[Federal Register Volume 75, Number 149 (Wednesday, August 4, 2010)]
[Notices]
[Pages 46958-47024]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19084]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5430-N-01]


Proposed Fair Market Rents for the Housing Choice Voucher Program 
and Moderate Rehabilitation Single Room Occupancy Program Fiscal Year 
2011

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

ACTION: Notice of Proposed Fiscal Year (FY) 2011 Fair Market Rents 
(FMRs).

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SUMMARY: Section 8(c)(1) of the United States Housing Act of 1937 
(USHA) requires the Secretary to publish FMRs periodically, but not 
less than annually, adjusted to be effective on October 1 of each year. 
Today's notice proposes FMRs for FY 2011 to be used to determine 
payment standard amounts for the Housing Choice Voucher (HCV) program, 
to determine initial renewal rents for some expiring project-based 
Section 8 contracts, and to determine initial rents for Housing 
Assistance Payment (HAP) contracts in the Moderate Rehabilitation 
Single Room Occupancy program. Other programs may require use of FMRs 
for other purposes.
    The proposed FY 2011 FMR areas are based on current Office of 
Management and Budget (OMB) metropolitan area definitions and include 
HUD modifications that were first used in the determination of FY 2006 
FMR areas. Changes to the OMB metropolitan area definitions through 
December 2009 are incorporated. The principal city for three 
metropolitan areas changed, which resulted in a code change. In Alaska, 
there was a name change for a nonmetropolitan borough and two boroughs 
in Alaska were divided to make four new boroughs.\1\ Proposed FY 2011 
FMRs are based on 2000 Census data updated using more current survey 
data. For FY 2011, FY 2010 FMRs are updated using 2008 American 
Community Survey (ACS) data, and more recent Consumer Price Index (CPI) 
rent and utility indexes. HUD continues to use ACS data in different 
ways based upon the number of two-bedroom standard-quality and recent-
mover sample cases that are available in the FMR area or its Core-Based 
Statistical Area (CBSA).
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    \1\ The three metropolitan areas are: North Port-Bradenton-
Sarasota, FL MSA, Crestview-Fort Walton Beach-Destin, FL MSA, and 
Steubenville-Weirton, OH-WV MSA. In Alaska, Prince of Wales-
Ketchikan Census Area, AK is changed to Prince of Wales-Hyder Census 
Area, AK; the Alaskan borough of Skagway-Hoonah-Angoon is divided 
into Skagway and Hoonah-Angoon boroughs; and the Alaskan borough of 
Wrangell-Petersburg is divided into Wrangell and Petersburg 
boroughs.
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    This notice also proposes Small Area FMRs for the Dallas, TX HUD 
Metro FMR Area in accordance with a Federal Register Notice published 
May 18, 2010, (75 FR27808) announcing a Small Area FMR Demonstration 
project.

DATES: Comment Due Date: 30 days after publication.

ADDRESSES: Interested persons are invited to submit comments regarding 
HUD's estimates of the FMRs, as published in this notice, to the Office 
of General Counsel, Rules Docket Clerk, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Room 10276, Washington, DC 20410-
0001. Communications should refer to the above docket number and title 
and should contain the information specified in the ``Request for 
Comments'' section.
    Submission of Hard Copy Comments. To ensure that the information is 
fully considered by all of the reviewers, each commenter who is 
submitting hard copy comments, by mail or hand delivery, is requested 
to submit two copies of its comments to the address above, one 
addressed to the attention of the Rules Docket Clerk and the other 
addressed to the attention of Economic and Market

[[Page 46959]]

Analysis Division staff in the appropriate HUD field office. Due to 
security measures at all federal agencies, submission of comments by 
mail often results in delayed delivery. To ensure timely receipt of 
comments, HUD recommends that any comments submitted by mail be 
submitted at least 2 weeks in advance of the public comment deadline.
    Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
http://www.regulations.gov website can be viewed by other commenters 
and interested members of the public. Commenters should follow 
instructions provided on that site to submit comments electronically.
    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
    Public Inspection of Comments. All comments and communications 
submitted to HUD will be available, without charge, for public 
inspection and copying between 8 a.m. and 5 p.m. weekdays at the above 
address. Due to security measures at the HUD Headquarters building, an 
advance appointment to review the public comments must be scheduled by 
calling the Regulations Division at 202-708-3055 (this is not a toll-
free number). Copies of all comments submitted are available for 
inspection and downloading at http://www.regulations.gov.

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/portal/datasets/fmr.html. FMRs are listed at the 40th or 50th percentile in Schedule B. 
For informational purposes, 40th percentile recent-mover rents for the 
areas with 50th percentile FMRs will be provided in the HUD FY 2011 FMR 
documentation system at http://www.huduser.org/portal/datasets/fmr/fmrs/index.asp?data=fmr11 and 50th percentile rents for all FMR areas 
will be published at http://www.huduser.org/portal/datasets/50per.html 
after publication of final FY 2011 FMRs.
    In addition to FMRs calculated across an entire metropolitan area, 
HUD will operate Small Area FMR demonstration projects for the HCV 
program in selected metropolitan areas. A copy of the Federal Register 
notice announcing this program can be accessed at http://www.huduser.org/portal/datasets/fmr/fmr2010f/Small_Area_FMRs.pdf. A 
system for looking up Small Area Rents based on Proposed FY2011 FMRs is 
available at http://www.huduser.org/portal/datasets/fmr/fmrs/index_sa.html.
    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 concerning further methodological 
explanations may be addressed to Marie L. Lihn or Peter B. Kahn, 
Economic and Market Analysis Division, Office of Economic Affairs, 
Office of Policy Development and Research, telephone 202-708-0590. 
Persons with hearing or speech impairments may access this number 
through TTY by calling the toll-free Federal Information Relay Service 
at 800-877-8339. (Other than the HUD USER information line and TDD 
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 geographic areas. In the HCV 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 
HCV 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 User page at http://www.huduser.org/datasets/fmr.html.  Federal Register notices also are 
available electronically from http://www.gpoaccess.gov/fr/index.html, 
the U.S. Government Printing Office Web site. Complete documentation of 
the methodology and data used to compute each area's proposed FY 2011 
FMRs is available at http://www.huduser.org/portal/datasets/fmr/fmrs/index.asp?data=fmr11.

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.
    HUD'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. Minimally qualified areas are reviewed each year unless not 
qualified to be reviewed. Areas are not qualified to be reviewed if 
they have been made a 50th percentile area within the last three years 
or have lost 50th percentile status for failure to de-concentrate 
within the last three years.
    For FY 2010 there are 17 areas using 50th percentile FMRs. None of 
these areas were evaluated for the FY 2011 FMRs because they have not 
completed 3 years of program participation since their last review, so 
all 17 areas will continue to use 50th percentile FMRs. Ten of these 
current 50th-percentile FMR areas will be up for review again in 
computation of the FY 2012 FMRs, and are listed below:

                 FY 2011 50th-Percentile FMR Areas Slated for Eligibility Evaluation in FY 2012
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Albuquerque, NM MSA.........................  Chicago-Joliet-Naperville, IL HMFA.\2\

[[Page 46960]]

 
Denver-Aurora, CO MSA.......................  Hartford-West Hartford-East Hartford,
                                              CT HMFA.
Houston-Baytown-Sugar Land, TX HMFA.........  Kansas City, MO-KS, HMFA.
Milwaukee-Waukesha-West Allis, WI MSA.......  North Port-Bradenton-Sarasota, FL MSA.
Richmond, VA HMFA...........................  Tacoma, WA HMFA.
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    The remaining 7 50th percentile FMR areas will complete three years 
in the program and be reviewed for the FY 2013 FMRs, as shown below:
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    \2\ HMFA stands for HUD Metropolitan FMR Area.

                 FY 2011 50th-Percentile FMR Areas Slated for Eligibility Evaluation in FY 2013
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Baltimore-Towson, MD MSA.....................  Fort Lauderdale, FL HMFA.
Grand Rapids-Wyoming, MI HMFA................  New Haven-Meriden, CT HMFA.
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD    Washington-Arlington-Alexandria,
 MSA.                                          DC-VA-MD HMFA.
West Palm Beach-Boca Raton, FL HMFA..........
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    In addition to these 17 50th percentile FMR areas, a new area, 
Bergen-Passaic, NJ HMFA, meets all of the criteria to be eligible to 
use 50th percentile FMRs, so for FY 2011 there are 18 50th percentile 
FMR areas. Under current regulations, Bergen-Passaic, NJ HMFA, will be 
in the 50th percentile program for three years and re-evaluated when 
the FY 2014 FMRs are being calculated.

III. FMR Methodology

    This section provides a brief overview of how the FY 2011 FMRs are 
computed. For complete information on how FMR areas are determined, and 
on how each area's FMRs are derived, see the online documentation at: 
http://www.huduser.org/portal/datasets/fmr/fmrs/index.asp?data=fmr11.
    The FY 2011 FMRs are based on current OMB metropolitan area 
definitions and standards that were first used in the FY 2006 FMRs. OMB 
changes to the metropolitan area definitions through December 2009 are 
incorporated. As of December 2009, there was a change in the principal 
city of three metropolitan areas that resulted in a code change. These 
three metropolitan areas are: North Port-Bradenton-Sarasota, FL MSA, 
Crestview-Fort Walton Beach-Destin, FL MSA, and Steubenville-Weirton, 
OH-WV MSA. In Alaska, there was a name change for a nonmetropolitan 
borough, from Prince of Wales-Ketchikan Census Area, AK to Prince of 
Wales-Hyder Census Area, AK; and two other Alaskan boroughs were 
divided, from Skagway-Hoonah-Angoon to Skagway and Hoonah-Angoon 
boroughs; and from Wrangell-Petersburg to Wrangell and Petersburg 
boroughs.

A. Data Sources--2000 Census, the American Community Survey, and the 
Consumer Price Index

    As in all post-FY 2006 FMR publications, FY 2011 FMRs start with 
base rents generated using Census 2000 long form survey data. They are 
updated with American Community Survey (ACS) data and Bureau of Labor 
Statistics Consumer Price Index (CPI) data. FY 2011 FMRs are FY 2010 
FMRs updated by replacing the CPI data used for FY 2010 FMRs with ACS 
2008 survey data and updated CPI data. Specifically, the FY 2010 rent 
(as of date: April, 2010) is deflated to June, 2007 by dividing it by 
18 months of CPI data representing June 2007 through December 2008 
inflation, and the usual 15 month trend factor. This June 2007 rent is 
the best rent estimate available using only ACS survey data available 
last year and eliminating all other update data. It is this rent that 
will be updated with additional ACS data and new CPI data.
    In order to preserve additional information gathered by HUD through 
random digit dialing (RDD) surveys, areas surveyed after June 2007 are 
updated separately, the details of which can be found at the Web site 
listed above.

B. Updates from 2007 to 2008--2008 ACS

    ACS survey data continues to be applied to areas based on the type 
of area (CBSA, metropolitan subarea, or non-metropolitan county), the 
amount of survey data available, and the reliability of the survey 
estimates. Both one- and three-year ACS 2008 data are used to update 
June 2007 rents. All areas are updated with the change from 2007 to 
2008 in state or metropolitan one-year standard quality median rents. 
HUD considered using the change in the three-year 2005-2007 ACS to 
three-year 2006-2008 ACS in place of the change from 2007 one-year ACS 
to 2008 one-year ACS, but the nature of the 3 year data mutes the 
effects of the more recent data, which HUD finds more important for 
achieving the objectives of the HCV program. So HUD used the change in 
ACS one year data from 2007 to 2008 for the update in all cases. 
Beginning with the FY 2010 FMRs, HUD tests these rent changes for 
statistical significance \3\
[GRAPHIC] [TIFF OMITTED] TN04AU10.001

    \3\ The change is considered statistically significant if Z > 
1.645 where (see equation above) and EST1 = ACS 2008 
Estimate, EST2 = ACS 2007 Estimate, 
SE1=Standard Error of Estimate 1 and 
SE2=Standard Error of Estimate 2.
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before applying them to the appropriate base rent. Any state- or 
metropolitan-level change that is not statistically significant is not 
applied. That is, the updated 2008 rent is the same as the 2007 rent if 
the applicable update factor does not represent a statistically 
significant change. HUD applied this test as a measure to minimize 
fluctuations in rents due to survey error. HUD uses metropolitan-level 
rent changes for CBSA areas and subareas that have more than 200 
standard quality sample cases in 2007 and 2008. All other areas are 
updated with state-level rent changes. For subareas, State and CBSA 
change factors continue to be selected based on which factor brings the 
subarea rent closer to the CBSA-wide rent. HUD updates subareas that 
have 200 or more local standard quality survey observations with their 
local area update factor.

[[Page 46961]]

    After all areas have been updated with a standard quality median 
rent change, HUD evaluates further local areas with estimates that 
reflect more than 200 one-year recent mover cases. If the updated rent 
is outside the confidence interval of the ACS recent mover estimate, 
the updated rent is replaced with the ACS recent mover rent estimate. 
In areas without 200 or more one-year ACS recent mover observations, 
but with 200 or more three-year ACS recent mover observations, HUD uses 
the three year estimate \4\ if it is statistically different from the 
updated 2008 rent based on the standard quality median rent change. 
This process estimates a June 2008 rent.
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    \4\ The recent mover estimate from the three year data includes 
all those who moved in the most recent 24 month period. That means 
that no 2006 survey data are included in this ``three-year'' recent 
mover classification and the likelihood of having a valid (with 200 
or more sample cases) three-year recent mover rent is lower for 
these estimates.
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C. Updates from 2008 to 2009

    ACS 2008 data updates the June 2007 rents used in the FY 2010 FMRs 
forward by 12 months to June 2008. HUD uses six months of 2008 and 12 
months of 2009 CPI rent and utilities price index data to update the 
June 2008 rents to the end of 2009. HUD uses Local CPI data for FMR 
areas with at least 75 percent of their population within Class A 
metropolitan areas covered by local CPI data. HUD uses Census region 
CPI data for FMR areas in Class B and C size metropolitan areas and 
nonmetropolitan areas without local CPI update factors.

D. Updates from 2009 to 2011

    The national 1990 to 2000 average annual rent increase trend of 3 
percent is applied to end-of-2009 rents for 15 months, to derive the 
proposed FY 2011 FMRs.
    The area-specific data and computations used to calculate proposed 
FY 2011 FMRs and FMR area definitions can be found at http://www.huduser.org/portal/datasets/fmr/fmrs/index.asp?data=fmr11.

E. Bedroom Rent Adjustments

    HUD calculates the primary FMR estimates for two-bedroom units. 
This is generally the most common size of rental units and, therefore, 
the most reliable to survey and analyze. After each Decennial Census, 
HUD calculates rent relationships between two-bedroom units and other 
unit sizes and uses them to set FMRs for other units. HUD does this 
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. HUD did the 
last update of bedroom-rent relationships using 2000 Census data. A 
publicly releasable version of the data file used for the derivations 
of rent ratios is available at http://www.huduser.org/portal/datasets/fmr/CensusRentData/index.html.
    HUD made adjustments using 2000 Census data to establish rent 
ratios for areas with local bedroom-size intervals above or below what 
are considered 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 that rent 
for more than typical one-bedroom units). HUD established bedroom 
interval ranges based on an analysis of the range of such intervals for 
all areas with large enough samples to permit accurate bedroom ratio 
determinations. These ranges are: efficiency FMRs are constrained to 
fall between 0.65 and 0.83 of the two-bedroom FMR; one-bedroom FMRs 
must be between 0.76 and 0.90 of the two-bedroom FMR; three-bedroom 
FMRs must be between 1.10 and 1.34 of the two-bedroom FMR; and four-
bedroom FMRs must be between 1.14 and 1.63 of the two-bedroom FMR. HUD 
adjusts bedroom rents for a given FMR area if the differentials between 
bedroom-size FMRs were inconsistent with normally observed patterns 
(i.e., efficiency rents are not allowed to be higher than one-bedroom 
rents and four-bedroom rents are not allowed to be lower than three-
bedroom rents).
    HUD further adjusts the rents for three-bedroom and larger units to 
reflect HUD's policy to set higher rents for these units than would 
result from using unadjusted 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.
    For low-population, nonmetropolitan counties with small 2000 Census 
samples of recent-mover rents, HUD uses Census-defined county group 
data to determine rents for each bedroom size. HUD made this adjustment 
to protect against unrealistically high or low FMRs due to insufficient 
sample sizes. The areas covered by this estimation method had less than 
the HUD standard of 200 two-bedroom, Census-tabulated observations.

IV. Manufactured Home Space Surveys

    The FMR used to establish payment standard amounts for the rental 
of manufactured home spaces in the HCV 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.
    All approved exceptions to these rents that were in effect in FY 
2010 were updated to FY 2011 using the same data used to estimate the 
Housing Choice Voucher program FMRs if the respective FMR area's 
definition remained the same. If the result of this computation was 
higher than 40 percent of the new 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 exception 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.

V. Methodology for Small-Area FMRs

    Use of metropolitan area-wide FMRs allows HUD's Section 8 Voucher 
Tenants access to different parts of a metropolitan area; however, 
because FMRs generally are set at the 40th percentile of the 
metropolitan rent distribution, certain neighborhoods may not have many 
units available in the FMR range. That is why HUD has an exception rent 
policy that allows payments standards to be set much higher (or much 
lower) than the FMR, but this policy is dependent on a showing of 
program need in terms of whether or not suitable housing is available. 
To make all of an FMR area accessible to our clients, HUD is 
researching ways to set FMRs at a more

[[Page 46962]]

granular level. Currently, HUD is proposing that small areas be defined 
by U.S. Postal Service ZIP codes, as the basis for publishing FMRs in 
metropolitan areas. For non-metropolitan areas, HUD would continue to 
use counties as the basis for publishing FMRs.
    The most recent data regarding rents, incomes and other socio-
economic information collected by the U.S. Census Bureau comes from the 
ACS. At this time, only one-year and three-year ACS tables are 
available. ACS five-year data are expected to have sufficient data at 
the Small Area level available to permit the calculation of 
statistically reliable FMRs for many ZIP codes in metropolitan areas. 
However, the first publication of five-year ACS data does not begin 
until the fourth quarter of 2010, so for the Small Area FMR 
Demonstration Projects, HUD must use a different data source; HUD will 
use data from the 2000 Decennial Census to estimate the rental rate 
relationship between the OMB-defined CBSA and each ZIP code within the 
given metropolitan area.\5\
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    \5\ Note that some ZIP Codes span metropolitan area boundaries 
so that a ZIP Code may contain parts of a metropolitan area and one 
(or more) nonmetropolitan county (counties), or part of another 
metropolitan CBSA. As in current FMR policy, nonmetropolitan 
counties would not be broken along ZIP code or any other lines under 
the Small-Area FMR policy. ZIP Codes that span more than one 
metropolitan CBSA would have different FMRs in each CBSA as they do 
under current metropolitan FMR policy.
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    Before a rental relationship can be determined, HUD first 
eliminates any records where there were zero occupied units for 
occupants paying cash rent. HUD then aggregates these rental 
distribution data for each CBSA and calculates a median (50th 
percentile) gross rent across all bedroom sizes. These CBSA median 
gross rents serve as the denominator in the rental rate relationship 
calculation. HUD then aggregates the rental distributions for each ZIP 
code within a given CBSA (ZIP codes can cross county boundaries; 
therefore, there may be multiple records for each ZIP code within a 
single CBSA, and HUD aggregates these multiple records). HUD calculates 
a median gross rent for each ZIP code (or ZIP code part for ZIP codes 
spanning CBSA boundaries). HUD restricts the use of ZIP code level 
median gross rents to those areas that have at least 1,000 cash rental 
unit observations.\6\
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    \6\ HUD anticipates that 1000 cash renter occupied units in the 
2000 Census will approximate statistically valid samples of rental 
units in the 5-year ACS tabulations.
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    HUD calculates the rental rate relationship in the following manner 
for those ZIP codes within the metropolitan area that have 1,000 or 
more cash rental units:

Rental Rate Ratio = Median Gross Rent for ZIP Code area/Median Gross 
Rent for CBSA

    The rental rate relationship is capped at 150 percent for areas 
that would otherwise be greater. If the ZIP code within the CBSA does 
not have 1,000 cash rental units, then the rental rate relationship is 
calculated as:
Rental Rate Ratio = Median Gross Rent STCO/Median Gross Rent of the 
CBSA
where STCO is the County within the State containing the ZIP Code.\7\ 
For metropolitan areas, FMRs will be calculated and published for each 
small area. HUD chose ZIP Codes because they localize rents, and a 
unit's ZIP Code is easily identified both by PHAs and by tenants.
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    \7\ For ZIP codes that cross county boundaries, the Median Gross 
Rent in the numerator is calculated as the rental unit weighted 
average of the Median Gross rents for each county containing the ZIP 
code.

    The individual ZIP-code-level two-bedroom FMR for each part of the 
FMR area is the product of the rental rate ratio and the two-bedroom 
FMR for that area's CBSA as calculated using methods employed for past 
metropolitan area FMR estimates and as specified in this Notice. HUD 
then compares this product to the state non-metropolitan minimum two-
bedroom rent for the state the area is located in and if the ZIP code 
rent determined using the rental rate ratio is less than the minimum, 
the ZIP code rent is set at the non-metropolitan minimum for that 
state. HUD estimates the relationship between two bedroom units and 
other bedroom sizes from decennial census data and then holds it 
constant until superseded by more recent data. HUD will calculate Small 
Area FMRs for other bedroom sizes based on the bedroom size 
relationships estimated for the large area of geography. HUD 
anticipates updating the bedroom rental rate ratios with the release of 
five-year ACS data (covering 2005 through 2009), and then once every 
five years when the five-year ACS sample is completely replaced.\8\ The 
final calculated rents are then rounded to the nearest $10.\9\
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    \8\ The current decennial data is not robust enough to lead us 
to believe that updating bedroom ratios on a more frequent basis 
would provide many changes. The current bedroom ratios are 
constrained by ranges that reflect the average relationship to the 
2-bedroom rent and for the 3-bedroom and 4-bedroom rents bonuses 
have been added to assist with the operation of the Section 8 
program.
    \9\ Calculation parameters such as the 150% cap and the rounding 
of Small Area FMRs to the nearest $10 were topics for public comment 
as requested in HUD's May 18, 2010 Federal Register Notice (75 FR 
27808). The comment period for that notice ended on July 19, 2010. 
The parameters listed in this notice may be changed subject to the 
comments filed in relation to the May 18, 2010 notice or based on 
the comments filed in response to this notice. As an example, the 
May 18, 2010 notice discussed rounding Small Area FMRs to the 
nearest $25; however, in response to comments, and further analysis 
by HUD, rounding to the nearest $10 is proposed in this notice.
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    Small Area FMRs for all metropolitan areas are available for 
viewing and download on the Internet at: http://www.huduser.org/portal/datasets/fmr.html. These have been updated using proposed FY 2011 FMRs 
as the basis and posted on the Web site. HUD is publishing proposed 
Small Area FMRs for the Dallas, TX HUD Metro FMR Area in this notice as 
HUD has determined that the Dallas area will be a participant in the 
Small Area FMR Demonstration project.

VI. Additional Participation in the Small Area FMR Demonstration 
Project

    Additional eligible PHAs may request participation in the Small 
Area Demonstration Project. To be eligible, the PHA or a group of PHAs 
must represent at least 80 percent of the Section 8 voucher tenants in 
a metropolitan area. Any PHA that is part of the Demonstration Project 
must use payment schedules based on these Small Area FMRs, beginning 
October 1, 2010 or when they are designated as a Small Area 
Demonstration Project in a subsequent Federal Register Notice. HUD 
assumes that the need for rent reasonableness studies will be reduced 
by using Small Area FMRs and is requesting information on rent 
reasonableness study results for Small Area FMR Demonstration Project 
areas. HUD is requesting that participating PHAs provide HUD with 
information on how long it takes tenants to find housing, and if this 
is less than the time spent when metropolitan FMRs were used; the 
distribution of tenants in areas above and below the metropolitan FMR; 
and the payment standards used for the Small Area FMRs. HUD would also 
request information on landlord actions in areas where the Small Area 
FMR is significantly lower or higher than the metropolitan FMR, and on 
tenants' interest in using vouchers in the new higher rent areas. HUD 
also would like to hear if the PHAs are experiencing any administrative 
issues.

VII. Request for Public Comments

    HUD seeks public comments on FMR levels for specific areas. 
Comments on FMR levels must include sufficient information (including 
local data and a full description of the rental housing

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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.
    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-$50,000. 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.
    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 
combined rents in the cluster of FMR areas will not have their FMRs 
revised unless the grouped survey results show a revised FMR 
statistically different from 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 on 800-245-2691, or from HUD's Web site, in Microsoft Word or 
Adobe Acrobat 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. 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. 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 cover only one- and two-bedroom units, which has 
statistical advantages. 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.
    While HUD is soliciting comments concerning the implementation of 
small area FMRs and the small area FMR Demonstration Project under 
Federal Register notice (75 FR 27808), comments may be filed under this 
notice on the small area FMRs for specific areas. HUD will publish a 
separate notice requesting volunteers for participation in a small area 
FMR Demonstration project. The forthcoming notice will include criteria 
for determining how volunteers will be selected. HUD is particularly 
interested in comments concerning the proposed small area FMRs in the 
Dallas, TX HMFA and any other area where commenters can show that the 
small area FMRs based on Proposed FY 2011 FMRs are substantially out of 
line with local area housing conditions.
    Accordingly, the Fair Market Rent Schedules, which will not be 
codified in 24 CFR part 888, are proposed to be amended as shown in the 
Appendix to this notice:

    Dated: July 29, 2010.
Jean Lin Pao,
General Deputy 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--Most FMRs are market-wide rent estimates 
that are intended to provide housing opportunities throughout the 
geographic area in which rental-housing units are in direct 
competition. HUD is using the metropolitan CBSAs, which are made up 
of one or more counties, as defined by the Office of Management and 
Budget (OMB), with some modifications. HUD is generally assigning 
separate FMRs to the component counties of CBSA Micropolitan Areas. 
FMRs in small area demonstration projects are specific to ZIP codes 
within a given Metropolitan area.
    b. Modifications to OMB Definitions-- Following OMB guidance, 
the estimation procedure for the FY 2011 proposed 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 subareas 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 MSAs) may be modified to 
allow for subarea 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 FY 2005 FMRs. Collectively they include 
1999-definition MSAs/Primary Metropolitan Statistical Areas (PMSAs), 
metro 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.) 
Subareas of MSAs are assigned their own FMRs when the subarea 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, or when the 2000 Census Median Family Income for the subarea 
differs by at least 5 percent from the MSA 2000 Census Median Family 
Income. MSA subareas, and the remaining portions of MSAs after 
subareas 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 Schedule B.

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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 FMRs for manufactured home spaces in Schedule D 
are listed alphabetically by state.
    b. The constituent counties (and New England towns and cities) 
included in each metropolitan FMR area are listed immediately 
following the listings of the FMR dollar amounts. All constituent 
parts of a metropolitan FMR area that are in more than one state can 
be identified by consulting the listings for each applicable state.
    c. Two nonmetropolitan counties are listed alphabetically on 
each line of the non-metropolitan county listings.
    d. The New England towns and cities included in a 
nonmetropolitan county are listed immediately following the county 
name.
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[FR Doc. 2010-19084 Filed 8-3-10; 8:45 am]
BILLING CODE 4210-67-C