[Federal Register Volume 78, Number 192 (Thursday, October 3, 2013)]
[Notices]
[Pages 61668-61742]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24155]



[[Page 61667]]

Vol. 78

Thursday,

No. 192

October 3, 2013

Part VI





Department of Housing and Urban Development





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Final Fair Market Rents for the Housing Choice Voucher Program and 
Moderate Rehabilitation Single Room Occupancy Program Fiscal Year 2014; 
Notice

  Federal Register / Vol. 78, No. 192 / Thursday, October 3, 2013 / 
Notices  

[[Page 61668]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5725-N-02]


Final Fair Market Rents for the Housing Choice Voucher Program 
and Moderate Rehabilitation Single Room Occupancy Program Fiscal Year 
2014

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

ACTION: Notice of Final Fiscal Year (FY) 2014 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. 
This notice publishes the FMRs for the Housing Choice Voucher, the 
Moderate Rehabilitation, the project-based voucher, and any other 
programs requiring their use. Today's notice provides final FY 2014 
FMRs for all areas that reflect the estimated 40th and 50th percentile 
rent levels trended to April 1, 2014. The FY 2014 FMRs are based on 5-
year, 2007-2011 data collected by the American Community Survey (ACS). 
These data are updated by one-year recent-mover 2011 ACS data for areas 
where statistically valid one-year ACS data are available. The Consumer 
Price Index (CPI) rent and utility indexes are used to further update 
the data from 2011 to the end of 2012. HUD continues to use ACS data in 
different ways according to the statistical reliability of rent 
estimates for areas of different population sizes and counts of rental 
units.
    The final FY 2014 FMR areas are based on Office of Management and 
Budget (OMB) metropolitan area definitions as updated through December 
1, 2009 and include HUD modifications that were first used in the 
determination of FY 2006 FMR areas. The February 28, 2013 OMB Area 
definition update has not been incorporated in the FMR process due to 
the timing of the release and the availability of ACS data. HUD will 
work toward incorporating these new area definitions into the Proposed 
FY 2015 FMR calculations; however, this is dependent on the 
availability of ACS data conforming to the new area definitions.
    The final FY 2014 FMRs in this notice reflect several updates from 
FY 2013 to the methodology used to calculate FMRs. Specifically, HUD 
has updated the information used to calculate FMRs in Puerto Rico. 
Puerto Rico FMRs are now based on 2007-2011 Puerto Rico Community 
Survey (PRCS) data (the PRCS is a part of the ACS program). Moreover, 
HUD is using Consumer Price Index data calculated specifically for 
Puerto Rico rather than using South Census Region CPI data. In response 
to comments on the proposed notice, HUD has also adjusted the FMRs for 
Puerto Rico based on validated information related to utility rates. 
HUD will continue to refine its methodology for incorporating validated 
utility rates into FMR calculations, as appropriate, in future notices. 
The remaining methodology used to calculate FMRs remains the same, 
including the use of the annually updated trend factor calculation 
methodology. This trend factor for the FY 2014 FMRs is based on the 
change in national gross rents from 2006 to 2011.
    The FMR for Danbury, CT was updated to incorporate the results of a 
survey. This survey was not available in time for inclusion in the 
proposed FY 2014 FMRs and results in an increase.

DATES: Effective Date: The FMRs published in this notice are effective 
on October 1, 2013.

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 website 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 2014 FMR 
documentation system at http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr14 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 2014 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 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 final FY 2014 FMRs 
is available at http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr14. Final FY 2014 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 final FY 2014 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 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

[[Page 61669]]

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.) For FY 2014 FMRs, HUD has considered 
all comments submitted in response to its August 5, 2013 (78 FR 47339) 
proposed FY 2014 FMRs and provides its responses later in this 
preamble.
    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 that currently have 50th percentile 
FMRs are evaluated for progress in voucher tenant concentration after 
three years in the program. Continued eligibility is determined using 
HUD administrative data that show levels of voucher tenant 
concentration. The levels of voucher tenant concentration must be above 
25 percent and show a decrease in concentration since the last 
evaluation. At least 85 percent of the voucher units in the area must 
be used to make this determination. 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 5-year ACS tract level 
data is available, HUD plans to implement new 50th percentile areas 
in conjunction with the implementation of new OMB area definitions.
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    In FY 2013 there were 20 areas using 50th-percentile FMRs. Of these 
20 areas, only one area, the Bergen-Passaic, NJ HMFA, has completed 
three years of program participation and is due for re-evaluation. 
Voucher tenant concentration in the Bergen-Passaic, NJ HMFA has 
decreased below what is required to be eligible for a 50th percentile 
FMR and the area has ``graduated'' from the 50th percentile program. 
Under current 50th percentile regulations, the Bergen-Passaic, NJ HMFA 
will be evaluated annually and may return to the program in the future.
    In summary, there will be 19 50th-percentile FMR areas in FY 2014. 
These areas are indicated by an asterisk in Schedule B, where all FMRs 
are listed by state. The following table lists the FMR areas along with 
the year of their next evaluation.

                         FY 2014 50th-Percentile FMR Areas and Year of Next Reevaluation
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Austin-Round Rock-San Marcos, TX MSA..........         2015  Sacramento--Arden-Arcade--Roseville,           2015
                                                              CA HUD Metro FMR Area.
Fort Worth-Arlington, TX HUD Metro FMR Area...         2015  Tucson, AZ MSA........................         2015
Hartford-West Hartford-East Hartford, CT HUD           2015  Virginia Beach-Norfolk-Newport News,           2015
 Metro FMR Area.                                              VA-NC MSA.
Honolulu, HI MSA..............................         2015  Baltimore-Towson, MD HUD Metro FMR             2016
                                                              Area.
Houston-Baytown-Sugar Land, TX HUD Metro FMR           2015  Fort Lauderdale, FL HUD Metro FMR Area         2016
 Area.
Las Vegas-Paradise, NV MSA....................         2015  New Haven-Meriden, CT HUD Metro FMR            2016
                                                              Area.
North Port-Bradenton-Sarasota, FL MSA.........         2015  Philadelphia-Camden-Wilmington, PA-NJ-         2016
                                                              DE-MD MSA.
Orange County, CA HUD Metro FMR Area..........         2015  Richmond, VA HUD Metro FMR Area.......         2016
Phoenix-Mesa-Glendale, AZ MSA.................         2015  West Palm Beach-Boca Raton, FL HUD             2016
                                                              Metro FMR Area.
Riverside-San Bernardino-Ontario, CA MSA......         2015
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III. Proposed FY 2014 FMRs

    On August 5, 2013 (78 FR 47339), HUD published proposed FY 2014 
FMRs with a comment period that ended September 4, 2013. HUD has 
considered all public comments received and HUD provides responses to 
these comments later in this preamble. HUD does not specifically 
identify each commenter, but all comments are available for review on 
the Federal Government's Web site for capturing comments on proposed 
regulations and related documents (Regulations.gov-- http://www.regulations.gov/%23!docketDetail;D=HUD-2013-0073).

IV. FMR Methodology

    This section provides a brief overview of how the FY 2014 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=fmr14.
    The FY 2014 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. The February 28, 2013 OMB area definition update has not 
been incorporated in the FMR process due to the timing of the release 
and the availability of ACS data. HUD will work toward incorporating 
these new area definitions into the Proposed FY 2015 FMR calculations; 
however, this is dependent on the availability of ACS data conforming 
to the new area definitions.

A. Base Year Rents

    The U.S. Census Bureau provided special tabulations of 5-year ACS 
data collected between 2007 through 2011 to HUD in June 2013. For FY 
2014 FMRs, HUD updates the base rents set in FY 2013 using the 2006-
2010 5-year data with the 2007-2011 5-year ACS data.\2\
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    \2\ The only difference in survey data between the 2006-2010 5-
year ACS data and the 2007-2011 5-year ACS data is the replacement 
of 2006 survey responses with survey responses collected in 2011. 
The 2007, 2008, 2009, and 2010 survey responses remain intact.
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    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 2013 FMRs, all areas are assigned as a base rent the 
estimated two-bedroom

[[Page 61670]]

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 in section B 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 2011 5-year ACS, HUD 
uses the two-bedroom state non-metro rent for non-metro areas.
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    The 2011 ACS is not used as the base rent for 11 areas based on 
surveys conducted in 2012 and 2013 by HUD or by PHAs. The FY 2013 FMRs 
were revised for seven areas, based on surveys conducted in 2012 by the 
PHA (for Hood River, OR) and by HUD (for Cheyenne, WY, Odessa, TX, 
Burlington, VT, Mountrail County, ND, Ward County, ND, and Williams 
County, ND). Two surveys conducted by HUD in 2012 were not included in 
the revised FY 2013 FMR publications because HUD wanted to provide the 
opportunity to comment on the proposed decreases. The survey results 
for these areas (Flagstaff, AZ and Rochester, MN) replaced the base 
rent of the 2011 ACS for the proposed FY 2014 FMRs. The PHAs that 
administer programs in the Oakland, CA metropolitan area conducted a 
survey in 2013, and submitted results in time to replace the 2011 ACS 
base rent for the proposed FMRs. The Danbury, CT survey conducted by 
HUD was not completed in time to be included in the proposed FY 2014 
publication, but is included in this final publication.

B. Recent Mover Factor

    The calculation of the recent mover factor for FY 2014 is similar 
to the methodology used in FY 2013, with the only difference being the 
use of updated ACS data. As described below, HUD calculates a similar 
percentage increase as the FY 2013 factor using data from the smallest 
geographic area containing the FMR area where the recent mover gross 
rent is statistically reliable.\4\ The following describes the process 
for determining the appropriate recent mover factor.
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    \4\ 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 recent mover 
gross rent estimate from the smallest geographic area encompassing the 
FMR area for which the estimate is statistically reliable to calculate 
the recent mover factor. HUD calculates some areas' recent mover 
factors using data collected just for the FMR area. Other areas' recent 
mover factors are 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 2007-2011 standard quality two-bedroom gross 
rent and the 1 year 2011 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 2014 Final FMR 
documentation system available at: http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr14. This process produces an ``as 
of'' 2011 recent mover two-bedroom base gross rent for the FMR area.\5\
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    \5\ The ACS is not conducted in the Pacific Islands (Guam, 
Northern Marianas and American Samoa) or the U.S. Virgin Islands. As 
part of the 2010 Decennial Census, the Census Bureau conducted a 
``long-form'' sample surveys for these areas. The results gathered 
by this long form survey were expected to be available late in 2012; 
however, these data have not yet become available. Therefore, HUD 
uses the national change in gross rents, measured between 2010 and 
2011 to update last year's FMRs for these areas.
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C. Updates From 2011 to 2012

    The ACS-based ``as of'' 2011 rent is updated through the end of 
2012 using the annual change in CPI from 2011 to 2012. As in previous 
years, HUD uses Local CPI data coupled with Consumer Expenditure Survey 
(CEX) 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. 
Additionally, HUD is using CPI data collected locally in Puerto Rico as 
the basis for CPI adjustments from 2011 to 2012 for all Puerto Rico FMR 
areas. Following the application of the appropriate CPI update factor, 
HUD converts the ``as of'' 2012 CPI adjusted rents to ``as of'' 
December 2012 rents by multiplying each rent by the national December 
2012 CPI divided by the national annual 2012 CPI value. HUD does this 
in order to apply an exact amount of the annual trend factor to place 
the FY 2014 FMRs as of the mid-point of the 2014 fiscal year.

D. Trend From 2012 to 2014

    As in FY 2013, HUD continues to calculate the trend factor as the 
annualized change in median gross rents as measured across the most 
recent 5 years of available 1 year ACS data. The national median gross 
rent in 2006 was $763 and $871 in 2011. The overall change between 2006 
and 2011 is 14.15 percent and the annualized change is 2.68 percent. 
Over a 15-month time period, the effective trend factor is 3.365 
percent.

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 annually 
and to use pre-established cost relationships with other bedroom sizes 
than it is to develop independent FMR estimates for each bedroom size. 
When calculating FY 2013 FMRs, HUD 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. The bedroom ratios used in the 
calculation of FY 2014 FMRs were unchanged from those calculated using 
2006-2010 ACS data. The bedroom ratios for Puerto Rico were calculated 
for the FY 2014 FMRs using the 2006-2010 Puerto Rico Community survey. 
HUD will continue to use the same bedroom ratios until the 5-year ACS 
from 2011-2015 is released, probably in time for the FY 2018 FMRs.
    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-

[[Page 61671]]

bedroom FMR. (The maximums for the three-bedroom and four-bedroom FMRs 
are irrespective of the adjustments discussed in the next paragraph.) 
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). The bedroom ratios for Puerto Rico follow these 
constraints.
    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 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 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.

V. Manufactured Home Space Surveys

    The FMR used to establish payment standard amounts for the rental 
of manufactured home spaces (pad rentals including utilities) in the 
HCV program is 40 percent of the FMR for a two-bedroom unit. HUD will 
consider exceptions of the manufactured home space FMRs where public 
comments present statistically valid survey data of manufactured home 
space rent (including the cost of utilities) for the entire FMR area.
    All approved exceptions to these rents based on survey data that 
were in effect in FY 2013 were updated to FY 2014 using the same data 
used to estimate the HCV program FMRs. This computation is compared to 
the new payment standard of 40 percent of the new two-bedroom FMR for 
the area, and if higher, the exception remains and is listed in 
Schedule D. No additional exception requests were received in the 
comments to the FY 2014 FMRs and all areas with manufactured housing 
exception rents in FY 2013 continued to have exception rents for FY 
2014.

VI. Small Area Fair Market Rents

    Public housing authorities in the Dallas, TX HMFA, along with the 
Housing Authority of the County of Cook (IL), the City of Long Beach 
(CA) Housing Authority, the Chattanooga, (TN) Housing Authority, the 
Town of Mamaroneck (NY) Housing Authority, and the Laredo, (TX) Housing 
Authority continue to be the only PHAs managing their voucher programs 
using Small Area Fair Market Rents (SAFMRs). These FMRs are listed in 
the Schedule B addendum. The department is working to secure more 
housing authority participants in its Small Area FMR Demonstration 
program.
    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 FY 2014 SAFMRs, HUD 
continues to use the rent ratios developed in conjunction with the 
calculation of FY 2013 FMRs based on 2006-2010 5-year ACS data.\6\
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    \6\ 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 Final FY 2014 FMR documentation system available at 
(http://www.huduser.org/portal/datasets/fmr/fmrs/docsys.html&data=fmr14) contains detailed calculations for each ZIP 
code area in participating jurisdictions.
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VII. Public Comments

A. Overview

    A total of 59 comments were received and posted on the 
regulations.gov site (http://www.regulations.gov/#!docketDetail;D=HUD-
2013-0073), which is also linked on the HUD User FMR page http://www.huduser.org/portal/datasets/fmr.html). Most comments contested FMR 
reductions compared with the FY 2013 FMRs and some contested reductions 
in FMRs over several years. A majority of the comments, assisted by a 
form letter provided by an advocacy organization, criticized the 
variability in FMRs from year-to-year for smaller metropolitan and 
nonmetropolitan areas and requested an analysis of the FY 2006 FMRs 
compared with the 2006 one-year data. Decreases of any level were 
opposed especially for certain HUD programs and other programs that use 
FMRs but do not allow flexibility in applying FMRs. Two PHAs from 
different FMR areas notified HUD of their intent to conduct surveys to 
adjust their rents and several areas requested HUD to conduct surveys 
of their areas. Several comments requested that HUD hold the FY 2014 
FMRs harmless, that is they wanted the FMR to remain at the FY 2013 
level, or some earlier level if it would otherwise be lower. In 
addition to, or instead of, implementing a hold harmless policy, 
several comments asked HUD to limit annual increases and decreases of 
FMRs to five percent, or at the very least impose a hard floor of five 
percent on decreases.
    While HUD has been able to use such measures in constraining income 
limit increases and decreases, HUD is specifically precluded from 
incorporating these changes into the FMR methodology by the statutory 
language governing FMRs requiring the use of the most recent available 
data. As stated in previous FMR notices, HUD's Housing Choice Voucher 
program counsel reviewed the statutory language governing the 
calculation of FMRs to determine if the Department has the authority to 
institute caps and floors on the amount the FMRs could change annually. 
Based on this review, HUD's program counsel issued a legal opinion that 
HUD CANNOT impose floors or caps in changes in FMRs because this would 
violate the portion of the statute that directs HUD to use the most 
current data available. The legal opinion is that the statute needs to 
be changed in order for HUD to implement these types of caps and 
floors. No statutory changes regarding the use of the most recent 
available data have since been enacted; consequently, HUD does not have 
the authority to use a hold harmless policy or other policy which would 
permit HUD to impose caps and floors on FMR changes. HUD is required to 
use the most recent available data and FMRs must increase or decrease 
based on this data. Ignoring decreases or phasing decreases or 
increases in over several years would not fully implement FMRs based on 
the most recent available data. Comments formulated using the 
assistance of the aforementioned form letter also posed the question of 
whether

[[Page 61672]]

or not the statutory changes to FMR provisions requested by the 
Department in recent budget requests would address the Department's 
inability to implement limits on the amount of change in FMRs from year 
to year. Statutory changes proposed affecting FMRs in HUD's FY 2014 
budget request do not include language that would give the department 
the flexibility to implement caps and floors on the FMRs. The statutory 
language HUD has included in the FY 2014 budget request is designed 
primarily to provide the Department with greater flexibility in the way 
FMRs are published each year.
    Comments were received that oppose the current methodology used to 
define FMR areas. There was no specific request, as in past years, to 
use the area definitions last used for the FY 2005 FMRs, nor were there 
any recommendations as to how HUD should determine FMR areas. HUD has 
not incorporated the new metropolitan area definitions released by the 
Office of Management and Budget (OMB) on February 28, 2013 for the FY 
2014 FMRs, but will begin to review how to incorporate these new area 
definitions. While HUD will work to incorporate these new area 
definitions into the Proposed FY 2015 FMRs, based on when the Census 
Bureau incorporates the new areas into its data collection and 
production, it is possible that HUD may not be able to incorporate the 
new metropolitan area definitions into FMRs until the FY 2016 FMRs are 
produced.
    Several PHAs with lower proposed FY 2014 FMRs relative to FY 2013 
or earlier FMRs requested that HUD conduct a survey of rents for their 
FMR areas. As stated in the proposed FY 2014 FMR Notice, HUD 
anticipates it will have no funds to conduct surveys in FY 2014. While 
one area provided data, most of this data could not be accepted as the 
basis for changing FMRs because it did not meet the threshold for 
representativeness and/or statistical reliability established for 
rental survey data to be used in FMR determinations. HUD may not use 
data from newspaper ads because these do not represent actual 
contracted rents, or rent reasonableness studies as these typically do 
not sample units randomly. Other data provided may be acceptable, but 
the sources and method of collection must be identified. Data must be 
collected randomly and cover the entire rental stock including single-
family units, not just large apartment projects. Single family units 
and smaller apartment buildings are an important part of the rental 
market and cannot be ignored. HUD did receive notification that two 
PHAs in different metropolitan areas are conducting their own surveys 
and have sought guidance from HUD on how to conduct the surveys. Any 
other PHAs interested in surveys to support changes in FMRs should 
review section VIII of this notice for further information regarding 
acceptable survey methodology.
    For areas that are considering conducting their own surveys, HUD 
would caution them to explore all no-cost options as a means of 
alleviating problems they are having with low FMRs. HUD has experience 
conducting surveys in areas with low or no vacancy rates and this 
experience has shown that it is extremely difficult to capture accurate 
gross rent levels in tight markets. For that reason, HUD provides 
emergency exception payment standards up to 135 percent of the FMR for 
the Section 8 voucher program in areas impacted by natural resource 
exploration or in presidentially declared disaster areas. PHAs 
interested in applying for these emergency payment standards should 
contact their local HUD field office. Other programs that use FMRs will 
have to pursue similar strategies such as exception payment standards 
or hold harmless provisions within the statutory and regulatory 
framework governing those programs.

B. Issues Raised in Comments and HUD Responses

    In accordance with 24 CFR 888.115, HUD has reviewed the public 
comments that have been submitted by the due date and has determined 
that there are no comments with ``statistically valid rental survey 
data that justify the requested changes.'' The following are HUD's 
responses to all known comments received by the comment due date and a 
part of the notice record at http://www.regulations.gov/#!docketDetail;D=HUD-2013-0073.
    Comment: FMRs should be held harmless at the FY 2013 levels. 
Several comments requested that FMRs not be allowed to decline from 
their FY 2013 level. Some of these comments asked HUD to delay 
implementation of FY 2014 FMRs for their area to allow local housing 
authorities to complete a rent survey, or until HUD completes a survey 
for them.
    HUD Response: HUD cannot ignore the more current 2011 American 
Community Survey (ACS) data and allow FMRs to stay the same as they 
were for FY 2013, which were based on gross rents from the 2010 ACS, 
except for areas where there was a HUD-sponsored or PHA-sponsored 
survey. By statute (42 U.S.C. 1437f(c)(1)(B)) and regulation (24 CFR 
888.113(e)), HUD is required to use the most current data available. 
While rent surveys conducted either by HUD or a PHA would provide more 
current data than the ACS, these surveys take about two months to 
complete and can be quite expensive. HUD does not have the funds to 
conduct any surveys in 2014 and HUD cannot delay the implementation of 
FY2014 FMRs while new surveys are being conducted. Areas with 
relatively short-term market tightening are not easily measured by rent 
surveys. Based on past experience, HUD finds that an area must have 
rent increases or declines for a period of at least two years before 
changes can be accurately measured by surveys. Should the survey 
results show market conditions that are statistically different from 
the published FMRs, HUD will revise the Final FY 2014 FMRs. HUD 
recommends following the survey guidance available at http://www.huduser.org/portal/datasets/fmr.html for small metropolitan areas 
without consistent one-year ACS data and nonmetropolitan areas. For 
large areas with significant one-year ACS data, the requirement for 
completed recent mover surveys are greater; there must be about 200 2-
BR (or 2-BR and equivalent 1-BR) recent mover surveys completed with a 
margin of error of plus or minus 5 percent. HUD will review the results 
of these private surveys and will revise the Final FY 2014 FMRs if 
warranted.
    Comment: The Puerto Rico Community Survey should not be used 
because it is seriously deficient. A 2012 publication by the Census 
Bureau that analyzed the 2005-2009 Puerto Rico Community Survey (PRCS) 
discussed how 20 percent of the population of Puerto Rico is excluded 
from the survey.
    HUD Response: The 2012 publication did show much lower coverage of 
the 2005-2009 PRCS compared with the 2005-2009 ACS, 79.5 percent 
compared with 94.2 percent; however, before FY 2014, the FMRs for 
Puerto Rico were based on a 2005 telephone survey of Puerto Rico, 
conducted by HUD, with even greater coverage issues than the 2009 PRCS. 
The FY 2014 FMRs are based on the 2007-2011 PRCS and 2011 PRCS data has 
much better coverage than the 2009 PRCS. Based on statics published by 
the Census Bureau (available at: http://www.census.gov/acs/www/methodology/coverage_rates_data/index.php) the population coverage 
rate of the PRCS is up to 89.2 percent. While the Census does 
acknowledge that there would be serious data deficiencies with coverage 
rates below 70 percent, the PRCS has a sufficiently high coverage rate 
to alleviate this concern and moreover, the

[[Page 61673]]

survey coverage is well above the HUD survey conducted in 2005.
    Comment: The FMR decreases do not reflect the reality of the rental 
market in Puerto Rico. The majority of rental units do not include 
utilities and utility rates have recently been substantially increased.
    HUD Response: HUD has reviewed the utility data referenced in the 
comments for the entire island of Puerto Rico and has made changes to 
the FY 2014 Final FMRs. These data included average consumption amounts 
and the increase in the rates which made it possible for HUD to 
determine a utility adjustment for each FMR bedroom size that would be 
applied uniformly across all areas, as the rate changes by these state-
owned utilities are also being applied. The table below shows the fixed 
amount that is added to the proposed FY 2014 FMRs at each bedroom count 
level in all Puerto Rico FMR areas.

                                   Additions to Puerto Rico Proposed FMRs To Account for Recent Utility Rate Increases
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        0-Bedroom        1-Bedroom        2-Bedroom        3-Bedroom        4-Bedroom
--------------------------------------------------------------------------------------------------------------------------------------------------------
Utility Adjustment.................................................             $20              $25              $35              $40              $50
--------------------------------------------------------------------------------------------------------------------------------------------------------

    HUD expects to phase out these increases over time as the utility 
rate increases are observed in Puerto Rico data, and will adjust FMRs 
as HUD refines its methodology for incorporating data on utility rates.
    Comment: Market rents did not decrease in the past year and neither 
should FMRs. Several comments were received that stated that market 
rents did not decrease over the past year and so FMRs also should not 
decrease.
    HUD Response: FMRs should not be considered a time series of rent 
data for each market in which FMRs are published. FMR data cannot 
justify claims that rents in a particular area are increasing, 
decreasing, or unchanged. The FMR process is designed to develop the 
best estimate of rents for a particular area using the timeliest 
available data covering the entire market area; this process does not 
take into account whether previous FMRs make sense in light of new 
data, and no attempt is made to revise past FMR estimates. Therefore, 
year-over-year FMR changes can sometimes seemingly conflict with 
perceived market trends.
    Annual revisions to all of the underlying data used to estimate 
FMRs are now possible with the 5-year ACS data. Because of the nature 
of the ACS 5-year tabulations, however, 80 percent of the survey 
observations will remain the same from one year to the next. Also, many 
small FMR areas rely on update factors based on survey results from a 
larger, encompassing geographic area (for example, state-based update 
factors used for nonmetropolitan counties). Even if the base rent is 
not adjusted, therefore, the annual changes in FMRs do not necessarily 
reflect very recent changes in the housing market conditions for the 
smaller area but still represent HUD's best estimate of 40th-percentile 
gross rents in the FMR area.
    Comment: FMR decreases do not reflect the annual or recent change 
in rents for an area. To seek changes in FMRs, some comments provided 
rent reasonableness findings, or rent data from large apartment 
projects that show that the rents in their area increased in the past 
year, while the FY 2014 FMRs show a decline from the FY 2013 FMRs.
    HUD Response: FMRs are estimated rents, and can change from year-
to-year in ways that are different from market rent changes or economic 
activity. First, as one commenter noted, when economic activity 
decreases, rents don't necessarily decrease and some increased economic 
activity that might put pressure on rents cannot be measured in real 
time. HUD is required to use the most current data available. HUD is 
also precluded from using sources of data that are not statistically 
reliable. Rent reasonableness studies are not subject to the same 
constraints on statistical reliability and cannot be used to alter 
FMRs. Surveys of large apartment projects provide indications of where 
the market is going, but do not account for the majority of most 
markets made up of single family homes and small apartment buildings 
(2-4 units). Much of the apartment project data submitted by the 
commenter was for larger apartment projects and represented less than 
20 percent of the rental market.
    Comment: For the areas affected by Superstorm Sandy, the FY 2014 
FMRs cannot go down; HUD should conduct a survey of the area. A 
commenter stated that lower income renters were disproportionately 
victims of the storm. Their already disadvantaged situation should not 
be made worse by a reduction in available assistance at a time when 
there is a demonstrated need for increased, not decreased, help.
    HUD Response: While there are modest FMR decreases in areas 
impacted by Sandy, HUD can continue to allow for the successful 
operation of the HCV program through regulatory waivers provided in 
disaster areas, and through its emergency exception payment standard 
process. The modest decreases in the FMRs can be offset by emergency 
payment standards up to 135 percent, depending on current rental 
vacancy data and storm damage data. HUD developed the emergency payment 
standards as an alternative to conducting surveys which do not work 
well in areas where there has been loss of rental housing. Also, for FY 
2014, there are no funds available for HUD-conducted surveys.
    Comment: HUD should validate its FMR estimation methodology by 
comparing one-year ACS data with fiscal year FMRs for the same year, 
beginning with a comparison of 2006 one-year ACS rent data to the FY 
2006 FMRs. This analysis would determine which aspects of HUD's 
discretionary methodology is less accurate and could help HUD modify 
its methodology to improve accuracy while adhering to the requirement 
to use the most recent data available. The up and down changes that 
occur with the final fair market rents cause a lot of problems and 
stress for the landlords, tenants and the PHA.
    HUD Response: Because the integration of ACS data into the FMR 
estimation process has been gradual and evolving, and will continue to 
evolve to address issues like volatility in estimates arising from 
large sampling variation in smaller markets, there is not yet a basis 
for making the suggested comparison. FMR methodology and the underlying 
data have been relatively stable only between FY2013 and FY2014 FMRs. 
ACS data on recent-mover rents are not yet available for 2013 and 2014. 
Further, because the ACS only produces highly reliable estimates of the 
40th percentile recent mover 2-bedroom rent in the largest metropolitan 
areas, the comparison would only be valid for large markets, and FMRs 
have not been particularly volatile in these markets. Finally, the 
logic of this comment suggests that HUD should change the FMR 
estimation process to a model-based forecast system derived from time-
series-panel data on rents. Again, this methodology would only be valid 
for the largest

[[Page 61674]]

metropolitan FMR areas where a highly reliable recent mover rent can be 
derived from ACS data. It is not clear that the model would be feasible 
and accurate for smaller FMR areas, or how a model-based FMR estimate 
would accord with statutory language regarding FMR estimates.
    Comment: The year-to-year volatility in FMRs has significant 
adverse impacts. A reduction of more than five percent in the published 
FMRs triggers a rent reasonableness analysis on the part of the PHA 
with jurisdiction over the area (Housing Choice Voucher Guidebook, 
directive 7420.10G). If the PHA's analysis finds that the rent being 
charged by a property owner is no longer reasonable, the owner will be 
required to reduce the rent. If the owner determines that this 
reduction will adversely affect the financial stability of the 
property, the owner will likely choose to leave the program, and the 
tenant will then have to move. Another consequence of a large reduction 
in FMRs is that owners may have to defer maintenance items because cash 
flows are no longer adequate to cover operating expenses.
    Alternatively, higher FMRs force the PHA with jurisdiction over the 
area to increase their payment standards and serve far fewer families 
within the community. This is detrimental at a time when PHAs are 
already stretching the limited amount of funding received from HUD to 
help as many families as they can. Increased FMRs will increase the 
waiting list for the HCV program and will increase the homeless 
population for an area.
    HUD Response: In estimating FMRs, HUD must carefully balance the 
use of the most local data available with possible volatility of FMRs 
from year to year. Most of the large changes in FMRs for smaller 
metropolitan and nonmetropolitan counties come from changes in the one-
year ACS data. It is not clear how much of the variation is due to 
actual market movement and how much is variability in the ACS sample. 
HUD will examine possibly limiting the application of one-year ACS data 
based on the size of the margin of error of the estimate of recent 
mover rent. Members of the public should be aware, however, that 
changes in methodology designed to limit FMR volatility in future years 
may result in substantial volatility of FMRs in the year of 
implementation.
    Comment: The decrease in the FMR for smaller bedroom sizes has a 
disproportionate impact on elderly, disabled and homeless programs.
    HUD Response: HUD recognizes that the reduction in efficiency and 
one-bedroom FMRs impacts these programs and is working to develop new 
tools or use existing ones that can alleviate program problems. PHAs 
may use Exception Payment Standards at 24 CFR 982.503 (c), or Success 
Rate Payment Standards 24 CFR 982.503(e) for certain bedroom sizes, to 
the extent allowed.
    Comment: The reduction in the recent mover adjustment factor caused 
a reduction in FMRs.
    HUD Response: While the recent mover adjustment factor cannot be 
below one, it can increase or decrease from year to year, just like the 
base rent for the FMR. FMRs cannot be held harmless for the reasons 
discussed in prior responses.
    Comment: Small Area FMRs (SAFMRs) should not be used as the areas 
for the Difficult to Develop Areas. ZIP Codes cannot be used to 
delineate housing market because ZIP Codes were developed to facilitate 
mail delivery. The use of SAFMRs could cause rents to drop 
significantly and create a disincentive for investment, and put 
existing properties into an unsustainable revenue loss position. While 
HUD says it will impose a floor of 10 percent annually if rents 
decrease, this is still a substantial drop in revenue for the property.
    HUD Response: The use of Small Area FMRs in the determination of 
Difficult to Develop Areas (DDAs) in the Low-Income Housing Tax Credit 
program is outside of the scope of this notice. However, HUD would like 
to point out that the proposed use of Small Area FMRs in the 
construction of DDAs was published for public comment in a Federal 
Register Notice on October 27, 2011 and that HUD further published a 
Federal Register notice on September 28, 2012 which contains HUD's 
responses to the comments received.
    Comment: The Small Area FMR Demonstration program should have a 
better analysis than the three questions listed in an article in 
Cityscape: A Journal of Policy Development and Research regarding HUD's 
intent to evaluate the demonstration program.
    HUD Response: The content of any analysis of the Small Area FMR 
Demonstration is beyond the scope of this notice. HUD will, however, 
consider any public input it receives regarding the design of the 
evaluation of the Small Area FMR demonstration program. In accordance 
with HUD's evidence-based policymaking philosophy, HUD will not require 
metropolitan housing authorities generally to use Small Area FMRs until 
the demonstration has been evaluated, and then only if the evaluation 
shows that Small Area FMRs achieve the intended policy objectives.
    Comment: Small Area FMRs should be estimated directly from the ZIP 
Code Tabulation Area (ZCTA) data published by the Census Bureau; the 
data and technology is available to determine FMRs without the use of 
the ratio method.
    HUD Response: HUD cannot generate FMRs directly from the 5-year 
ZCTA data tables because recent mover rents cannot be determined from 
5-year ACS data and ZCTA tabulations are only created from the 5-year 
data. HUD has maintained the ZCTA-to-metropolitan area rent 
relationships based on the 2006-2010 5-year ACS data to ensure 
stability of the Small Area FMR estimates. HUD uses the 2011 ACS data 
to estimate the metropolitan level rent that is used in conjunction 
with the rent ratio to determine the FY 2014 Small Area FMR for each 
ZIP Code area.
    Comment: FMRs cannot decrease in economic growth areas; some of 
these areas cannot manage the voucher program even with modest FMR 
increases. Several comments, even pertaining to FMR areas with 
decreases below 5 percent, or with modest increases, pressed for higher 
FY 2014 FMRs. Some of these areas had very tight markets and some of 
these areas already used payment standards at 110 percent of the FMRs.
    HUD Response: For rent data, the ACS provides the most current 
data, and the 5-year 2007-2011 data is the most current data available 
for FMR areas of all sizes. HUD must use the most current statistically 
reliable data available. None of the areas that found FMRs too low 
because of economic and population growth provided statistically valid 
data that could be use to update the proposed FY 2014 FMRs. To help 
manage the program during times of FMR decreases, PHAs operating the 
Housing Choice Voucher program may be able to use Success Rate Payment 
Standards 24 CFR 982.503(e), or request Exception Payment Standards for 
subareas within a FMR area (not to exceed 50 percent of the population) 
at 24 CFR 982.503 (c), or in severely disrupted rental markets, 
emergency payment standards.
    Comment: Vacancy rates are low, making it impossible to absorb FMR 
decreases. Several comments stated that low or no vacancy rates in 
areas with increased economic activity require higher FMRs so that 
voucher tenants can compete for housing. In these areas, there is not 
sufficient rental housing and generally the 2011 rental data from the 
ACS does not reflect this situation.

[[Page 61675]]

    HUD Response: When a market tightens rapidly, the FMRs cannot keep 
pace. The most accurate, statistically reliable data available to HUD 
is lagged by two years. Even if HUD conducts surveys of these areas, 
capturing the full scope of rent increases is difficult if the market 
condition has been occurring for less than two years; furthermore, it 
is challenging to get valid results for surveys of relatively small 
housing markets (under 1,000). Most of the areas suffering from very 
rapidly tightening market conditions meet one or both of these 
criteria. Areas with sustained extremely low vacancy rates require 
construction of additional units. Higher FMR levels will not 
necessarily encourage additional development. These areas will have to 
rely on the use of Exception Payment Standards for subareas within an 
FMR area (not to exceed 50 percent of the population) as described at 
24 CFR 982.503 (c), or through the use of Success Rate Payment 
Standards available at 24 CFR 982.503(e) to alleviate market pressures, 
or in severely disrupted rental markets, emergency payment standards.
    Comment: FY 2014 FMR decreases reduce the ability of families to 
find affordable housing. Several comments stated that decreases in FMRs 
would negatively affect tenants' ability to find affordable housing and 
therefore should not be implemented. The decrease in FMRs from FY 2013 
to FY2014 will reduce the availability of affordable housing in the 
area; landlords will be able to get higher rents from tenants that are 
not Section 8 voucher holders and so many will opt out of the program.
    HUD Response: FMRs must reflect the most current statistically 
valid data and this means that FMRs cannot be held harmless when this 
data shows a decline. Most of the declines in the FMRs are based on 
lower 2011 rents, in a few cases the 2011 to 2012 CPI adjustment 
reflects a decline.
    Comment: FMR reductions will lead to poverty concentration. 
Decreases in the FMR, whether by loss of a 50th percentile FMR status 
or by reductions in Small Area FMRs (SAFMRs) lead to poverty 
concentration and prevent tenants from moving to areas of opportunity.
    HUD Response: HUD is required to increase or decrease FMRs (and 
SAFMRs are the FMRs for Dallas) based on the most currently available 
data that meets the statistical reliability tests. PHAs may use 
Exception Payment Standards to increase payment standards for higher 
rent parts of their FMR areas as a means to reduce poverty 
concentration. Areas that lost their 50th percentile FMR because they 
graduated from the program or failed to show measurable poverty 
deconcentration can use higher payment standards as shown at 24 CFR 
982.503 (f) to mitigate FMR decreases.
    Comment: A significant increase in the FMR is detrimental to 
managing the HCV program. PHAs must already stretch the limited amount 
of funding received from HUD to help as many families as possible. A 
proposed increase will increase the waiting list for the HCV program 
and also increase the homeless population. The commenter assumes that 
new luxury apartments in the area may be responsible for the increase 
in the FMR.
    HUD Response: HUD is required to increase or decrease FMRs based on 
the most currently available data that meets the statistical 
reliability tests. While the commenter assumes that new luxury 
apartments in the area may be responsible for the increase in the FMR, 
the ACS rent data, which is from 2011, excludes units built in the past 
two years, so units built since 2009 are not included in the data set.
    Comment: A reduction in the FMRs puts HUD-financed projects and 
low-income housing tax credit projects at risk. If a current HUD 
Section 8 project uses rents at 110 percent of the FMR, a reduction in 
the FMR puts this project at risk. An FMR reduction could mean that 
LIHTC landlords will no longer accept Section 8 voucher tenants.
    HUD Response: HUD is required to increase or decrease FMRs based on 
the most currently available data that meets the statistical 
reliability tests. PHAs may use the Exception Payment Standard to 
increase payment standards for higher rent areas and reduce poverty 
concentration. While there are no project-based exception areas, an 
area already at 110 percent of the FMR may be eligible for Success Rate 
Payment Standards or a portion of the FMR area may be granted 
exceptions above 110 percent, if warranted. PHAs interested in 
exploring this option are encouraged to review the FY 2014 Small Area 
FMRs published at http://www.huduser.org/portal/datasets/fmr.html in 
the section labeled ``Small Area FMRs.'' The manner in which SAFMRs are 
calculated makes them ideal to be used as in the ``median rent method'' 
section of the exception payment standard regulations found at 24 CFR 
982.503(c)(2)(A). While certain HUD and non-HUD programs are limited to 
the use of the FMR and not the potentially higher payment standard, we 
are working to resolve this issue with HUD programs and would suggest 
that non-HUD programs also make rule changes to allow for flexibility 
during times of decreases in FMRs.
    Comment: FY 2014 FMR decreases will require existing tenants to pay 
a greater share of their income on rents. Several comments stated that 
their current tenants will have to pay a greater share of their income 
on rents, with FMR decreases.
    HUD Response: New tenants are not allowed to pay more than 40 
percent of their income on rent. Existing tenants will not have to pay 
rent based on reduced FMRs until the second anniversary of their 
Housing Assistance Payment (HAP) contract. If tenant rent burden 
increases for an area, PHAs may use this as a justification for higher 
payment standards.
    Comment: Disabled and difficult-to-place residents suffer a 
disproportionately greater impact from FMR decreases because they have 
fewer housing choice options. Disabled residents already have fewer 
units available to them, and reducing the FMR will further reduce their 
options. Difficult to place residents, because of history of late 
payments or other issues, will have fewer landlords willing to rent to 
them if the FMR is lower.
    HUD Response: If an FMR decreases there may be fewer units 
available at or below the FMR. However, HUD must use the most current 
data available and rents may increase and decrease. The data used as 
the basis for FY 2014 FMRs is more current than what was available in 
the estimation of the 40th percentile FMRs for FY 2013, so while more 
units were available, those rents are being replaced with rents based 
on more current information. If a family has a member with a 
disability, a PHA may establish a higher payment standard for that 
family as a reasonable accommodation as discussed in 24 CFR 982.505(d).
    Comment: Construction and/or preservation of affordable housing is 
threatened by FMR decreases. In areas where affordable housing 
construction is increasing, a reduction in the FMR will reduce the 
benefit of existing affordable housing projects and may prevent 
additional affordable housing construction. Several areas claim that 
there has been an increase in affordable housing production and that 
HUD's failure to include units built in the past two years ignores new 
affordable housing production, which in turn artificially reduces the 
FMR.
    HUD Response: HUD has long eliminated rents from units built in the 
last two years from its calculation of the 40th percentile FMR. This is 
because new units typically receive a premium over other units of the 
same size in the

[[Page 61676]]

same area, and may skew the distribution of market rent. Maximum 
allowable rents in Low-Income Housing Tax Credit properties are set 
based upon 50- or 60-percent income limit levels, or if the payment 
standard is higher, this amount can be used for voucher holders. If the 
FMR is below the rent determined by the income limit levels, then 
generally the income limit rent is used. So if FMRs fall below the 
income limit rents, voucher holders would either pay more out of pocket 
for units or would be unable to use their voucher for these units. 
However, PHAs could use their authority to adjust payment standards 
where warranted, to increase FMRs so voucher holders can have access to 
these existing units. FMRs are used in the determination of High- and 
Low-Rent levels for HOME funded projects. However, when the income 
limit hold harmless policy was removed for the FY 2010 Income Limits, 
HUD instituted a specific hold harmless provision for HOME rents. A 
decrease in the FY 2013 FMR will not necessarily affect HOME rents or 
home project funding unless the FMR is lower than the held harmless 
income limit rent.
    Comment: FMRs in nonmetro counties adjacent to metropolitan areas 
should be more like those in the neighboring metropolitan areas.
    HUD Response: HUD will not make changes to metropolitan area 
composition until it incorporates the February 28, 2013 OMB new 
metropolitan area definitions, and it will begin its analysis of these 
areas with the FY 2015 FMRs. HUD relies on OMB guidance for determining 
metropolitan areas and plans to continue market area definitions based 
on income and rent differences of more than 5 percent.
    Comment: Homelessness will increase in areas where the FY 2014 FMRs 
decreased. Several comments suggest that FMR decreases, even those 
under five percent, will reduce the ability of tenants to find units 
that meet housing quality standards and will increase homelessness, as 
fewer units are available at the lower FMR.
    HUD Response: Where market conditions warrant, HUD encourages PHAs 
to use Exception Payment Standards and Success Rate Payment Standards 
to increase voucher holder's success in finding housing.
    Comment: Decreases in FMRs will undo PHAs efforts to maintain a 
high success rate; program utilization will be reduced with lower FMRs.
    HUD Response: Where market conditions warrant, HUD encourages PHAs 
to use Exception Payment Standards and Success Rate Payment Standards 
to increase voucher holder's success in finding housing.
    Comment: HUD should institute caps and floors to limit annual FMR 
changes to five percent. A five percent change in the FMR triggers a 
rent reasonableness study, which is costly for cash-strapped PHAs. HUD 
should have instituted the same cap and floor of five percent that it 
instituted for Income Limits with the FY 2010 Income Limits.
    HUD Response: HUD is constrained by legal and regulatory language 
for its calculation of FMRs, and therefore cannot ignore the 
requirement to use the most current data by only implementing FMR 
changes in five percent increments. Statutory and regulatory changes 
are required before HUD would be able to implement any methodology 
changes to not fully use the most current rent data in setting FMRs. No 
such regulation or legislative requirement governs the calculation of 
income limits and prior to FY 2010, income limits were held harmless, 
that is, not allowed to ever decline. The change to incorporate caps 
and floors of up to five percent was a way to remove this hold harmless 
policy and create parity with increases and decreases.
    Comment: The FY 2014 Small Area FMRs for Dallas do not 
affirmatively further fair housing. HUD's 2014 proposed SAFMRs will 
perpetuate racial segregation by increasing SAFMRs in the Black and 
other predominantly minority ZIP Codes while decreasing SAFMRs in many 
majority White ZIP Codes. The landlords for 9,609 of the 9,952 voucher 
holders in the less than 10-percent White Zip Codes will have an SAFMR 
increase averaging 10 percent more than the 2011 SAFMRs. The landlords 
in the 10 majority Black ZIP Codes will have an SAFMR increase 
averaging 12 percent over the 2011 SAFMRS. The landlords for only 343 
of the 9,952 existing voucher participants in these ZIP Codes will have 
a decreased SAFMR that will average 1 percent less than the 2011 
SAFMRS. HUD will decrease by 9 percent the SAFMRs for 2,622 of the 
voucher participants in those majority White ZIP Codes where SAFMRs 
decrease. This is 54 percent of participants in all majority White ZIP 
Codes. HUD's 2014 proposed SAFMRs will perpetuate the segregation of 
Black voucher participants into predominantly minority areas with 
conditions substantially inferior to the conditions in which White 
voucher participants are housed.
    HUD Response: HUD must follow its statutory and regulatory 
requirements to update FMRs using the most current data available. This 
means that both increases and decreases must be applied to the Dallas 
SAFMRs. A decrease that reflects more current data does not prevent HUD 
from affirmatively further fair housing. The data HUD uses in the 
calculation of FMRs (both metropolitan-wide and small area FMRs) are 
compiled across all survey respondents in a given area and are not 
segmented in any way by demographic traits.
    Comment: The FMRs are too low and do not reflect market rents; HUD 
must conduct a survey of rents.
    HUD Response: While rent surveys conducted either by HUD or a PHA 
would provide more current data, these surveys take about two months to 
complete and are quite expensive. HUD does not anticipate having the 
funds to conduct any surveys in FY 2014 and HUD cannot delay the 
implementation while any surveys are being conducted. Areas with 
relatively short-term market tightening are not easily measured by rent 
surveys. Based on past experience, HUD finds that an area must have 
rent increases or decreases for a period of at least two years before 
it can be measured.
    Comment: HUD should publish 2000 decennial Census data to help PHAs 
determine exception payment standards.
    HUD Response: Data from the 2010 ACS is much more current than the 
2000 Decennial Census long form data. Moreover, with the calculation of 
Small Area FMRs for metropolitan areas, HUD is relying on the SAFMRs, 
published by ZIP Code, to help determine what portions of a 
metropolitan area may qualify for exception payment standards. This 
data for metropolitan areas only is already available to PHAs at http://www.huduser.org/portal/datasets/fmr/fmrs/index_sa.html&data=fy2014.

VIII. Rental Housing Surveys

    In 2011, HUD solicited bidders to study the methodology used to 
conduct local area surveys of gross rents to determine if the Random 
Digit Dialing (RDD) methodology could be improved upon. The Department 
undertook this study due to the increasing costs and declining response 
rates associated with telephone surveys. Furthermore, the advent of the 
1-year ACS limits the need for surveys in large metropolitan areas. 
Based on this research, the Department decided that its survey 
methodology should be changed with mail surveys being the preferred 
method for conducting surveys, because of the lower cost and greater 
likelihood of survey responses. These surveys, however, take almost 
twice as long to conduct as prior survey methods took,

[[Page 61677]]

and when response times are most critical, the Department may choose to 
conduct random digit dialing surveys as well, as the budget permits. 
Unfortunately, the anticipated budget does not permit any surveys to be 
conducted in FY 2014. The methodology for both types of surveys along 
with the survey instruments is posted on the HUD USER website, at the 
bottom of the FMR page in a section labeled Fair Market Rent Surveys 
at: 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 of structure type (including single-family, 
duplex, and other small rental properties), age of housing unit, and 
geographic location. The 2007-2011 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 rental market data 
than the 2011 ACS.

VIII. 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: September 27, 2013.
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.
    b. Modifications to OMB Definitions--Following OMB guidance, the 
estimation procedure for the FY 2014 Final FMRs incorporates the OMB 
definitions of metropolitan areas based on the CBSA standards as 
implemented with 2000 Census data updated through December 1, 2009, 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 HUD Metro FMR Areas (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 all PHAs 
operating using Small Area FMRs. 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.

[[Page 61678]]

    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.
BILLING CODE 4210-67-P

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BILLING CODE 4210-67-C

  Schedule D--FY 2014 Fair Market Rents for Manufactured Home Spaces in
              the Section 8 Housing Choice Voucher Program
------------------------------------------------------------------------
             State                       Area name           Space rent
------------------------------------------------------------------------
California.....................  Orange County, CA HUD              $818
                                  Metro FMR Area *.
                                 Riverside-San Bernardino-           532
                                  Ontario, CA MSA *.
                                 Los Angeles-Long Beach,             674
                                  CA HUD Metro FMR Area.
                                 San Diego-Carlsbad-San              819
                                  Marcos, CA MSA.
                                 Santa Rosa-Petaluma, CA             738
                                  MSA.

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                                 Vallejo-Fairfield, CA MSA           594
Colorado.......................  Boulder, CO MSA..........           479
Maryland.......................  St. Mary's County........           500
Oregon.........................  Bend, OR MSA.............           355
                                 Salem, OR MSA............           506
Pennsylvania...................  Adams County.............           568
Washington.....................  Olympia, WA MSA..........           603
                                 Seattle-Bellevue, WA HUD            664
                                  Metro FMR Area.
West Virginia..................  Logan County.............           453
                                 McDowell County..........           453
                                 Mercer County............           453
                                 Mingo County.............           453
                                 Wyoming County...........          453
------------------------------------------------------------------------
* 50th percentile FMR areas.

 [FR Doc. 2013-24155 Filed 10-2-13; 8:45 am]
BILLING CODE 4210-67-P