[Federal Register Volume 70, Number 190 (Monday, October 3, 2005)]
[Notices]
[Pages 57654-57714]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-19678]



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Part II





Department of Housing and Urban Development





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Final Fair Market Rents for the Housing Choice Voucher Program and 
Moderate Rehabilitation Single Room Occupancy Program for Fiscal Year 
2006; Notice

  Federal Register / Vol. 70, No. 190 / Monday, October 3, 2005 / 
Notices  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4995-N-03]


Final Fair Market Rents for the Housing Choice Voucher Program 
and Moderate Rehabilitation Single Room Occupancy Program for Fiscal 
Year 2006

AGENCY: Office of the Secretary, HUD.

ACTION: Notice of Final Fair Market Rents (FMRs) for Fiscal Year 2006.

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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. 
The primary uses of FMRs are to determine payment standard amounts for 
the Housing Choice Voucher program, to determine initial renewal rents 
for some expiring project-based Section 8 contracts, to determine 
initial rents for housing assistance payment (HAP) contracts in the 
Moderate Rehabilitation Single Room Occupancy program, and to serve as 
a rent ceiling in the HOME rental assistance program. Today's notice 
provides final FY2006 FMRs for all areas that reflect the estimated 
40th and 50th percentile rent levels trended to April 1, 2006. Today's 
notice, however, does not include final determinations on 50th 
percentile rent levels, as proposed in HUD's notice published on August 
25, 2005. The 30-day public comment period on that notice ended 
September 26, 2005, and HUD is evaluating the public comments. A notice 
that provides final determinations on 50th percentile FMRs will be 
issued subsequently, and as further discussed in Section VII of this 
notice.
    This notice also invokes the Secretary's authority to waive 
regulatory requirements for exception FMRs in areas affected by 
Hurricane Katrina and by displacement of residents of the affected 
area.

DATES: The FMRs published in this notice are effective on October 1, 
2005.

FOR FURTHER INFORMATION CONTACT: For technical information on the 
methodology used to develop FMRs or a listing of all FMRs, 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. FMRs are listed at the 40th or 50th percentile in Schedule B. 
For informational purposes, a table of 40th percentile recent mover 
rents for those areas currently at the 50th percentile FMRs will be 
provided on the same Web site noted above. Any questions related to use 
of FMRs or voucher payment standards should be directed to the 
respective local HUD program staff. Questions on how to conduct FMR 
surveys or further methodological explanations 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. Questions about disaster-related 
FMR exceptions should be referred to the respective local HUD office. 
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 U.S. Housing Act of 1937 (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. In addition, all 
rents subsidized under the Housing Choice Voucher program must meet 
reasonable rent standards. The final FY2006 FMRs are the first to be 
calculated using the revised Office of Management and Budget (OMB) 
statistical area definitions that were issued in 2003. The new 
definitions are county-based.
    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. Information on how FMRs are 
determined, including detailed calculations, is available at: http://www.huduser.org/fmr/fmr.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 FY2006 FMRs are 
published on or before October 1, 2005, as required by section 8(c)(1) 
of the USHA.

III. Proposed FY2006 FMRs

    On June 2, 2005 (70 FR 32402), HUD published proposed FY2006 FMRs. 
In the proposed FY2006 FMRs notice, HUD advised that the assessment, as 
directed by HUD's regulations, on eligibility or ineligibility for 50th 
percentile FMRs would be addressed by a subsequent notice. The 
subsequent notice on 50th percentile FMRs was published on August 25, 
2005, and is further discussed in Section VII of this notice.
    As noted in the preamble to the proposed FMRs, the FMRs for FY2006 
were based on a change in metropolitan area definitions. HUD is using 
the county-based statistical areas as defined by OMB, with some 
modifications. The only modifications made are to permit OMB-defined 
metropolitan areas to be divided into more than one FMR area when 
necessary to minimize changes in FMRs due solely to the use of the new 
definitions. All proposed metropolitan FMR areas consist of areas 
within new OMB metropolitan areas. In general, any parts of old 
metropolitan areas, or formerly nonmetropolitan counties, that would 
have more than a 5 percent increase or decrease in their FMRs as a 
result of implementing the new OMB metropolitan definitions are defined 
as separate FMR areas.
    During the comment period, which ended August 1, 2005, HUD received 
58 public comments on the proposed

[[Page 57655]]

FY2006 FMRs. Over one-half of the comments concerned the changes in 
FMRs as a result of using the new OMB metropolitan definitions. Other 
comments opposed reductions in their FMRs as a result of recent Random 
Digit Dialing (RDD) surveys. Low FMRs were cited as a reason for 
program difficulties. Most of the public comments received lacked the 
data needed to support FMR changes. The comments received are discussed 
in more detail later in this notice.
    All RDD results are being implemented with the exception of the 
reduction for New Orleans. This area experienced such massive losses to 
its rental housing inventory that the survey results are no longer 
valid.

IV. FMR Methodology

    As detailed in the June 2, 2005, notice, the FY2006 FMRs are based 
on current OMB metropolitan area definitions. These definitions have 
the advantages that they are based on more current (2000 Census) data, 
use a more relevant commuting interchange, and generally provide a 
better measure of current housing market relationships. HUD had three 
objectives in defining FMR areas for FY2006: (1) To incorporate new OMB 
metropolitan area definitions so the FMR estimation system can employ 
new data collected using those definitions; (2) to better reflect 
current housing markets; and (3) to minimize the number of large 
changes in FMRs due to use of the new OMB definitions. The proposed FMR 
area definitions were developed to achieve these objectives as follows:
     FMRs were calculated for each of the new OMB metropolitan 
areas using 2000 Census data.
     Subparts of any of the new areas that had separate FMRs 
under the old OMB definitions were identified, and 2000 Census Base 
Rents for these subparts were calculated. Only the subparts within the 
new OMB metropolitan area were included in this calculation (e.g., 
counties that had been excluded from the new OMB metropolitan area were 
not included).
     Metropolitan subparts of new areas that had previously had 
separate FMRs were assigned their own FMRs if their 2000 Census Base 
Rents differed by more than 5 percent from the new OMB area 2000 Census 
Base Rent.
     Formerly metro counties removed from metro areas get their 
own FMRs.
     Proposed FY2006 FMRs were calculated using the same 
information used to compute FY2005 Final FMRs plus additional update 
factors.

A. Data Sources

    FY2005 and FY2006 FMRs for most areas were based on 2000 Census 
data updated with more current survey data. At HUD's request, the 
Census Bureau prepared a special publicly releasable Census file that 
permits almost exact replication of HUD's 2000 Base Rent calculations 
except for areas with few rental units. This data set is located on 
HUD's HUDUSER Web site at: http://www.huduser.org/datasets/fmr/CensusRentData/. The area-specific data and computations used to 
calculate final FY2006 FMRs and FMR area definitions can be found at 
http://www.huduser.org/datasets/fmr/fmrs/.

B. FMR Updates From 2005 to 2006

    The 2000 to 2005 update factors in the Revised Final FY2005 FMRs, 
published February 28, 2005 (70 FR 9778), are used to update the 
metropolitan area to the new OMB definition, as modified by HUD. All 
new FMR areas that are part of a new metropolitan area are updated with 
the same 2005-to-2006 metropolitan area update factor, except where 
RDDs were performed at the subarea level.
    Specifically, local Consumer Price Index (CPI) data is used to move 
rents from the end of 2003 to the end of 2004 and the same 15-month 
trending factor is then applied. Regional RDD surveys were used to 
provide update factors for areas without local CPI estimates. Regional 
RDDs, however, were not conducted in 2004 in anticipation of the 
arrival of American Community Survey (ACS) data. Data from the 2004 ACS 
was not available in time for inclusion in the final FY2006 FMR 
publication. Therefore, for proposed FY2006 FMRs, census region CPI 
data for Class B and C size cities is being used to update areas 
without local CPI update factors. Once full-scale ACS data collections 
start to become available in the latter part of 2006, sample sizes will 
be large enough to estimate FMRs for the larger metropolitan areas on 
an annual basis and for other areas on a two-to four-year basis.

C. Additional RDD Surveys and Other Data

    RDDs covering 18 additional areas were conducted by HUD in the 
July-August 2005 period and completed in time for use in this 
publication. In addition, one PHA survey was submitted. The first 
column of the following table identifies the RDD survey area. The 
second column shows the proposed FY2006 FMR as published on June 2, 
2005. The third column shows the final FY2006 FMR. The fourth column 
shows whether or not the RDD results were statistically different 
enough to justify replacing the updated Census or other survey 
estimates with the RDD results. The survey results were as follows:

                                  Table 1.--Results of Recent RDD Rent Surveys
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                                                 Proposed      Final  FY2006
                Area surveyed                   FY2006  FMR         FMR                   RDD result
----------------------------------------------------------------------------------------------------------------
New Bedford, MA HMFA........................             694             753  Increase.
Taunton-Mansfield-Norton, MA HMFA...........             940             992  Increase.
Providence-Fall River, RI-MA HMFA...........             891             965  No Change.*
Davidson County, NC.........................             543             543  No Change.
Lincoln County, NC..........................             549             549  No Change.
Rowan County, NC............................             564             593  Increase.
Aguadilla, PR HMFA..........................             321             352  Increase.*
Fajardo, PR MSA.............................             403             403  No Change.
Arroyo-Patillas, PR HMFA....................             312             352  No Change.*
Mayaguez, PR MSA............................             400             400  No Change.
Ponce, PR MSA...............................             349             423  Increase.
San German-Cabo Rojo, PR MSA................             364             364  No Change.
San Juan Guaynabo, PR HMFA..................             403             403  No Change.
Arecibo, PR HMFA............................             330             352  No Change.*
Caguas, PR HMFA.............................             362             362  No Change.
Barranquitas-Aibonito-Quebradillas, PR HMFA.             324             352  No Change.*
Yauco, PR...................................             349             352  No Change.*

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Nonmetropolitan Counties, PR................             309             352  Increase.
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*Providence increased as a result of becoming a 50th percentile FMR area. Other ``No change'' areas increased as
  a result of the state minimum FMRs. Aguadilla had an increase resulting from the RDD and a further increase
  resulting from applying the state minimum.

    HUD is directed by statute to use the most recent data available in 
its FMR publications. These RDD survey results are being implemented in 
the revised final FY2006 FMR publication consistent with that 
requirement.
    The RDD surveys conducted in Puerto Rico included a number of 
additional housing quality questions that were used to address the 
concerns of HUD and the Puerto Rico Housing Authority. Only one 
question produced increases in FMR estimates; it was related to whether 
a housing unit had hot and cold running water. Screening RDD results 
based on that housing quality question increased FMR estimates in some 
areas. The Puerto Rico RDD results had small recent mover samples, and 
none of the areas had high recent mover bonuses. For FMR computation 
purposes, FMR estimates were based on a mix of stayer rents inflated by 
the average Puerto Rico recent-mover-to-stayer ratio and recent mover 
rents. Using this approach, three areas had increases based on RDD 
results, and nine areas showed no change, but there were increases over 
the proposed FMRs for five areas that would otherwise be below the 
state minimum FMR.
    HUD also reviewed a survey submitted by the St. Mary's County (MD) 
PHA and data on two-bedroom rents submitted by the Housing Authority of 
the County of Santa Clara. Neither of these submissions provided data 
that was statistically representative of their rental markets. HUD 
plans to conduct surveys of both areas within the next few months to 
address their concerns.

D. Large Bedroom Rents

    FMR estimates are calculated for two-bedroom units. This is the 
most common type of rental unit and, therefore, the easiest to 
accurately survey and analyze. After each Decennial Census, rent ratios 
between two-bedroom units and other unit sizes are calculated. These 
ratios are then used to calculate FMRs in future years after a two-
bedroom FMR is calculated. This is done because it is much easier to 
obtain accurate two-bedroom estimates, and then to use pre-established 
cost relationships with other bedroom sizes to update those rent 
estimates, than it is to develop independent FMR estimates for each 
bedroom size. A publicly releasable version of the data file that 
permits derivations of rent ratios from the 2000 Census, as well as 
demonstrations of how the data are used, are available at http://www.huduser.org/datasets/fmr/fmr.html.
    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 bonuses of 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. 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: 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 3 
percent higher than three-bedroom rents).
    For nonmetropolitan counties with few rental units and 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 due to insufficient 
sample sizes. The areas covered by this new estimation method had less 
than 200 two-bedroom Census-tabulated observations.

E. State Minimums

    In response to comments received on the FY2005 and the proposed 
FY2006 FMRs, a state minimum policy similar to that used prior to 
FY2005 has been implemented. The rationale for having a state minimum 
FMR is that some low-income, low-rent nonmetropolitan counties have 
Census-based FMR estimates that appear to be below long-term operating 
costs for standard quality rental units and raise concerns about 
housing quality. Housing quality problems are limited in most parts of 
the country and have little impact on FMR estimates. The exception to 
this generality within the continental United States occurs in some 
nonmetropolitan areas with unusually low rents. State minimum FMRs have 
been set at the respective state-wide median nonmetropolitan rent 
level, but are not allowed to exceed the U.S. median nonmetropolitan 
rent level. This change primarily affects small nonmetropolitan 
counties in the South with low rents.

V. Public Comments

    Form letters were received from the tenants and landlords of 
Section 8 housing in Taunton, MA. Taunton used to be part of the Boston 
metropolitan area and is now part of the Providence

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metropolitan area. The 2000 Census data shows that Taunton's rents are 
more than 5 percent higher than those for the Providence metropolitan 
area. Taunton is therefore established as a separate FMR area, the 
Taunton-Mansfield-Norton, MA HMFA, but the Taunton comments objected to 
the fact that its FMRs were decreased because it had been removed from 
the Boston metropolitan area. The social services office and the town 
government of Mansfield also submitted comments stating that FMRs were 
too low and would hinder Mansfield in meeting the Massachusetts State 
requirement for a 10 percent affordable housing stock. New Bedford was 
not significantly affected by the geography change, but requested a 
survey because it believed its proposed FMRs are too low. RDD surveys 
of the Taunton-Mansfield-Norton and New Bedford subareas of Providence 
were conducted. Both areas received higher FMRs as a result of the 
surveys.
    The Milford Housing Authority (representing the Eastern Worcester, 
MA HMFA) also submitted comments objecting to the significant FMR 
reduction that resulted from its being removed from the Boston 
metropolitan area and placed in the Worcester, MA metropolitan area. A 
few tenants also filed comments requesting that Milford remain part of 
Boston. Data from the 2000 Census showed that Eastern Worcester's rents 
are more than 5 percent higher than those for the Worcester 
metropolitan area, and there is a separate FMR area, Eastern Worcester 
County, MA HMFA. No change in the proposed FMRs was warranted. The 
Citizens Housing and Planning Association of MA requested that HUD use 
the city-town building blocks in Census Bureau NECTA area definitions 
rather than county-based areas.
    The Lexington and Lincolnton public housing agencies (PHAs) of 
North Carolina, representing Davidson and Lincoln counties, 
respectively, protested the large FMR decreases that resulted from 
these counties being removed from metropolitan areas under the new OMB 
definitions and being redefined as nonmetropolitan counties with their 
own FMRs. Davidson County formerly was in the Greensboro-Winston-Salem-
High Point MSA and Lincoln was in the Charlotte-Gastonia-Rock Hill MSA. 
Surveys were conducted of these two counties, as well as Rowan County, 
which was also formerly part of the Charlotte metropolitan area. Only 
Rowan County received a survey-based increase.
    The Chatham County Housing Authority protested the change in area 
definitions for what had been the Raleigh-Durham-Chapel Hill 
metropolitan area. This metropolitan area was split into three 
metropolitan areas, and Chatham County was defined to be part of the 
new Durham HMFA. The Homeless Services Network, serving the Charlotte-
Gastonia-Concord, NC-SC HMFA, also protested the reduced FMRs that were 
proposed for some counties in the newly defined areas. In each of these 
instances, the 2000 Census data and OMB definitions used supported the 
proposed FMR area definitions and the FMR estimates.
    The South Carolina Regional Housing Authority Number 1 opposed the 
creation of a new one-county metropolitan area, the Anderson, SC MSA. 
It also complained about inconsistencies and inequities in FMRs among 
nonmetropolitan counties. A number of other criticisms of very low 
nonmetropolitan FMRs were raised in other comments both this year and 
last year. Many of the concerns about nonmetropolitan FMRs are 
addressed by state minimum FMRs.
    A number of other comments were received on the new metropolitan 
area definitions. Island County, WA, formerly part of the Seattle 
metropolitan area but now a nonmetropolitan county, submitted a request 
that it be made part of the Mount Vernon-Anacortes, WA MSA. Island 
County, however, failed to meet the OMB commutation test to become part 
of that metropolitan area. Simpson Property Group, LP argued that 
Broomfield County, CO should be placed in the Boulder metropolitan area 
rather than the Denver metropolitan area. This request is not supported 
by the data used to determine to which area a county is most closely 
aligned. Lafayette, IN, and Rochester, MN, both expressed concern that 
adding a nonmetropolitan county reduced their FMRs. Rochester, MN, 
reiterated its comments filed for the FY2005 FMRs that the reduction in 
the FMRs for the large bedroom-size rents was based on flawed Census 
2000 data and HUD should not increase all bedroom FMRs at the same 
rate. No acceptable factual data were submitted to support this group 
of requests or to indicate why 2000 Census data should not be used.
    Comments on proposed San Francisco FMRs were filed by the local 
housing authority, the Mayor, the Housing Rights Committee, and U.S. 
Representative Tom Lantos. All protested the low FMRs, which were 
reduced last year, and all expressed concern that San Francisco's tight 
rental market was not adequately measured by the FMR methodology, which 
found the same large decreases in rents in 2004 as indicated by earlier 
private market apartment complex surveys. The Mayor requested 
reinstitution of high exception rents for San Francisco. Available data 
from private market apartment complex surveys, however, show little 
increase in rents through the middle of 2005. San Francisco indicated 
it preferred to conduct its own survey.
    Comments on Puerto Rico's FMRs were submitted by the Departmento de 
la Viviendo, a housing management corporation, and the Affordable 
Housing Management Association. They stated that Puerto Rico has a 
unique rental housing market and requested that its FMRs be based on 
construction and operating costs rather than the costs of existing 
housing. Concern was expressed that low FMRs adversely affected the 
Moderate Rehabilitation program. It was argued that it was inconsistent 
for Puerto Rico to have lower FMRs than the Virgin Islands.
    HUD did not accept any of the Puerto Rico arguments as a valid 
basis for changing FMRs, but did conduct surveys that resulted in 
higher FMRs for some areas. Market rents for many Moderate 
Rehabilitation units are higher than typical rent levels, but this is 
not a basis for changing FMRs. The Virgin Islands has income and rents 
that current and past survey data show are far higher than Puerto 
Rico's. The statutory guidance on FMRs explicitly differentiates 
between new construction rents and rents for existing structures, and 
indicates that rents for existing structures are to be based on rents 
for existing rental housing dwelling units. An extensive survey of all 
Puerto Rico FMR areas was conducted during the summer of 2005. Puerto 
Rico's FMRs were calculated so as to take into consideration all 
available data that might result in upward housing quality or other 
adjustments to rents, and the final FMRs are considerably above the 
normal points in which FMRs are located within overall rent 
distributions.
    Many areas expressed concern with FMR reductions resulting from 
either recent RDDs or modifications to their area definition. These 
include the Oklahoma City Housing Authority, the Chicago Area Fair 
Housing Alliance, the Village of North Syracuse Housing Authority, and 
the Bloomington Housing Authority. The Oklahoma and Chicago concerns 
were not supported by factual data and are inconsistent with survey 
data. The North Syracuse problem can be addressed using the HUD 
exception policy. HUD plans to conduct a survey of Bloomington, but 
this was delayed until the fall because

[[Page 57658]]

the respective PHA agreed with HUD staff that conducting a survey 
during the summer of 2005 was undesirable because it would have omitted 
the significant impact of college student renters.
    The National Association of Home Builders (NAHB), the Public 
Housing Authorities Directors Association (PHADA), the National 
Association of Affordable Housing Lenders (NAAHL), and the National 
Association of Housing and Redevelopment Officials (NAHRO) provided 
comments for their constituents. NAHB stressed that there should be a 
strict floor on FMR reductions, no more than five percent, including 
RDD survey results. HUD disagrees that there should be constraints on 
increases or decreases, since these are based on factual rent 
relationships and only affect prospective voucher leases.
    NAAHL commented that the application of the five percent rule is 
uneven because it did not limit decreases for FMRs of counties that 
were removed from metropolitan areas. They suggested that areas with 
large decreases should be held harmless. PHADA also expressed concern 
for formerly metropolitan counties with large decreases. HUD disagrees 
that its treatment of nonmetropolitan county FMRs is inconsistent with 
its treatment of metropolitan areas. Metropolitan areas with more than 
a five percent increase or decrease as a result of the new definitions 
were assigned FMRs calculated based on their own data. Counties that 
were removed from FMR areas were also given FMRs based on their own 
data. The only difference is that use of FMR area data produced larger 
decreases for some of the counties removed from metropolitan areas.
    NAHRO asserted that recent RDD results that produced a much higher 
number of FMR reductions than increases point to a problem with this 
methodology. HUD does not agree. Data from Census Bureau and private 
market rental surveys show that rental vacancy levels have been 
unusually high the past few years and that rent changes in many areas 
are minimal or negative. Census surveys show the same pattern of 
results. Given this information, it was to be expected that FMR surveys 
would produce more decreases than increases if a representative 
selection of FMR areas was surveyed.
    A better explanation of the utility component of the gross rent in 
the FMR was also requested. This has been provided in HUD's new FMR 
documentation system at http://www.huduser.org/datasets/fmr/fmrs.html.

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. No new exception requests were filed.
    All approved exceptions to these rents that were in effect in 
FY2005 were updated to the midpoint of FY2006 using the same data used 
to estimate the Housing Choice Voucher program FMRs. 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. 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. 50th Percentile FMR Area Designation

    An interim rule published on October 2, 2000 (65 FR 58870), 
established 50th percentile FMRs for 39 FMR areas. That notice required 
a periodic review of areas eligible for 50th percentile FMRs. The 
notice published on August 25, 2005 (70 FR 50138), provided updated 
information on which areas met the 50th percentile FMR eligibility 
criteria and requested public comments on the proposed changes. Because 
FY2006 FMRs have to be issued for effect before public comments on the 
August 25, 2005, notice can be considered, the FMRs published in this 
notice do not implement any of the proposed FMR reductions from the 
50th to the 40th percentile level. This notice does, however, provide 
50th percentile FMRs for the newly eligible areas designated in the 
August 25, 2005, notice.
    HUD asks that areas please take special note that unless 
information is submitted that changes the results of the eligibility 
determinations issued in the August 25, 2005, notice, the proposed 
reductions in FMRs from the 50th to the 40th percentile for selected 
areas will be implemented in a subsequent notice. HUD intends to issue 
this subsequent notice as quickly as possible after review and 
consideration of the public comments on the August 25, 2005, notice.
    Because the results of the 50th percentile FMR eligibility analysis 
contained in the August 25, 2005, notice are not being fully 
implemented at this time, all areas that had 50th percentile FMRs in 
the June 2, 2005, notice of proposed FY2006 FMRs continue to have them 
in this notice. In addition, the 10 newly designated areas that 
qualified for 50th percentile FMRs are assigned them in this notice. 
Again, however, HUD anticipates that the subsequent notice to be issued 
on 50th percentile FMRs will be limited to the areas listed as eligible 
for 50th percentile FMRs in the August 25, 2005, notice and not the 
June 2, 2005, notice. Table 2 identifies the 10 new areas (which were 
identified in the August 25, 2005, notice).

        Table 2.--Proposed FY2006 40th Percentile FMR Areas that Should Be Assigned 50th Percentile FMRs
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Baltimore-Towson, MD MSA................   Providence-Fall River, RI-MA HMFA.
Hartford-West Hartford-East Hartford, CT  Riverside-San Bernardino-Ontario, CA MSA.
 HMFA.
Honolulu, HI MSA........................  Sarasota-Bradenton-Venice, FL MSA.
Milwaukee-Waukesha-West Allis, WI MSA...  Tacoma, WA HMFA.
New Haven-Meriden, CT HMFA..............  Tucson, AZ MSA.
----------------------------------------------------------------------------------------------------------------

    Riverside-San Bernardino-Ontario, CA, in addition to becoming a 
50th percentile FMR area, has an additional FMR increase based on RDD 
results. At the 50th percentile standard, the RDD survey conducted 
showed a statistically significant increase in the 50th percentile FMR 
estimate for the area that is reflected in this publication.

VIII. Katrina Disaster Area FMRs

    The Secretary of HUD has authority to modify FMRs to meet changes 
in rents resulting from declared Federal disasters. HUD's past natural 
disaster policy has been to allow PHAs in Federal Emergency Management 
Agency (FEMA)-designated disaster areas to request exception FMRs of 
110 percent of published FMRs, and to allow them to retain use of those 
FMRs for a two-

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year period. The Department is fully aware that the Katrina disaster is 
much larger in scope than previous disasters and that the FMRs in this 
publication are based on pre-Katrina data. Communities far outside 
FEMA-designated disaster areas are being significantly impacted by 
displacees seeking housing. HUD's Office of Public and Indian Housing 
will be issuing a notice within the next few weeks that addresses how 
PHAs may obtain disaster-related exception FMRs to meet local needs.

IX. 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 to $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 than 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 have to 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 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. 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 FMR Schedules, which will not be codified in 24 
CFR part 888, are amended as follows:

    Dated: September 27, 2005.
Roy A. Bernardi,
Deputy Secretary.

Fair Market Rents for the Housing Choice Voucher 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. The 
FY2006 FMRs reflect a change in metropolitan area definition where HUD 
is using Core-Based Statistical Areas (CBSA), that are made up of one 
or more counties, as defined by OMB, with some modifications. HUD is 
generally assigning separate FMRs to the component counties of CBSA 
Micropolitan Areas.
    b. Modifications to OMB Definitions--Following OMB guidance, the 
estimation procedure for the FY2006 FMRs incorporates the 2003 OMB 
definitions of metropolitan areas based on the new CBSA standards as 
implemented with 2000 Census data, but makes adjustments to the 
definitions to separate subparts of these areas where FMRs would 
otherwise change significantly if the new area definitions were used 
without modification. In CBSAs where sub-areas are established, it is 
HUD's view that the geographic extent of the housing markets are not 
yet the same as the geographic extent of the CBSAs, but may become so 
as the social and economic integration of the CBSA component areas 
increases. Modifications to metropolitan CBSA definitions are made 
according to a formula as described below:
    Metropolitan Areas CBSAs (referred to as Metropolitan Statistical 
Areas or MSAs) may be modified to allow for sub-area FMRs within MSAs 
based on the boundaries of old FMR areas (OFAs) within the boundaries 
of new MSAs. (OFAs are the FMR areas defined for the FY2005 FMRs. 
Collectively, they include old-definition MSAs/PMSAs, metro counties 
deleted from old-definition MSAs/PMSAs by HUD for FMR purposes, and 
counties and county parts outside of old-definition MSAs/PMSAs referred 
to as non-metropolitan counties.) Sub-areas of MSAs are assigned their 
own FMRs when the sub-area 2000 Census Base Rent differs by at least 5 
percent from (i.e., is at most 95 percent or at least 105 percent of) 
the MSA 2000 Census Base Rent. MSA subareas, and the remaining portions 
of MSAs after sub-areas have been determined, are referred to as HMFAs 
to distinguish these areas from OMB's official definition of MSAs.
    The specific counties and New England towns and cities within each 
state in MSAs and HMFAs are listed in the FMR tables.

2. Bedroom Size Adjustments

    Schedules B 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 the 0-bedroom FMR.

3. Arrangement of FMR Areas and Identification of Constituent Parts

    a. The FMR areas in Schedule B are listed alphabetically by 
metropolitan FMR area and by nonmetropolitan county within each state. 
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.

[[Page 57660]]

    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. 05-19678 Filed 9-28-05; 9:49 am]
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