[Federal Register Volume 84, Number 169 (Friday, August 30, 2019)]
[Notices]
[Pages 45789-45798]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-18608]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6161-N-02]


Fair Market Rents for the Housing Choice Voucher Program, 
Moderate Rehabilitation Single Room Occupancy Program, and Other 
Programs Fiscal Year 2020

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

ACTION: Notice of Fiscal Year (FY) 2020 Fair Market Rents (FMRs) and 
Response to Public Comments on the June 5, 2019 Federal Register notice 
announcing two method changes in the calculation of FMRs.

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SUMMARY: Section 8(c)(1) of the United States Housing Act of 1937 
(USHA), as amended by the Housing Opportunities 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 2020 FMRs and 
enumerates the procedures for Public Housing Agencies (PHAs) and other 
interested parties to request reevaluations of their FMRs as required 
by HOTMA. This notice also discusses the comments received on the 
Notice of Proposed Changes to the Methodology Used for Estimating Fair 
Market Rents (84 FR 26141).

DATES: Comment Due Date: September 30, 2019.
    Effective Date: October 1, 2019 unless HUD receives a valid request 
for reevaluation of specific area FMRs as described below.

[[Page 45790]]


ADDRESSES: HUD invites interested persons to submit comments regarding 
the FMRs and to request reevaluation of the FY 2020 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 20410-0500. 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 https://www.regulations.gov.
    2. Electronic Submission of Comments. Interested persons may submit 
comments or reevaluation requests electronically through the Federal 
eRulemaking Portal at https://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 them immediately available to the public. Comments or 
reevaluation requests submitted electronically through the https://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 https://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 website https://www.huduser.gov/portal/datasets/fmr.html. FMRs are listed at the 40th percentile in Schedule B. For 
informational purposes, 50th percentile rents for all FMR areas will be 
published at https://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 Program Parameters and Research 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 Federal 
Relay Service at 800-877-8339 (toll-free number).
    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/ the 
U.S. Government Printing Office website. Complete documentation of the 
methods and data used to compute each area's FY 2020 FMRs is available 
at https://www.huduser.gov/portal/datasets/fmr.html#2020_query. FY 2020 
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: https://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. 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.
    On November 16, 2016 (81 FR 80567), 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), with an effective date of

[[Page 45791]]

January 17, 2017. The Small Area FMR final rule eliminated the 50th 
percentile FMR provisions in the FMR regulations (24 CFR 888.113) \1\ 
and for the first time since FY 2001, there are no designated 50th 
percentile areas in FY 2020 FMRs. There were three areas still 
designated as 50th percentile FMRs in FY 2019. Two of the areas, 
Bergen-Passaic, NJ HUD Metro FMR Area, San Diego-Carlsbad-San Marcos, 
CA MSA, were identified as Small Area FMR required areas in the 
November 2016 rulemaking and are required to use Small Area FMRs in the 
administration of their Housing Choice Voucher programs. PHAs in the 
Spokane, WA HUD Metro FMR area that 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 may obtain HUD Field Office approval 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: https://www.huduser.gov/portal/datasets/50per.html), which policy was not changed by the Small Area FMR 
rule.
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    The FMRs values published in Schedule B will be 40th percentile 
values for FY 2020 for the Bergen-Passaic, NJ HUD Metro FMR Area, San 
Diego-Carlsbad-San Marcos, CA MSA, and Spokane, WA HUD Metro FMR Area.

II. Procedures for the Development of FMRs

    Section 8(c)(1) of the USHA, as amended by 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 2020 FMRs are available at 
https://www.huduser.gov/portal/datasets/fmr.html and will become 
effective on October 1, 2019. This notice also provides procedures for 
FMR reevaluation requests.

III. FMR Methodology

    This section provides a brief overview of how HUD computes the FY 
2020 FMRs. HUD is making changes to the estimation methodology for FMRs 
as discussed in the June 5, 2019 Federal Register notice, ``Proposed 
Changes to the Methodology Used for Estimating FMRs'' (84 FR 26141), 
see the online documents tab at https://www.huduser.gov/portal/datasets/fmr.html#2020. HUD is replacing the national trend factor with 
local and regional trend factors in order to improve the accuracy of 
the FMRs. In addition, for Small Area FMRs, HUD is including the 
``neighboring policy'' as the next step when a ZIP Code Tabulation Area 
(ZCTA) does not have reliable data. This improvement determines if 
there is reliable data for bordering ZCTAs and uses this data before 
going to county-based Small Area FMRs.
    In conjunction with the use of 2017 American Community Survey (ACS) 
data, HUD has implemented the following geography changes: Bedford 
City, VA is no longer an incorporated city in the Lynchburg, VA MSA, so 
it is not listed separately in either the Schedule B table or the EXCEL 
data files; it continues to receive the FMR for Lynchburg, VA MSA.

A. Base Year Rents

    For FY 2020 FMRs, HUD uses the U.S. Census Bureau's 5-year ACS data 
collected between 2013 and 2017 (released in December of 2018) as the 
base rents for 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 in order to improve the 
statistical reliability of the ACS data used in the FMR calculations. 
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 2020, the three years of ACS data in question are 
2015, 2016 and 2017. The 2015 data are adjusted to be denominated in 
2017 dollars using the growth in Consumer Price Index (CPI)-based 
gross rents measured between 2015 and 2017. Similarly, the 2016 
gross rent data is adjusted to 2017 denominated dollars using the 
growth in CPI-based gross rents measured between 2016 and 2017.
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    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 data collected between 2013 and 
2017 through the 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, which HUD continues to use in FY 2020: 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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B. Recent Mover Factor

    Following the assignment of the standard quality two-bedroom rent 
described above, HUD applies a recent

[[Page 45792]]

mover factor to these rents. HUD calculates the recent mover factor as 
the change between the 5-year 2013-2017 standard quality two-bedroom 
gross rent and the 1-year 2017 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 so the base rent is updated and trended. When 
the recent mover factor is greater than one, the base rent is 
effectively replaced with the recent mover rent for that area and that 
is what is updated and trended. For virtually all metropolitan areas, 
one-year recent mover data is the basis for the updated and trended 
FMRs.
    The calculation of the recent mover factor for FY 2020 continues to 
use statistical reliability requirements that are similar to those for 
base rents. That is, 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 in 
the following order (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 state.
     In non-metropolitan areas, the order is the FMR area, 
aggregated non-metropolitan parts of the state, and state.
    The process for calculating each area's recent mover factor is 
detailed in the FY 2020 FMR documentation system available at: https://www.huduser.gov/portal/datasets/fmr.html#2020_query. Applying the 
recent mover factor to the standard quality base rent produces an ``as 
of'' 2017 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 2017 for the FY 2020 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 2020 
FMRs.
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    HUD does not use ACS data to establish the base rent or recent 
mover factor for 19 areas where the FY 2020 FMR was adjusted based on 
survey data:
     Survey data from 2017 is used to adjust the FMRs for 
Seattle-Bellevue, WA HMFA; Hood River County, OR; Wasco County, OR; 
Hawaii County, HI; Jonesboro, AR HMFA; Santa Maria-Santa Barbara, CA 
MSA; and Urban Honolulu, HI MSA.
     Survey data from 2018 is used to adjust the FMR for Santa 
Cruz-Watsonville, CA MSA; Portland-Vancouver-Hillsboro, OR-WA; 
Burlington-South Burlington, VT; Coos County, OR; Curry County, OR; 
Oakland-Fremont, CA HUD Metro FMR Area; San Francisco, CA HUD Metro FMR 
Area; San Jose-Sunnyvale-Santa Clara, CA HUD Metro FMR Area; Boston-
Cambridge-Quincy, MA-NH HUD Metro FMR Area; Douglas County, OR; and San 
Diego-Carlsbad, CA MSA.
     Survey data from 2019 is used to adjust the FMRs for Kauai 
County, HI.
    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 2020 FMRs is from 2017, larger areas may not use survey 
data collected before June 30, 2017 for the FY 2020 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.

D. Updates From 2017 to 2018

    HUD updates the ACS-based ``as of'' 2017 rent through the end of 
2018 using the annual change in gross rents measured through the 
Consumer Price Index (CPI) from 2017 to 2018 (CPI update factor). As in 
previous years, HUD uses local CPI data coupled with Consumer 
Expenditure Survey data for FMR areas within Class A metropolitan areas 
covered by local CPI data. In 2018, the Bureau of Labor Statistics 
(BLS) changed the area definitions of its Class A metropolitan areas 
from the 1990 definition of Primary Metropolitan Statistical Areas 
(PMSA) to smaller CBSA-based MSAs. In addition, BLS eliminated some 
areas from this Class A collection: Pittsburgh, PA MSA; Cleveland-
Elyria, OH MSA; Cincinnati, OH-KY-IN MSA; Kansas City, MO-KS MSA; 
Milwaukee-Waukesha-West Allis, WI MSA; and Portland-Vancouver-
Hillsboro, OR-WA MSA. HUD will estimate these areas' FMRs using 
regional CPI beginning with the FY 2020 FMRs. HUD uses CPI data 
aggregated at the Census region level for all Class B and C size 
metropolitan areas and non-metropolitan areas. Additionally, HUD uses 
CPI data collected locally in Puerto Rico as the basis for CPI 
adjustments from 2017 to 2018 for all Puerto Rico FMR areas.

E. Trend Factor Forecasts

    Following the application of the appropriate CPI update factor, HUD 
trends the gross rent estimate from 2018 to FY 2020 using local and 
regional forecasts of the CPI gross rent data as proposed in the June 
5, 2019 Federal Register notice (84 FR 26141). Riverside-San 
Bernardino-Ontario, CA MSA as a newly designated Class A city (it was 
previously part of the Los Angeles PMSA) has data for a 2018 CPI 
update, but does not have enough data for a trend factor forecast; 
therefore, its trend factor is the regional (West) trend factor. The 
actual model used for each trend factor has been chosen based on which 
model generates the lowest Root Mean Square Error (RMSE) statistic. As 
detailed in the June 5 notice, the trend factors were selected from a 
series of time series models based on national inputs (National Input 
Model or NIM), local inputs (Local Input Model or LIM) and historical 
values of the predicted series (Pure Time Series--PTS). HUD will hold 
the type of model selected (NIM, LIM, or PTS) constant for 5 years and 
will reassess the model selections during the calculation of the FY 
2025 FMRs. For instances when HUD changes

[[Page 45793]]

the functional form of the model (NIM, PTS, LIM) for a geographic area 
that is different from the previous model selection, HUD will ensure 
the change is not due to overfitting the model or outliers in the data. 
HUD will update and run the gross rent forecast models annually with 
updated actual data and newly created input forecasts.

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 
2020 FMRs have been updated using average data from three five-year ACS 
data series (2011-2015, 2012-2016, and 2013-2017). 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.
    In the calculation of FY 2020 FMR estimates, HUD set the bedroom 
interval ranges as follows: Efficiency FMRs are constrained to fall 
between 0.65 and 0.85 of the two-bedroom FMR; one-bedroom FMRs must be 
between 0.76 and 0.88 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.\7\ 
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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    \7\ 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).\8\
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    \8\ 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 2020 Small 
Area FMRs may be no less than 90 percent of the FY 2019 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 2020 Small Area FMRs may be no less than 90 percent of the 
greater of the FY 2019 metropolitan area-wide FMRs or the applicable FY 
2019 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 2020 FMR Documentation System, available at 
https://www.huduser.gov/portal/datasets/fmr.html#2020_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 2020, the 
national minimum rent is $714. 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 the use of 
Small Area FMRs; HUD has suspended the Small Area FMR designation for 
the metropolitan area under 24 CFR 888.113(c)(4); or the PHA is an MTW 
PHA with an approved alternative payment standard policy. For more 
information on the process for obtaining a temporary exemption or area-
wide suspension, please see PIH Notice 2018-01: Guidance on Recent 
Changes in Fair

[[Page 45794]]

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 should contact their local HUD field office to 
request approval from HUD to do so.
    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 2020 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-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.\9\
---------------------------------------------------------------------------

    \9\ For example, for FY 2020 Small Area FMRs, HUD averages the 
gross rents from 2015, 2016, and 2017 5-Year ACS estimates. The 2015 
and 2016 gross rent estimates would be adjusted to 2017 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 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. If 
a ZCTA does not have reliable rent data at the all bedroom level, HUD 
will then check to see if the ZCTA is bordered by ZCTAs that themselves 
have reliable rent data. If at least half of a ZCTA's ``neighbors'' 
have such data, the weighted average of those estimates will be used as 
the basis for the SAFMR rather than a county proxy, where the weight is 
the length of the shared boundary between the ZCTA and its neighbor. 
This is a new step, as proposed in the Federal Register notice, 
``Proposed Changes to the Methodology Used for Estimating FMRs'' (84 FR 
26141). In small areas where the neighboring ZCTA median gross rents 
are not statistically reliable, HUD continues to substitute 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 2020 Small Area FMRs, HUD has updated the rent ratios 
to use an average of the rent ratios calculated from the 2011-2015, 
2012-2016, and 2013-2017 5-year ACS estimates.

VI. Request for Public Comments and FMR Reevaluations

    In the next Section, HUD will respond to the comments on its 
proposed methodology changes, which have been incorporated in the use 
of more local trend factors and use of more local data for the Small 
Area FMRs. HUD will continue to accept public comments on the methods 
HUD uses to calculate FY 2020 FMRs, including Small Area FMRs, and the 
FMR levels for specific areas. Due to its current funding levels, HUD 
does not have 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 ongoing administrative fees or their administrative fee 
reserve 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 parties interested in requesting HUD's reevaluation 
of their area's FY 2020 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 https://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 2017 ACS data used in the 
calculation of the FY 2020 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.\10\ 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.
---------------------------------------------------------------------------

    \10\ Although there are no 50th percentile FMRs for FY 2020, HUD 
must calculate 50th percentile rents for the Success Rate Payment 
Standard under 24 CFR 982.503(e).
---------------------------------------------------------------------------

    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 2019 FMRs remain in effect.
    4. Data for reevaluations must be supplied to HUD no later than 
Friday January 10, 2020. On Monday January 13, 2020, HUD will post at 
https://www.huduser.gov/portal/datasets/fmr.html a listing of the areas 
that requested FMR reevaluations but did not deliver data and making 
the FY 2020 FMRs effective in these areas.
    5. HUD will use the data delivered by January 10, 2020 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 for this notice.
    6. Any data supporting a change in FMRs supplied after January 10, 
2020 will be incorporated into FY 2021 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

[[Page 45795]]

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 2020 FMR Documentation 
System (available at: https://www.huduser.gov/portal/datasets/fmr.html#2020_query.
    Questions on how to conduct FMR surveys may be addressed to Marie 
L. Lihn or Peter B. Kahn of the Program Parameters and Research 
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].
    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 
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 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 gross rents paid 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 survey three-bedroom units, in 
addition to one- and two-bedroom units and are only required to get 100 
eligible survey responses. In certain circumstances, PHAs may conduct 
surveys of groups of non-metropolitan 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, but in no case 
will fewer than 100 eligible cases be considered.
    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 2020 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 2017 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. Public Comments on Notice of Proposed Changes to the Methodology 
Used for Estimating Fair Market Rents

    HUD received 25 comments addressing the proposed changes to the 
methodology of calculating FMRs. There are three additional comments 
that appear to be mistakenly filed with this notice as they do not 
pertain to FMRs. There are two proposed methodology changes to the 
calculation of FMRs. The first concerns the use of local or regional 
trend factors in place of the national trend factor that has 
historically been used. The more local trend factors were proposed to 
improve FMR estimates to better reflect the rent inflation that occurs 
between the time that ACS data is collected and the fiscal year for 
which the FMRs are produced. HUD proposed to use metropolitan and 
regional Gross Rent Index forecasts to calculate and apply more locally 
based trend factors to address concerns of FMR accuracy. While several 
commenters were opposed to this change, primarily due to the belief 
that HUD did not provide enough information to evaluate the proposal, 
many of the comments that addressed this proposed change to the trend 
factor supported the change to more local trend factors. Consequently, 
HUD replaced the national trend factor with local and regional trend 
factors in the FY 2020 FMRs.
    The second proposed methodology change concerns calculating Small 
Area FMRs. In calculating Small Area FMRs, HUD attempts to use ZIP Code 
level estimates where possible. In cases where ZIP Code level estimates 
are not available or are not sufficiently reliable, HUD's practice was 
to assign a Small Area FMRs based on the estimate of gross rent for the 
county of the ZIP Code. However, because metropolitan counties are 
often much larger than ZIP Codes, this approach has the potential to 
produce anomalous Small Area FMR values where the county based Small 
Area FMR is not an accurate proxy for neighborhood-level rents. HUD's 
new estimation method for a ZCTA without reliable rent data is to check 
to see if the ZCTA is bordered by ZCTAs that themselves have reliable 
rent data. If at

[[Page 45796]]

least half of a ZCTA's ``neighbors'' have such data, the weighted 
average of those estimates will be used as the basis for the Small Area 
FMR rather than a county proxy, where the weight is length of the 
shared boundary between the subject ZCTA and its neighbor. Again, many 
of the comments that addressed this proposal were supportive and this 
proposal is implemented in the FY 2020 FMRs. Objections to the Small 
Area FMR proposal were offered by commenters that felt they had 
insufficient information to evaluate the proposal.
    The following summaries of comments and responses also include 
responses to other comments regarding the calculation of FMRs that were 
not responsive to the specific methodology changes that were the 
subject of the notice. No response is provided to comments that did not 
address FMR estimation methodology.

A. More Local Trend Factors

    Comments: Some commenters were concerned that HUD would use its 
flexibility in selecting from a range of trend factor models to choose 
the one resulting in the lowest FMRs, while others asked HUD to 
uniformly choose the model that provides the highest possible FMRs.
    HUD Response: The goal of selecting the trend factor from among 
several models based on RMSE is not to provide the lowest or highest 
FMR possible, but rather to provide the most accurate forecast of rent. 
While all of the models will be updated and run annually, HUD will hold 
constant the models selected for the FY 2020 FMRs for a period of 5 
years.
    Comments: More information is needed on how the models are 
selected. How are the Hypothetical FY 2019 FMRs calculated for areas 
that are based on local surveys?
    HUD Response: For each geography, a sample of past quarters of CPI 
data are used to forecast the most recent 8 quarters of published CPI 
values. These 8 quarters are the validation set. A forecast is run on 
the sample CPI data, excluding the validation set. For each quarter in 
the validation set, the known value is compared to the forecasted value 
to determine its RMSE. An average of the RMSE in the validation set is 
assigned to each geography and used in comparison to other models. HUD 
includes information on which model was selected for each forecast area 
in the FY 2020 FMR documentation system at https://www.huduser.gov/portal/datasets/fmr.html#2020_query. The models will be reassessed 
every 5 years. The FY 2019 Hypotheticals are based on ACS data, even in 
areas where a local survey is used for FY 2019 FMRs.
    Comments: The new trend factor methodology does not place enough 
weight on the impact of local rents in calculating the FMR. The FMR 
methodology can be improved by increasing the weight of local housing 
conditions on the formula, or by returning to the policy where local 
rent survey costs may be reimbursed by HUD. The local surveys being 
conducted provide more accurate information than the trend factor 
methodology change, they should be used for 5 years and they should be 
funded by HUD. Several commenters were concerned that HUD would not 
continue to use local surveys conducted by the PHAs.
    HUD Response: HUD is not eliminating the use of locally conducted 
surveys and HUD has never reimbursed local survey costs meaning there 
is no such policy to which to return. HUD has not been appropriated 
funding to conduct local area surveys for FMR purposes. The only viable 
avenue for reimbursement of surveys is the Housing Choice Voucher 
program administrative fee set aside account; however, reimbursement of 
FMR surveys is not an explicitly authorized category for reimbursement. 
In the past, when HUD relied on decennial Census data to estimate FMRs, 
HUD selected and paid for the local surveys that would be conducted in 
a given year; this contract and source of funds no longer exists. 
During that time if an unselected local area did its own survey, its 
survey cost was not reimbursed by HUD. Surveys are used for 5 years 
when there is no ACS recent mover data available for the FMR area in 
question. HUD extends the use of surveys to the maximum extent possible 
with the statutory limitation of using the ``most recent data 
available.''
    Comments: Commenters were concerned about the Hypothetical FY 2019 
FMRs that decline with the new local trend factor models. FMR decreases 
should be limited to 5 percent. Another commenter requested that FMR 
decreases should not be applied in the first year of a decline and 
should be limited to a 5 percent reduction afterward
    HUD Response: The decrease in the hypothetical FY 2019 FMRs means 
that the rate of growth measured by the more local forecast is slower 
than the national forecast. The FMR rulemaking that was completed in 
2016, instituted a 10 percent limit on FMR decreases. This cannot be 
changed without undertaking further rulemaking. In cases where there 
were survey data used in place of ACS data, the hypothetical FY 2019 
FMRs may be lower because the survey rents were not used. PHAs have the 
authority to maintain their payment standard levels for in place 
tenants when FMRs decrease.

B. Neighboring ZIP Code Rents

    Comments: County-based proxies should continue to be used instead 
of neighboring ZCTA.
    HUD Response: County based proxies do not provide the same level of 
differentiation in rents and lead to anomalously high and low Small 
Area FMRs.
    Comments: The methodology change for Small Area FMRs should not be 
implemented without a strict hold harmless policy at the level of the 
metro FMR. Also, concerns were expressed about decreases in SAFMRs in 
Qualified Opportunity Zones.
    HUD Response: The purpose of using neighboring ZCTA data is to 
better localize rents and to take advantage of more local data. As for 
hold harmless policies, PHAs have the right to hold their payment 
standards harmless for in-place tenants who choose not to move.
    Comments: HUD should investigate the spatial relationship between a 
ZIP Code that does not appear in the ZCTA data set and other 
neighboring ZIP Codes using the ZIP+4 data set. This could reduce the 
number of Small Area FMRs that will continue to use a county-based 
proxy rent estimate even with the proposed neighboring ZIP Code 
methodology.
    HUD Response: HUD will evaluate this proposal and may propose 
additional changes to the Small Area FMR methodology, but that will 
require publishing a methodology change notice at a later date.

C. Other FMR Issues

    Comments: The proposed methodology continues to be very complicated 
and does nothing to minimize the administrative burden for agencies to 
budget and better predict funding levels.
    HUD Response: HUD provides detailed documentation and explanations 
of how FMRs are calculated. HUD has received numerous comments about 
the inaccuracy of FMRs particularly in housing markets where rents are 
changing rapidly. The complexity of the FMR calculation methods reflect 
HUD's best efforts to improve the accuracy of the FMR calculations. 
HUD's Office of Public and Indian Housing provides tools and support to 
agencies in their budgeting

[[Page 45797]]

activities for the Housing Choice Voucher program.
    Comments: FMRs are not high enough, they should be increased. FMRs 
should be set at the 50th percentile. HUD should use rent 
reasonableness data, data from all renters not just recent movers, and 
rental data from additional sources such as Craigslist in setting FMRs.
    HUD Response: HUD cannot unilaterally increase FMRs without 
supporting data. HUD cannot change the FMR percentile without 
undertaking rulemaking. Rent Reasonableness data are generally not 
market wide assessments of gross rents paid across the totality of the 
rental stock in an area and therefore are not suitable for calculating 
FMRs. HUD does use ``All renters'' in setting the base rent. The recent 
mover rent or recent mover adjustment is only used to increase the 
FMRs--we do not let the recent mover adjustment decrease rents. 
Craigslist, Axiometrics, and Apartment.com are not sources that can be 
relied upon for data capturing gross rents paid. HUD is reviewing the 
possibility of using alternative data sources for update factors but 
cannot use these sources for baselining FMRs.
    Comments: HUD should incorporate vacancy rates and additional 
geographic data when calculating FMRs.
    HUD Response: Vacancy rates were tested and did not add explanatory 
power to the gross rent index forecasts; further, there are not 
forecasts of expected vacancy rates as inputs for use in the forecast 
models.
    Comments: Using CPI has unintended consequences; the use of CPI 
often forces people to choose between housing and Medicaid.
    HUD Response: CPI has been the basis of our update of base year 
data for many years and our trend factors for several years. This 
proposed change to more local trend factors changes the use of the CPI 
from national to local and regional to capture differences in rent 
changes within the nation.
    Comments: HUD should increase basic range payment standard 
flexibilities.
    HUD Response: Payment standard ranges cannot be increased without 
statutory and regulatory changes. This is not something that can be 
done within the FMR calculation method notices; this may be done as 
part of a larger package of regulatory reforms.
    Comments: How are bedroom sizes calculated and why was the two-
bedroom the only one provided for the Hypothetical FY 2019 FMRs?
    HUD Response: HUD calculates FMRs directly for two-bedroom units 
and other bedroom unit sizes are calculated using bedroom ratios 
relating the different unit sizes to two-bedroom units. For a given 
year, the relationship between two-bedroom units and other unit sizes 
is the same; therefore, the percentage difference between the actual FY 
2019 2-bedroom FMR and the Hypothetical two-bedroom FMR will be the 
same across all unit sizes.
    Comments: HUD should discontinue it use of Core Based Statistical 
Areas (CBSAs) as the basis of metropolitan FMR areas. These areas 
create distortions in FMRs.
    HUD Response: HUD has been using CBSAs as the basis of metropolitan 
FMRs since the FY 2006 FMRs for all but the New England areas. While 
the CBSAs were larger than the FMR areas in most metropolitan areas 
prior to FY 2006 FMRs, HUD instituted a policy of only including new 
counties to a metropolitan area where the there was no rent data of its 
own that could be used or where the rent data for the new county was 
within five percent of the metropolitan-wide rent. This was done to 
mitigate the effects of geography changes on FMRs. Median family 
incomes were also required to be within five percent for a county to be 
added to an FMR area under a CBSA definition change. The adjustments 
made to the FY 2006 area 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 changes in the 
CBSA definitions will still be treated as separate counties for FMR 
calculations; that is, the rents from a county that is a subarea 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 the HUD defined 
area is not available, HUD uses information from larger encompassing 
geographies, as described elsewhere in this notice. As of 2018, the CPI 
uses areas based on CBSAs. While CBSAs represented larger areas for the 
FMRs, for the CPI the CBSAs represent smaller areas.

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 21, 2019.
Seth D. Appleton,
Assistant Secretary for 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 uses the metropolitan 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 2020 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, 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 the HUD defined area is not 
available, HUD uses information from larger encompassing geographies, 
as described elsewhere in this notice.

[[Page 45798]]

    The specific counties and New England towns and cities within each 
state in MSAs and HMFAs were not changed by the July 15, 2015 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. 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 non-metropolitan county within each 
state and are available at https://www.huduser.gov/portal/datasets/fmr.html.
    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 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. 2019-18608 Filed 8-29-19; 8:45 am]
 BILLING CODE 4210-67-P