[Federal Register Volume 69, Number 190 (Friday, October 1, 2004)]
[Notices]
[Pages 59004-59070]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-21892]



[[Page 59003]]

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Part II





Department of Housing and Urban Development





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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. 190 / Friday, October 1, 2004 / 
Notices  

[[Page 59004]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4937-N-02]


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 final 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 FMRs periodically, but not 
less than annually, adjusted to be effective on October 1 of each year. 
FMRs are 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. Today's notice provides for all 
areas final FY2005 FMRs that reflect the estimated 40th and 50th 
percentile rent levels trended to April 1, 2005.
    Proposed FY2005 FMRs were published in the Federal Register on 
August 6, 2004. The proposed FMRs were calculated for the first time 
using 2000 Census data and new Office of Management and Budget (OMB) 
metropolitan area definitions. Both changes in how FMRs were calculated 
had significant impacts. A number of public comments from public 
housing agencies (PHAs) and major interest groups raised concerns about 
the magnitude of FMR changes experienced by many areas. HUD is required 
by law to utilize the most recent available data in calculating FMRs, 
and all federal agencies are instructed to use current OMB metropolitan 
area definitions unless there are strong program reasons to use 
alternative definitions. As a result of public comments and further 
consideration of the proposed FMRs, HUD determined that there was 
sufficient reason to not use the new OMB metropolitan area definitions 
in calculating the final FY2005 FMRs. The final FY2005 FMRs provided in 
this publication are therefore based on the most recent available data 
but use the same FMR area definitions used in the FY2004 FMR 
publication, which were based on old OMB metropolitan area definitions.

EFFECTIVE DATE: The FMRs published in this notice are effective on 
October 1, 2004.

FOR FURTHER INFORMATION CONTACT: 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 HUD's Web site, http://www.huduser.org/datasets/fmr.html. Any questions related to use of FMRs or voucher 
payment standards should be directed to HUD's local program staff for 
the area in question. Questions on how to conduct FMR surveys or 
further methodological inquiries may be addressed to Marie L. Lihn or 
Lynn A. Rodgers, Economic and Market Analysis Division, Office of 
Economic Affairs, Office of Policy Development and Research, telephone 
202-708-0590. Persons with hearing or speech impairments may access 
this number through TTY by calling the toll-free Federal Information 
Relay Service at 800-877-8339. (Other than the HUD USER information 
line 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 to 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. In addition, all rents 
subsidized under the Housing Choice Voucher program must meet 
reasonable rent standards. 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 website, http://www.gpoaccess.gov/fr/index.html

II. Procedures for the Development of FMRs

    Section 8(c) of the USHA requires the Secretary of HUD to publish 
FMRs periodically, but not less frequently than annually. Section 8(c) 
states in part as follows:
    Proposed fair market rentals for an area shall be published in the 
Federal Register with reasonable time for public comment and shall 
become effective upon the date of publication in final form in the 
Federal Register. Each fair market rental in effect under this 
subsection shall be adjusted to be effective on October 1 of each year 
to reflect changes, based on the most recent available data trended so 
the rentals will be current for the year to which they apply, of rents 
for existing or newly constructed rental dwelling units, as the case 
may be, of various sizes and types in this section.
    The Department's regulations at 24 CFR part 888 provide that HUD 
will develop proposed FMRs, publish them for public comment, provide a 
public comment period of at least 30 days, analyze the comments, and 
publish final FMRs. (See 24 CFR 888.115.) Final FY2005 FMRs are 
published on or before October 1, 2004, as required by section 8(c)(1) 
of the USHA.

III. Proposed FY2005 FMRs

    On August 6, 2004 (69 FR 48040), HUD published proposed FY2005 
FMRs. As noted in the preamble to the proposed FMRs, the FMRs for 
FY2005 were based on two significant changes to the statistical 
methodology used to compute FMRs.
    The first change was the introduction of 2000 Census data as a 
benchmark for FMRs. The 2004 FMRs were based on updated 1990 Census 
data except in areas where Random Digit Dialing (RDD) surveys or 
American Housing Surveys (AHS) had been conducted. Census 2000 data 
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 second change was the use of new metropolitan area definitions 
issued by OMB to define FMR areas. As part of the 2000 Census process, 
OMB released new metropolitan area

[[Page 59005]]

definitions on June 7, 2003, and updated them on February 18, 2004. 
These new metropolitan area definitions contain substantial changes 
from the old metropolitan area definitions because they incorporate the 
2000 Census data and a substantially revised standard for defining 
metropolitan areas.
    In response to the August 6, 2004, proposed FMRs, HUD received 370 
public comments. The majority of the commenters were opposed to the 
proposed FMRs and cited various reasons. The primary reason given was 
that the proposed FY2005 FMRs were significantly different from the 
FY2004 FMRs and additional time was needed to examine the proposed 
FMRs. Many commenters asked HUD to delay issuing FY2005 FMRs.
    As noted in Section II of this preamble, HUD is required to issue 
FMRs to be effective October 1, and the FMRs to be issued by HUD must 
be based on the most recent available data trended to the mid-point of 
the year in which they will be used. While HUD cannot delay issuance of 
the FY2005 FMRs, HUD has made changes to the proposed FY2005 FMRs 
announced in this notice in response to the public comments. (The 
public comments are discussed in more detail in Section V of this 
preamble.)

IV. Final FY2005 FMRs and FY2005 FMR Procedures

    In setting the final FY2005 FMRs, HUD took into consideration a 
large number of comments objecting to the magnitude of changes caused 
by use of new OMB metropolitan area definitions and the inadequate time 
given to evaluate and respond to the proposed changes. While HUD is 
required by statute to use the most recent available data in setting 
FMRs, and by regulation to use current OMB metropolitan area 
definitions, HUD's regulations allow HUD to make exceptions to the use 
of the most current OMB metropolitan area definitions. Therefore, HUD 
is not obligated to use the new OMB metropolitan area definitions, and 
has determined to use the old OMB metropolitan area definitions, that 
is, the 2004 FMR area definitions, in calculating the final FY2005 
FMRs. Use of the 2004 FMR area definitions generally produce fewer and 
smaller differences between the FY2004 FMRs and the FY2005 FMRs set 
forth in this notice for two reasons. The first is that the geographic 
area over which the 40th (or 50th) percentile rent is determined is 
unchanged, eliminating FMR differences resulting from changes in 
geography. The second reason is that some areas retained post-2000 
Census RDD survey-based increases by reverting to the old definitions, 
whereas these increases could not be applied to the proposed FY2005 
FMRs because the new areas differed too much from the old areas. 
Therefore, the FY2005 FMR schedules contained in this notice are based 
on 2000 Census and, when available, more current data, but were 
calculated for the same geographic areas used in preparing the FY2004 
FMRs. Schedule B(1) lists Fair Market Rents for each area by state. 
FMRs that are at the 50th percentile, or median rent, are denoted by an 
asterisk. For informational purposes, Schedule B(2) shows what the 40th 
percentile FMRs would have been for the 39 areas where the FMR is set 
at the 50th percentile.

A. 2000 Census-Based FMRs

    For areas where the base-year estimates were developed from the 
2000 Census, the 40th and, where appropriate, 50th percentile gross 
rents for standard-quality units occupied by recent movers were 
calculated for differing numbers of bedrooms. The rent distributions 
were modified to eliminate public housing and other units with 
similarly low rents, so that only market-rent units would be 
considered. FMRs are calculated for all metropolitan areas and non-
metropolitan counties.
    FMR estimates are calculated for two-bedroom units, which are the 
most common rental units. Rent relationships between two-bedroom and 
other unit sizes are then calculated using local unit size rent 
relationships to the extent statistically feasible. For the past 
several years, bedroom ratios have been based on 1990 Census data. The 
FY2005 FMRs are the first to make use of 2000 Census data to more 
closely reflect market rent differentials between units with differing 
numbers of bedrooms. The rents for three-bedroom and larger units 
continue to reflect HUD's policy to set higher rents for these units 
than would result from using normal market rents. This adjustment is 
intended to increase the likelihood that the largest families, who have 
the most difficulty in leasing units, will be successful in finding 
eligible program units. The adjustment adds 8.7 percent to the 
unadjusted three-bedroom FMR estimates and adds 7.7 percent to the 
unadjusted four-bedroom FMR estimates. 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. The FMRs for single-
room occupancy units are 0.75 times the zero-bedroom (efficiency) FMR.
    A further adjustment is made for areas with local bedroom-size 
intervals above or below what are considered to be reasonable ranges or 
where sample sizes are inadequate to accurately measure bedroom rent 
differentials. Experience has shown that highly unusual bedroom ratios 
typically reflect inadequate sample sizes or peculiar local 
circumstances that HUD would not want to utilize in setting FMRs (e.g., 
luxury efficiency apartments in New York City that rent for more than 
typical one-bedroom units). Bedroom interval ranges were established 
based on an analysis of the range of such intervals for all areas with 
large enough samples to permit accurate bedroom ratio determinations. 
The final ranges used were as follows: efficiency units are constrained 
to fall between 0.65 and 0.83 of the two-bedroom FMR, one-bedroom units 
must be between 0.76 and 0.90 of the two-bedroom unit, three-bedroom 
units must be between 1.10 and 1.34 of the two-bedroom unit and four-
bedroom units must be between 1.14 and 1.63 of the two-bedroom unit. 
Bedroom rents for a given FMR area were then adjusted if the 
differentials between bedroom-size FMRs were inconsistent with normally 
observed patterns (e.g., efficiency rents were not allowed to be higher 
than one-bedroom rents and four bedroom rents were set at a minimum of 
three percent higher than three-bedroom rents).
    For low-population, non-metropolitan counties with small Census 
recent-mover rent samples, Census-defined county group data were used 
in determining rents for each bedroom size. This adjustment was made to 
protect against unrealistically high or low FMRs resulting from 
insufficient sample sizes. The areas covered by this new estimation 
method have fewer 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). Update 
factors for the 2000 through end of 2003 period were based either on 
the area-specific Consumer Price Index (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

[[Page 59006]]

December of 2000. Annual CPI survey data could then be used for 
calendar years 2001, 2002, and 2003. Trending to cover the period from 
January 1, 2004, to April 1, 2005, was then needed. An annual trending 
factor of three percent, based on the average annual increase in the 
median Census gross rent between 1990 and 2000, was used to update 
estimates from the end of 2003 (i.e., the last date for which CPI data 
were available) until the midpoint of the fiscal year in which the 
estimates were used. 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.

B. FMRs Based on Post-2000 Census Surveys

    There are a number of areas where AHS and RDD telephone surveys of 
rents have been conducted since the 2000 Census. Both the AHS and RDD 
surveys have been proven to provide statistically reliable results 
within the limits of their stated confidence intervals.
    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. 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. These 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 survey estimates of contract rent will 
be within five percent of the actual 40th or 50th percentile value.
    A number of RDD surveys were conducted after the 2000 Census. The 
results of RDD surveys conducted in 2001 and 2002 were used in the 
FY2004 FMRs and were evaluated for use in the final FY2005 FMRs. RDD 
surveys are used to provide a rebenchmarked FMR in lieu of updating the 
previous year's FMR when there is a statistically significant 
difference. RDD estimates are updated using the same types of data used 
to update Census estimates.
    RDDs covering 24 areas were conducted in August 2004 and completed 
in time for use in this publication. The first column of the following 
table identifies the RDD survey area. The second column shows the final 
FY2005 FMRs that would have been published based on updated Census and 
2001-2002 AHS and RDD surveys. The third column shows the August 2004 
RDD results, trended to the middle of FY2005. The fourth column shows 
whether or not the RDD results were statistically different enough to 
justify replacing the Census or other survey estimates with the RDD 
results. The survey results were as follows:

----------------------------------------------------------------------------------------------------------------
                                               FY2005 FMR     FY2005 FMR  with
              Area definition                  without RDD           RDD                   RDD result
----------------------------------------------------------------------------------------------------------------
Baltimore, MD.............................               915               847  Decrease.
Boston, MA................................              1442              1266  Decrease.
Chicago, IL...............................               979               906  Decrease.
Cleveland-Lorain-Elyria, OH...............               703               703  No Change.
Detroit, MI...............................               848               805  Decrease.
Dutchess County, NY.......................               901               942  Increase.
Fort Worth-Arlington, TX..................               799               732  Decrease.
Indianapolis, IN..........................               655               655  No Change.
Kansas City, MO-KS........................               741               691  Decrease.
Los Angeles-Long Beach, CA................              1011              1124  Increase.
Nassau-Suffolk, NY........................              1225              1225  No Change.
Newburgh, NY-PA...........................               913               954  Increase.
Oakland, CA...............................              1342              1342  No Change.
Orange County, CA.........................              1403              1317  Decrease.
Portland-Vancouver, OR-WA.................               717               717  No Change.
Providence-Fall River-Warwick, RI-MA......               663               845  Increase.
Sacramento, CA............................               971               971  No Change.
San Antonio, TX...........................               716               716  No Change.
San Francisco, CA.........................              1792              1539  Decrease.
San Jose, CA..............................              1748              1313  Decrease.
Seattle-Bellevue-Everett, WA..............               943               834  Decrease.
Ventura, CA...............................              1257              1382  Increase.
Washington, DC-VA-MD-WV...................              1250              1187  Decrease.
Westchester County, NY....................              1174              1259  Increase.
----------------------------------------------------------------------------------------------------------------

    HUD is directed by statute to use the most recent available data in 
its FMR publications. The RDD survey results are being implemented in 
the final FY2005 FMR publication consistent with that requirement.
    HUD uses 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 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

[[Page 59007]]

FMR estimates and were used to rebenchmark FMRs for the following areas 
in Schedule B(1):
    Orange County, CA, Portland-Vancouver, OR-WA, and Riverside-San 
Bernardino, CA. As noted in the proposed FY2005 publication, the AHS 
reduced the Portland FMR. The subsequent 2004 RDD survey confirmed this 
result. Orange County and Riverside-San Bernardino had increases as a 
result of the AHS. All three of these areas are 50th percentile FMR 
areas.

C. Impacts of New Data on Final FY2005 FMRs

    The use of the 2000 Census rent data corrects for estimation errors 
that have accumulated during the past decade, and results in a larger 
than usual number of FMR revisions this year. The availability of more 
detailed local information on public housing, which is excluded from 
FMR estimates, also improved these estimates. Post-2000 AHS and RDD 
surveys provide more current estimates of market rents than those 
available from the Census, and serve to document the need for FMR 
changes in areas where recent mover rents do not follow regional or CPI 
rent trends. New AHS and RDD survey results were incorporated into this 
publication. The following table shows the distribution of impacts 
resulting from use of the 2000 Census and the AHS and RDD surveys used 
in this publication:

------------------------------------------------------------------------
                                                 Percent of   Number of
     Final FY2005 FMRs as % of FY2004 FMRs        vouchers    FMR areas
------------------------------------------------------------------------
Less than 80% of FY04 FMR.....................          1.1           14
80-89.9% of FY04 FMR..........................          4.0          109
90-99.9% of FY04 FMR..........................         34.0          403
100-110% of FY04 FMR..........................         45.9        1,053
110.1-120% of FY04 FMR........................         12.1          734
More than 120% of FY04 FMR....................          2.9          345
------------------------------------------------------------------------

    There are an additional 22 areas in the country where HUD has begun 
RDD surveys that could not be completed in time for this publication. 
Additionally, seven areas will be surveyed beginning in October 2004. 
Because the FY2005 FMRs for these areas will not have the benefit of a 
completed RDD survey by the date of submission of this document for 
publication in the Federal Register, and thus not have the benefit of 
the most recent rental data, HUD is allowing PHAs in those areas to 
wait, if they so choose, for completion of the RDD surveys and issuance 
of a notice that contains revised final FY2005 FMRs that reflect the 
completed RDD surveys. The notice of revised final FY2005 FMRs for 
these areas will reflect the RDD survey data and, at that point, 
housing authorities must use these published FMRs. Areas where HUD is 
currently conducting RDD surveys are:

----------------------------------------------------------------------------------------------------------------
                         August and September 2004
         State                 survey starts                 Area                October 2004 Survey Starts
----------------------------------------------------------------------------------------------------------------
NY....................  Albany-Schenectady-Troy,    PR....................  Aguadilla, PR.
                         NY.
NM....................  Albuquerque, NM...........  PR....................  Arecibo, PR.
GA....................  Atlanta, GA...............  PR....................  Caguas, PR.
NJ....................  Bergen-Passaic, NJ........  PR....................  Mayaguez, PR.
OH....................  Cincinnati, OH-KY-IN......  PR....................  Ponce, PR.
OH....................  Columbus, OH..............  PR....................  San Juan-Bayamon, PR.
OH....................  Dayton-Springfield, OH....  PR....................  Nonmetropolitan areas.
CO....................  Denver, CO................
CT....................  Hartford, CT..............
HI....................  Honolulu, HI..............
TX....................  Houston, TX...............
HI....................  Kauai and Maui, HI........
KY....................  Louisville, KY-IN.........
TX....................  McAllen-Edinburg-Mission,
                         TX.
TN....................  Nashville, TN.............
NJ....................  Newark, NJ................
NY....................  New York, NY..............
NE....................  Omaha, NE-IA..............
PA....................  Philadelphia, PA-NJ.......
MA....................  Springfield, MA...........
OK....................  Tulsa, OK.................
AZ....................  Tucson, AZ................
----------------------------------------------------------------------------------------------------------------

D. Regulatory Procedures for Exceptions to Established FMRs

    For housing authorities in areas that are not undergoing RDD 
surveys but continue to have concerns with the FY2005 FMRs announced in 
this notice, HUD's regulations in 24 CFR 888.113 provide the procedures 
by which HUD may make exceptions to established FMRs.

E. 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.

F. FMRs for Federal Disaster Areas

    Under the authority granted in 24 CFR part 888, the Secretary of 
HUD finds good cause to waive and hereby waives the regulatory 
requirements that govern requests for geographic area exception FMRs 
for areas that are declared disaster areas by the Federal Emergency 
Management Agency (FEMA). HUD is prepared (1) to grant disaster-related 
FMR exceptions up to 10 percent above the applicable FMRs for those 
areas. HUD field offices are authorized to approve such exceptions for 
single-county FMR areas and for individual county parts of multi-county 
FMR areas that qualify as disaster areas under the Robert T. Stafford 
Disaster Relief and Emergency Assistance Act, if (2) the PHA certifies 
that damage to the rental housing stock as a result of the disaster is 
so substantial that it has increased the prevailing rent levels in the 
affected

[[Page 59008]]

area. Such exception FMRs must be requested in writing by the 
responsible PHAs. Exception FMRs approved by HUD during FY2005 will 
remain in effect until superseded by the publication of the final 
FY2007 FMRs, and replace lower, published FMR values.

V. Public Comments

    In addition to the changes made in this notice for final FY2005 
FMRs, HUD is continuing to accept public comments on FY2005 FMRs 
through November 5, 2004. HUD will consider these comments in 
determining revisions that may be needed to the FY2005 FMRs. Any such 
revisions will be announced in a subsequent FY2005 Federal Register 
notice.
    In response to the August 6, 2004 proposed FMRs, HUD received 370 
public comments covering 75 FMR areas during the initial comment period 
ending September 7, 2004. The majority of these comments concerned 
changes in the metropolitan area definitions that resulted in higher or 
lower FMRs. The New England region, where there was a proposed change 
away from the city-town designations previously used to define 
metropolitan areas to new OMB county-based metropolitan definitions, 
provided 148 comments. Many of the New England comments noted that the 
change in the geographic definitions was significant and had the impact 
of reducing FMRs in most metropolitan areas in New England. Some county 
parts shifted from one metropolitan area to another (e.g., part of 
Brockton to Providence, part of Boston to Providence), and some non-
metropolitan areas were added to metropolitan areas with substantial 
increases for the non-metropolitan area (Chelmsford to Cambridge) and 
significant decreases for the metro area. Some metropolitan areas were 
combined (Bridgeport and Stamford-Norwalk) with increases for one area 
and decreases for the other area. The change in geography prevented the 
use of some 2001 and 2002 HUD RDD surveys in the proposed FY2005 FMR 
publication, because the metropolitan area coverage for these areas had 
changed so much under the new OMB area definitions that it was not 
considered valid to apply survey results based on different area 
definitions. Returning to use of the old metropolitan area definitions 
has the effect of re-instating RDD-based increases for the following 
areas (that are either a Metropolitan Statistical Area (MSAs) or a 
Primary Metropolitan Statistical Areas (PMSA):

Boston, MA-NH MSA
Portland, ME MSA
Brockton, MA PMSA
Lawrence, MA-NH PMSA
Lowell, MA-NH PMSA
Worcester, MA-CT MSA

    Though not all comments from the New England region discussed the 
new geography, most stated that the proposed reductions were 
inconsistent with recent rental market history. In general, however, 
Census and more current surveys correct for what can be several years 
of accumulated estimation errors, and should not be thought of as 
solely relating to the change in rents that occurred between FY 2004 
and FY2005. Many national housing and legal aid organizations also 
provided comments opposing the use of the new county-based metropolitan 
designations for New England and other areas and cited fair housing 
concerns.
    Comments for other parts of the country also expressed concerns 
about geographic definitional changes that resulted in significant 
increases and decreases in FMRs that could adversely affect local 
programs. The new OMB definitions combined the two large metropolitan 
areas of New York City and Bergen-Passaic to create the New York--
Wayne-White Plains, NY-NJ Division. As a result, the rents for Bergen-
Passaic declined significantly, and comments were received about this 
decline. Dutchess and Orange counties in New York, formerly both 
separate metropolitan areas, were combined under the new geographic 
definitions. The proposed FY2005 FMRs for this combined metropolitan 
area significantly lowered rents for Dutchess County. Counties that 
were formerly non-metropolitan were concerned that HUD's current 
voucher renewal policy meant that they would be unable to continue to 
assist all current voucher families if FMRs increased, because voucher 
assistance funding would be set at the previous year's expenditure 
level plus a modest inflation adjustment. This was the primary concern 
from counties added to the metropolitan areas of Clarksville, TN, 
Lafayette, IN, Jonesboro, AR, and Anchorage, AK. In other comments, 
objections were raised by counties that had previously been included in 
metropolitan areas that were removed and designated as micropolitan 
areas with their own, much lower FMRs. This category includes comments 
received from Lincoln County, NC (formerly in Charlotte), Richmond 
County, KY (formerly in Lexington), Genessee County, NY (formerly in 
Rochester, NY), and Webster Parish, LA (formerly in Shreveport). 
Warrenton County, NJ, had a large proposed FMR reduction because it was 
removed from the Newark metropolitan area and placed in the Allentown, 
PA, metropolitan area. Anderson County, SC, had a large FMR reduction 
because it was taken out of the Greenville metropolitan area and made a 
separate metropolitan area with its own, much lower FMR.
    In Puerto Rico, the new OMB definitions, especially for San Juan, 
were considered a cause of the proposed FMR reduction because many 
lower rent metropolitan and non-metropolitan municipios were added to 
this metropolitan area. The main source of these reductions, however, 
was the 2000 Census. RDD surveys of all Puerto Rico FMR areas will be 
conducted starting in October 2004.
    A form letter-writing campaign by landlords in the Lake County-
Kenosha County, IL-WI Division, resulted in 134 comments. Taking Lake 
County out of the Chicago metropolitan area and merging it with Kenosha 
County resulted in a significant decline in the FMR for Lake County and 
a significant increase for Kenosha County.
    Many commenters with no changes in geography expressed concern over 
reductions in their FMRs. This included Cheyenne, WY, Fargo, ND, and 
Knox County, IN, and all areas in Hawaii. In Johnstown, PA, the removal 
of Somerset County was noted as a possible cause of the reduction in 
the proposed FMR, although the primary cause of the reductions proposed 
for both parts of the old metropolitan area was related to the use of 
2000 Census data. The change from the use of state minimums to Census-
defined county groups produced FMR declines in areas such as Sumter 
County, FL, Evangeline Parish, LA, and Harlan and Knox counties in 
Kentucky. Concerns about the large changes in county rents in Texas, 
Georgia, and Oklahoma were noted in general comments by the Texas 
Tenants' Union, the Georgia Department of Community Affairs, and the 
Oklahoma City Housing Authority. Other commenters stated that the 
proposed FMRs resulted in too many significant changes and would hinder 
the application of the program. This included comments from the States 
of Georgia, New York, New Jersey, Massachusetts, Vermont, Rhode Island, 
and Puerto Rico.
    The Louisville Metro Housing Authority commented that significantly 
higher utility costs in the past year warranted higher FMRs. Louisville 
is currently undergoing an RDD survey that was started in September 
2004. The utilities used for the FMR come from the utility schedule of 
the PHA, so the

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higher utility costs will be included in determining the RDD estimate.
    Data of some form were provided to support comments made for 30 FMR 
areas. For the most part, the data consisted of rent reasonableness 
studies, data on local housing market conditions, newspaper ads for 
rental units, voucher rent data, and apartment rent data for projects. 
Only the data submitted with the comments of the Okanogan County 
Housing Authority met the minimum statistical requirement for 
acceptance. Accordingly, the FMRs for the County of Okanagon, WA, will 
be increased from the proposed FMR.
    A group of major industry organizations (e.g., CLPHA, NAHMA, NAHRO, 
NLIHC, and others) jointly submitted a set of comments which argued for 
more time to evaluate the impacts of the new OMB definitions, more time 
to permit RDD surveys (including HUD's) to be completed, and postponing 
implementation of decreases until all RDD results were available and 
sufficient time had been allowed to consider all public comments. They 
also recommended an analysis of the new OMB definitions with the 
objective of minimizing the impact of their implementation (e.g., by 
allowing for submarket areas patterned after old area definitions when 
appropriate). HUD-conducted surveys of all areas with significant 
decreases in large-unit FMRs were proposed by commenters, as was the 
continued use of state minimum FMRs and the same minimum bedroom ratios 
used in the FY2004 FMRs. Concerns about large-unit FMR calculations 
were also expressed. The final FMRs address some but not all of these 
concerns. Use of old OMB definitions is the simplest way of addressing 
the concerns raised in many comments about use of the new definitions, 
and permits the impacts of use of new definitions to be distinguished 
from the impacts of new data. Many of the other requests were at odds 
with the requirement that HUD use the most recent available data in 
setting FMRs. PHAs continue to have the discretion to fund their own 
RDD surveys, but HUD's budget for this purpose has been and will 
continue to be limited.
    HUD is permitting areas where HUD RDD surveys are being conducted 
to wait for issuance of updated final FY2005 FMRs for these areas that 
reflect completed RDD surveys. HUD will do as many RDD surveys in the 
future as available funding permits, and will continue to concentrate 
on areas with believe that use of local bedroom ratio data is 
appropriate in instances where there are large samples. The Census 
provides the best available measure of bedroom size rent relationships 
for most larger areas, and shows that small differentials, between 
bedroom sizes occur and are valid. In response to comments, however, 
HUD is using standard national ratios in instances where the 
statistical reliability of local ratios is questionable and has 
adjusted the calculation for the four-bedroom FMR to ensure that it is 
higher than the three-bedroom FMR by the minimum typical percentage 
differential even when Census data show no difference.
    Both the increases and decreases in the bedroom ratios based on 
2000 Census data reflect actual rent relationships, and HUD continues 
to add significant rent bonuses for units with more than two bedrooms. 
The decrease in the differentials between two-bedroom and larger rental 
units that occurs in some FMR areas is due to the availability of more 
current and reliable Census data. The same FMR bonuses for larger 
bedroom sizes used in the past were also applied in calculating the 
FY2005 FMRs.

VI. Manufactured Home Space Surveys

    The FMR used to establish payment standard amounts for the rental 
of manufactured home spaces in the Housing Choice Voucher program is 40 
percent of the FMR for a two-bedroom unit. HUD will consider 
modification of the manufactured home space FMRs where public comments 
present statistically valid survey data showing the 40th percentile 
manufactured home space rent (including the cost of utilities) for the 
entire FMR area.
    Manufactured home space FMR revisions are published as final FMRs 
in Schedule D. Once approved, the revised manufactured home space FMRs 
establish new base year estimates that are updated annually using the 
same data used to estimate the Housing Choice Voucher program FMRs. The 
FMR area definitions used for the rental of manufactured home spaces 
are the same as the area definitions used for the other FMRs.

VII. HUD Rental Housing Survey Guides

    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 
$20,000-$30,000. Areas with 500 or more program units usually meet this 
criterion, and areas with fewer units may meet it if local rents are 
thought to be significantly different from the FMR proposed by HUD. In 
addition, HUD has developed a simplified 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.
    PHAs in nonmetropolitan areas may, in certain circumstances, do 
surveys of groups of counties. All county-group surveys must be 
approved in advance by HUD. 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 its relationship to the combined 
rent of the group of FMR areas.
    PHAs that plan to use the RDD survey technique may obtain a copy of 
the appropriate survey guide by calling HUD USER on 800-245-2691. 
Larger PHAs should request ``Random Digit Dialing Surveys; A Guide to 
Assist Larger Housing Agencies in Preparing Fair Market Rent 
Comments.'' Smaller PHAs should obtain ``Rental Housing Surveys; A 
Guide to Assist Smaller Housing Agencies in Preparing Fair Market Rent 
Comments.'' These guides are also available on the Internet at http://www.huduser.org/datasets/fmr.html.
    HUD prefers, but does not mandate, the use of RDD telephone 
surveys, or the more traditional method described in the small PHA 
survey guide. Other survey methodologies are acceptable if they provide 
statistically reliable, unbiased estimates of the 40th percentile gross 
rent. Survey samples preferably should 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 so as to be statistically 
representative of the entire rental housing stock of the FMR area. In 
particular, surveys must include units of 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 starting point and 
means of verification for determining whether the sample is 
representative of the FMR area's rental housing stock. All survey 
results must be fully documented.
    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.
    Accordingly, the Fair Market Rent Schedules, which will not be 
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24 CFR part 888, are amended as follows:

    Dated: September 24, 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 Areas--FMRs are market-wide rent estimates that are 
intended to provide housing opportunities throughout the geographic 
area in which rental-housing units are in direct competition.
    HUD uses the OMB Metropolitan Statistical Area (MSA) and Primary 
Metropolitan Statistical Area (PMSA) definitions, but the current 
definitions from the June 6, 2003 publication have not yet been 
incorporated. Use of these new geographic definitions will be 
considered for use in future FMR publications. Schedule B FMRs are 
issued for the same metropolitan area definitions used by HUD in FY 
2004 with the exceptions discussed in paragraph (b). The OMB-defined 
metropolitan areas closely correspond to housing market area 
definitions.
    b. Exceptions to OMB Definitions--The exceptions are counties 
deleted from several large metropolitan areas whose old OMB 
metropolitan area definitions were determined by HUD to be larger than 
the housing market areas. The FMRs for the following counties (shown by 
the metropolitan area) are calculated separately and are shown in 
Schedule B within their respective states under the ``Metropolitan FMR 
Areas'' listing:

Metropolitan Area Counties Assigned County-Based FMRs

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-MD-VA-WV
    Berkeley and Jefferson Counties in West Virginia; and Clarke, 
Culpeper, King George and Warren Counties in Virginia
    c. Nonmetropolitan Area FMRs--FMRs also are established for 
nonmetropolitan counties and for county equivalents in the United 
States, for nonmetropolitan parts of counties in the New England states 
and for FMR areas in Puerto Rico, the Virgin Islands and the Pacific 
Islands.
    d. 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 visiting in Schedule B 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 Falls, Covington.
Augusta..............................  Staunton and Waynesboro.
Carroll..............................  Galax.
Frederick............................  Winchester.
Greensville..........................  Emporia.
Henry................................  Martinsville.
Montgomery...........................  Radford.
Rockbridge...........................  Buena Vista and Lexington.
Rockingham...........................  Harrisonburg.
Southampton..........................  Franklin.
Wise.................................  Norton.
------------------------------------------------------------------------

2. Bedroom Size Adjustments
    Schedules B(1) and B(2) shows the FMRs for 0-bedroom through 4-
bedroom units. The FMRs for unit sizes larger than 4 bedrooms are 
calculated by adding 15 percent to the 4-bedroom FMR for each extra 
bedroom. For example, the FMR for a 5-bedroom unit is 1.15 times the 4-
bedroom FMR, and the FMR for a 6-bedroom unit is 1.30 times the 4-
bedroom FMR. FMRs for single-room-occupancy (SRO) units are 0.75 times 
th 0-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 metropolitan areas in Schedule B(2) are listed alphabetically by 
the state and metropolitan area for only those 39 areas currently at 
the 50th percentile for their FMR. The exception FMRs for manufactured 
home spaces in Schedule D are listed alphabetically by State.
    b. The constituent counties (and New England towns and cities) 
included in each metropolitan FMR area are listed immediately following 
the listings of the FMR dollar amounts. All constituent parts of a 
metropolitan FMR area that are in more than one state can be identified 
by consulting the listings for each applicable state.
    c. Two nonmetropolitan counties are listed alphabetically on each 
line of the nonmetropolitan county listings.
    d. The New England towns and cities included in a nonmetropolitan 
part of a county are listed immediately following the county name.
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[FR Doc. 04-21892 Filed 9-30-04; 8:45 am]
BILLING CODE 4210-32-C