[Federal Register Volume 72, Number 189 (Monday, October 1, 2007)]
[Notices]
[Pages 55940-56000]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-4801]



[[Page 55939]]

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Part III





Department of Housing and Urban Development





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Final Fair Market Rents for Fiscal Year 2008 for the Housing Choice 
Voucher Program and Moderate Rehabilitation Single Room Occupancy 
Program; Notice

  Federal Register / Vol. 72, No. 189 / Monday, October 1, 2007 / 
Notices  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5152-N-02]


Final Fair Market Rents for Fiscal Year 2008 for the Housing 
Choice Voucher Program and Moderate Rehabilitation Single Room 
Occupancy Program

AGENCY: Office of the Assistant Secretary for Policy Development and 
Research, HUD.

ACTION: Notice of Final Fair Market Rents (FMRs) for Fiscal Year (FY) 
2008.

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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 (Mod Rehab), and 
to serve as a rent ceiling in the HOME rental assistance program. 
Today's notice provides final FY2008 FMRs for all areas that reflect 
the estimated 40th and 50th percentile rent levels trended to April 1, 
2008. The FY2008 FMRs are based on 2000 Census data updated with more 
current survey data. For the first time, HUD is using data from the 
Census Bureau's American Community Survey (ACS). HUD is largely 
replacing the accumulated 2001-through-2005 FMR update factors from 
various sources with data from ACS's first full implementation year, 
2005. HUD uses ACS data in different ways according to how many two-
bedroom, standard-quality and recent-mover sample cases are available 
in the FMR area or in its Core-Based Statistical Area (CBSA), as 
described in detail later in this notice. Random digit dialing (RDD) 
surveys, as well as some limited private surveys, performed between 
2001 and 2005 may also be used under certain conditions. Revised 2005 
FMRs based on 2000 Census and 2005 ACS data have been updated with 
Consumer Price Index (CPI) data through the end of 2006 and then 
trended to April 2008, the midpoint of FY2008. FY2008 FMRs are the 
first to be able to take advantage of the full-implementation ACS, a 
major new Census survey that is being conducted annually. The ACS will 
replace the Decennial Census ``long-form'' sample survey that is the 
source of Decennial Census rent information. The ACS will permit more 
accurate FMR estimates each year than were possible using the Decennial 
Census trending techniques of previous FMR estimates.

DATES: Effective Date: The FMRs published in this notice are effective 
on October 1, 2007.

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 at the following link on the HUD Web site: http://www.huduser.org/datasets/fmr.html. FMRs are listed at the 40th or 50th 
percentile in Schedule B. An asterisk before the FMR area name 
identifies a 50th percentile area. For informational purposes, 40th 
percentile recent-mover rents for the areas with 50th percentile FMRs 
will be provided in the HUD FY2008 FMR documentation system at http://www.huduser.org/datasets/fmr/fmrs/index.asp?data=fmr08.
    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 for further methodological 
explanations, please contact Marie L. Lihn or Lynn A. Rodgers, Economic 
and Market Analysis Division, Office of Economic Affairs, Office of 
Policy Development and Research, telephone number (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 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 
(nonluxury) 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 Web site at http://www.hudclips.org. Federal Register notices are also available 
electronically from the U.S. Government Printing Office Web site, 
http://www.gpoaccess.gov/fr/index.html. Complete documentation of the 
methodology and data used to compute each area's Final FY2008 FMRs is 
available at http://www.huduser.org/datasets/fmr/fmrs/index.asp?data=fmr08.

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).
    In addition, HUD's regulations at 24 CFR 888.113 set out procedures 
for HUD to assess whether areas are eligible for FMRs at the 50th 
percentile. For FY2008, no new areas became eligible for 50th 
percentile rents. Final FY2008 FMRs are published on or before October 
1, 2007, as required by section 8(c)(1) of the USHA.

III. Proposed FY2008 FMRs

    On July 12, 2007, at 72 FR 38398, HUD published proposed FY2008 
FMRs. As noted in the preamble to the proposed FMRs, the FMRs for 
FY2008 reflect the use of the 2005 ACS data for metropolitan areas. For 
all areas, the update of the FMRs from the 2000 Census base rent to 
2005 has largely been replaced by using ACS update

[[Page 55941]]

factors. There are some areas where RDDs conducted between 2001 and 
2005 are still being used, and some areas where the 2005 ACS data 
provides a new benchmark rent. In addition, the FY2008 FMRs include all 
changes made to metropolitan area definitions made by the Office of 
Management and Budget (OMB), as of December 2006.
    During the comment period, which ended August 13, 2007, HUD 
received 30 public comments on the proposed FY2008 FMRs. Most of the 
comments received lacked the data needed to support FMR changes. The 
comments received are discussed in more detail later in this notice.

IV. FMR Methodology

    The FY2008 FMRs are based on current OMB metropolitan area 
definitions that were first used in the FY2006 FMRs. The changes OMB 
made to the Metropolitan Area Definitions in December 2006 have been 
incorporated. This means there are two new, one-county metropolitan 
statistical areas (MSAs), and a few areas where MSA name changes add or 
delete a primary city name. These definitions have the advantages that 
they are based on more current (2000 Census) data, use a more relevant 
commuting interchange standard, 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 that the FMR estimation system can employ new data 
released according to 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. These objectives continue 
to apply to the FY2008 FMRs, and area definitions were developed to 
achieve these objectives, as follows:
     FMR Census Base Rents and Median Family Incomes 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, and that had sufficiently large 2000 
Census counts of recent-mover renter households in standard-quality 
units, were identified, and 2000 Census Base Rents and Median Family 
Incomes for these subparts were calculated. Only the subparts within 
the new OMB metropolitan area were included in these calculations 
(e.g., counties that had been excluded from the new OMB metropolitan 
areas 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, or if their 2000 Census Median Family Income differed by 
more than 5 percent from the new OMB area 2000 Census Median Family 
Income.
     Former metropolitan counties removed from metropolitan 
areas get their own FMRs.
    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 HUD USER Web site at: http://www.huduser.org/datasets/fmr/CensusRentData/.

A. Data Sources--2000 Census and 2005 American Community Survey

    FY 2008 FMRs are based on 2000 Census data updated with more 
current survey data. For the first time, HUD is using data from the 
Census Bureau's ACS; the ACS data are from 2005, the full survey's 
first implementation year. While the Census Bureau intends for the ACS 
to replace the Decennial Census sample ``long form'' for collecting 
detailed socio-economic data, the ACS has several important differences 
from the decennial long form. These include:
     The ACS is conducted on a continuous ``rolling'' basis 
throughout the year. As a result, survey responses do not correspond to 
a particular date, whereas the long form responses are as of the census 
date of April 1. This has implications for the ``as-of'' date assumed 
for ACS-based rents. The ``as of'' date for ACS-based rents is set at 
June 30, 2005.
     The ACS has about one-fifth the sample size of the 
decennial long form, which surveyed approximately one out of every six 
households. This means that an adequate sample size for one-year ACS 
data will be available only for very large-population geographic areas, 
and that data for smaller areas will be accumulated over 3 or 5 years 
to form the basis of decennial-long-form equivalent estimates.
    In the FY 2008 FMRs, HUD is largely replacing the accumulated 2001-
through-2005 FMR update factors from various sources with 2005 ACS data 
(RDDs performed between 2001 and 2005 will be used under certain 
conditions described below). HUD uses ACS data in different ways 
according to how many two-bedroom, standard-quality and recent-mover 
sample cases are available in the FMR area or the CBSA. FMR areas are 
classified into four ACS data-availability categories:
    ACS-1. FMR Areas that have at least 200 sample cases of two-
bedroom, standard-quality rents. ACS-1 areas may be entire MSAs, sub-
areas that are assigned the CBSA base rents, other sub-areas, or large 
nonmetropolitan counties.
    ACS-2. FMR Areas that are sub-areas of CBSAs where the sub-area is 
not assigned the CBSA base rent, and the sub-area does not have at 
least 200 sample cases of two-bedroom, standard-quality rents, but the 
CBSA containing the sub-area does have at least 200 sample cases of 
two-bedroom, standard-quality rents.
    ACS-3. FMR Areas that are MSAs or nonmetropolitan counties that 
have fewer than 200 sample cases of two-bedroom, standard-quality 
rents, or sub-areas of CBSAs that have fewer than 200 sample cases of 
two-bedroom, standard-quality rents.
    ACS-4. FMR Areas that have at least 200 sample cases of two-
bedroom, recent-mover rents. ACS-4 areas may be entire MSAs, sub-areas 
that are assigned CBSA rents, other sub-areas, or large nonmetropolitan 
counties. By definition, these areas are a subset of ACS-1 areas.
    In ACS-1 FMR areas, the 2000 Census-to-2005 ACS update factor is 
the ratio of the 2005 ACS two-bedroom, standard-quality median rent to 
the 2000 Census two-bedroom, standard-quality median rent for the FMR 
Area.
    In ACS-2 FMR areas, the 2000 Census-to-2005 ACS update factor is 
either: (1) the ratio of the 2005 ACS two-bedroom, standard-quality 
median rent to the 2000 Census two-bedroom, standard-quality median 
rent for the CBSA containing the FMR Area, or (2) the ratio of the 2005 
ACS two-bedroom, standard-quality median rent to the 2000 Census two-
bedroom, standard-quality median rent for the entire state (or 
population-weighted average of states) containing the FMR area, 
whichever brings its 2005 updated rent closer to the value of its CBSA 
2005 updated rent.
    In ACS-3 FMR areas, the 2000 Census-to-2005 ACS update factor is 
the ratio of the 2005 ACS two-bedroom, standard-quality median rent to 
the 2000 Census two-bedroom, standard-quality median rent for the parts 
of the state not in ACS-1 or ACS-2 FMR areas; or the population-
weighted average factor across such parts of the states containing each 
multi-state FMR area. In cases where there are fewer than 200 sample 
cases of 2005 ACS two-bedroom, standard-quality median rents in the 
parts of the state not in ACS-1 or ACS-2 areas, HUD uses, as the update 
factor, the ratio of the 2005 ACS two-bedroom,

[[Page 55942]]

standard-quality median rent to the 2000 Census two-bedroom, standard-
quality median rent for the entire state containing the FMR area \1\.
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    \1\ For Final FY 2008 FMRs, HUD made one further adjustment to 
this update factor calculation. For sub-areas and MSAs that cross 
state lines (multi-state FMR areas), the population-weighted average 
factor is either the sub-area population-weighted average factor or 
the CBSA-wide population-weighted average factor, whichever brings 
the sub-area FMR closer to the CBSA FMR. This adjustment produces an 
increase in rents for Franklin County, AR; Gibson County, IN; 
Stewart County, TN; and Martinsburg, WV.
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    In ACS-4 FMR areas, the local 2005 ACS recent-mover rent becomes a 
new base rent for 2005, if the updated 2000 Census base rent is outside 
its 90 percent confidence interval and the recent-mover median rent is 
greater than the local standard-quality median rent. This means that 
the ACS is used to replace the updated 2000 base rent with a 2005 local 
ACS base rent.

B. Data Sources--Legacy RDDs

    The Department regularly obtains additional rent survey data to 
update the FMRs in the form of RDD telephone rent surveys meeting the 
Department's statistical criteria for updating FMRs. HUD conducted 
numerous RDD surveys between 2001 and 2005, and also accepted a number 
of non-HUD RDD surveys to update FMRs during this time period. Since 
these RDDs were performed according to the FMR area geography in place 
at the time, they may not provide usable coverage of FY2008 FMR areas. 
RDD surveys performed between 2001 and 2005 are used to update or 
replace 2000 Census base rents in ACS-2 and ACS-3 FMR areas under the 
following conditions (in ACS-1 and ACS-4 FMR areas, the ACS results are 
deemed superior to legacy RDD results, and legacy RDDs are not 
evaluated \2\):
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    \2\ The results of certain special case RDDs performed in ACS-1, 
ACS-2, and ACS-4 areas that, for example, adjusted bedroom rent 
ratios derived from the 2000 Census, may still be used on a case-by-
case basis as noted in the FY2008 FMR Documentation System; see 
http://www.huduser.org/datasets/fmr/fmrs/index.asp?data-fmr08.
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     The RDD was the most recent RDD performed for the area.
     The RDD is ``Accepted,'' meaning the updated 2000 Census 
base rent for the RDD area (prorated to the RDD month) is outside the 
95 percent confidence interval of the RDD.
     If the Accepted RDD area covers at least 75 percent of the 
population of the FMR area, and the FMR area's population in the 
Accepted RDD area is at least 75 percent of the Accepted RDD area, the 
new base rent is the Accepted RDD result. If these conditions do not 
hold, the RDD is not used.
    FMR area base rents affected by Legacy RDDs from 2001 to 2005 are 
updated to 2005 using the prorated 2000 Census to 2005 ACS update 
factor (from the RDD month to June 2005) for the area.

C. FMR Updates from 2005 to 2006

    Local CPI data is used to move rents from June 2005 to the end of 
2006 for FMR areas with at least 75 percent of their population within 
Class A metropolitan areas covered by local CPI data. Census region CPI 
data is used for FMR areas in Class B and C size metropolitan areas and 
in nonmetropolitan areas without local CPI update factors.

D. FMR Updates from 2006 to 2008

    The national 1990-to-2000 average annual rent increase trend of 3 
percent is applied for 1.25 years (from December 2006 through April 
2008).

E. Additional Rent Surveys and Other Data

    Post-2005 RDDs are evaluated against the 2005 ACS-based rent 
trended to the RDD month by the appropriate proportion (root) of the 
2005-to-2008 update factors. For example, if the RDD was conducted in 
August 2006, then the appropriate root (14/18) of the 2005-to-2006 CPI-
based update is used to update the 2005 ACS rent. If the RDD was 
conducted in February 2007, then the entire CPI update factor is 
applied to the 2005 rent, and the appropriate root (2/15) of the 
December 2006-to-April 2008 update is applied. If the updated 2005 rent 
is outside the 95 percent confidence interval of the RDD, then the RDD 
is ``Accepted.'' Accepted RDD results are trended to April 2008 using 
the remainder of the 2005-to-2008 update factors.
    The FMR bonuses related to the impact of Hurricane Katrina for 
Baton Rouge and New Orleans, which were first applied on March 6, 2006, 
are proposed to continue to be applied in the FY2008 FMRs. The 2005 ACS 
was conducted largely before the impact of Katrina, in particular its 
effects on the rental market, could be detected in the survey. Because 
the ACS indicates that the 2000-to-2005 FMR update factors for these 
areas should be lower than for other data sources used in FY2007 and 
earlier FMRs, HUD is adjusting the bonus percentages to 15 percent in 
Baton Rouge and 35 percent in New Orleans, since subsequent research 
shows that the tight rental market conditions in both areas indicate 
that FMRs should not be reduced.
    The area-specific data and computations used to calculate proposed 
FY2008 FMRs and FMR area definitions can be found at: http://www.huduser.org/datasets/fmrs/fmrs/index.asp?data=fmr08.

F. Large Bedroom Rents

    FMR estimates are calculated for two-bedroom units. This, 
generally, is the most common size of rental units, and, therefore, the 
most reliable to survey and analyze. After each Decennial Census, rent 
relationships between two-bedroom units and other unit sizes are 
calculated and used to set FMRs for other units. This is done because 
it is much easier to update two-bedroom estimates and to use pre-
established cost relationships with other bedroom sizes than it is to 
develop independent FMR estimates for each bedroom size. This was last 
done using 2000 Census data. A publicly releasable version of the data 
file used that permits derivations of rent ratios is available at: 
http://www.huduser.org/datasets/fmr/CensusRentData/index.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 was made using 2000 Census data in 
establishing rent ratios 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. HUD's 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 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

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bedroom ratio determinations. The 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 (i.e., efficiency rents 
were not allowed to be higher than one-bedroom rents, and four-bedroom 
rents were not allowed to be lower than three-bedroom rents).
    For low-population, nonmetropolitan counties with small census 
samples for recent-mover rents, 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 the HUD standard of 200 two-bedroom, census-
tabulated observations.

V. Public Comments

    A total of 30 public comments were received on the proposed FY2008 
FMRs. The local Public Housing Agency (PHAs) for the Seattle-Bellevue, 
WA, FMR area conducted a survey that HUD found acceptable. The PHAs' 
survey, however, resulted in only a small increase over the FY2008 
proposed FMRs. A manufactured housing survey, also conducted for the 
Seattle-Bellevue area and found acceptable, is discussed in the 
following section.
    Comments with data were submitted concerning Santa Rosa, CA; 
Casper, WY; Grand Junction, CO; the Counties of Moffat and Rio Blanco 
in Colorado; Rock Springs, WY; and Martinsburg, WV. None of the data 
were sufficient to determine new FMRs. Three towns in Southern 
Connecticut also submitted data; however, data for those towns were 
found to be unacceptable. For data to be acceptable, there must be 
sufficient information (including local data and a full description of 
the rental housing survey methodology used) to justify any proposed 
changes. Changes may be proposed in all or any one or more of the unit-
size categories on the schedule. Recommendations and supporting data 
must reflect the rent levels that exist within the entire FMR area. The 
data must be statistically significant, and newspaper ads are 
specifically excluded. The qualifications on the acceptance of data and 
conducting statistically significant surveys were discussed in the 
preamble to the proposed FMRs and should be followed when providing 
comments.
    The National Association of Home Builders (NAHB) commended HUD for 
the use of FMR bonuses to help New Orleans and Baton Rouge continue its 
recovery from Hurricane Katrina. The NAHB also requested that HUD 
undertake RDD surveys for all areas with more than a 5 percent decrease 
in the FMR, a solution that HUD does not consider practical. HUD does 
not have the funds to survey all of these areas, and only two of the 
nine areas with decreases of more than 5 percent provided comments 
concerning their lower FMRs. There were several comments filed by 
Pittsburgh, PA, housing organizations, with some requesting a survey, 
but the FY2008 FMRs for Pittsburgh are based on the 2005 ACS local data 
for this area. This data shows that FMRs for Pittsburgh were 
overestimated in the past, and therefore, they have been lowered based 
on the 2005 ACS data. Okanogan County, WA, is the only other area to 
request a review of its decrease in FMRs and asked HUD to accept a 
simple survey conducted of its area, similar to one conducted and 
accepted in 2005. In reviewing this survey and the one conducted in 
2005, HUD discovered that it mistakenly did not apply the 2005 
survey.\3\ The effect of applying the 2005 survey is shown in these 
final FMRs, and results in an increase for the two-bedroom FMR.
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    \3\ During the process of reviewing the 2005 Okanogan County, 
WA, survey, HUD found two additional private surveys that had not 
been applied: Those for Kanabec County, MN, and Mille Lacs County, 
MN. Their surveys have now been applied and the final FY2008 FMRs 
reflect these increases.
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    The NAHB disagreed with HUD's use of a substandard unit proxy set 
at the 75th percentile of public housing units, and instead recommended 
increasing this to the 95th percentile. It should be noted that HUD did 
not arbitrarily establish the cutoff at the 75th percentile of the 
regional public housing rent. It chose this level based on assisted 
housing data from the AHS. Instituting a 95th percentile of the 
regional public housing rent would be arbitrary, unlike the current 
standard.
    Burlington County, NJ, while noting that it has historically been 
part of the Philadelphia-Camden-Wilmington, PA-NJ-DE, MSA, requested a 
change in its geographic definition to make it part of markets to the 
north in New Jersey. It claimed that its rents are higher than those in 
the Philadelphia metropolitan area. HUD would not be able to make this 
change in geographic definition. This is because HUD's FMR areas must 
follow the metropolitan area definitions as determined by OMB, which 
are based on commuting patterns. If there is such a rent disparity 
between Burlington County, NJ, and the rest of the Philadelphia 
metropolitan area, Burlington County, NJ, may qualify for an exception 
rent of up to 120 percent of the FMR or more. Procedures for requesting 
exception rents are outlined at http://www.hud.gov/offices/pih/publications/notices/02/pih2002-20.pdf and in the regulations at 24 CFR 
982.503(c). HUD field offices have the authority to increase payment 
standards up to 120 percent above published FMR levels, and should be 
contacted to pursue this approach. Requests for exceptions above 120 
percent of published FMRs have additional requirements specified in the 
referenced HUD notice and regulations.
    The Mansfield Housing Authority, representing three towns in 
southern Connecticut that are part of the Hartford-West Hartford-East 
Hartford, CT, MSA, also requested higher FMRs, but may also qualify for 
exception rents. The information on rents provided by the PHA could not 
be used as a basis for higher FMRs because such data must be 
representative of the entire metropolitan area. Also, because a valid 
survey was not conducted, the information on rents also could not be 
used to determine an exception rent for the three towns. Nevertheless, 
these three areas could look into using the 2000 Census median rents if 
they qualify for exception rents over 110 percent of the FMR.
    The Housing Authority of the City of Alameda, CA, appears to also 
have a concern about its geographic definition. Alameda asserts that 
the change in the geographic definition in FY2006 has resulted in a 
dilution of the FMR below what it would have been without the inclusion 
of former nonmetropolitan counties. This is not correct; the Oakland-
Fremont HMFA is comprised of the same two counties that were included 
in FY2005. Alameda City may consider the use of an exception payment 
standard to receive higher rents.
    Several comments were filed in support of higher FMRs for 
Transylvania County, NC. This nonmetropolitan county borders the 
metropolitan area of Asheville, NC, and even neighboring 
nonmetropolitan counties have higher rents. A survey was conducted of 
this area and supported an increase in the FMR. Another area requesting 
an FMR review and where HUD implemented an RDD survey was Kershaw 
County, SC, a

[[Page 55944]]

county that has been separated from the metropolitan area, Columbia, 
SC, and the disparity in the FMR has been significant. The survey, 
halted for cost considerations, was not showing an increase in the FMR. 
Baker County, FL, has a situation that is similar to Kershaw County, 
SC: It is also a metropolitan county given its own rent because of the 
disparity with the rent for its metropolitan area, Jacksonville, FL. In 
this case, however, the rent and income disparity is significantly 
greater than for Kershaw County. To increase its rents, Baker County, 
FL, may be able to use the success rate payment standard, where the FMR 
is set between 90 percent and 110 percent of the 50th percentile rent 
(see 24 CFR 982.503(e)).
    Genesee County, MI (Flint, MI, MSA), also sounds like a candidate 
for the success rate standard payment program. The Michigan State 
Housing Development Authority noted that the approximately 3 percent 
decrease in the FMRs for Genesee County, MI (Flint, MI, MSA), would 
create many programmatic problems, including an increase in rent burden 
for the tenants, a decrease in landlord participation, reduction in 
deconcentration, difficulty in serving the elderly and disabled, and 
lower voucher leasing rates. A survey of rents is not requested by 
Genesee County, MI, and would not likely improve the FMR.
    The Oklahoma City Housing Authority brought up the issue of 
conducting ongoing and periodic RDD surveys for all FMR areas. In the 
past, HUD attempted to conduct surveys of all major metropolitan areas 
every 4 to 5 years. This is no longer possible, because RDD surveys 
have become more expensive as funding for these surveys has decreased 
and the ACS has eliminated the need to survey most large metropolitan 
areas. The PHA for Oklahoma City also requested a longer comment 
period.
    Casper, WY, and Rock Springs, WY, have filed comments for the past 
2 years suggesting that their FMRs are too low. Casper has been using 
the success rate payment standard program to increase its rents, and, 
even with the 10 percent increase in the FY2008 FMRs, does not believe 
the FMRs will be high enough to manage its program effectively. HUD is 
conducting field work to determine if an RDD is warranted. Rock Springs 
faces a tightening rental market as a result of the extensive natural 
gas development activity in the area, and claims the FMRs are too low. 
HUD will also consider a survey of this area, perhaps combined with 
other contiguous counties that may also be affected. ACS data on small 
areas will not be available for at least a year, and then it will be an 
aggregation of data from 2005 to 2007. Other areas in the Rocky 
Mountain region that commented on tightening rental markets include 
Grand Junction, Montrose County, Moffat County, and Rio Blanco County, 
all in Colorado. These areas will also be reviewed to determine if 
rents have increased and if they can be measured by an RDD survey. HUD 
carefully considers conducting surveys in tight markets, because 
historically there is a time lag between rental rate increases and an 
RDD survey's ability to effectively capture the changes. While most 
comments were concerned with the low FMRs, two comments, filed by the 
City and County of Honolulu, HI, and the Housing Authority of 
Owensboro, KY, requested significant reductions in their FY2008 FMRs. 
Honolulu stated that the increase in its FMR of 27 percent does not 
reflect the rental market for 2008, and requested an early review of 
its 50th percentile status, and requested that HUD conduct an RDD 
survey. Because Honolulu qualifies for a 50th percentile FMR, HUD 
cannot evaluate its progress for the 3-year period, as set forth in the 
regulations (see 24 CFR 888.113(c) (2)). An RDD survey will not be 
conducted. The FY2008 FMR is based on its own local recent-mover rents 
from the 2005 ACS survey, and this annual survey data will be available 
each year. To help manage its program, Honolulu may apply for an 
exception rent that is more than 90 percent below the FMR.
    Owensboro, KY, notes that the higher FMRs are not needed. It has 
short waiting lists for the voucher program, its tenants are not paying 
more than 30 percent of the median, and there is no shortage of 
affordable units. Unlike Honolulu, the FY2008 FMR is not 
``rebenchmarked'' to 2005 using its own rents from the ACS; Owensboro 
is updated to 2005 using state-level ACS data, so there is the 
possibility that its FMRs are too high and that it may benefit from a 
survey. The data provided by Owensboro was not statistically valid, but 
HUD will review the area to determine if an RDD survey is warranted. In 
the interim, Owensboro will have to seek relief by requesting exception 
rents below 90 percent of its FMR.

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. HUD modified manufactured home space FMRs for Seattle-
Bellevue, WA, based on survey data showing the 40th percentile 
manufactured home space rent (including the cost of utilities) for the 
entire FMR area.
    All approved exceptions to these rents that were in effect in 
FY2007 were updated to FY2008 using the same data used to estimate the 
Housing Choice Voucher program FMRs, so long as the respective FMR 
area's definition remained the same. 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. Areas with definitional 
changes that previously had exceptions to their manufactured housing 
space rental FMRs are requested to submit new surveys to justify 
higher-than-standard space rental FMRs, if they believe higher space 
rental allowances are needed.

VII. HUD Rental Housing Survey Guides

    For the supporting data, HUD recommends the use of professionally 
conducted RDD telephone surveys to test the accuracy of FMRs, for areas 
where there is a sufficient number of Section 8 units to justify the 
survey cost of approximately $35,000. Areas with 2,000 or more program 
units usually meet this cost criterion, and areas with fewer units may 
meet it if actual rents for two-bedroom units are significantly 
different from the FMRs proposed by HUD. In addition, HUD has developed 
a version of the RDD survey methodology for smaller, nonmetropolitan 
PHAs. This methodology is designed to be simple enough to be done by 
the PHA itself, rather than by professional survey organizations, and 
at a cost of $5,000 or less.
    PHAs in nonmetropolitan areas may, in certain circumstances, 
conduct surveys of groups of counties. HUD must approve all county-
grouped surveys in advance. PHAs are cautioned that the resulting FMRs 
will not be identical for the counties surveyed. Each individual FMR 
area will have a separate FMR based on the relationship of rents in 
that area to the combined rents in the cluster of FMR areas. In 
addition, PHAs are advised that counties where FMRs are based on the

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combined rents in the cluster of FMR areas will not have their FMRs 
revised, unless the grouped-survey results show a revised FMR above the 
combined rent level.
    PHAs that plan to use the RDD survey technique should obtain a copy 
of the appropriate survey guide. Larger PHAs should request HUD's 
survey guide entitled ``Random Digit Dialing Surveys; A Guide to Assist 
Larger Public Housing Agencies in Preparing Fair Market Rent 
Comments.'' Smaller PHAs should obtain the guide entitled ``Rental 
Housing Surveys: A Guide to Assist Smaller Public Housing Agencies in 
Preparing Fair Market Rent Comments.'' These guides are available from 
HUD USER at HUD's Web site, in Microsoft Word format, at the following 
address: http://www.huduser.org/datasets/fmr.html.
    Other survey methodologies are acceptable in providing data to 
support comments, if the survey methodology can provide statistically 
reliable, unbiased estimates of the gross rent. Preferably, survey 
samples 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 to be statistically representative of the entire rental housing 
stock of the FMR area. Surveys must include units at all rent levels 
and be representative by structure type (including single-family, 
duplex, and other small rental properties), age of housing unit, and 
geographic location. The Decennial Census should be used as a means of 
verifying if a sample is representative of the FMR area's rental 
housing stock.
    Most surveys of FMR areas cover only one- and two-bedroom units. If 
the survey is statistically acceptable, HUD will estimate FMRs for 
other bedroom sizes using ratios based on the Decennial Census. A PHA 
or contractor that cannot obtain the recommended number of sample 
responses, after reasonable efforts, should consult with HUD before 
abandoning its survey; in such situations, HUD may find it appropriate 
to relax normal sample size requirements.
    HUD will consider increasing manufactured home space FMRs where 
public comment demonstrates that 40 percent of the two-bedroom FMR is 
not adequate. In order to be accepted as a basis for revising the 
manufactured home space FMRs, comments must include a pad rental survey 
of the mobile home parks in the area, identify the utilities included 
in each park's rental fee, and provide a copy of the applicable public 
housing authority's utility schedule.
    Accordingly, the Fair Market Rent Schedules, which will not be 
codified in 24 CFR Part 888, are amended as follows:

    Dated: September 24, 2007.
Darlene F. Williams,
Assistant Secretary for Policy, Development and Research.

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. The 
FY2008 FMRs reflect a change in metropolitan area definitions. HUD is 
using the metropolitan Core Based Statistical Areas (CBSA), which are 
made up of one or more counties, as defined by the OMB, with some 
modifications. HUD is generally assigning separate FMRs to the 
component counties of CBSA Micropolitan Areas.
    b. Modifications to OMB Definitions--In keeping with OMB guidance, 
the estimation procedure for the FY2008 FMRs incorporates the current 
OMB definitions of metropolitan areas based on the CBSA standards, as 
implemented with 2000 Census data, but makes adjustments to the 
definitions to separate subparts of these areas where FMRs or median 
incomes 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 in the future 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 area 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 1999-definition MSAs/PMSAs, metropolitan 
counties deleted from 1999-definition MSAs/PMSAs by HUD for FMR 
purposes, and counties and county parts outside of 1999-definition 
MSAs/PMSAs referred to as nonmetropolitan 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 the MSA 2000 Census Base Rent (i.e., 
by at most 95 percent or at least 105 percent), or when the 2000 Census 
Median Family Income for the sub-area differs by at least 5 percent 
from the MSA 2000 Census Median Family Income. MSA sub-areas, and the 
remaining portions of MSAs after sub-areas have been determined, are 
referred to as HUD Metro FMR Areas (HMFAs), to distinguish such 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 Schedule B.
2. Bedroom Size Adjustments
    Schedule B shows the FMRs for zero-bedroom through four-bedroom 
units. The FMRs for unit sizes larger than four bedrooms are calculated 
by adding 15 percent to the four-bedroom FMR for each extra bedroom. 
For example, the FMR for a five-bedroom unit is 1.15 times the four-
bedroom FMR, and the FMR for a six-bedroom unit is 1.30 times the four-
bedroom FMR. FMRs for single-room-occupancy (SRO) units are 0.75 times 
the zero-bedroom FMR.
3. Arrangement of FMR Areas and Identification of Constituent Parts
    a. The FMR areas in Schedule B are listed alphabetically by 
metropolitan FMR area and by nonmetropolitan county within each state. 
The exception rents for manufactured home spaces FMRs are listed 
alphabetically in Schedule D.
    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. 07-4801 Filed 9-28-07; 8:45 am]
BILLING CODE 4210-67-C