[Federal Register Volume 72, Number 206 (Thursday, October 25, 2007)]
[Notices]
[Pages 60688-60690]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-21020]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5103-N-02]


Notice of Certain Operating Cost Adjustment Factors for 2008

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Publication of the 2008 Operating Cost Adjustment Factors 
(OCAFs) for in some instances adjusting and in others establishing 
Section 8 rents under the Multifamily Assisted Housing Reform and 
Affordability Act of 1997 (MAHRA), as amended, and under the Low-Income 
Housing Preservation and Resident Homeownership Act of 1990 (LIHPRHA) 
Projects assisted with Section 8 Housing Assistance Payments.

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SUMMARY: This notice establishes annual factors used in calculating 
renewal rents and rent adjustments under certain provisions of MAHRA 
and LIHPRHA.

DATES: Effective Date: February 11, 2008.

FOR FURTHER INFORMATION CONTACT: Judith May, Director, Office of 
Evaluation, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Washington, DC 20410; telephone (202) 402-3239 (this is 
not a toll-free number). Hearing or speech-impaired individuals may 
access this number via TTY by calling the toll-free Federal Information 
Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

[[Page 60689]]

I. Operating Cost Adjustment Factors (OCAFs)

    Section 514(e)(2) of MAHRA requires HUD to establish guidelines for 
rent adjustments based on an operating cost adjustment factor (OCAF). 
The legislation requiring HUD to establish OCAFs for LIHPRHA projects 
and projects with contract renewals or adjustments under section 524 of 
MAHRA is similar in wording and intent. HUD has therefore developed a 
single factor to be applied uniformly to all projects utilizing OCAFs 
as the method by which renewal rents are established or adjusted.
    Additionally, MAHRA gives HUD broad discretion in setting OCAFs--
referring, for example, in sections 524(a)(4)(C)(i), 524(b)(1)(A), 
524(b)(3)(A) and 524(c)(1) simply to ``an operating cost adjustment 
factor established by the Secretary.'' The sole limitation to this 
grant of authority is a specific requirement in each of the foregoing 
provisions that application of an OCAF ``shall not result in a negative 
adjustment.'' OCAFs are to be applied uniformly to all projects 
utilizing OCAFs as the method by which rents are established or 
adjusted. OCAFs are applied to project contract rent less debt service.
    In prior years, HUD developed OCAFs by combining price change 
indices for nine categories of project operating costs derived mostly 
from national data--only three of the nine price change indices were 
available at the state level. Furthermore, several of the price indices 
used to develop past OCAFs were indirect measures of project operating 
costs. For FY 2008, HUD has decided to develop OCAFs from the most 
current actual project operating cost data at the state level, and this 
eliminates the need to break the costs into categories and to rely on 
national data which serve as surrogate measures for project operating 
costs.
    Extensive research into the OCAF methodology determined that HUD's 
administrative data provides the best source of data detailing the 
operating costs experienced by properties submitting financial 
statement reports to HUD. Therefore, in order to more closely align 
OCAFs with actual changes in operating expenses as reported to HUD by 
those properties filing Annual Financial Statement (AFS) data, HUD is 
using the AFS information as the basis for FY 2008 OCAFs.
    Specifically, HUD calculated the average, per unit, change in 
operating costs (excluding debt service and bad debt expense), by 
state, for all projects submitting consecutive valid financial 
statement reports with Fiscal Year end dates between July 31, 2005 and 
July 31, 2007. The projects comprise all multifamily properties 
excluding nursing homes and hospitals. Furthermore, data for projects 
with unusually high or low expenses due to unusual circumstances were 
deleted from the analysis. These changes in actual operating costs 
experienced by properties within HUD's portfolio have become the FY 
2008 OCAFs.
    OCAFs continue to be published at the state level. States are the 
lowest level of geographical aggregation at which there are enough 
projects to permit statistically reliable analysis. Additionally, no 
data were available for the Western Pacific Islands. Data for Hawaii 
was therefore used to generate OCAFs for these areas.

II. MAHRA and LIHPRHA OCAF Procedures

    MAHRA, as amended, created the Mark-to-Market Program to reduce the 
cost of Federal housing assistance, enhance HUD's administration of 
such assistance, and to ensure the continued affordability of units in 
certain multifamily housing projects. Section 524 of MAHRA authorizes 
renewal of Section 8 project-based assistance contracts for projects 
without Restructuring Plans under the Mark-to-Market Program, including 
projects that are not eligible for a Plan and those for which the owner 
does not request a Plan. Renewals must be at rents not exceeding 
comparable market rents except for certain projects. As an example, for 
Section 8 Moderate Rehabilitation projects, other than single room 
occupancy projects (SROs) under the McKinney-Vento Homeless Assistance 
Act (McKinney Act, 42 U.S.C. 11301 et seq.), that are eligible for 
renewal under section 524(b)(3) of MAHRA, the renewal rents are 
required to be set at the lesser of: (1) The existing rents under the 
expiring contract, as adjusted by the OCAF; (2) fair market rents (less 
any amounts allowed for tenant-purchased utilities; or (3) comparable 
market rents for the market area.
    LIHPRHA (see, in particular, section 222(a)(2)(G)(i), 12 U.S.C. 
4112 (a)(2)(G) and the regulations at 24 CFR 248.145(a)(9)) require 
that future rent adjustments for LIHPRHA projects be made by applying 
an annual factor to be determined by the Secretary to the portion of 
project rent attributable to operating expenses for the project and, 
where the owner is a priority purchaser, to the portion of project rent 
attributable to project oversight costs.

III. Findings and Certifications

Environmental Impact

    This issuance sets forth rate determinations and related external 
administrative requirements and procedures that do not constitute a 
development decision affecting the physical condition of specific 
project areas or building sites. Accordingly, under 24 CFR 50.19(c)(6), 
this notice is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Executive Order 13132, Federalism

    This final rule does not have federalism implications and does not 
impose substantial direct compliance costs on state and local 
governments or preempt state law within the meaning of Executive Order 
13132 (entitled ``Federalism'').

Catalog of Federal Domestic Assistance Number

    The Catalog of Federal Domestic Assistance Number for this program 
is 14.187.

    Dated: October 17, 2007.
Brian D. Montgomery,
Assistant Secretary for Housing--Federal Housing Commissioner.

Appendix--Operating Cost Adjustment Factors for 2008

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                                                                Percent
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ALABAMA.....................................................         5.0
ALASKA......................................................         3.9
ARIZONA.....................................................         6.8
ARKANSAS....................................................         6.8
CALIFORNIA..................................................         5.3
COLORADO....................................................         2.7
CONNECTICUT.................................................         3.5
DELAWARE....................................................         8.2
DIST. OF COLUMBIA...........................................         6.8
FLORIDA.....................................................         7.0
GEORGIA.....................................................         3.5
HAWAII......................................................         9.2
IDAHO.......................................................         6.1
ILLINOIS....................................................         3.4
INDIANA.....................................................         2.6
IOWA........................................................         3.7
KANSAS......................................................         3.8
KENTUCKY....................................................         3.6
LOUISIANA...................................................         5.7
MAINE.......................................................         8.0
MARYLAND....................................................         4.3
MASSACHUSETTS...............................................         4.7
MICHIGAN....................................................         2.8
MINNESOTA...................................................         0.5
MISSISSIPPI.................................................         5.7
MISSOURI....................................................         2.9
MONTANA.....................................................         3.4
NEBRASKA....................................................         1.8
NEVADA......................................................         7.3
NEW HAMPSHIRE...............................................         3.0
NEW JERSEY..................................................         4.6
NEW MEXICO..................................................         1.5
NEW YORK....................................................         2.7

[[Page 60690]]

 
N. CAROLINA.................................................         4.8
N. DAKOTA...................................................         1.6
OHIO........................................................         2.6
OKLAHOMA....................................................         4.2
OREGON......................................................         3.3
PENNSYLVANIA................................................         3.6
RHODE ISLAND................................................         3.2
S. CAROLINA.................................................         5.5
S. DAKOTA...................................................         2.2
TENNESSEE...................................................         3.7
TEXAS.......................................................         5.1
UTAH........................................................         2.2
VERMONT.....................................................         0.9
VIRGINIA....................................................         5.3
WASHINGTON..................................................         6.0
W. VIRGINIA.................................................         3.1
WISCONSIN...................................................         3.2
WYOMING.....................................................         5.2
PACIFIC ISLANDS.............................................         9.2
PUERTO RICO.................................................         7.4
VIRGIN ISLANDS..............................................         6.6
U.S. AVERAGE................................................         4.1
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 [FR Doc. E7-21020 Filed 10-24-07; 8:45 am]
BILLING CODE 4210-67-P