[Federal Register Volume 81, Number 142 (Monday, July 25, 2016)]
[Proposed Rules]
[Pages 48366-48369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17567]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 578

[Docket No. FR-5476-N-04]
RIN 2506-AC29


Continuum of Care Program: Solicitation of Comment on Continuum 
of Care Formula

AGENCY: Office of the Assistant Secretary for Community Planning and 
Development, HUD.

ACTION: Notice; request for comments.

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SUMMARY: On July 31, 2012, HUD published an interim rule, for public 
comment, entitled ``Homeless Emergency Assistance and Rapid Transition 
to Housing: Continuum of Care Program,'' a program designed to address 
the critical problem of homelessness through a coordinated community-
based process of identifying needs and building a system of housing and 
services to address those needs. HUD received 551 public comments on 
the interim rule. Approximately 42 of the public comments addressed the 
Continuum of Care formula, with the majority of these commenters 
seeking changes to the formula. With the interim rule now in place for 
3 years, HUD seeks additional comment on the Continuum of Care formula.
    Comment Due Date: September 23, 2016.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, 451 
7th Street SW., Room 10276, Department of Housing and Urban 
Development, Washington, DC 20410-0500. Communications must refer to 
the above docket number and title. There are two methods for submitting 
public comments. All submissions must refer to the above docket number 
and title.
    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.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
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 
www.regulations.gov Web site can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
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 document.

    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 www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Norm Suchar, Director, Office of 
Special Needs Assistance Programs, Office of Community Planning and 
Development, Department of Housing and Urban Development, 451 7th 
Street SW., Washington, DC 20410-7000; telephone number 202-708-4300 
(this is not a toll-free number). Hearing- and speech-impaired persons 
may access this number through TTY by calling the Federal Relay Service 
at 800-877-8339 (this is a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

Continuum of Care (CoC) Interim Rule

    On July 31, 2012, at 77 FR 45422, HUD published in the Federal 
Register an interim rule to implement the CoC authorized amendments to 
the McKinney-Vento Homeless Assistance Act in the Homeless Emergency 
Assistance and Rapid Transition to Housing Act of 2009 (HEARTH Act). 
The purpose of the CoC program is to promote communitywide commitment 
to the goal of ending homelessness; provide funding for efforts by 
nonprofit providers, and State and local governments to quickly rehouse 
homeless individuals and families while minimizing the trauma and 
dislocation caused to homeless individuals, families, and communities 
by homelessness; promote access to and effective utilization of 
mainstream programs by homeless individuals and families; and optimize 
self-sufficiency among individuals and families experiencing 
homelessness.
    Section 427 of the McKinney Vento Act, as amended by the HEARTH 
Act, directs the Secretary to establish, by regulation, a funding 
formula that is based upon factors that are appropriate to allocate 
funds to meet the goals and objectives of the CoC program. As part of 
the interim rule, HUD codified the formula for establishing a CoC's 
Preliminary Pro Rata Need (PPRN formula) that had been used for many 
years prior to the interim rule to establish a CoC's PPRN. The PPRN 
formula is a combination of the formula used to award Emergency 
Solutions Grants (ESG) Program grant funds and Community Development 
Block Grant (CBDG) funds. Under the current PPRN formula, after a .2 
percent set-aside for U.S. territories and insular areas, 75 percent of 
the total CoC allocation is distributed to ESG entitlement communities, 
generally comprised of large metropolitan cities and urban counties 
where homelessness is more concentrated, according to the CDBG formula. 
The remaining 25 percent of the CoC allocation is distributed to ESG 
non-entitlement communities according to the CDBG formula. Within this 
framework, the current CDBG formula is structured as a ``dual formula'' 
system. As set forth below, Formula A allocates funds to communities 
based on the following weighted factors: population, poverty, and 
overcrowding. Formula B assigns a different weighting scheme to an 
alternative menu of factors: population growth lag,\1\ poverty, and 
pre-1940s housing.\2\ Specifically, the existing CDBG formulas \3\ are 
weighted as follows.
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    \1\ Population growth lag identifies slower growing communities 
or communities experiencing population loss as potential indicators 
of communities in decline and in need of development assistance.
    \2\ The share of housing units built before 1940 reflects the 
age of a community's housing stock, a potential indicator of blight.
    \3\ For non-entitlement communities, Formula B uses population 
instead of population growth lag.

[[Page 48367]]



------------------------------------------------------------------------
                 Formula A                            Formula B
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25% * population..........................  20% * population growth lag.
50% * poverty.............................  30% * poverty.
25% * overcrowding........................  50% * pre-1940 housing.
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    Pursuant to this dual formula system, HUD calculates the funding 
amounts for each jurisdiction under both Formulas A and B and assigns 
the larger of the two grant calculations, less a pro rata reduction to 
ensure the total amount allocated is within the amount appropriated for 
funding.
    Section 427 of the McKinney Vento Act, as amended by the HEARTH Act 
also allows HUD to adjust a CoC's formula to ensure that the formula 
amount is sufficient to renew existing projects in each CoC for one 
year, which is known as the Annual Renewal Demand (ARD). In the FY 2015 
Continuum of Care Program NOFA, and in several previous Continuum of 
Care Program NOFAs, the amount of funding that CoCs were eligible to 
receive was based primarily on their ARD and the PPRN formula had 
little impact on the amount they were eligible to apply for. Only for a 
minority of CoCs that had a PPRN that was larger than their ARD did the 
PPRN formula affect funding, and in these cases, it only affected the 
amount available for new projects. The PPRN formula would only have a 
more significant impact on CoC funding if the amount of funding 
available for the CoC program nationally is significantly larger than 
the amount needed to renew existing projects for one year.
    Several stakeholders indicated that the existing PPRN formula was 
not representative of the number of individuals and families 
experiencing homelessness in their geographic area. Therefore, the 
interim rule specifically sought comment on the PPRN formula and the 
process for determining a CoC's maximum award amount. HUD solicited 
public comment through November 16, 2012 and of the 551 public comments 
that HUD received, approximately 42 public comments were directed to 
the PPRN formula. The majority of the comments on the PPRN formula were 
from western States, counties, and cities, and indicated that the CDBG 
formula was not the appropriate basis for the PPRN formula because the 
CDBG formula utilizes urban blight, as reflected in the age of housing 
stock, and population growth lag factors to allocate funds, which may 
measure community development needs generally, but are not specifically 
tailored to measure homelessness. Other commenters stated that they 
opposed reductions in funding for renewal projects.
    As a result of the comments received, HUD has explored several 
alternative factors relevant to homelessness for potential inclusion in 
the PPRN formula and is re-opening the public comment period on the 
PPRN formula established in 24 CFR 578.17(a) of the interim rule for 
the purpose of seeking broader input on four proposed changes to the 
PPRN formula described in this section of the Notice before HUD selects 
the formula to include in the final rule. In developing the following 
proposals, HUD considered the many comments received in response to the 
formula in the interim rule, including those stating that the current 
formula utilizes factors that are not necessarily correlated with 
homelessness such as urban blight and population growth lag, and the 
request that the PPRN formula be based on updated factors that are 
intended to specifically measure homelessness.
    In developing proposals for alternative factors to be included in 
the final formula, HUD sought to maintain the basic structure of the 
current PPRN formula, while investigating alternative data sources and 
measures to be included as formula factors. The characteristics of the 
data sources for the four proposed alternative formula factors were 
determined to be consistent with HUD's 2001 Report to Congress \4\ on 
measuring need for homeless grant funding. Namely, the data sources for 
the proposed factors \5\ are: (1) Relevant to measuring homelessness, 
(2) accurate, (3) timely, and (4) readily available for every 
jurisdiction. HUD chose not to incorporate the point-in-time count data 
into the formula because not all CoCs use the same methodology to 
conduct their counts--with some CoCs having stronger methodology than 
others--and because not all CoCs conduct annual PIT counts. Instead, 
HUD used an average of two years of PIT count data to compare how 
highly a factor being considered for the formula correlated with rates 
of homelessness. In this way, PIT counts helped quantify the relevance 
of potential formula factors to measuring homelessness, while 
insulating potential formulas from the limitations of directly 
including PIT counts. Further, by using factors correlated with the PIT 
count, the proposed formulas mitigate the risk of data fluctuations in 
PIT counts that may be less prevalent in large Census datasets. 
Finally, since PIT counts are locally-generated and self-reported by 
jurisdictions seeking funding under the CoC program, direct inclusion 
of PIT counts into an allocation formula may create perverse incentives 
against objective PIT count methodologies.
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    \4\ See ``Report to Congress: Measuring ``Need'' for HUD's 
McKinney-Vento Homeless Competitive Grants,'' January 2001 at 
https://www.hudexchange.info/resources/documents/MeasuringNeed.pdf.
    \5\ Including the decennial Census (population), American 
Community Survey 5-Year Data (poverty, overcrowding, pre-1940 
housing, renter-occupied units, average gross rent, rent-to-income 
ratio, vacant rental units, and hybrid factor), and Comprehensive 
Housing Affordability Strategy 5-Year Data (affordability gap, rent-
burdened extremely low-income households, and hybrid factor).
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    Before considering any new factors, HUD reviewed the factors 
included in the existing PPRN formula--overcrowding, poverty, pre-1940s 
housing, and population--and their correlation to rates of 
homelessness. HUD conducted Pearson's Correlation analyses \6\ and 
found that three of these factors had a positive and statistically 
significant correlation with rates of homelessness. These were: (1) 
Overcrowding, with a .277 correlation; (2) poverty, with a .153 
correlation; and (3) pre-1940s housing, with a .113 correlation. 
Population was not shown to have a significant correlation with rates 
of homelessness in a community. In addition to analyzing factors 
included in the current PPRN formula, HUD also considered several other 
potential factors related to housing markets, affordability, and 
demographics, as well as a hybrid factor that combined housing market 
and affordability measures. Understanding these factors, along with 
their correlation, is necessary to understanding the formulas being 
proposed for consideration.
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    \6\ Pearson's correlation coefficients range from -1 to 1. A 
correlation coefficient of -1 or 1 indicates a perfect linear 
relationship (negative or positive, respectively) between two 
variables, while a correlation coefficient of 0 indicates a random 
relationship or no linear relationship between two variables.
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    Broadly speaking, the potential formula factors chosen by HUD for 
analysis, and described more fully below, represent important 
community-level determinants of homelessness identified in the research 
literature. Together, these factors represent three related categories 
of known determinants of homelessness: housing market factors, economic 
conditions, and housing affordability (which combines housing market 
and economic factors). Other categories of known community-level 
determinants of homelessness, such as climate factors or the robustness 
and quality of a community's safety net of social services for 
vulnerable populations, were found to lack the type of data

[[Page 48368]]

measures (e.g., timely and readily available for each jurisdiction) 
necessary to be included as potential formula factors. Similarly, some 
demographic factors identified as possible correlates to homelessness 
were excluded from consideration due to data limitations. For example, 
population growth lag could not be readily calculated for every 
jurisdiction due to changes in geographic boundaries since 1960 that 
artificially affect population counts.
    Potential Housing Market Factors: HUD considered the following 
potential housing market factors:
     Renter-occupied units--HUD explored this factor because 
renters generally experience higher housing instability than 
inhabitants of owner-occupied units. They are also more vulnerable to 
steep or sudden increases in rent, may be more economically unstable, 
and are subject to evictions as a result of non-payment of rent which 
tend to happen more quickly than the foreclosure process. For this 
factor, HUD found a .444 correlation between renter-occupied units as a 
percentage of all occupied housing units and rates of homelessness.
     Average gross rent--HUD explored this factor because 
several studies have found measures of ``rent level'' to be 
significantly correlated to higher rates of homelessness. However, this 
aggregate measure encompasses the entire rental market and may not be a 
good indicator of the rent pressures specifically faced by individuals 
and families experiencing homelessness or at risk of homelessness. For 
this factor, HUD found a .248 correlation between average gross rent 
(calculated by dividing aggregate gross rent by the number of renter-
occupied housing units) and rates of homelessness.
     Vacant rental units--HUD explored this factor because some 
studies have theorized that people are at higher risk of homelessness 
in tight rental markets; however, HUD found no significant correlation 
between rental vacancy rates (calculated by dividing the number of 
vacant rental units by total rental units) and rates of homelessness. 
Therefore, it was not used in any of the proposed formulas for 
consideration.
     Affordability gap--This factor was created to measure the 
gap between the demand for and supply of rental units that are both 
affordable and available to Extremely Low-Income (ELI) \7\ renter 
households. HUD considered this factor because ELI households have been 
shown to be at a greater risk of housing instability and homelessness. 
For this factor, HUD found a .310 correlation between this factor as a 
percentage of total housing units and rates of homelessness.
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    \7\ ELI households consist of families with incomes that do not 
exceed 30 percent of the area median income.
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    Potential Affordability Factors: HUD considered the following 
potential factors related to the cost of housing combined with renters' 
ability to pay:
     Rent-to-income ratio is the comparison of how much rent 
people pay when compared to their income in the designated geographic 
area. HUD found a .288 correlation with rates of homelessness.
     Rent-burdened ELI households are those ELI households that 
pay more than 30% of their gross income for housing. HUD found a .336 
correlation with rates of homelessness.
    Hybrid Factor: HUD considered one factor, developed specifically 
for the purposes of this formula, that weighted an affordability factor 
(rent-burdened ELI households) by a housing market factor (renter-
occupied units), two variables found to be correlated with homelessness 
(with correlations of .336 and .444, respectively). This factor was 
calculated by multiplying the number of rent-burdened ELI households by 
the ratio of: the jurisdiction's percentage of renter-occupied units 
divided by the national percentage of renter-occupied units. HUD found 
that this hybrid factor had a .393 correlation with rates of 
homelessness.

II. Proposed PPRN Formula Options for Public Comment

    After reviewing the simple (bivariate) Pearson's correlations 
between rates of homelessness and each of the above factors, HUD 
considered many different options for leveraging a combination of these 
factors into a formula that would better capture pro-rata need than any 
single factor on its own. HUD considered various factor weights as 
representing the relative magnitude of each factor's effect on need 
within a particular formula combination. The proposed weights represent 
what HUD views to be reasonable options for weighting the relative 
magnitudes of factors within each formula option based on its simple 
correlational analyses and the theoretical relationships between sets 
of factors and homelessness documented in established research 
literature.
    HUD seeks comment on the four formula options set out in the table 
below. HUD believes these options are better correlated with rates of 
homelessness at the local level than the current PPRN formula.

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              Formula A                       Formula B                Formula C                Formula D
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10% * population.....................  25% * poverty..........  25% * population.......  25% * poverty
15% * poverty........................  25% * affordability gap  25% * poverty..........  25% * affordability gap
25% * affordability gap..............  25% * rent-burdened ELI  50% * hybrid factor....  50% * hybrid factor
                                        households.
25% * rent-burdened ELI households...  25% * rental units.....
25% * rental units...................
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    None of these proposed PPRN formula options include the 75%/25% 
split between entitlement and non-entitlement communities that is a 
part of the current formula. In addition to comments on the proposed 
formulas set forth above, HUD welcomes comments on factors and 
corresponding weights that will target formula funding to urban and 
rural areas most in need of homeless assistance, whether by ESG 
entitlement designation, population density considerations, or 
otherwise. In addition, HUD welcomes comments on whether any of the 
four proposed options should be combined into a dual or multi-formula 
system similar to the dual calculation system utilized under the 
current PPRN formula.
    HUD has posted, on its Web site, a listing of each CoC's existing 
PPRN amount (as determined using the existing formula) as well as the 
amount that each CoC's PPRN would be using each of these four proposed 
formulas. HUD has also published a tool on its

[[Page 48369]]

Web site that stakeholders can use to adjust the weights of the 
proposed factors and determine the resulting PPRN. This tool can be 
used to explore formula options, using the factors listed above, other 
than the four formula options already published by HUD on its Web site. 
Using all of this information, HUD seeks comment on the proposed 
formulas made available as well as any new formulas and factors 
relevant to the goals and objectives of the CoC program for HUD to 
consider.
    Additionally, HUD acknowledges that each of the proposed formula 
options will result in the PPRN amounts of some CoCs decreasing. To 
prevent against a CoC losing a substantial amount of PPRN in a given 
year, HUD is considering including language that would prevent a CoC 
from losing more than a certain portion of their PPRN. For example, if 
a CoC's current PPRN amount is $2.5 million and a newly adopted PPRN 
formula would result in the CoC's PPRN amount being reduced to $1.7 
million, HUD could consider language that would provide the CoC with 
more than $1.7 million in PPRN, but less than $2.5 million. HUD seeks 
comment on this proposal and also, what the appropriate amount or 
portion to be protected should be.
    HUD welcomes other comments on how the CoC formula may be improved.

    Dated: July 19, 2016.
Harriet Tregoning,
Principal Deputy Assistant Secretary for Community Planning and 
Development.
[FR Doc. 2016-17567 Filed 7-22-16; 8:45 am]
 BILLING CODE 4210-67-P