[Federal Register Volume 77, Number 150 (Friday, August 3, 2012)]
[Notices]
[Pages 46447-46511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-18874]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5648-N-01]


Proposed Fair Market Rents for the Housing Choice Voucher Program 
and Moderate Rehabilitation Single Room Occupancy Program Fiscal Year 
2013

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

ACTION: Notice of Proposed Fiscal Year (FY) 2013 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. 
The primary uses of FMRs are to determine payment standards for the 
Housing Choice Voucher (HCV) program, to determine initial renewal 
rents for some expiring project-based Section 8 contracts, to determine 
initial rents for housing assistance payment contracts in the Moderate 
Rehabilitation Single Room Occupancy program, and to serve as rent 
ceilings in the HOME program. Today's notice provides proposed FY 2013 
FMRs for all areas that reflect the estimated 40th and 50th percentile 
rent levels trended to April 1, 2013. The FY 2013 FMRs are based on 
using 5-year, 2006-2010 data collected by the American Community Survey 
(ACS). These data are updated by one-year ACS data using areas where 
statistically valid one-year ACS data is available. The Consumer Price 
Index (CPI) rent and utility indexes are used to further update the 
data from 2010 to the end of 2011. HUD continues to use 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 its Core-
Based Statistical Area (CBSA).
    The proposed FY 2013 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; there have been no further metropolitan 
area definitions changes.
    The proposed FY 2013 FMRs in this notice reflect several updates to 
the methodology used to calculate FMRs. First, HUD has updated the 
bedroom ratios used to calculate 0, 1, 3 and 4 bedroom FMRs based on 
the 2 bedroom FMR. The new bedroom ratios are constructed using 2006-
2010 5-year ACS data. The methodology for calculating the bedroom 
ratios is very similar to the method used when the bedroom ratios were 
based on 2000 decennial census long-form data. Second, these FMRs 
reflect a new trend factor calculation methodology which HUD stated 
would be implemented in its proposed FY 2012 FMR publication on August 
19, 2011 (76 FR 52058). This trend factor is based on national gross 
rent data and will change annually.

DATES: Comment Due Date: September 4, 2012.

ADDRESSES: Interested persons are invited to submit comments regarding 
the proposed FMRs to the Regulations Division, Office of General 
Counsel, Department of Housing and Urban Development, 451 Seventh 
Street SW., Room 10276, Washington, DC 20410-0001. Communications must 
refer to the above docket number and title and should contain the 
information specified in the ``Request for Comments'' section. There 
are two methods for submitting public comments.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW., Room 10276, 
Washington, DC 20410-0500. Due to security measures at all federal 
agencies, however, submission of comments by mail often results in 
delayed delivery. To ensure timely receipt of comments, HUD recommends 
that comments submitted by mail be submitted at least two weeks in 
advance of the public comment deadline.
    2. 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 Web site can be viewed by other commenters 
and interested members of the public. Commenters should follow 
instructions

[[Page 46448]]

provided on that site to submit comments electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
rule.

    No Facsimile Comments. Facsimile (Fax) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available 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). Individuals with speech or hearing impairments 
may access this number through TTY by calling the Federal Relay Service 
at 800-877-8339. 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 USER 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 2013 FMR 
documentation system at http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr13 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 2013 FMRs.
    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 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. HUD's regulations at 
24 CFR 888.113 permit it to establish 50th percentile FMRs for certain 
areas.
    Electronic Data Availability: This Federal Register notice will be 
available electronically from the HUD User page at SUPPLEMENTARY 
INFORMATION: Federal Register notices also are available electronically 
from SUPPLEMENTARY INFORMATION: the U.S. Government Printing Office Web 
site. Complete documentation of the methodology and data used to 
compute each area's proposed FY 2013 FMRs is available at SUPPLEMENTARY 
INFORMATION: Proposed FY 2013 FMRs are available in a variety of 
electronic formats at http://www.huduser.org/portal/datasets/fmr.html. 
FMRs may be accessed in PDF format as well as in Microsoft Excel. Small 
Area FMRs based on proposed FY 2013 Metropolitan Area Rents are 
available in Microsoft Excel format at the same web address. Please 
note that these Small Area FMRs are for reference only, except where 
they are used by public housing agencies (PHAs) participating in the 
Small Area FMR demonstration.

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 \1\ 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.
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    \1\ As defined in 24 CFR 888.113(c), a minimally qualified area 
is an area with at least 100 census tracts where 70 percent or fewer 
of the census tracts with at least 10 two bedroom rental units are 
census tracts in which at least 30 percent of the two bedroom rental 
units have gross rents at or below the two bedroom FMR set at the 
40th percentile rent. This continues to be evaluated with 2000 
Decennial Census information. Although the 2006-2010 5-year ACS 
tract level data is available, HUD's administrative data on tenant 
locations (used in the calculation of concentration) has not yet 
been updated to use the 2010 Census Tract area definitions. Once 
this administrative data is updated, HUD will implement the 5-year 
ACS data as the basis for determining if areas are minimally 
qualified for 50th percentile status.
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    In FY 2012 there were 21 areas using 50th-percentile FMRs. Of these 
21 areas, 7 of them have completed three years of program participation 
and are due for re-evaluation. The following table lists these 7 areas.

FY 2012 50th-Percentile FMR Areas Reevaluated for Eligibility in FY 2013
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Baltimore-Towson, MD MSA......  Fort Lauderdale, FL HMFA.\2\

[[Page 46449]]

 
Grand Rapids-Wyoming, MI HMFA.  New Haven-Meriden, CT HMFA.
Philadelphia-Camden-            Washington-Arlington-Alexandria, DC-VA-
 Wilmington, PA-NJ-DE-MD MSA.    MD HMFA.
West Palm Beach-Boca Raton, FL
 HMFA.
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    Only 5 of the 7 areas up for re-evaluation will continue to be 
50th-percentile FMR areas:
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    \2\ HMFA stands for HUD Metropolitan FMR Area.

   FY 2012 50th-Percentile FMR Areas That Continue as 50th-Percentile
                    Areas, Next Evaluation in FY 2016
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Baltimore-Towson, MD MSA......  Fort Lauderdale, FL HMFA.
New Haven-Meriden, CT HMFA....  Philadelphia-Camden-Wilmington, PA-NJ-DE-
                                 MD MSA.
West Palm Beach-Boca Raton, FL
 HMFA.
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    The Washington-Arlington-Alexandria, DC-VA-MD HMFA did not 
deconcentrate and will not be eligible for evaluation for three years, 
until the FY 2016 FMRs are evaluated. Additionally, the Grand Rapids-
Wyoming, MI HMFA ``graduated'' from the 50th- percentile FMR program. 
This means that the concentration of HCV tenants is below what is 
required to be eligible for a 50th-percentile FMR. Under current 50th 
percentile regulations, the Grand Rapids-Wyoming, MI HMFA will be 
evaluated annually and may return to the program in the future.
    Of the remaining 14 50th-percentile FMR areas that were not 
eligible for review in FY 2013, only one area, Bergen-Passaic, NJ HMFA 
will complete three years in the program next year and be reviewed for 
the FY 2014 FMRs. Lastly, the Richmond, VA HUD Metro FMR Area, which 
graduated from the 50th percentile program in FY 2012, re-enters the 
program in FY 2013 and will next be evaluated in FY 2016.
    In summary, there will be 20 50th-percentile FMR areas in FY 2013. 
These areas are indicated by an asterisk in Schedule B, where all FMRs 
are listed by state.

III. FMR Methodology

    This section provides a brief overview of how the FY 2013 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/docsys.html&data=fmr13.
    The proposed FY 2013 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. There have been no area definition changes 
published by OMB since the publication of the FY 2012 FMRs; therefore, 
the FY 2013 area definitions are the same as those used in FY 2012. HUD 
anticipates that OMB will publish new area definitions in 2013. 
Depending on the timing of this release, HUD will incorporate the new 
area definitions into either the FY 2014 or FY 2015 proposed FMRs.

A. Base Year Rents

    The U.S. Census Bureau released standard tabulations of 5-year ACS 
data collected between 2006 through 2010 in December of 2011. For FY 
2013 FMRs, HUD used the 2006-2010 5-year ACS data to update the base 
rents set in FY 2012 using the 2005-2009 5-year ACS data.
    FMRs are historically based on gross rents for recent movers (those 
who have moved into their current residence in the last 24 months). 
However, due to the way the 5-year ACS data are constructed, HUD 
developed a new methodology for calculating recent-mover FMRs in FY 
2012. As in FY 2012, all areas are assigned as a base rent the 
estimated two-bedroom standard quality 5-year gross rent from the 
ACS.\3\ Because HUD's regulations mandate that FMRs must be published 
as recent mover gross rents, HUD continues to apply a recent mover 
factor to the standard quality base rents assigned from the 5-year ACS 
data. Calculation of the recent mover factor is described below.
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    \3\ For areas with a two-bedroom standard quality gross rent 
from the ACS that have a margin of error greater than the estimate 
or no estimate due to inadequate sample in the 2010 5-year ACS, HUD 
uses the two-bedroom state non-metro rent for non-metro areas.
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    No local area rent surveys were conducted in 2011 or 2012 by HUD or 
PHAs, but the surveys conducted in 2010, for Williamsport, PA and Pike 
County, PA continue to be applied.

B. Recent Mover Factor

    Following the assignment of the standard quality two-bedroom rent 
described above, HUD applies a recent mover factor to these rents. In 
preparation for calculating the Proposed FY 2013 FMRs, the Department 
reviewed the methodology for calculating the recent mover factor from 
the FY 2012 process and made several improvements. The primary change 
is that HUD no longer compares the standard quality gross rent to the 
recent mover gross rent to determine if the two statistics are 
significantly different.\4\ For the FY 2012 FMRs, if the two rents were 
determined to be statistically different the recent mover factor was 
calculated as the percentage increase of the recent mover gross rent 
over the standard quality gross rent. In cases where the two gross 
rents were not statistically different, the recent mover factor was set 
to one. As described below, HUD calculates a similar percentage 
increase as the FY 2013 factor using data from

[[Page 46450]]

the smallest geographic area containing the FMR area where the recent 
mover gross rent is statistically reliable.\5\ The following describes 
the process for determining the appropriate recent mover factor. The 
revised recent mover factor process results in 91 percent of FMR areas 
having a recent mover factor greater than one in FY 2013 compared to 
only 38 percent in FY 2012.
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    \4\ The statistical comparison test used, the z-test, assumes 
that the samples from which the 2 statistics are calculated are 
independent. Because recent mover responders are also part of the 
standard quality responders, the two samples are not independent.
    \5\ For the purpose of the recent mover factor calculation, 
statistically reliable is where the recent mover gross rent has a 
margin of error that is less than the estimate itself.
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    In general, HUD uses the 1 year ACS based two-bedroom statistically 
reliable recent mover gross rent estimate from the smallest geographic 
area encompassing the FMR area to calculate the recent mover factor. 
Some areas' recent mover factors will be calculated using data 
collected just for the FMR area. Other areas' recent mover factor will 
be based on larger geographic areas. For metropolitan areas that are 
sub-areas of larger metropolitan areas, the order is subarea, 
metropolitan area, state metropolitan area, and state. Metropolitan 
areas that are not divided follow a similar path from FMR area, to 
state metropolitan areas, to state. In nonmetropolitan areas the recent 
mover factor is based on the FMR area, the state nonmetropolitan area, 
or if that is not available, on the basis of the whole state. The 
recent mover factor is calculated as the percentage change between the 
5-year 2006-2010 two-bedroom gross rent and the 1 year 2010 recent 
mover two-bedroom gross rent for the recent mover factor area. Recent 
mover factors are not allowed to lower the standard quality base rent; 
therefore, if the 5-year standard quality rent is larger than the 
comparable 1 year recent mover rent, the recent mover factor is set to 
1. The process for calculating each area's recent mover factor is 
detailed in the FY 2013 Proposed FMR documentation system available at: 
http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr13.
    This process produces an ``as of'' 2010 recent mover two-bedroom 
base gross rent for the FMR area.\6\
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    \6\ The Pacific Islands (Guam, Northern Marianas and American 
Samoa) as well as the US Virgin Islands are not covered by ACS data. 
As part of the 2010 Decennial Census, these areas were covered by a 
long-form survey. The results gathered by this long form survey are 
not expected to be available until later in 2012. Therefore, HUD 
uses the national change in gross rents, measured between 2009 and 
2010 to update last year's FMR for these areas. Puerto Rico is 
covered by the Puerto Rico Community Survey within the American 
Community Survey; however, the gross rent data produced by the 2006-
2010 ACS are not sufficient to adequately house voucher holders in 
Puerto Rico. This is due to the limited ability to eliminate units 
that do not pass the voucher program's housing quality standards. 
Consequently, HUD is updating last year's FMRs for Puerto Rico using 
the change in rents measured from all of Puerto Rico measured 
between the 2009 and 2010. For details behind these calculations, 
please see HUD's Proposed FY 2013 FMR documentation system available 
at: http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr13.
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C. Updates From 2010 to 2011

    The ACS based ``as of'' 2010 rent is updated through the end of 
2011 using the annual change in CPI from 2010 to 2011. As in previous 
years, 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. Following the application of the appropriate CPI update 
factor, HUD converts the ``as of'' 2011 CPI adjusted rents to ``as of'' 
December 2011 rents by multiplying each rent by the national December 
2011 CPI divided by the national annual 2011 CPI value. HUD does this 
in order to apply an exact amount of the annual trend factor to place 
the FY 2013 FMRs as of the mid-point of the 2013 fiscal year.

D. Trend From 2011 to 2013

    On March 9, 2011 (76 FR 12985), HUD published a notice requesting 
public comment regarding the manner in which it calculates the trend 
factor used in determining FMR estimates to meet the statutory 
requirement that FMRs be ``trended so the rentals will be current for 
the year to which they apply.'' HUD's notice provided several proposed 
alternatives to the current trend factor and requested comments on the 
alternatives as well as suggestions of other ideas. In its publication 
of the proposed FY 2012 FMRs on August 19, 2011, (76 FR 52058) HUD 
discussed these comments and announced that a new trend factor would be 
used in the FY 2013 FMRs. HUD calculates the trend factor as the 
annualized change in median gross rents as measured between the 1 year 
2005 ACS and the 1 year 2010 ACS. The median gross rent in 2005 was 
$728 and $855 in 2010. The overall change is 17.45% and the annualized 
change is 3.27%. Over a 15-month time period, the effective trend 
factor is 4.1%

E. Bedroom Rent Adjustments

    HUD calculates the primary FMR estimates for two-bedroom units. 
This is generally the most common sized rental unit and, therefore, the 
most reliable to survey and analyze. Formerly, after each Decennial 
Census, HUD calculated rent relationships between two-bedroom units and 
other unit sizes and used them to set FMRs for other units. HUD did 
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. For FY 
2013 Proposed FMRs, HUD has updated the bedroom ratio adjustment 
factors using 2006-2010 5-year ACS data using similar methodology to 
what was implemented when calculating bedroom ratios using 2000 Census 
data to establish rent ratios.
    HUD again made adjustments to the bedroom ratios using 2006-2010 5-
year ACS data 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 0.59 and 0.81 of the two-bedroom FMR; one-
bedroom FMRs must be between 0.74 and 0.84 of the two-bedroom FMR; 
three-bedroom FMRs must be between 1.15 and 1.36 of the two-bedroom 
FMR; and four-bedroom FMRs must be between 1.24 and 1.64 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

[[Page 46451]]

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 or 
statistically insignificant 2006-2010 5-year ACS recent-mover rents, 
HUD uses state non-metropolitan data to determine bedroom ratios for 
each bedroom size. HUD made this adjustment to protect against 
unrealistically high or low FMRs due to insufficient sample sizes.

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 
2012 were updated to FY 2013 using the same data used to estimate the 
HCV program FMRs. 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.

V. Small Area Fair Market Rents

    Public housing authorities in the Dallas, TX HMFA continue to be 
the only PHAs managing their voucher programs using Small Area Fair 
Market Rents (SAFMRs). These FMRs are listed in Schedule B addendum. 
The department anticipates announcing additional PHAs authorized to 
operate using SAFMRs in the notice of Final FY 2013 FMRs.
    SAFMRs are calculated using a rent ratio determined by dividing the 
median gross rent across all bedrooms for the small area (a ZIP code) 
by the similar median gross rent for the metropolitan area of the ZIP 
code. This rent ratio is multiplied by the current two- bedroom rent 
for the entire metropolitan area containing the small area to generate 
the current year two-bedroom rent for the small area. In small areas 
where the median gross rent is not statistically reliable, HUD 
substitutes the median gross rent for the county containing the ZIP 
code in the numerator of the rent ratio calculation. For proposed FY 
2013 SAFMRs, HUD has implemented two changes to the rent ratio 
calculation methodology. First, HUD has updated the 2005-2009 5-year 
ACS based ZIP code median gross rent data with 2006-2010 5-year ZIP 
Code Tabulation Area (ZCTA) median gross rent data. Next, HUD has 
expanded the criteria for determining the statistical reliability of 
the small area rent data in order to ensure that more SAFMRs are based 
on the data for the small area as opposed to using data from the parent 
county as a proxy.\7\
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    \7\ HUD has provided numerous detailed accounts of the 
calculation methodology used for Small Area Fair Market Rents. 
Please see our Federal Register notice of April 20, 2011 (76 FR 
22125) for more information regarding the calculation methodology. 
Also, HUD's Proposed FY 2013 FMR documentation system available at 
(http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr13) contains detailed calculations for each ZIP 
code area in the Dallas, TX HMFA.
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VI. Request for Public Comments

    HUD seeks public comments on the methodology used to calculate FY 
2013 Proposed FMRs and the FMR levels for specific areas. Comments on 
FMR levels must include 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.
    For the supporting data, HUD recommends the use of professionally 
conducted 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 $25,000--$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.
    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 
may 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.
    The survey methodology has recently changed with mail surveys being 
the preferred method for conducting surveys, because of the lower cost 
and greater number of survey results. These surveys, however, take 
almost twice as long to conduct and random digit dialing surveys may be 
conducted as well. The methodology for both types of surveys and the 
survey instruments is posted on the HUD USER Web site, at the bottom of 
the FMR page: http://www.huduser.org/portal/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 2006-2010 5-year ACS data 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 
2006-2010 5-year ACS data. 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.
    As stated earlier in this Notice, HUD is required to use the most 
recent data available when calculating FMRs. Therefore, in order to re-
evaluate an area's FMR, HUD requires more current

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rental market data than the 2010 ACS. HUD encourages a PHA or other 
interested party that believes the FMR in their area is incorrect to 
file a comment even if they do not have the resources to provide 
market-wide rental data. In these instances, HUD will use the comments 
when determining the areas HUD will select for HUD-funded local are 
rent surveys using the limited survey budget available.

VII. Environmental Impact

    This Notice involves the establishment of fair market rent 
schedules, which 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).
    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 27, 2012.
Erika C. Poethig,
Acting 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.
    b. Modifications to OMB Definitions--Following OMB guidance, the 
estimation procedure for the FY 2012 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 for programmatic purposes 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.

2. Bedroom Size Adjustments

    Schedule B shows the FMRs for zero-bedroom through four-bedroom 
units. The Schedule B addendum shows Small Area FMRs for PHAs operating 
using Small Area FMRs within the Dallas, TX HMFA. 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. 2012-18874 Filed 8-2-12; 8:45 am]
BILLING CODE 4210-67-P