[Federal Register Volume 83, Number 170 (Friday, August 31, 2018)]
[Notices]
[Pages 44644-44651]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-19090]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6125-N-01]


Fair Market Rents for the Housing Choice Voucher Program, 
Moderate Rehabilitation Single Room Occupancy Program, and Other 
Programs Fiscal Year 2019

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

ACTION: Notice of Fiscal Year (FY) 2019 Fair Market Rents (FMRs) and 
response to public comments on the use of FMR surveys in the 
calculation of renewal funding inflation factors.

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SUMMARY: Section 8(c)(1) of the United States Housing Act of 1937 
(USHA), as amended by the Housing Opportunity Through Modernization Act 
of 2016 (HOTMA), requires the Secretary to publish FMRs not less than 
annually, adjusted to be effective on October 1 of each year. This 
notice describes the methods used to calculate the FY 2019 FMRs and 
enumerates the procedures for Public Housing Agencies (PHAs) and other 
interested parties to request reevaluations of their FMRs, as required 
by HOTMA. To help inform PHAs' decisions concerning reevaluation 
requests, this notice briefly addresses HUD's May 30, 2018 notice 
regarding the use of FMR surveys in the calculation of Renewal Funding 
Inflation Factors.

DATES: 
    Comment Due Date: October 1, 2018.
    Effective Date: The Fair Market Rents are effective October 1, 2018 
unless HUD receives a request for reevaluation of specific area FMRs as 
described below.

ADDRESSES: HUD invites interested persons to submit comments regarding 
the FMRs and to request reevaluation of the FY 2019 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/Request for Reevaluation'' section. There are two methods for 
submitting public comments.
    1. Submission of Comments 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-

[[Page 44645]]

0500. Often, submission of comments by mail 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 2 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. 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 author maximum time to prepare and submit a comment 
or reevaluation request, ensures timely receipt by HUD, and enables HUD 
to make comments immediately available to the public. Comments or 
reevaluation requests submitted electronically through the http://www.regulations.gov website can be viewed by other submitters 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 (toll-free 
number). Copies of all comments and reevaluation requests submitted are 
available for inspection and downloading at http://www.regulations.gov.
    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 at https://www.federalregister.gov/ the 
U.S. Government Printing Office website. Complete documentation of the 
methods and data used to compute each area's FY 2019 FMRs is available 
at https://www.huduser.gov/portal/datasets/fmr.html#2019_query. FY 2019 
FMRs are available in a variety of electronic formats at https://www.huduser.gov/portal/datasets/fmr.html. FMRs may be accessed in PDF 
as well as in Microsoft Excel. Small Area FMRs for all metropolitan FMR 
areas are available in Microsoft Excel format at: http://www.huduser.gov/portal/datasets/fmr/smallarea/index.html.

FOR FURTHER INFORMATION CONTACT: For technical information on the 
methodology used to develop FMRs or a listing of all FMRs, please call 
the HUD USER information line at 800-245-2691 or access the information 
on the HUD USER website at 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 2019 FMR 
documentation system at https://www.huduser.gov/portal/datasets/fmr.html#2019_query 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 via 
email at [email protected]. Persons with hearing or speech impairments 
may access HUD numbers through TTY by calling the Federal Relay Service 
at 800-877-8339 (toll-free number).

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. HUD also uses the FMRs to determine initial 
renewal rents for some expiring project-based Section 8 contracts, 
initial rents for housing assistance payment contracts in the Moderate 
Rehabilitation Single Room Occupancy program, rent ceilings for rental 
units in both the HOME Investment Partnerships program and the 
Emergency Solution Grants program, calculation of maximum award amounts 
for Continuum of Care recipients and the maximum amount of rent a 
recipient may pay for property leased with Continuum of Care funds, and 
calculation of flat rents in Public Housing units. 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. HUD's FMR calculations represent HUD's best effort to 
estimate the 40th percentile gross rent paid by recent movers into 
standard quality units in each FMR area. In addition, all rents 
subsidized under the HCV program must meet reasonable rent standards.
    As of October 2, 2000, HUD required FMRs to be set at the 50th 
percentile for areas where HUD determined higher FMRs were needed to 
help families assisted under certain HUD programs find and lease decent 
and affordable housing (65 FR 58870). On November 16, 2016, HUD 
published a Final Rule entitled ``Establishing a More Effective Fair 
Market Rent System; Using Small Area Fair Market Rents in the Housing 
Choice Voucher Program Instead of the Current 50th Percentile FMRs'' 
(Small Area FMR final rule) (81 FR 80567), with an effective date of 
January 17, 2017. The Small Area FMR final rule eliminates the 50th 
percentile FMR provisions in the FMR regulations (24 CFR 888.113) \1\ 
and provides that areas

[[Page 44646]]

currently designated as 50th percentile areas remain 50th percentile 
areas until their current 3-year eligibility period expires. At the end 
of the 3-year eligibility period, these areas revert to 40th percentile 
FMR status. If PHAs in areas converting from 50th percentile FMRs to 
40th percentile FMRs meet the deconcentration criteria specified in 24 
CFR 982.503(f), available at: https://www.gpo.gov/fdsys/pkg/CFR-2016-title24-vol4/pdf/CFR-2016-title24-vol4-sec982-503.pdf, they may 
petition HUD to maintain payment standards based on 50th percentile 
rents on that basis.
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    \1\ Separately from the Small Area FMR regulations, HUD also 
calculates and posts 50th percentile rent estimates for the purposes 
of Success Rate Payment Standards, as defined at 24 CFR 982.503(e) 
(estimates available at: http://www.huduser.gov/portal/datasets/50per.html), which policy was not changed by the Small Area FMR 
rule.
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    The following areas completed their 3 years of 50th percentile 
eligibility in FY 2018 and will revert to 40th percentile FMR status in 
FY 2019:

 FY 2018 50th-Percentile FMR Areas Reverting to 40th Percentile FMRs in
                                 FY 2019
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Baltimore-Columbia-Towson, MD MSA.........  Philadelphia-Camden-
                                             Wilmington, PA-NJ-DE-MD.
Washington, DC-VA-MD HUD Metro FMR Area...  West Palm Beach-Boca Raton,
                                             FL HUD Metro FMR Area.
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    The following is a list of FMR areas that retain 50th percentile 
FMRs for FY 2019, along with the year that they will revert to 40th 
percentile status:

    FY 2019 50th-Percentile FMR Areas With Year of Reversion to 40th
                             Percentile FMRs
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Bergen-Passaic, NJ HUD Metro FMR Area........................       2020
Spokane, WA HUD Metro FMR Area...............................       2020
San Diego-Carlsbad-San Marcos, CA MSA........................       2020
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II. Procedures for the Development of FMRs

    Section 8(c)(1) of the USHA, as amended by the Housing Opportunity 
Through Modernization Act of 2016 (HOTMA) (Pub. L. 114-201, approved 
July 29, 2016), requires the Secretary of HUD to publish FMRs not less 
than annually. Section 8(c)(1)(A) states that each FMR ``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 . . .'' Section 8(c)(1)(B) 
requires that HUD publish, not less than annually, new FMRs on the 
World Wide Web or in any other manner specified by the Secretary, and 
that HUD must also notify the public of when it publishes FMRs by 
Federal Register notice. After notification, the FMRs ``shall become 
effective no earlier than 30 days after the date of such publication,'' 
and HUD must provide a procedure for the public to comment and request 
a reevaluation of the FMRs in a jurisdiction before the FMRs become 
effective. Consistent with the statute, HUD is issuing this notice to 
notify the public that FY 2019 FMRs are available at https://www.huduser.gov/portal/datasets/fmr.html and will become effective on 
October 1, 2018. This notice also provides procedures for FMR 
reevaluation requests.

III. FMR Methodology

    This section provides a brief overview of how HUD computes the FY 
2019 FMRs. HUD is making no changes to the estimation methodology for 
FMRs as used by HUD for the FY 2018 FMRs. The only difference is the 
use of more recent data. For complete information on how HUD determines 
FMR areas, and on how HUD derives each area's FMRs, see the online 
documentation at https://www.huduser.gov/portal/datasets/fmr.html#2019_query.
    In conjunction with the use of 2016 American Community Survey (ACS) 
data, HUD has implemented the following geography changes: Effective 
May 1, 2016, Garfield County, Oklahoma became the metropolitan area of 
Enid, OK metropolitan statistical area (MSA). In addition, HUD changed 
from two separate county-based HUD Metro FMR Areas (HMFA) (Kalawao 
County, HI HMFA and Maui County, HI HMFA) to a two county MSA, the 
Kahului-Wailuku-Lahaina, HI MSA due to extremely limited data available 
for Kalawao County, HI.

A. Base Year Rents

    For FY 2019 FMRs, HUD uses the U.S. Census Bureau's 5-year ACS data 
collected between 2012 and 2016 (released in December 2017) as the base 
rents for the FMR calculations. In order to improve the statistical 
reliability of the ACS data used in the FMR calculations, HUD pairs a 
``margin of error'' test \2\ with an additional test based on the 
number of survey observations supporting the estimate, beginning with 
the FY 2018 FMRs and continuing with the FY 2019 FMRs. The Census 
Bureau does not provide HUD with an exact count of the number of 
observations supporting the ACS estimate; rather, the Census Bureau 
provides HUD with categories of the number of survey responses 
underlying the estimate, including whether the estimate is based on 
more than 100 observations. Using these categories, HUD requires that, 
in addition to the ``margin of error'' test, ACS rent estimates must be 
based on at least 100 observations in order to be used as base rents.
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    \2\ HUD's margin of error test requires that the margin of error 
of the ACS estimate is less than half the size of the estimate 
itself.
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    For areas in which the 5-year ACS data for two-bedroom, standard 
quality gross rents do not pass the statistical reliability tests 
(i.e., have a margin of error ratio greater than 50 percent or fewer 
than 100 observations), HUD will use an average of the base rents over 
the three most recent years (provided that there is data available for 
at least two of these years),\3\ or if such data is not available, 
using the two-bedroom rent data within the next largest geographic 
area, which for a non-metropolitan area would be the state non-metro 
area rent data.
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    \3\ For FY 2019, the three years of ACS data in question are 
2014, 2015 and 2016. The 2014 data are adjusted to be denominated in 
2016 dollars using the growth in CPI-based gross rents measured 
between 2014 and 2016. Similarly, the 2015 gross rent data is 
adjusted to 2016 denominated dollars using the growth in CPI-based 
gross rents measured between 2015 and 2016.
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    Since FY 2012, HUD has updated base rents each year based on new 5-
year data, for which HUD used 2005-2009 ACS data. HUD is also updating 
base rents for Puerto Rico FMRs using data collected through the Puerto 
Rico Community Surveys (PRCS) between 2012 and 2016. 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 from decennial census long form survey responses. 
However, due to the way the 5-year ACS data are constructed, HUD 
developed a new method for calculating recent-mover FMRs in FY 2012, 
which HUD continues to use in FY 2019: HUD assigns all areas a base 
rent, which is the two-bedroom standard quality 5-year gross rent 
estimate from the ACS; then, because HUD's regulations mandate that 
FMRs must be published as recent mover gross rents, HUD applies a 
recent mover factor to the base rents assigned from the 5-year ACS 
data.\4\ The calculation of the recent mover factor is described below.
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    \4\ HUD's regulations incorporate recent mover data into FMR 
calculations because the gross rents of those who most recently 
moved into their units likely depicts the most current market 
conditions observable through the ACS. Rents paid by renters 
renewing existing leases may not reflect the most current market 
conditions, in part because these renters may have clauses within 
their leases that predetermine the annual increases in rents paid 
(i.e., rent escalator clauses).

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[[Page 44647]]

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. HUD 
calculates the recent mover factor as the change between the 5-year 
2012-2016 standard quality two-bedroom gross rent and the 1-year 2016 
recent mover 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 calculation of the recent mover factor for FY 2019 continues 
with the modifications first applied to the FY 2018 FMRs. Similar to 
the statistical reliability requirements for base rents, for a recent 
mover gross rent estimate to be considered statistically reliable, the 
estimate must have a margin of error ratio that is less than 50 
percent, and the estimate must be based on 100 or more observations.
    When an FMR area does not have statistically reliable two-bedroom 
recent mover data, the ``all-bedroom'' \5\ 1-year recent mover ACS data 
for the FMR area is tested for statistical reliability. An ``all-
bedroom'' recent mover factor from the FMR area will be used, if 
statistically reliable, before substituting a two-bedroom recent mover 
factor from the next larger geography. Incorporating ``all-bedroom'' 
rents into the recent mover factor calculation when statistically 
reliable two-bedroom data is not available preserves the use of local 
information to the greatest extent possible.
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    \5\ ``All-bedroom'' refers to estimates aggregated together 
regardless of the number of bedrooms in the dwelling unit.
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    However, where statistically reliable ``all-bedroom'' data is not 
available, HUD will continue to base FMR areas' recent mover factors on 
larger geographic areas, following the same procedures used 
historically: HUD tests data from differently sized geographic areas 
from small to large, and bases the recent mover factor on the first 
statistically reliable recent mover rent estimate in the geographic 
hierarchy listed below.
     For metropolitan areas that are subareas of larger 
metropolitan areas, the order is the FMR area, metropolitan area, 
aggregated metropolitan parts of the state, and state.
     For metropolitan areas that are not divided, the order is 
the FMR area, aggregated metropolitan parts of the state, and the 
state.
     In non-metropolitan areas, the order is the FMR area, 
aggregated non-metropolitan parts of the state, and the state.
    The process for calculating each area's recent mover factor is 
detailed in the FY 2019 FMR documentation system available at: https://www.huduser.gov/portal/datasets/fmr.html#2019_query. Applying the 
recent mover factor to the standard quality base rent produces an ``as 
of'' 2016 recent mover two-bedroom gross rent for the FMR area.

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.\6\ This 2010 
base year data is updated through 2016 for the FY 2019 FMRs using 
national ACS data.
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    \6\ The ACS is not conducted in the Pacific Islands (Guam, 
Northern Marianas and American Samoa) or the US 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 2019 
FMRs.
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    HUD does not use ACS data to establish the base rent or recent 
mover factor for 10 areas where the FY 2018 FMR was adjusted based on 
the following survey data:
     Survey data from 2016 is used to adjust the FMR for 
Portland, ME.
     Survey data from 2017 is used to adjust the FMRs for Santa 
Rosa, CA; Seattle-Bellevue, WA HMFA; Hood River County, OR; Wasco 
County, OR; Hawaii County, HI; Jonesboro, AR HMFA; Urban Honolulu, HI 
MSA; and Santa Maria-Santa Barbara, CA MSA.
     Survey data from 2018 is used to adjust the FMR for Santa 
Cruz-Watsonville, CA MSA.
    For larger metropolitan areas that have valid ACS one-year recent 
mover data, survey data may not be any older than the midpoint of the 
calendar year for the ACS one-year data. Since the ACS one-year data 
used for the FY 2019 FMRs is from 2016, larger areas may not use survey 
data collected before June 30, 2016, for the FY 2019 FMRs. Smaller 
areas without 1-year ACS data, may continue to use local survey data 
until the mid-point of the 5-year ACS data is more recent than the 
local survey.\7\
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    \7\ The 2013-2017 5-Year ACS data and the 2017 1-Year ACS data 
will be used to calculate the FY 2020 FMRs. We did discontinue the 
use of survey in Kauai and Maui counties in HI and in Vallejo-
Fairfield, CA even though these surveys did not meet the age 
requirements because the data provided did not meet our current 
tighter statistical standards enacted for the FY 2018 FMRs. In all 
cases the FMRs for FY 2019 would have been lower than for FY 2018 
and in some cases, much lower.
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D. Updates From 2016 to 2017 and Forecast to FY 2019

    HUD updates the ACS-based ``as of'' 2016 rent through the end of 
2017 using the annual change in gross rents measured through the 
Consumer Price Index (CPI) from 2016 to 2017 (CPI update factor). As in 
previous years, HUD uses local CPI data coupled with Consumer 
Expenditure Survey data for FMR areas with at least 75 percent of their 
population within Class A metropolitan areas covered by local CPI data. 
In FMR areas that do not meet this criterion, including Class B and C 
size metropolitan areas and non-metropolitan areas, HUD uses CPI data 
aggregated at the Census region level. Additionally, HUD is using CPI 
data collected locally in Puerto Rico as the basis for CPI adjustments 
from 2016 to 2017 for all Puerto Rico FMR areas.
    Following the application of the appropriate CPI update factor, HUD 
trends the gross rent estimate from 2017 to FY 2019 using a national 
forecast of expected growth in gross rents. This forecast produces ``as 
of'' FY 2019 FMRs.

E. Bedroom Rent Adjustments

    HUD updates the bedroom ratios used in the calculation of FMRs 
annually. The bedroom ratios which HUD used in the calculation of FY 
2019 FMRs have been updated using average data from three 5-year ACS 
data series (2010-2014, 2011-2015, and 2012-2016). The bedroom ratio 
methodology used in this update is unchanged from previous calculations 
using 2000 Census data. HUD only uses estimates with a margin of error 
ratio of less than 50 percent. If an area does not have reliable 
estimates in at least two of the previous three ACS releases, bedroom 
ratios for the area's larger parent geography are used.
    HUD uses two-bedroom units for its primary calculation of FMR 
estimates. This is generally the most common size of rental unit and, 
therefore, the most reliable to survey and analyze. After estimating 
two-bedroom FMRs, HUD calculates bedroom ratios for each FMR area which 
relate the prices of smaller and larger units to the cost of two-
bedroom units. To prevent illogical results in particular FMR areas, 
HUD establishes bedroom interval ranges which set upper and lower 
limits for bedroom ratios nationwide, based on an analysis of the range 
of such intervals for all areas with large enough samples to permit 
accurate bedroom ratio determinations.

[[Page 44648]]

    In the calculation of FY 2019 FMR estimates, HUD set the bedroom 
interval ranges as follows: Efficiency FMRs are constrained to fall 
between 0.64 and 0.85 of the two-bedroom FMR; one-bedroom FMRs must be 
between 0.76 and 0.87 of the two-bedroom FMR; three-bedroom FMRs (prior 
to the adjustments described below) must be between 1.15 and 1.33 of 
the two-bedroom FMR; and four-bedroom FMRs (again, prior to adjustment) 
must be between 1.26 and 1.63 of the two-bedroom FMR. Given that these 
interval ranges partially overlap across unit bedroom counts, HUD 
further adjusts bedroom ratios for a given FMR area, if necessary, to 
ensure that higher bedroom-count units have higher rents than lower 
bedroom-count units within that area. The bedroom ratios for Puerto 
Rico follow these constraints.
    HUD also further adjusts the rents for three-bedroom and larger 
units to reflect HUD's policy to set higher rents for these units.\8\ 
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.
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    \8\ As mentioned above, HUD applies the interval ranges for the 
three-bedroom and four-bedroom FMR ratios prior to making these 
adjustments. In other words, the adjusted three- and four-bedroom 
FMRs can exceed the interval ranges, but the unadjusted FMRs cannot.
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    HUD derives FMRs for units with more than four bedrooms 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. 
Similarly, HUD derives FMRs for single-room occupancy units by 
subtracting 25 percent from the zero-bedroom FMR (i.e., they are set at 
0.75 times the zero-bedroom (efficiency) FMR).\9\
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    \9\ 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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F. Limit on FMR Decreases

    Within the Small Area FMR final rule published on November 16, 
2016, HUD amended 24 CFR 888.113 to include a limit on the amount that 
FMRs may annually decrease. The current year's FMRs resulting from the 
application of the bedroom ratios, as discussed in section (E) above, 
may be no less than 90 percent of the prior year's FMRs for units with 
the same number of bedrooms. Accordingly, if the current year's FMRs 
are less than 90 percent of the prior year's FMRs as calculated by the 
above methodology, HUD sets the current year's FMRs equal to 90 percent 
of the prior year's FMRs. For areas where use of Small Area FMRs in the 
administration of their voucher programs is required, the FY 2019 Small 
Area FMRs may be no less than 90 percent of the FY 2018 Small Area 
FMRs. For all other metropolitan areas, for which Small Area FMRs are 
calculated so that they may be used for other allowable purposes if 
desired (e.g., exception payment standards, public housing flat rents), 
the FY 2019 Small Area FMRs may be no less than 90 percent of the 
greater of the FY 2018 metropolitan area-wide FMRs or the applicable FY 
2018 Small Area FMR.

G. Other Limits on FMRs

    All FMRs are subject to a state or national minimum. HUD calculates 
a population-weighted median two-bedroom 40th percentile rent across 
all non-metropolitan portions of each state, which, for the purposes of 
FMRs, is the state minimum rent. State-minimum rents for each FMR area 
are available in the FY 2019 FMR Documentation System, available at 
https://www.huduser.gov/portal/datasets/fmr.html#2019_query. HUD also 
calculates the population-weighted median two-bedroom 40th percentile 
rent across all non-metropolitan portions of the country, which, for 
the purposes of FMRs, is the national minimum rent. For FY 2019, the 
national minimum rent is $700. The applicable minimum rent for a 
particular area is the lower of the state or national minimum. Each 
area's two-bedroom FMR must be no less than the applicable minimum 
rent.
    As in prior years, Small Area FMRs are subject to a maximum limit. 
HUD limits each two-bedroom Small Area FMR to be no more than 150 
percent of the two-bedroom FMR for the metropolitan area where the ZIP 
code is located.

IV. Manufactured Home Space Surveys

    HOTMA changed the manner in which vouchers are used to subsidize 
manufactured home units. Please see HUD's Notice from January 18, 2017 
(82 FR 5458) for more detailed information concerning the use of 
vouchers for manufactured home units. Due to the nature of these 
changes, HUD will no longer be publishing exception rents for 
Manufactured Home Space pad rents.

V. Small Area FMRs

    PHAs operating the Housing Choice Voucher (HCV) program in the 24 
metropolitan areas identified in the November 16, 2016 Federal Register 
notice ``Small Area Fair Market Rents in Housing Choice Voucher Program 
Values for Selection Criteria and Metropolitan Areas Subject to Small 
Area Fair Market Rents'' (81 FR 80678) are required to use Small Area 
FMRs unless the PHA has received a temporary exemption from such use; 
HUD has suspended the Small Area FMR designation for the metropolitan 
area under 24 CFR 888.113(c)(4); or the PHA is a Moving to Work PHA 
with an approved alternative payment standard policy. For more 
information on the process of obtaining a temporary exemption or area-
wide suspension, please see PIH Notice 2018-01: Guidance on Recent 
Changes in Fair Market Rent (FMR), Payment Standard, and Rent 
Reasonableness Requirements in the Housing Choice Voucher Program, item 
(9) beginning on page 13, available at: https://www.hud.gov/sites/dfiles/PIH/documents/PIH-2018-01.pdf. Small Area FMRs for all 
metropolitan areas are listed in the Schedule B addendum. Other 
metropolitan PHAs interested in using Small Area FMRs in the operation 
of their Housing Choice Voucher program must contact their local HUD 
field office to request approval from HUD.
    In the FY 2018 FMR Federal Register notice (82 FR 41637), HUD 
announced changes in the way Small Area FMRs are calculated and 
continues this change for the FY 2019 Small Area FMRs. HUD calculates 
Small Area FMRs directly from the standard quality gross rents provided 
to HUD by the Census Bureau for ZIP Code Tabulation Areas (ZCTAs), when 
such data is statistically reliable, instead of using the current rent 
ratio calculation. The ZCTA two-bedroom equivalent 40th percentile 
gross rent is analogous to the standard quality base rents set for 
metropolitan areas and non-metropolitan counties. For each ZCTA with 
statistically reliable gross rent estimates, using the expanded test of 
statistical reliability first used in FY 2018 (i.e., estimates with 
margins of error ratios below 50 percent and based on at least 100 
observations), HUD will calculate a two-bedroom equivalent 40th 
percentile gross rent using the first statistically reliable gross rent 
distribution data from the following data sets (in this order): Two-
bedroom gross rents, one-bedroom gross rents, and three-bedroom gross 
rents. If either the one-bedroom or three-bedroom gross rent data is 
used because the two-

[[Page 44649]]

bedroom gross rent data is not statistically reliable, the one-bedroom 
or three-bedroom 40th percentile gross rent will be converted to a two-
bedroom equivalent rent using the bedroom ratios for the ZCTA's parent 
metropolitan area. To increase stability to these Small Area FMR 
estimates, HUD averages the latest three years of gross rent 
estimates.\10\
---------------------------------------------------------------------------

    \10\ For example, for FY 2019 Small Area FMRs, HUD averages the 
gross rents from 2014, 2015 and 2016 5-Year ACS estimates. The 2014 
and 2015 gross rent estimates would be adjusted to 2016 dollars 
using the metropolitan area's gross rent CPI adjustment factors.
---------------------------------------------------------------------------

    For ZCTAs without usable gross rent data by bedroom size, HUD will 
continue to calculate Small Area FMRs using the rent ratio method 
similar to that which HUD has used in past Small Area FMR calculations. 
To calculate Small Area FMRs using a rent ratio, HUD divides the median 
gross rent across all bedrooms for the small area (a ZIP code) by the 
similar median gross rent for the metropolitan area of the ZIP code. 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 metropolitan 
area containing the small area to generate the current year two-bedroom 
rent for the small area.
    HUD continues to use a rolling average of ACS data in calculating 
the Small Area FMR rent ratios. HUD 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 2019 Small Area FMRs, HUD has updated the rent ratios 
to use an average of the rent ratios calculated from the 2010-2014, 
2011-2015, and 2012-2016 5-year ACS estimates.

VI. Request for Public Comments and FMR Reevaluations

    Although HUD has not changed the FMR estimation method for FY 2019, 
HUD will continue to accept public comments on the methods HUD uses to 
calculate FY 2019 FMRs, including Small Area FMRs, and the 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. PHAs may 
continue to fund such surveys independently, as specified below, using 
administrative fees if they so choose. 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.
    PHAs or other interested parties interested in requesting HUD 
reevaluation of their area's FY 2019 FMRs, as provided for under 
section 8(c)(1)(B) of USHA, 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. The area's PHA or, in multijurisdictional 
areas, PHA(s) representing at least half of the voucher tenants in the 
FMR area, must agree that the reevaluation is necessary.
    2. In order for a reevaluation to occur, the requestor(s) must 
supply HUD with data more recent than the 2016 American Community 
Survey data used in the calculation of the FY 2019 FMRs. HUD requires 
data on gross rents paid in the FMR area for standard quality rental 
housing units. The data delivered must be sufficient for HUD to 
calculate a 40th and 50th percentile two-bedroom rent. Should this type 
of data not be available, requestors may gather this information 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 2, HUD will post a list, at https://www.huduser.gov/portal/datasets/fmr.html of the areas requesting 
reevaluations and where FY 2018 FMRs remain in effect.
    4. Data for reevaluations must be supplied to HUD no later than 
Friday, January 11, 2019. On Monday January 14, 2018, HUD will post at 
https://www.huduser.gov/portal/datasets/fmr.html a listing of the areas 
failing to deliver data and making the FY 2019 FMRs effective in these 
areas.
    5. HUD will use the data delivered by January 11, 2019, to 
reevaluate the FMRs and following the reevaluation, will post revised 
FMRs with an accompanying Federal Register notice stating the revised 
FMRs are available, which will include HUD responses to comments filed 
during the comment period.
    6. Any data supporting a change in FMRs supplied after January 11, 
2019, will be incorporated into FY 2020 FMRs.
    7. PHAs operating in areas where the calculated FMR is lower than 
the published FMR (i.e., those areas where HUD has limited the decrease 
in the annual change in the FMR to 10 percent) may request payment 
standards below the basic range (24 CFR 982.503(d)) and reference the 
``unfloored'' rents (i.e., the unfinalized FMRs calculated by HUD prior 
to application of the 10-percent-decrease limit) depicted in the FY 
2019 FMR Documentation System available at: https://www.huduser.gov/portal/datasets/fmr.html#2019_query.

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 via email at [email protected].
    For small metropolitan areas without one-year ACS data and non-
metropolitan 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#survey_info. 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 or in areas not covered by ACS data, HUD 
will apply the standard established for Random-Digit Dialing (RDD) 
telephone rent surveys. HUD will evaluate these survey results to 
determine whether to 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 
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 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 within the entire FMR area and 
should be statistically reliable.
    PHAs in non-metropolitan areas may, in certain circumstances, 
conduct surveys of groups of counties. HUD must approve all county-
grouped surveys in advance. PHAs are cautioned

[[Page 44650]]

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.
    HUD has developed guidance on how to provide data-supported 
comments on Small Area FMRs using HUD's special tabulations of the 
distribution of gross rents by unit bedroom count for ZIP Code 
Tabulation Areas. This guidance is available at https://www.huduser.gov/portal/datasets/fmr.html in the FY 2019 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.
    As stated earlier in this notice, HUD is required to use the most 
recent data available when calculating FMRs. Therefore, in order to 
reevaluate an area's FMR, HUD requires more current rental market data 
than the 2016 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. Information Regarding Public Comments on May 30, 2018 Renewal 
Funding Inflation Factor Federal Register Notice

    HUD received 10 comments addressing the use of FMR surveys in the 
calculation of Renewal Funding Inflation Factors (RFIFs). Most of the 
comments received directed HUD to continue using FMR surveys in the 
calculation of RFIFs. Consequently, HUD does not have current plans to 
discontinue use of FMR surveys in the rent change component of RFIF 
calculations. HUD is still determining the exact methods to use when 
incorporating surveys in RFIF calculations. Public comments will be 
discussed in greater detail, and HUD's responses will be provided, in 
the 2019 Renewal Funding Inflation Factor notice. HUD provides the 
above information in this notice for the awareness of PHAs that are 
considering undertaking a survey to reevaluate their FY 2019 FMRs.

VIII. Environmental Impact

    This Notice involves the establishment of FMR 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 27, 2018.
Todd M. Richardson,
General Deputy Assistant Secretary, Office of Policy Development and 
Research.

Fair Market Rents for the Housing Choice Voucher Program

Schedule B--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 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 2019 FMRs incorporates 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, 
including incremental adjustments through July 15, 2015. 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 HUD's 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 by the CBSA will 
still be treated as separate counties for FMR calculations; that is, 
the rents from a county that is a sub-area will not be used in the 
remaining metropolitan sub-area rent determination. All metropolitan 
areas that have been subdivided by HUD will use ACS data which conforms 
to HUD's area definition if statistically reliable information exists. 
If statistically reliable data for a HUD defined area is not available, 
HUD uses information from larger encompassing geographies, as described 
elsewhere in this notice.
    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 metropolitan 
areas. 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.

[[Page 44651]]

3. Arrangement of FMR Areas and Identification of Constituent Parts

    a. FMR areas in online Schedule B are listed alphabetically by 
metropolitan FMR area and by non-metropolitan county within each state 
and are available at https://www.huduser.gov/portal/datasets/fmr.html.
    b. 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 non-metropolitan counties are listed alphabetically on each 
line of the non-metropolitan county listings.
    d. The New England towns and cities included in a non-metropolitan 
county are listed immediately following the county name.

[FR Doc. 2018-19090 Filed 8-29-18; 4:15 pm]
 BILLING CODE 4210-67-P