[Federal Register Volume 81, Number 166 (Friday, August 26, 2016)]
[Notices]
[Pages 58952-58959]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20552]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5962-N-01]


Fair Market Rents for the Housing Choice Voucher Program, 
Moderate Rehabilitation Single Room Occupancy Program and Other 
Programs Fiscal Year 2017

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

ACTION: Notice of Fiscal Year (FY) 2017 Fair Market Rents (FMRs).

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SUMMARY: Today's notice announces the FY 2017 Fair Market Rents (FMRs) 
for all areas that reflect the estimated 40th and 50th percentile rent 
levels trended to April 1, 2017. The Housing Opportunities Through 
Modernization Act of 2016 (HOTMA) (Pub. L. 114-201, approved July 29, 
2016) revises the procedure by which HUD publishes its annual FMRs. 
Specifically, HUD is no longer required to publish proposed FMRs for 
comment in the Federal Register. Rather, HUD may post the FMRs on HUD's 
Web site and announce such posting by notice published in the

[[Page 58953]]

Federal Register. In addition, HOTMA provides that HUD's FMRs shall be 
effective no earlier than 30 days after the date of the publication of 
HUD's Federal Register notice but that public housing agencies (PHAs) 
and other interested parties may comment on the FMR and request 
revevaluation of FMRs in a jurisdiction before such FMRs become 
effective. This notice announces that HUD's FY 2017 FMRs are available 
at www.huduser.gov and will take effect as stated in the DATES section 
of this notice unless interested parties request reevaluation of a 
their FMRs by September 26, 2016. HOTMA also requires HUD to publish 
proposed material changes to the methodology for comment. This notice 
also announces that HUD is not changing the methodology for calculating 
the FY 2017 FMRs estimates from that used to determine the FY 2016 
FMRs. This notice, however, requests public comments on defining the 
scope of material changes that will trigger notice and comment in 
future calculation of FMRs.
    The FY 2017 FMRs announced in this notice are based on ``5-year'' 
data collected by the American Community Survey (ACS) from 2010 through 
2014. HUD updated the 5-year data with ``one-year'' 2014 ACS data for 
areas where statistically valid one-year ACS data is available. HUD 
continues to use ACS data in different ways according to the 
statistical reliability of rent estimates. HUD uses actual and forecast 
Consumer Price Index (CPI) rent and utility price indices to further 
update the ACS-derived rents to the middle of the FY 2017 fiscal year. 
The FY 2017 FMRs continue to use the February 28, 2013, OMB 
metropolitan area definitions. As noted above, the FY 2017 FMRs are 
calculated in the same manner used to calculate of the FY 2016 FMRs 
with the only differences being the use of updated data.
    HUD notes that the only area for which HUD announces Small Area 
FMRs is the Dallas, TX HUD Metro FMR Area. The Small Area FMR 
Demonstration project with 5 PHA participants concludes on September 
30, 2016. The 5 PHAs that participated in the demonstration may 
continue to be able set their housing choice voucher payment standards 
based on Small Area FMRs, as discussed in this notice.

DATES: Comment Due Date: September 26, 2016. Effective Date: October 1, 
2016.

ADDRESSES: HUD invites interested persons to submit comments regarding 
the FMRs and requests for reevaluation of the FY 2017 FMRs to the 
Regulations Division, Office of General Counsel, Department of Housing 
and Urban Development, 451 Seventh Street SW., Room 10276, Washington, 
DC 20410-0001. Communications must refer to the above docket number and 
title and should contain the information specified in the ``Request for 
Comments'' and ``Requests for FMR Reevaluations'' sections below. There 
are two methods for submitting public comments and reevaluation 
requests.
    1. Submission of Comments or Reevaluation Requests by Mail. 
Comments or requests for reevaluation 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 or reevaluation requests, HUD 
recommends that comments or requests submitted by mail be submitted at 
least two weeks in advance of the deadline. HUD will make all comments 
or reevaluation requests received by mail available to the public at 
http://www.regulations.gov/.
    2. Electronic Submission of Comments or Reevaluation Requests. 
Interested persons may submit comments or reevaluation requests 
electronically through the Federal eRulemaking Portal at http://www.regulations.gov. HUD strongly encourages commenters to submit 
comments or reevaluation requests electronically. Electronic submission 
of comments or reevaluation requests allows the commenter maximum time 
to prepare and submit a comment or reevaluation request, ensures timely 
receipt by HUD, and enables HUD to make them immediately available to 
the public. Comments or reevaluation requests submitted electronically 
through the http://www.regulations.gov Web site can be viewed by other 
commenters and interested members of the public. Commenters or 
reevaluation requestors should follow instructions provided on that 
site to submit comments or reevaluation requests electronically.

    Note: To receive consideration as public comments or 
reevaluation requests, comments or requests 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 or Reevaluation Requests. Facsimile (FAX) 
comments or requests for FMR reevaluation are not acceptable.
    Public Inspection of Public Comments and Reevaluation Requests. All 
properly submitted comments and reevaluation requests and 
communications regarding this notice 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 and 
reevaluation requests 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 and reevaluation requests submitted are available for 
inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For technical information on the 
methodology used to develop FMRs or a listing of all FMRs, please call 
the HUD USER information line at 800-245-2691 or access the information 
on the HUD USER Web site http://www.huduser.gov/portal/datasets/fmr.html. FMRs are listed at the 40th or 50th percentile in Schedule B. 
For informational purposes, 40th percentile rents for the areas with 
50th percentile FMRs will be provided in the HUD FY 2017 FMR 
documentation system at http://www.huduser.gov/portal/datasets/fmr/fmrs/docsys.html&data=fmr17 and 50th percentile rents for all FMR areas 
will be published at http://www.huduser.gov/portal/datasets/50per.html.
    Questions related to use of FMRs or voucher payment standards 
should be directed to the respective local HUD program staff. Questions 
on how to conduct FMR surveys may be addressed to Marie L. Lihn or 
Peter B. Kahn of the Economic and Market Analysis Division, Office of 
Economic Affairs, Office of Policy Development and Research at HUD 
headquarters [451 7th Street SW., Room 8208, Washington, DC 20410]; 
telephone number 202-402-2409 (this is not a toll-free number), or they 
may be reached at [email protected]. Persons with hearing or speech 
impairments may access HUD numbers through TTY by calling the toll-free 
Federal Relay Service at 800-877-8339.
    Electronic Data Availability. This Federal Register notice will be 
available electronically from the HUD User page at https://www.huduser.gov/portal/datasets/fmr.html.Federal Register notices also 
are available electronically from https://www.federalregister.gov/

[[Page 58954]]

the U.S. Government Printing Office Web site. Complete documentation of 
the methods and data used to compute each area's FY 2017 FMRs is 
available at http://www.huduser.gov/portal/datasets/fmr/fmrs/docsys.html&data=fmr17. FY 2017 FMRs are available in a variety of 
electronic formats at https://www.huduser.gov/portal/datasets/fmr.html. 
FMRs may be accessed in PDF format as well as in Microsoft Excel. Small 
Area FMRs based on FY 2017 Metropolitan Area Rents for the Dallas, TX 
HUD Metro FMR Area are available in Microsoft Excel format at the same 
web address. Small Area FMRs for all other metropolitan FMR areas are 
available at: http://www.huduser.gov/portal/datasets/fmr/smallarea/index.html.

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 Housing Choice Voucher (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 and is typically set 
at the 40th percentile of the distribution of gross rents. In addition, 
all rents subsidized under the HCV program must meet reasonable rent 
standards. HUD's regulations at 24 CFR 888.113 permit the Department to 
establish 50th percentile FMRs for certain areas.
    In addition to the HCV program, FMRs are used to determine initial 
renewal rents for some expiring project-based Section 8 contracts, to 
determine initial rents for housing assistance payment contracts in the 
Moderate Rehabilitation Single Room Occupancy program, and to serve as 
rent ceilings for rental units in the HOME Investment Partnerships 
program. HUD also uses FMRs in the calculation of maximum award amounts 
for Continuum of Care grantees and in the calculation of flat rents in 
Public Housing units.

II. Procedures for the Development of FMRs

    Section 8(c)(1) of the USHA, as amended by HOTMA requires the 
Secretary of HUD to publish FMRs not less than annually. Section 
8(c)(1)(A) states, in part, that ``[e]ach fair market rental in effect 
under this subsection shall be adjusted to be effective on October 1 of 
each year to reflect changes, based on the most recent available data 
trended so the rentals will be current for the year to which they 
apply, of rents for existing or newly constructed rental dwelling 
units, as the case may be, of various sizes and types in the market 
area suitable for occupancy by persons assisted under this section.''
    Section 8(c)(1)(B) also provides that FMRs for an area shall be 
published not less than annually on the Department's Web site on the 
World Wide Web. In addition, HUD is required to publish a notice in the 
Federal Register alerting the public that such FMRs are being 
published. Section 8(c)(1)(B) provides that such FMRs shall become 
effective no earlier than 30 days after the date of such publication. 
HUD is required, however, to establish a procedure for PHAs and other 
interested parties to comment on such FMRs and to request, within a 
time specified by HUD, reevaluation of the FMRs in a jurisdiction 
before such rentals become effective.
    This notice serves as the statutory requirement to provide notice 
that FY 2017 FMRs are available at https://www.huduser.gov/portal/datasets/fmr.html. In addition, HUD's regulations at 24 CFR 888.113(c) 
set out procedures for HUD to assess whether areas are eligible for 
FMRs at the 50th percentile. Minimally qualified areas \1\ are reviewed 
each year unless not qualified to be reviewed. Areas are not qualified 
to be reviewed if they have been made a 50th-percentile area within the 
last three years or have lost 50th-percentile status for failure to 
deconcentrate 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 and where 25 percent or more of voucher tenants 
reside in the 5 percent of the census tracts within the FMR area 
that have the largest number of voucher program participants. This 
continues to be evaluated with 2000 Decennial Census information. In 
light of HUD's June 6, 2015 Advanced Notice of Proposed Rulemaking, 
HUD has chosen not to update the area selection criteria with 2010 
tract delineations in order to ease the anticipated future 
implementation of a Small Area FMR based deconcentration rule.
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    In FY 2016 there were 14 areas using 50th-percentile FMRs. Of these 
14 areas, no area completed three years of program participation and 
were evaluated. Therefore, all 14 areas will continue to operate using 
50th percentile FMRs in FY 2017.
    In addition, two areas that previously ``graduated'' from the 50th 
percentile FMR program, become 50th percentile FMR areas again because 
voucher tenant concentrations are now above this 25 percent minimum. 
Under the 50th percentile FMR program, areas that experience a 
reduction in the concentration of tenants below the 25 percent minimum 
required to reside in the 5 percent of the census tracts within the FMR 
area with the largest number of voucher program participants, are 
evaluated each year after they lose their 50th percentile FMRs. Two of 
these areas, Bergen-Passaic, NJ HUD Metro FMR Area, and San Diego-
Carlsbad-San Marcos, CA MSA, become 50th percentile FMR areas again 
because voucher tenant concentrations are now above this 25 percent 
minimum. In addition, a new area, Spokane, WA HUD Metro FMR Area 
qualified for the first time by registering a significant increase in 
its concentration measure to get above 25 percent. Based on the current 
regulations, HUD is including these 3 areas along with the 14 areas 
from FY 2016 in the use of 50th percentile FMRs in FY 2017.

     FY 2017 50th-Percentile FMR Areas and Year of Next Reevaluation
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Albuquerque, NM MSA..........         2018  Baltimore-              2019
                                             Columbia-
                                             Towson, MD MSA.
Bergen-Passaic, NJ HUD Metro          2020  Chicago-Joliet-         2018
 FMR Area.                                   Naperville, IL
                                             HUD Metro FMR
                                             Area.
Denver-Aurora-Broomfield, CO          2018  Hartford-West           2018
 MSA.                                        Hartford-East
                                             Hartford, CT
                                             HUD Metro FMR
                                             Area.
Urban Honolulu, HI MSA.......         2018  Kansas City, MO-        2018
                                             KS HUD Metro
                                             FMR Area.
Milwaukee-Waukesha-West               2018  Philadelphia-           2019
 Allis, WI MSA.                              Camden-
                                             Wilmington, PA-
                                             NJ-DE-MD.
Riverside-San Bernardino-             2018  San Diego-              2020
 Ontario, CA MSA.                            Carlsbad-San
                                             Marcos, CA MSA.
Spokane, WA HUD Metro FMR             2020  Tacoma, WA HUD          2018
 Area.                                       Metro FMR Area.

[[Page 58955]]

 
Virginia Beach-Norfolk-               2018  Washington, DC-         2019
 Newport News, VA-NC MSA.                    VA-MD HUD
                                             Metro FMR Area.
West Palm Beach-Boca Raton,           2019
 FL HUD Metro FMR Area.
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    HUD published a proposed rule titled, ``Establishing a More 
Effective Fair Market Rent System; Using Small Area Fair Market Rents 
in Housing Choice Voucher Program Instead of the Current 50th 
Percentile FMRs'' on June 16, 2016 (81 FR 39218) that proposes to 
revise the 50th percentile FMR regulation and replace it with a Small 
Area FMR based regulation for certain areas.
    Two of these proposed Small Area FMR areas will start the three 
year 50th percentile FMR period in FY 2017 (Bergen-Passaic, NJ and San 
Diego-Carlsbad-San Marcos, CA) while the third area to begin use of 
50th percentile FMRs in FY 2017 (Spokane, WA) is not currently proposed 
to be a Small Area FMR Area. HUD is specifically seeking comment from 
these three new 50th percentile areas as to whether being elevated to a 
50th percentile area in the FY 2017 FMRs would create operational 
challenges under HUD's proposed Small Area FMR rule. HUD also request 
comments on whether the PHAs within these 50th percentile areas would 
consider requesting a waiver for exemption from 50th percentile status 
in FY 2017 as a way to address these challenges.

III. FMR Methodology

    This section provides a brief overview of how HUD computes the FY 
2017 FMRs. For complete information on how HUD determines FMR areas, 
and on how HUD derives each area's FMRs, see the online documentation 
at http://www.huduser.gov/portal/datasets/fmr/fmrs/docsys.html&data=fmr17.
    HUD bases the FY 2017 FMRs on the updated metropolitan area 
definitions published by OMB on February 28, 2013. HUD has not 
implemented any geography changes for FY 2017; however, several areas 
have been renamed to avoid confusion. For example, the Morristown, TN 
HUD Metro FMR Area (HMFA) has been renamed to the Grainger County, TN 
HMFA to avoid confusion with Morristown, TN MSA. Similarly, HUD has not 
included any method changes to the calculation of FY 2017 FMRs from 
what was used in the Final FY 2016 FMRs beyond updates to use the most 
current data available. For a complete description of the methods used 
to calculate FY 2016 FMRs, please see the Final FY 2016 FMR notice, 
published in the Federal Register on December 11, 2015 (80 FR 77124) 
and available at https://www.huduser.gov/portal/datasets/fmr/fmr2016f/FY2016_Final_FMRs_preamble.pdf.

A. Base Year Rents

    The U.S. Census Bureau released standard tabulations of 5-year ACS 
data collected between 2010 through 2014 in December of 2015. For FY 
2017 FMRs, HUD uses the 2010-2014 5-year ACS data to update the base 
rents. As in FY 2016, HUD used ACS estimates where the margin of error 
of the estimate is less than half the size of the estimate itself.
    HUD has updated base rents each year based on new 5-year data since 
FY 2012 for which HUD used 2005-2009 ACS data. HUD is also updating 
base rents for Puerto Rico FMRs using the 2010-2014 Puerto Rico 
Community Survey (PRCS); HUD first updated the Puerto Rico base rents 
in FY 2014 based on 2007-2011 PRCS data collected through the ACS 
program.
    HUD historically based FMRs on gross rents for recent movers (those 
who have moved into their current residence in the last 24 months) 
measured directly. However, due to the way Census constructs the 5-year 
ACS data, HUD developed a new method for calculating recent-mover FMRs 
in FY 2012. As in FY 2012, HUD assigns all areas a base rent, which is 
the two-bedroom standard quality 5-year gross rent estimate from the 
ACS. 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. 
The calculation of the recent mover factor is described below.

B. Recent Mover Factor

    Following the assignment of the standard quality two-bedroom rent 
described above, HUD applies a recent mover factor to these rents. The 
calculation of the recent mover factor for FY 2017 is updated to use 
2014 ACS data but otherwise remains unchanged from the method used in 
FY 2016.
    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.\2\ HUD calculates some areas' recent mover 
factors using data collected just for the FMR area. As in FY 2016, HUD 
bases other areas' recent mover factors on larger geographic areas if 
this is necessary to obtain statistically reliable estimates. For 
metropolitan areas that are subareas of larger metropolitan areas, the 
order is FMR area, metropolitan area, aggregated metropolitan parts of 
the state, and state. Metropolitan areas that are not divided follow a 
similar path from FMR area, to aggregated metropolitan parts of the 
state, to state. In nonmetropolitan areas HUD bases the recent mover 
factor on the FMR area, the aggregated non-metropolitan parts of the 
state, or if that is not available, on the basis of the whole state. 
HUD calculates the recent mover factor as the percentage change between 
the 5-year 2010-2014 standard quality two-bedroom gross rent and the 1 
year 2014 recent mover two-bedroom gross rent for the recent mover 
factor area. HUD does not allow recent mover factors 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 2017 FMR documentation system 
available at: http://www.huduser.gov/portal/datasets/fmr/fmrs/docsys.html&data=fmr17. Applying the recent mover factor to the 
standard quality base rent produces an ``as of'' 2014 recent mover two-
bedroom base gross rent for the FMR area.
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    \2\ 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 half the estimate.
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C. Other Rent Survey Data

    HUD calculated base rents for the insular areas using the 2010 
decennial census of American Samoa, Guam, the Northern Mariana Islands, 
and the Virgin Islands beginning with the FY 2016 FMRs.\3\ This 2010 
base year data was updated to 2013 for the FY 2016 FMRs and is updated 
through 2014 for

[[Page 58956]]

the FY 2017 FMRs using national ACS data.
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    \3\ 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 
``long-form'' sample surveys for these areas. The results gathered 
by this long form survey have been incorporated into the FY 2017 
FMRs.
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    HUD does not use the ACS as the base rent or recent mover factor 
for 12 areas where the FY 2017 FMR was adjusted based on survey data 
collected in 2012 for Hood River County, OR, Mountrail County, ND, Ward 
County, ND, and Williams County, ND,\4\ survey data collected in 2014 
for Bennington County, VT, Windham County, VT, Windsor County, VT, and 
Seattle, WA, survey data from 2015 for Portland, OR, Oakland, CA, and 
survey data from 2016 for Burlington, VT and San Francisco, CA.\5\
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    \4\ Surveys conducted in 2012 will be superseded for FMR base 
rent purposes with the FY 2018 FMRs.
    \5\ Similar to FY 2016, HUD has not allocated funds to conduct 
FMR area surveys in FY 2017. Therefore, areas wishing to conduct 
local surveys for the purposes of revising FMRs will have to fund 
those surveys locally as well.
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D. Updates From 2014 to 2015 and Forecast to April 2017

    HUD updates the ACS-based ``as of'' 2014 rent through the end of 
2015 using the annual change in CPI from 2014 to 2015. 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 2014 to 2015 for all Puerto Rico FMR 
areas. Following the application of the appropriate CPI update factor, 
HUD trends the estimate from 2015 to be as of FY 2017 using forecasts 
of expected growth in gross rents. In the Final FY 2016 FMRs, HUD used 
a national forecast of expected changes in gross rents between 2014 and 
FY 2016. For FY 2017 FMRs, HUD continues to use a national forecast of 
expected changes in gross rents from 2015 to FY 2017.

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 bedroom counts and used them to set FMRs for other units. 
HUD did this because it is much easier to update two-bedroom estimates 
and to use pre-established cost relationships with other unit bedroom 
counts than it is to develop independent FMR estimates for each unit 
bedroom count. When calculating FY 2013 FMRs, HUD updated the bedroom 
ratio adjustment factors using 2006-2010 5-year ACS data. The bedroom 
ratio methodology used in this update was the same methodology that was 
used when calculating bedroom ratios using 2000 Census data. The 
bedroom ratios HUD used in the calculation of FY 2017 FMRs have been 
updated using average data from three five-year ACS data series (2008-
2012, 2009-2013 and 2010-2014).
    HUD establishes 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. HUD sets these ranges as 
follows: Efficiency FMRs are constrained to fall between 0.63 and 0.83 
of the two-bedroom FMR; one-bedroom FMRs must be between 0.75 and 0.87 
of the two-bedroom FMR; three-bedroom FMRs must be between 1.15 and 
1.34 of the two-bedroom FMR; and four-bedroom FMRs must be between 1.28 
and 1.64 of the two-bedroom FMR. (HUD sets these upper limits for the 
three-bedroom and four-bedroom FMR ratios without regard to 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. 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. HUD derives FMRs 
for unit bedroom counts larger than four 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.\6\
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    \6\ As established in the interim rules implementing the 
provisions of the Quality Housing and Work Responsibility Act of 
1998 (Title V of the FY 1999 HUD Appropriations Act; Pub. L. 105-
276. In 24 CFR 982.604).
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    For low-population, nonmetropolitan counties with small or 
statistically insignificant data for any two of the three 5-year ACS 
standard quality rents series used in the average, HUD uses state non-
metropolitan data to determine bedroom ratios for each unit bedroom 
count. HUD made this adjustment to protect against unrealistically high 
or low FMRs due to insufficient sample sizes.

IV. Manufactured Home Space Surveys

    The FMR HUD uses to establish payment standard amounts for the 
rental of manufactured home spaces in the HCV program is 40 percent of 
the FMR for a two-bedroom unit.\7\ HUD will consider modification of 
the manufactured home space FMRs where public comments present 
statistically valid survey data showing the 40th-percentile 
manufactured home space rent (including the cost of utilities) for the 
entire FMR area.
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    \7\ In the HCV program, a family which owns a manufactured home 
may use their voucher to subsidize the rent of a plot of land within 
a manufactured home park designed for the accommodation of a single 
manufactured home.
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    All approved exceptions to these rents that were in effect in FY 
2016 were updated to FY 2017 using the same data used to estimate the 
HCV program FMRs. If the result of this computation was higher than 40 
percent of the new two-bedroom rent, the exception remains and is 
listed in Schedule D online. The FMR area definitions HUD establishes 
for the rental of manufactured home spaces are the same as the area 
definitions established for the other FMRs.

V. Small Area Fair Market Rents

    PHAs in the Dallas, TX HUD Metro FMR Area (HMFA), continue to use 
Small Area Fair Market Rents (SAFMRs) per the terms of court entered 
settlement. These FMRs are listed in the Schedule B addendum. PHAs who 
had been participating in HUD's SAFMR Demonstration may request a 
waiver of HUD's existing payment standard regulations to continue to 
use Small Area FMRs after the expiration of their demonstration 
agreements. HUD will work with these PHAs to effectuate the required 
waivers.
    HUD calculates SAFMRs using a rent ratio determined by dividing the 
median gross rent across all bedrooms for the small area (a ZIP code) 
by the similar

[[Page 58957]]

median gross rent for the metropolitan area of the ZIP code. 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. HUD multiplies 
this rent ratio 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. As in FY 2016, HUD continues 
to use a rolling-average of ACS data in calculating the Small Area FMR 
rent ratios. The Department believes coupling the most current data 
with previous year's data minimizes excessive year-to-year variability 
in Small Area FMR rent ratios due to sampling variance. Therefore, for 
FY 2017 SAFMRs, HUD has updated the rent ratios to use an average of 
the rent ratios calculated from the 2008-2012, 2009-2013, and 2010-2014 
5-year ACS estimates.

VI. Request for Public Comments

    HUD is seeking public comments on the methods it uses to calculate 
FY 2017 FMRs including Small Area FMRs, and FMR levels for specific 
areas. Due to its current funding levels, HUD no longer has sufficient 
resources to conduct local surveys of rents to address comments filed 
regarding the FMR levels for specific areas. HUD continually strives to 
calculate FMRs that meet the statutory requirement of using ``the most 
recent available data'' while also serving as an effective program 
parameter.
    While HUD is making no changes in the methodology used to estimate 
the FY 2017 FMRs from the methods HUD used in calculating the FY 2016 
FMRs, HUD is interested in making improvements in FMR estimation 
methods in the future. As noted earlier, the FMR procedures enacted in 
Section 8(c)(1)(B) of HOTMA require that HUD publish a notice in the 
Federal Register seeking comment on any proposed ``material changes'' 
in methodology. In this notice, HUD requests public comment on what 
should be considered ``material changes'' in FMR estimation methods for 
purposes of triggering public notice and comment under HOTMA. For 
example, on the assumption that any change in the FMR estimation method 
must necessarily change at least some FMR values from what they would 
otherwise be, and that such changes have the potential to change 
subsidy levels for voucher tenants to the extent they are fully 
accounted for in payment standard adjustments, what level of potential 
subsidy redistribution caused by a change in FMR estimation methods 
should HUD consider ``material'' prior to implementing such changes? 
What other effects of changes in FMR estimation methods should HUD 
consider in determining whether such changes are ``material?'' Examples 
might include the number of FMR areas affected by the proposed change, 
or the number of areas whose FMRs would change beyond a particular 
threshold such as 10 percent. Should HUD consider any and all changes 
made to the FMR estimation methods to rise to the level of a material 
change? If so, would this be consistent with the purpose of Section 
8(c)(1)(B) of HOTMA?
    HUD anticipates publishing a Federal Register notice with responses 
to comments on this notice including responses to what is considered 
``material changes'' in methodology along with proposed material 
changes to be implemented for the FY 2018 FMRs following a review of 
the comments on this notice.

V. Requests for FMR Reevaluations

    As amended by HOTMA, Section 8(c)(1)(B) states, in part that HUD 
``shall establish a procedure for PHAs and other interested parties to 
comment on such fair market rentals and to request, within a time 
specified by the Secretary, reevaluation of the fair market rentals in 
a jurisdiction before such rentals become effective.'' PHAs or other 
interested parties interested in requesting HUD reevaluation of its FY 
2017 FMRs must follow the following procedures:
    1. By the end of the comment period, such reevaluation requests 
must be submitted publicly through www.regulations.gov or directly to 
HUD as described above. PHAs representing at least half of the voucher 
tenants in multijurisdictional FMR areas must agree that the re-
evaluation is necessary.
    2. In order for a reevaluation to occur, the requestor(s) must 
supply HUD with data more recent than the 2014 American Community 
Survey data using the survey guidance available at https://www.huduser.gov/portal/datasets/fmr/NoteRevisedAreaSurveyProcedures.pdf 
and https://www.huduser.gov/portal/datasets/fmr/PrinciplesforPHA-ConductedAreaRentSurveys.pdf.
    3. On or about October 3, HUD will post a list, at https://www.huduser.gov/portal/datasets/fmr.html, of the areas requesting 
reevaluations and where FY 2016 FMRs remain in effect.
    4. Data for reevaluations must be supplied to the Department by 
Friday January 6, 2017. On Monday January 9, 2017, HUD will post at 
https://www.huduser.gov/portal/datasets/fmr.html a list of areas 
failing to deliver data and making the FY 2017 FMRs effective in these 
areas.
    5. HUD will use the data delivered by January 6, 2017 to reevaluate 
the FMRs and following the reevaluation, will post revised FMRs with an 
accompanying Federal Register notice stating the revised FMRs are 
available and the effective date of the FMRs for these jurisdictions. 
Such notice will include HUD responses to comments filed during the 
comment period on FY2017 FMRs if no intervening ``Notice of Proposed 
Material Change'' has been published.
    6. Any data supporting a change in FMRs supplied after January 6, 
2017, or that was not submitted in connection with a request for 
reevaulation of the FY2017 FMRs for an area, will be incorporated into 
FY 2018 FMRs.
    Questions on how to conduct FMR surveys may be addressed to the 
individuals listed in the FOR FURTHER INFORMATION section of this 
notice. Data submissions for FMR reevaluations must include a full 
description of the rental housing survey method used to ensure that the 
data comply with HUD's rental housing survey guidance.
    For small metropolitan areas without one-year ACS data and 
nonmetropolitan counties, HUD has developed a method using mail surveys 
that is discussed on the FMR Web page: https://www.huduser.gov/portal/datasets/fmr.html#fmrsurvey. This method allows for the collection of 
as few as 100 one-bedroom, two-bedroom and three-bedroom recent mover 
(tenants that moved in last 24 months) units.
    While HUD has not developed a specific method for mail surveys in 
areas with 1-year ACS data, HUD would apply the standard established 
for Random-Digit Dialing (RDD) telephone rent surveys. HUD will 
evaluate these survey results to determine whether they would establish 
a new FMR statistically different from the current FMR, which means 
that the survey confidence interval must not include the FMR. The 
survey should collect results based on 200 one-bedroom and two-bedroom 
eligible recent mover units to provide a small enough confidence 
interval for significant results in large market mail surveys. Areas 
with statistically reliable 1-year ACS data generally are not 
considered to be good candidates for local surveys due to the size and 
completeness of the ACS process.
    Other survey methods are acceptable in providing data to support 
reevaluation requests if the survey

[[Page 58958]]

method can provide statistically reliable, unbiased estimates of the 
gross rent of the entire FMR area. In general, recommendations for FMR 
changes and supporting data must reflect the rent levels that exist 
across all rental units within the entire FMR area and should be 
statistically reliable.
    PHAs in nonmetropolitan areas may, in certain circumstances, 
conduct surveys of groups of counties. HUD must approve all county-
grouped surveys in advance. PHAs are cautioned that the resulting FMRs 
may not be identical for the counties surveyed; each individual FMR 
area will have a separate FMR based on the relationship of rents in 
that area to the combined rents in the cluster of FMR areas. In 
addition, PHAs are advised that in counties where FMRs are based on the 
combined rents in the cluster of FMR areas HUD will not revise their 
FMRs unless the grouped survey results show a revised FMR statistically 
different from the combined rent level.
    Survey samples should preferably be randomly drawn from a complete 
list of rental units for the FMR area. If this is not feasible, the 
selected sample must be drawn to be statistically representative of the 
entire rental housing stock of the FMR area. Surveys must include units 
at all rent levels and be representative by structure type (including 
single-family, duplex, and other small rental properties), age of 
housing unit, and geographic location. The current 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.
    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.
    The Department has developed guidance on how to provide data-
supported comments on or requests for reevaluation of Small Area FMRs 
using HUD's special tabulations of the distribution of gross rents by 
bedroom unit size for ZIP Code Tabulation Areas. This guidance is 
available at http://www.huduser.gov/portal/datasets/fmr.html in the FY 
2017 FMR section and should be used by interested parties in commenting 
on whether or not the level of Small Area FMRs are too high or too low 
(i.e. Small Area FMRs that are larger than the gross rent necessary to 
make 40 percent of the units accessible for an individual zip code or 
that are smaller than the gross rent necessary to make 40 percent of 
the units accessible for a given zip code). HUD will post revised Small 
Area FMRs after confirming commenters calculations.
    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 2014 ACS. HUD encourages a PHA or other interested party that 
believes the FMR in their area is incorrect to file a comment even if 
they do not have the resources to provide market-wide rental data. In 
these instances, HUD will use the comments, should survey funding be 
restored, when determining the areas HUD will select for HUD-funded 
local area rent surveys.

VII. Environmental Impact

    This Notice involves the establishment of fair market rent 
schedules, which do not constitute a development decision affecting the 
physical condition of specific project areas or building sites. 
Accordingly, under 24 CFR 50.19(c)(6), this Notice is categorically 
excluded from environmental review under the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321).
    Accordingly, the Fair Market Rent Schedules, which will not be 
codified in 24 CFR part 888, are available at https://www.huduser.gov/portal/datasets/fmr.html:

    Dated: August 19, 2016.
Matthew E. Ammon,
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 Core-Based Statistical Areas 
(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 2017 FMRs incorporates the OMB 
definitions of metropolitan areas based on the CBSA standards as 
implemented with 2000 Census data and updated by the 2010 Census in 
February 28, 2013. The adjustments made to the 2000 definitions to 
separate subparts of these areas where FMRs or median incomes would 
otherwise change significantly are continued. To follow HUDs policy of 
providing FMRs at the smallest possible area of geography, no counties 
were added to existing metropolitan areas due to recent updates in 
metropolitan area definitions. All counties added to metropolitan areas 
will still be treated as separate counties. All metropolitan areas that 
have at least one subarea will also receive a subarea, that is the 
rents from a county that is a subarea will not be used for the 
remaining metropolitan subarea rent determination.
    The specific counties and New England towns and cities within each 
state in MSAs and HMFAs were not changed by the February 28, 2013 OMB 
metropolitan area definitions. These areas are listed in Schedule B, 
available online at https://www.huduser.gov/portal/datasets/fmr.html.

2. Unit Bedroom Count Adjustments

    Schedule B, available at https://www.huduser.gov/portal/datasets/fmr.html 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 (please see section V of this notice for a list 
of participating PHAs). The FMRs for unit sizes larger than four 
bedrooms may be 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 the online 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

[[Page 58959]]

D, available at https://www.huduser.gov/portal/datasets/fmr.html, are 
listed alphabetically by state.
    b. The constituent counties (and New England towns and cities) 
included in each metropolitan FMR area are listed immediately following 
the listings of the FMR dollar amounts. All constituent parts of a 
metropolitan FMR area that are in more than one state can be identified 
by consulting the listings for each applicable state.
    c. Two nonmetropolitan counties are listed alphabetically on each 
line of the non-metropolitan county listings.
    d. The New England towns and cities included in a nonmetropolitan 
county are listed immediately following the county name.

[FR Doc. 2016-20552 Filed 8-25-16; 8:45 am]
BILLING CODE 4210-67-P