[Federal Register Volume 74, Number 217 (Thursday, November 12, 2009)]
[Notices]
[Pages 58305-58306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-27340]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5362-N-01]


Notice of Certain Operating Cost Adjustment Factors for 2010

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

ACTION: Notice.

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SUMMARY: This notice establishes, for 2010, operating cost adjustment 
factors (OCAFs). OCAFs are annual factors used to adjust Section 8 
rents renewed under section 524 of the Multifamily Assisted Housing 
Reform and Affordability Act of 1997 (MAHRA).

DATES: Effective Date: February 11, 2010.

FOR FURTHER INFORMATION CONTACT: Charles Capone, Director, Office of 
Evaluation, Office of Housing, Department of Housing and Urban 
Development, 451 7th Street, SW., Washington, DC 20410; telephone 
number 202-402-3237 (this is not a toll-free number). Hearing- or 
speech-impaired individuals may access this number through TTY by 
calling the toll-free Federal Information Relay Service at 800-877-
8339.

SUPPLEMENTARY INFORMATION:

I. OCAFs

    Section 514(e)(2) of MAHRA requires HUD to establish guidelines for 
rent adjustments based on an OCAF. The statute 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.
    LIHPRHA projects are low-income housing projects insured by the 
Federal Housing Administration (FHA). LIHPRHA projects are primarily 
low-income housing projects insured under section 221(d)(3) below-
market interest rate (BMIR) and section 236 of the National Housing 
Act, respectively. Both categories of projects have low-income use 
restrictions that have been extended beyond the 20-year period 
specified in the original documents, and both categories of projects 
also receive assistance under section 8 of the U.S. Housing Act of 1937 
to support the continued low-income use.
    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.'' Contract rents are adjusted by applying the OCAF to that 
portion of the rent attributable to operating expenses exclusive of 
debt service.
    HUD calculates 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, 2007 and July 31, 2009. 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 2010 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. Finally, due to 
limited data, Puerto Rico data was used to generate OCAFs for the 
Virgin Islands.
    The Department continues to reexamine the methodology for computing 
the operating cost adjustment factors so that they more closely mirror 
actual operating expenses. Future OCAF releases will likely include 
methodology improvements.

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 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 restructuring plan and those for 
which the owner does not request such 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 (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

[[Page 58306]]

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)) requires 
that future rent adjustments for LIHPRHA projects be made by applying 
an annual factor, to be determined by HUD 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).

Catalog of Federal Domestic Assistance Number

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

    Dated: October 15, 2009.
David H. Stevens,
Assistant Secretary for Housing--Federal Housing Commissioner.

Appendix

               Operating Cost Adjustment Factors for 2010
                          [U.S. Average: 4.7%]
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Alabama.........................................................     4.5
Alaska..........................................................    11.0
Arizona.........................................................     4.3
Arkansas........................................................     5.3
California......................................................     4.3
Colorado........................................................     3.0
Connecticut.....................................................     8.2
Delaware........................................................     5.7
District of Columbia............................................     5.2
Florida.........................................................     1.8
Georgia.........................................................     5.7
Hawaii..........................................................     7.5
Idaho...........................................................     4.5
Illinois........................................................     4.6
Indiana.........................................................     4.1
Iowa............................................................     6.0
Kansas..........................................................     3.9
Kentucky........................................................     5.8
Louisiana.......................................................     3.7
Maine...........................................................     6.3
Maryland........................................................     5.0
Massachusetts...................................................     5.6
Michigan........................................................     3.8
Minnesota.......................................................     5.3
Mississippi.....................................................     4.7
Missouri........................................................     3.9
Montana.........................................................     3.2
Nebraska........................................................     2.3
Nevada..........................................................     5.1
New Hampshire...................................................     5.7
New Jersey......................................................     5.5
New Mexico......................................................     6.4
New York........................................................     5.4
North Carolina..................................................     4.1
North Dakota....................................................     6.6
Ohio............................................................     5.4
Oklahoma........................................................     4.7
Oregon..........................................................     3.2
Pacific Islands.................................................     7.5
Pennsylvania....................................................     4.1
Puerto Rico.....................................................     4.6
Rhode Island....................................................     5.2
South Carolina..................................................     4.1
South Dakota....................................................     3.5
Tennessee.......................................................     3.6
Texas...........................................................     5.5
Utah............................................................     5.1
Vermont.........................................................     4.1
Virgin Islands..................................................     4.6
Virginia........................................................     5.1
Washington......................................................     3.9
West Virginia...................................................     2.2
Wisconsin.......................................................     7.1
Wyoming.........................................................     7.1
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[FR Doc. E9-27340 Filed 11-10-09; 8:45 am]
BILLING CODE 4210-67-P