[Federal Register Volume 83, Number 34 (Tuesday, February 20, 2018)]
[Notices]
[Pages 7205-7208]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03398]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6021-N-03]


Fair Market Rents for the Housing Choice Voucher Program and 
Moderate Rehabilitation Single Room Occupancy Program Fiscal Year 2018; 
Revised

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

ACTION: Notice of revised fiscal year (FY) 2018 fair market rents 
(FMRs) and discussion of comments on FY 2018 FMRs.

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SUMMARY: This notice updates the FY 2018 FMRs for eight areas based on 
new survey data: Hawaii County, HI; Hood River County, OR; Jonesboro, 
AR HUD Metro FMR Area (HMFA); Santa Cruz-Watsonville, CA Metropolitan 
Statistical Area (MSA); Santa Maria-Santa Barbara, CA MSA; Seattle-
Bellevue, WA HMFA; Urban Honolulu, HI MSA; and, Wasco County, OR. All 
comments received on the FY 2018 FMRs are also discussed.

DATES: Applicability: The revised FY 2018 FMRs for these eight areas 
are applicable beginning March 22, 2018.

FOR FURTHER INFORMATION CONTACT: 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 202-402-2409. Persons with hearing 
or speech impairments may access this number through TTY by calling the 
toll-free Federal Relay Service at 800-877-8339 (toll-free).
    Questions related to use of FMRs or voucher payment standards 
should be directed to the respective local HUD program staff.
    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 (toll-free) or access the information on the HUD USER 
website: 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 recent-mover rents for the areas with 50th 
percentile FMRs will be provided in the HUD FY 2018 FMR documentation 
system at https://www.huduser.gov/portal/datasets/fmr.html#2018_query 
and 50th percentile rents for all FMR areas are published at http://www.huduser.gov/portal/datasets/50per.html.

SUPPLEMENTARY INFORMATION: On September 1, 2017 HUD published the FY 
2018 FMRs, requesting comments on the FY 2018 FMRs, and outlining 
procedures for requesting a reevaluation of an area's FY 2018 FMRs (82 
FR 41637). This notice revises FY 2018 FMRs for eight areas that 
requested reevaluation and provided data to HUD to allow for a 
reevaluation, and provides responses to the public comments HUD 
received on the previous notice referenced above.

I. Revised FY 2018 FMRs

    The FMRs appearing in the following table supersede the use of the 
FY 2017 FMRs for these eight areas. The updated FY 2018 FMRs are based 
on surveys conducted by the area public housing agencies (PHAs) and 
reflect the estimated 40th percentile rent levels trended to April 1, 
2018.
    The FMRs for the affected area are revised as follows:

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                                                         FMR by number of bedrooms in unit
   2018 Fair market rent area    -------------------------------------------------------------------------------
                                       0 BR            1 BR            2 BR            3 BR            4 BR
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Hawaii County, HI...............             877           1,009           1,322           1,663           1,936
Hood River County, OR...........             696             901           1,090           1,586           1,739
Jonesboro, AR, HMFA.............             493             613             743           1,046           1,047
Santa Cruz-Watsonville, CA MSA..           1,253           1,477           1,965           2,615           2,961
Santa Maria-Santa Barbara, CA              1,393           1,636           1,917           2,603           3,030
 MSA............................
Seattle-Bellevue, WA HMFA.......           1,363           1,529           1,878           2,719           3,219
Urban Honolulu, HI MSA..........           1,352           1,527           2,031           2,954           3,525
Wasco County, OR................             708             798           1,062           1,440           1,835
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    The FY 2018 FMRs are amended and are available on the HUD USER 
website: http://www.huduser.gov/portal/datasets/fmr.html. The FY 2018 
Small Area FMRs (SAFMRs) for the revised metropolitan areas have also 
been

[[Page 7206]]

updated and may be found at https://www.huduser.gov/portal/datasets/fmr/smallarea/index.html.

II. Public Comments on FY 2018 FMRs

    A total of 18 comments were received and posted on regulations.gov, 
https://www.regulations.gov/docketBrowser?rpp=25&so=DESC&sb=commentDueDate&po=0&dct=PS&D=HUD-2017-0051. Fifteen of these comments were requests for reevaluation of the 
FY 2018 FMRs. HUD granted requests for reevaluation for 13 FMR areas, 
and rejected one area's request, by Department of Human Services for 
Monmouth County, NJ, because this requestor did not administer at least 
half of the housing choice voucher families as required. HUD discussed 
these requests for reevaluation in a posting available at https://www.huduser.gov/portal/datasets/fmr.html#2018_data.
    These 13 areas continued to use FY 2017 FMRs until the PHAs 
provided local survey rent data, which was due no later than January 5, 
2018. Only eight of these 13 areas have continued to use FY 2017 FMRs 
because they provided sufficient data. HUD published a list of the five 
FMR areas not providing data on January 8, 2018 stating that the FY 
2018 FMRs become applicable on January 8, 2018 (https://www.huduser.gov/portal/datasets/fmr.html#2018_data). This notice 
provides the reevaluated FY 2018 FMRs for these eight areas.

General Comments

    Most of the comments discussed inaccuracies of the FMRs and a need 
for more current and local data. There were also comments on HUD's 
methodology, especially HUD's failure to use more local forecasts for 
the trend factor and a request to use vacancy data to adjust FMRs. 
Several commenters also asked HUD to agree to use FMRs revised by PHA 
surveys for three years as FMRs and as an input to the Renewal Funding 
Inflation Factors. These comments and their responses are discussed in 
greater detail below.
    Comment: FMRs do not represent accurate on-the-ground rental market 
prices. The accuracy of FMRs is a function of the underlying data set 
and the methodology used to convert the data set to the FMRs, and the 
source of the data is unchanged from last year. More current and more 
local data should be used.
    HUD Response: The American Community Survey (ACS) continues to be 
the primary source of gross rent data used in the calculation of the 
FMRs as it is the only known statistically reliable data source that 
provides comprehensive information on gross rents paid collected in a 
consistent manner nationwide. The ACS data HUD acquires is adjusted for 
housing quality and calculated at the 40th percentile rent for the FMR 
areas. HUD does point out that the data used to calculate FY 2018 FMRs 
is one year more current than the data used to calculate FY 2017 FMRs. 
HUD uses the most current ACS data available when calculating the FMRs. 
As an example, consider the publication timeline for the FY 2018 FMRs. 
The FY 2018 FMRs were calculated in June and July of 2017 for 
publication by September 2017, but the 2016 ACS data was not released 
until September through December of 2017. Therefore, during calculation 
of FY 2018 FMRs, the 2015 ACS data was the most current available ACS 
data. FMRs use a 40th percentile standard quality gross rent paid by 
recent movers, which requires a special tabulation from the Census that 
is provided by June of the year following the release of the data. HUD 
augments the most current available ACS data with the annual change in 
gross rents measured by the Bureau of Labor Statistics' Consumer Price 
Index (CPI), measured between 2015 and 2016 for the FY 2018 FMR, and a 
forecasted trend factor to align the calculated FMRs with the Fiscal 
Year for which the FMRs are applicable.
    Comment: HUD should use local and regional forecasts of the CPI 
rather than national forecasts.
    HUD Response: HUD has evaluated the use of more local forecasts for 
a trend factor, but has only been able to develop forecasts based on 
national inputs. The lack of consistent local data reduces the 
effectiveness of the local forecast.
    Comment: HUD's use of Office of Management and Budget (OMB) 
metropolitan area definitions continues to be a problem in setting 
FMRs. HUD should not have changed the area definitions in FY 2006 based 
on the new OMB definitions and this change is continued through the 
changes to area definitions for FY 2016. HUD has the discretion to not 
accept the OMB definition changes and should exercise this discretion 
rather than continue to follow its past practice of updating area 
definitions with the OMB changes.
    HUD Response: While the commenter is correct that HUD is not 
required to adopt OMB metropolitan area definitions for the calculation 
of FMRs, HUD believes there are compelling reasons to continue to use 
these area definitions. OMB defines metropolitan areas primarily based 
on commuting interchange patterns that also offer a good approximation 
of areas within which housing units are in competition with one 
another. These patterns change over time with growth and decline in 
jobs and populations. HUD's use of updated OMB metropolitan area 
definitions in estimating FMRs recognizes these changes in housing 
markets. The commuting interchange patterns coupled with other factors 
comprise the standards that have come to be known as ``core based 
statistical areas'' (75 FR 37246).\1\ The core based statistical areas 
are the metropolitan and micropolitan statistical areas published by 
OMB. For the purposes of calculating and publishing FMRs, HUD uses the 
metropolitan statistical areas (and subdivisions thereof) delineated 
using the core based statistical area standards.
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    \1\ 2010 Standards for Delineating Metropolitan and Micropolitan 
Statistical Areas; Notice. Federal Register, June 28, 2010.
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    Further, the accuracy of the annual FMR values lies in the accuracy 
of the underlying statistical information used to calculate the FMRs. 
As HUD has established numerous times, the only known source of 
information on gross rents paid that is collected and distributed in a 
consistent manner across the country is the American Community Survey 
(ACS). As stated by OMB, ``The purpose of the Metropolitan and 
Micropolitan Statistical Area standards is to provide nationally 
consistent delineations for collecting, tabulating, and publishing 
Federal statistics for a set of geographic areas'' (75 FR 37249). The 
ACS uses the OMB metropolitan area definitions in collecting its rent 
(and other) data. Therefore, it is imperative that HUD continue to base 
the FMR calculations on OMB metropolitan area definitions, as updated.
    The commenter also asserts that HUD's continued use of OMB 
metropolitan area definitions ``remain one of the biggest contributors 
to erratic and by extension inaccurate FMR and SAFMR estimates.'' HUD 
has employed numerous strategies to address the accuracy and to 
attenuate the variability in the FMRs precisely due to changes in 
metropolitan area definitions. For example, HUD modified the OMB-
defined metropolitan areas in the FY 2006 FMR implementation if the 
underlying gross rent or area median family income data exhibited more 
than a five percent difference in the subject area's FMR or area median 
family income calculation. More recently, HUD has discontinued the 
practice of using metropolitan area wide base rents, when local values 
are statistically reliable, for counties newly added to metropolitan 
areas. HUD uses data specific to the

[[Page 7207]]

county when available and uses the smallest encompassing geography for 
recent mover gross rent update factors and CPI update factors when 
local data is not available.
    Comment: HUD should use more timely data when calculating FMRs. HUD 
should work to develop a method to incorporate more recent data into 
its published FMRs rather than continue to rely on PHA-funded studies 
to correct inaccuracies in FMRs. PHAs are not well suited to conduct 
surveys and compile sophisticated statistical analyses. This is a 
function that would be better suited for HUD's Office of Policy 
Development and Research (PD&R).
    HUD Response: There is no other data on gross rents paid that is 
consistently collected on a nationwide basis, available to HUD, that is 
more current than the data we receive from the ACS dataset. HUD 
recognizes the housing quality data limitations of the ACS dataset and 
uses a combination of ACS survey responses and a public housing ``cut-
off'' rent calculated from HUD administrative data to identify and 
eliminate these low rent units from the distribution of gross rents 
paid before a 40th percentile rent is calculated. Propriety rental data 
cannot be used in establishing FMRs because it is not consistently 
available for all areas and is not statistically representative of the 
market it covers. Some of these sources focus on rents for major 
apartment projects only. Other sources that include single family 
homes, which are at least 30 percent of the rental market in major 
metropolitan areas and a greater portion in rural areas, are typically 
compiled from internet-based ads. These online listings of rents are 
akin to newspaper ads and newspaper ads have been excluded as a source 
of rent data for FMRs since the mid-1980s due to a directive issued by 
HUD's Inspector General.
    HUD currently lacks funding to conduct surveys of area rents to 
adjust FMRs. HUD would need to obtain budget authority to conduct 
surveys as well as OMB approval under the Paperwork Reduction Act for 
the survey mechanism. HUD is subject to stricter federal rules for 
conducting surveys than PHAs, which means that it would take longer for 
HUD to pass these hurdles before being able to conduct surveys. HUD 
would also likely have to weigh competing needs for surveys based on a 
limited budget. HUD has provided technical assistance, significant at 
times, in compiling and analyzing the data collected by PHAs.
    Comment: Allow PHAs to use other survey methodologies for at least 
half of the FMR Area. HUD should allow PHAs to conduct valid rent 
studies for their portion of an FMR area for the purposes of appealing 
the portion of the FMR in their service area and for RFIF purposes. 
These agencies do not have the necessary funding to conduct or secure 
services to conduct rental market survey for the entire FMR area.
    HUD Response: FMRs are area-wide assessments of the 40th percentile 
of gross rents paid by recent movers for standard quality housing 
units. Surveys or other methods of collecting data in a portion of the 
metropolitan area may not be representative of rents across the entire 
area. Issues pertaining to FMRs in portions of the FMR area are best 
addressed through Exception Payment Standards which are defined at 24 
CFR 982.503. HUD requires PHAs representing at least half of the 
voucher holders in a given FMR area to acknowledge and agree that a 
survey is necessary because the FMR directly impacts the PHAs' 
administration of their HCV program. HUD includes this requirement to 
ensure that the decision to request an FMR reevaluation is supported by 
PHAs that administer at least half of the vouchers under lease in the 
metropolitan area.
    Comment: HUD should use valid rent studies in FMRs, small area FMRs 
(SAFMRs) and renewal funding inflation factors (RFIF) for three years. 
Depending on the date on which HUD approved a PHA's rent survey, HUD's 
use of that data in subsequent years resulted in a dilution of its 
value for purposes of determining RFIFs for areas.
    HUD Response: HUD will use the rent surveys conducted by PHAs to 
modify FMRs for such time until the majority of the ACS data supersedes 
the survey. For a large metropolitan area where the FMR is estimated 
from local one-year ACS data, the survey can be used until the ACS data 
is of the same year (for those conducted up through June), and in the 
following year for those conducted from July and on. For smaller areas 
that rely on five-year ACS data, they will continue to have FMRs based 
on the local survey until more than half of the five-year ACS data is 
newer, which means they will be used for more than three years.
    Historically, HUD has included survey-based FMRs in the next RFIF 
calculation following the applicability date of the newly revised FMRs. 
In some cases, the year of the RFIF containing the initial survey based 
FMR matches the year of the first implementation of the survey and in 
other cases the survey based FMR is included in the following year's 
RFIF calculation. Regardless of when the survey based FMR is included 
in the RFIF calculation, the survey-based FMRs remain part of the 
calculation until the survey is no longer used in the calculation of 
the FMRs.
    Comment: PHAs should freeze FMRs and payment standards during FMR 
appeals. PHAs should be awarded HAP funds upon successful appeal of 
changes to the HUD-approved inflation factor adjustment.
    HUD Response: The Housing Opportunities Through Modernization Act 
(HOTMA) specifies that newly posted FMRs do not go into effect in areas 
that have initiated valid reevaluation requests. Existing FMRs remain 
in effect until the reevaluation process is complete and reevaluated 
FMRs have been posted and become applicable. With regards to the 
portion of the comment concerning the awarding of HAP funds, 
reevaluated FMRs are included in the next calculation of RFIFs 
following the end of the reevaluation process. Should the renewal 
funding calculations and awards occur before the reevaluation process 
is complete, under current HUD policy, the survey-based FMR increase is 
incorporated into the calculation of the RFIFs in the following year.
    Comment: HUD should request a reallocation of a portion of the 
$41.5 million that the Department receives so that it can begin to 
conduct its own rent studies.
    HUD Response: The budget item of $41.5 million covers the cost of 
conducting the American Housing Survey, the Survey of Construction, the 
Survey of Market Absorption, the Rental Housing Finance Survey, and the 
Manufactured Housing Placement Survey. There are no excess funds in 
that amount that could be used to conduct area rent surveys to adjust 
FMRs, so additional funds would have to be made available for area rent 
surveys. HUD would also need a contract to spend these additional funds 
for surveys and would have to receive approval under the Paperwork 
Reduction Act from OMB (required for any data collection activity of 10 
or more respondents (in this case tenants)).
    Comment: For certain rural areas the FMR is too high.
    HUD Response: Unfortunately, in many cases these are small areas 
that do not have enough ACS data for locally calculated FMRs. These 
areas typically have FMRs set at the state minimum FMR. Where 
available, HUD publishes the rents below the state minimum for use as 
public housing flat rents. A PHA that believes the FMR for a rural 
county is too high for purposes of HCV administration may request HUD 
approval to establish a payment

[[Page 7208]]

standard lower than the basic range in accordance with 24 CFR 
982.503(d).
    Comment: The zero bedroom and one-bedroom FMRs are the same. Please 
verify.
    HUD Response: This is correct. HUD does not allow the zero-bedroom 
FMR to be greater than the one-bedroom FMR, so where it would be 
higher, it is set at the one-bedroom FMR. Zero-bedroom units, or 
efficiencies, represent a much smaller segment of the rental market 
population than one-bedroom units and their rents may be skewed in some 
areas by a preponderance of the units in newer buildings and/or 
buildings with better amenities.
    Comment: Small Area FMRs should not be required. SAFMRs will 
increase the complexity in administering the voucher program by 
increasing the number of payment schedules. Also, many ZIP Codes where 
voucher holders live have lower SAFMRs that will force voucher holders 
out of neighborhoods where they have lived their entire lives to areas 
away from their support groups.
    HUD Response: Small Area FMRs (SAFMRs) are required in the 
administration of the housing choice voucher (HCV) program in a limited 
number of metropolitan areas where voucher holders are highly 
concentrated in areas of concentrated low income and where SAFMRs are 
likely to be an effective tool in helping HCV holders access units in 
higher opportunity areas.
    HUD included provisions in the SAFMR rule to provide PHAs the 
ability to maintain payment standards at current levels for in-place 
tenants should the PHA choose to do so.
    To assist with the administrative complexity of converting to 
SAFMRs, HUD has tasked a Technical Assistance provider to develop 
training materials and to conduct in-person trainings for all PHAs who 
are required to implement SAFMRs.

III. Environmental Impact

    This Notice makes changes in FMRs for two FMR areas and 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: February 13, 2018.
Todd M. Richardson,
Deputy Assistant Secretary, Office of Policy Development, Office of 
Policy Development and Research.
[FR Doc. 2018-03398 Filed 2-16-18; 8:45 am]
 BILLING CODE 4210-67-P