surveys did not have 
enough recent mover cases to provide reliable estimates. More current 
AHS results were used to replace FMR estimates based on Census or RDD 
survey data if the Census- or RDD-based estimate was outside the 95 
percent confidence interval of the AHS estimate. The AHS results 
produced statistically different FMR estimates and were used to 
rebenchmark FMRs for the following areas in Schedule B(1): Dallas, TX; 
Phoenix, AZ; Portland, OR; and Santa Ana, CA.
    Dallas and Phoenix are 50th percentile FMR areas and the AHS rent 
was also used to rebenchmark the FMR for these two areas at the 40th 
percentile rent shown in Schedule B(2).

Manufactured Home Space Rents

    Manufactured home space rents are set at 40 percent of the two-
bedroom rent. Exceptions to this rent are granted when justified by 
survey data. All approved exceptions to these rents that were in effect 
in FY2004 were updated to 2005 using the relevant update factor. If the 
result of this computation was higher than 40 percent of the 
rebenchmarked two-bedroom rent, the exception remains and is listed in 
Schedule D.

VI. Request for Comments

    HUD seeks public comments on FMR levels for specific areas. 
Comments on FMR levels must include sufficient information (including 
local data and a full description of the rental housing survey 
methodology used) to justify any proposed changes. Changes may be 
proposed in all or any one or more of the unit-size categories on the 
schedule. Recommendations and supporting data must reflect the rent 
levels that exist within the entire FMR area.
    For the supporting data, HUD recommends the use of professionally 
conducted RDD telephone surveys to test the accuracy of FMRs for areas 
where there is a sufficient number of Section 8 units to justify the 
survey cost of approximately $20,000 to $30,000. Areas with 500 or more 
program units usually meet this cost criterion, and areas with fewer 
units may meet it if actual rents for two-bedroom units are 
significantly different from the FMRs proposed by HUD. In addition, HUD 
has developed a version of the RDD survey methodology for smaller, 
nonmetropolitan PHAs. This methodology is designed to be simple enough 
to be done by the PHA itself, rather than by professional survey 
organizations, at a cost of $5,000 or less.
    PHAs in nonmetropolitan areas may, in certain circumstances, 
conduct surveys of groups of counties. HUD must approve all county-
grouped surveys in advance. PHAs are cautioned that the resulting FMRs 
will not be identical for the counties surveyed; each individual FMR 
area will have a separate FMR based on the relationship of rents in 
that area to the combined rents in the cluster of FMR areas. In 
addition, PHAs are advised that counties whose FMRs are based on the 
combined rents in the cluster of FMR areas will not have their FMRs 
revised unless the grouped survey results show a revised FMR above the 
combined rent level.
    PHAs that plan to use the RDD survey technique should obtain a copy 
of the appropriate survey guide. Larger PHAs should request HUD's 
survey guide entitled ``Random Digit Dialing Surveys; A Guide to Assist 
Larger Public Housing Agencies in Preparing Fair Market Rent 
Comments.'' Smaller PHAs should obtain the guide entitled ``Rental 
Housing Surveys; A Guide to Assist Smaller Public Housing Agencies in 
Preparing Fair Market Rent Comments.'' These guides are available from 
HUD USER on (800) 245-2691, or from HUD's Web site, in Microsoft Word 
or Adobe Acrobat format, at the following address: http://www.huduser.org/datasets/fmr.html.
    Other survey methodologies are acceptable in providing data to 
support comments, if the survey methodology can provide statistically 
reliable, unbiased estimates of the gross rent. Survey samples should 
preferably be randomly drawn from a complete list of rental units for 
the FMR area. If this is not feasible, the selected sample must be 
drawn to be statistically representative of the entire rental housing 
stock of the FMR area. Surveys must include units at all rent levels 
and be representative by structure type (including single-family, 
duplex, and other small rental properties), age of housing unit, and 
geographic location. The decennial Census should be used as a means of 
verifying if a sample is representative of the FMR area's rental 
housing stock.
    Most surveys cover only one- and two-bedroom units, which has 
statistical advantages. If the survey is statistically acceptable, HUD 
will estimate FMRs for other bedroom sizes using ratios based on the 
decennial Census. A PHA or contractor that cannot obtain the 
recommended number of sample responses after reasonable efforts should 
consult with HUD before abandoning its survey; in such situations HUD 
is prepared to relax normal sample size requirements.
    HUD will consider increasing manufactured home space FMRs where 
public comment demonstrates that 40 percent of the two-bedroom FMR is 
not adequate. In order to be accepted as a basis for revising the 
manufactured home space FMRs, comments must include a pad rental survey 
of the mobile home parks in the area, identify the utilities included 
in each park's rental fee, and provide a copy of the applicable public 
housing authority's utility schedule.
    Accordingly, the Fair Market Rent Schedules, which will not be 
codified in 24 CFR part 888, are proposed to be amended as shown in the 
Appendix to this notice:

    Dated: July 30, 2004.
Alphonso Jackson,
Secretary.

Fair Market Rents for the Housing Choice Voucher Program

Schedules B and D--General Explanatory Notes

1. Geographic Coverage
    a. Metropolitan Area FMRs--FMRs are market-wide rent estimates that 
are intended to provide housing opportunities throughout the geographic

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area in which rental-housing units are in direct competition.
    b. Nonmetropolitan Area FMRs--FMRs also are established for 
nonmetropolitan counties and for county equivalents in the United 
States, and for FMR areas in Puerto Rico, the Virgin Islands, and the 
Pacific Islands.
    c. Virginia Independent Cities--FMRs for the areas in Virginia 
shown in the table below were established by combining the Census data 
for the nonmetropolitan counties with the data for the independent 
cities that are located within the county borders. Because of space 
limitations, the FMR listing in Schedule B(1) includes only the name of 
the nonmetropolitan county. The full definitions of these areas, 
including the independent cities, are as follows:

Virginia Nonmetropolitan County FMR Area and Independent Cities Included
                               With County
------------------------------------------------------------------------
                  County                               Cities
------------------------------------------------------------------------
Allegheny.................................  Clifton Forge and Covington.
Carroll...................................  Galax.
Greensville...............................  Emporia
Rockbridge................................  Buena Vista and Lexington.
Southhampton..............................  Franklin
Wise......................................  Norton
------------------------------------------------------------------------

2. Bedroom Size Adjustments
    Schedule B(1) shows the FMRs for zero-bedroom through four-bedroom 
units. The FMRs for unit sizes larger than four bedrooms are calculated 
by adding 15 percent to the four-bedroom FMR for each extra bedroom. 
For example, the FMR for a five-bedroom unit is 1.15 times the four-
bedroom FMR, and the FMR for a six-bedroom unit is 1.30 times the four-
bedroom FMR. FMRs for single-room occupancy units are 0.75 times the 
zero-bedroom FMR.
3. Arrangement of FMR Areas and Identification of Constituent Parts
    a. The FMR areas in Schedule B(1) are listed alphabetically by 
metropolitan FMR area and by nonmetropolitan county within each State. 
The exception rent FMRs for manufactured home spaces in Schedule D are 
listed alphabetically by State.
    b. Two nonmetropolitan counties are listed alphabetically on each 
line of the nonmetropolitan county listings.
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[FR Doc. 04-17884 Filed 8-3-04; 11:10 am]
BILLING CODE 4210-62-C