[Federal Register Volume 80, Number 75 (Monday, April 20, 2015)]
[Notices]
[Pages 21754-21755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09011]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5857-N-01]


Section 8 Housing Assistance Payments Program--Fiscal Year (FY) 
2015 Inflation Factors for Public Housing Agency (PHA) Renewal Funding

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

ACTION: Notice.

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SUMMARY: The Consolidated Appropriations Act, 2015 requires that HUD 
apply ``an inflation factor as established by the Secretary, by notice 
published in the Federal Register'' to adjust FY 2015 renewal funding 
for the Tenant-based Rental Assistance Program or Housing Choice 
Voucher (HCV) Program of each PHA. HUD began using Renewal Funding 
Inflation Factors in FY 2012. These Renewal Funding Inflation Factors 
incorporate economic indices to measure the expected change in per unit 
costs (PUC) for the HCV program. The methodology for FY 2015 is similar 
to that used in FY 2014.

DATES: Effective Date: April 20, 2015. Comments Due Date: June 19, 
2015.

ADDRESSES: Interested persons are invited to submit comments on 
potential improvements to HUD's per unit cost (PUC) forecasting model 
to the Office of the General Counsel, Rules Docket Clerk, Department of 
Housing and Urban Development, 451 Seventh Street SW., Room 10276, 
Washington, DC 20410-0001. Communications should refer to the above 
docket number and title and should contain the information specified in 
the ``Request for Comments'' section. 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 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 
notice.

    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
    Public Inspection of Comments. All comments and communications 
submitted to HUD will be available, without change, for public 
inspection and copying between 8 a.m. and 5 p.m. weekdays at the above 
address. Due to security measures at the HUD Headquarters building, an 
advance appointment to review the public comments must be scheduled by 
calling the Regulations Division at (202) 708-3055 (this is not a toll-
free number). Copies of all comments submitted are available for 
inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Miguel A. Fontanez, Director, Housing 
Voucher Financial Division, Office of Public Housing and Voucher 
Programs, Office of Public and Indian Housing, telephone number 202-
402-4212; or Peter B. Kahn, Director, Economic and Market Analysis 
Division, Office of Policy Development and Research, telephone number 
202-402-2409, for technical information regarding the development of 
the schedules for specific areas or the methods used for calculating 
the inflation factors, Department of Housing and Urban Development, 451 
7th Street SW., Washington, DC 20410. Hearing- or speech-impaired 
persons may contact the Federal Relay Service at 800-877-8339 (TTY). 
(Other than the ``800'' TTY number, the above-listed telephone numbers 
are not toll free.)

SUPPLEMENTARY INFORMATION:

I. Background

    Tables showing Renewal Funding Inflation Factors will be available 
electronically from the HUD data information page at: http://www.huduser.org/portal/datasets/rfif/FY2015/FY2015_RFIF_FMR_AREA_REPORT.pdf.
    Division K, Title II, Consolidated and Further Continuing 
Appropriations Act, 2015 requires that the HUD Secretary, for the 
calendar year 2015 funding cycle, provide renewal funding for each 
public housing agency (PHA) based on validated voucher management 
system (VMS) leasing and cost data for the prior calendar year and by 
applying an inflation factor as established by the Secretary, by notice 
published in the Federal Register. This notice provides the FY 2015 
inflation factors and describes the methodology for calculating them.

II. Methodology

    The Department has focused on measuring the change in average PUC 
as captured in HUD's administrative data in VMS. In order to predict 
the likely path of PUC over time, HUD has implemented a model that uses 
three economic indices that capture key components of the economic 
climate and assist in explaining the changes in PUC. These economic 
components are the seasonally-adjusted unemployment rate (lagged twelve 
months), the Consumer Price Index from the Bureau of Labor Statistics, 
and the ``wages and salaries'' component of personal income from the 
National Income and Product Accounts from the Bureau of Economic 
Analysis. This model subsequently forecasts the expected annual change 
in average PUC from Calendar Year (CY) 2014 to CY 2015 for the voucher 
program on a national basis by incorporating comparable economic 
variables from the Administration's

[[Page 21755]]

economic assumptions. For reference, these economic assumptions are 
described in Chapter 2 of the Analytical Perspectives in the 
President's FY 2016 Budget Proposal.
    Using the Per Unit Cost forecasting model, HUD forecasts average 
PUC to decrease slightly in 2015. The PUC forecast for 2015 uses VMS 
data and actual performance of economic indices through December of 
2014. With no increases in PUCs predicted for 2015, the Renewal Funding 
Inflation Factor for each area will be 1.0.

III. The Use of Inflation Factors

    Typically, the inflation factors have been developed to account for 
relative differences in the PUC of vouchers so that HCV funds can be 
allocated among PHAs. However, since the current forecast is for the 
PUC to decline in 2015, HUD has set all areas to have an inflation 
factor of 1.0, which is consistent with the statutory requirements 
governing the Annual Adjustment Factor.

IV. Geographic Areas and Area Definitions

    Inflation factors based on PUC forecasts are produced for all FMR 
areas. The tables showing the Renewal Funding Inflation Factors 
available electronically from the HUD data information page list the 
inflation factors for each FMR area and are created on a state by state 
basis. The inflation factors use the same OMB metropolitan area 
definitions, as revised by HUD, that are used in the FY 2015 FMRs. To 
make certain that they are referencing the correct inflation factors, 
PHAs should refer to the Area Definitions Table on the following Web 
page: http://www.huduser.org/portal/datasets/rfif/FY2015/FY2015_RFIF_FMR_AREA_REPORT.pdf. The Area Definitions Table lists areas 
in alphabetical order by state, and the counties associated with each 
area. In the six New England states, the listings are for counties or 
parts of counties as defined by towns or cities.

V. Request for Comments

    HUD has forecasted the decline in national PUC for 2015 to be -0.79 
percent. While more analysis is necessary, HUD is concerned that the 
current model used to predict the amount of per unit cost, when 
interacted with voucher program appropriations decisions, may have 
inadvertently locked in PHA cost reduction behaviors used to cope with 
funding reductions under sequestration in 2013.
    Rather than terminate assistance from families participating in the 
program, PHAs often respond to reduced funding by not reissuing 
vouchers when families leave the program. However there is a strong 
incentive for PHAs to reduce spending in the voucher program by means 
other than reducing the number of families served because PHA 
administrative fees are based on the number of vouchers under lease. 
These policies have the effect of reducing the (average) subsidy cost 
of vouchers, and as a result, reduce a family's ability to rent in 
higher rent markets and higher opportunity areas. These policies, while 
necessary to handle the budget constraints, may also be viewed as 
reducing the effectiveness of vouchers in meeting the goals of the 
program.
    One of the primary tools PHAs use in administering the voucher 
program is through setting payment standards. Payment standards, rather 
than Fair Market Rents (FMR), form the basis of the subsidy (the lower 
of the payment standard or gross rent less the total tenant payment--
typically 30 percent of adjusted household income) since a tenant 
selecting a unit with a gross rent higher than the payment standard 
must make up the additional rent to the owner. When payment standards 
decrease relative to FMR, the selection of units available to tenants 
decreases and higher opportunity neighborhoods with generally higher 
rents may no longer be available for tenants. A reduction of payment 
standards relative to FMRs is likely to cause gross rents to grow more 
slowly than FMRs as tenants choose units available within the payment 
standard.
    Other tools PHAs may use to reduce subsidy cost include policies 
that encourage more earnings among tenants or by approving more cases 
of tenants paying more than 30 percent of adjusted income toward rent.
    Thus, the model's projections for PUC may not accurately forecast 
the true cost of maintaining a voucher program when there is a 
significant external event. As stated in prior notices, HUD may update 
the methodology for future funding estimates to improve the forecasting 
model, if necessary. HUD is also continuing to review and refine the 
methodology, especially for area differences in the factors, which will 
be described in future inflation factor notices. One option the 
Department is considering is to create a ``constant quality'' PUC 
forecast that addresses reduced payment standards and increases in 
tenant contributions as a way to account for outside disruptions such 
as sequestration. The Department welcomes comments on other ways to 
calculate the Renewal Funding Inflation Factor for the Housing Choice 
Voucher program for 2016 and beyond.

VI. Environmental Impact

    This notice involves a statutorily required establishment of a rate 
or cost determination which does 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).

    Dated: April 10, 2015.
Katherine M. O'Regan,
Assistant Secretary for Policy Development and Research.
[FR Doc. 2015-09011 Filed 4-17-15; 8:45 am]
 BILLING CODE 4210-67-P