[Federal Register Volume 85, Number 158 (Friday, August 14, 2020)]
[Notices]
[Pages 49666-49672]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-17717]



[[Page 49666]]

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6224-N-01]


Fair Market Rents for the Housing Choice Voucher Program, 
Moderate Rehabilitation Single Room Occupancy Program, and Other 
Programs Fiscal Year 2021

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

ACTION: Notice of Fiscal Year (FY) 2021 Fair Market Rents (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 federal 
fiscal year (FFY). This notice describes the methods used to calculate 
the FY 2021 FMRs and enumerates the procedures for Public Housing 
Agencies (PHAs) and other interested parties to request reevaluations 
of their FMRs as required by HOTMA. The trend factors used in the FY 
2021 FMRs include updated economic assumptions to reflect the economic 
downturn caused by the COVID-19 pandemic.

DATES: 
    Comment Due Date: September 30, 2020.
    Applicable Date: October 1, 2020 unless HUD receives a valid 
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 2021 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 standard mail often results in delayed delivery. To ensure 
timely receipt of comments or reevaluation requests, HUD recommends 
that comments or requests submitted by standard 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 the Schedule of 
Metropolitan and Non-Metropolitan Area FMRs. 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 2021 FMRs is available 
at https://www.huduser.gov/portal/datasets/fmr.html#2021_query. FY 2021 
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

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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 \1\ 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.
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    \1\ 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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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 2021 FMRs are available at 
https://www.huduser.gov/portal/datasets/fmr.html and will become 
effective on October 1, 2020. This notice also provides procedures for 
FMR reevaluation requests.

III. FMR Methodology

    This section provides a brief overview of how HUD computes the FY 
2021 FMRs. HUD is making no changes to the estimation methodology for 
FMRs as used by HUD for the FY 2020 FMRs. For complete information on 
how HUD derives each area's FMRs, see the online documentation at 
https://www.huduser.gov/portal/datasets/fmr.html#2021_query.
    In conjunction with the use of 2018 American Community Survey (ACS) 
data, HUD has implemented the following geography change, the 
designation of the two counties comprising newly created Twin Falls, ID 
MSA as metropolitan counties. These two counties will be designated as 
Twin Falls County, ID HUD Metro FMR Area and Jerome County, ID HUD 
Metro FMR Area. Although the FMRs for these counties will be calculated 
separately, the metropolitan area designation impacts the FMR 
calculations since the areas will use the Idaho metropolitan state-
based recent mover factor instead of the Idaho state non-metropolitan 
recent mover factor.

A. Base Year Rents

    For FY 2021 FMRs, HUD uses the U.S. Census Bureau's 5-year ACS data 
collected between 2014 and 2018 and released in December 2019 as the 
base rents for the FMR calculations. The ACS data released at the end 
of 2019 is the most current ACS data available at the time the FY 2021 
FMRs are calculated. HUD pairs a ``margin of error'' test \2\ with an 
additional requirement based on the number of survey observations 
supporting the estimate 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 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 \3\ (provided that there is data available 
for at least two of these years),\4\ 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 2021, the three years of ACS data in question are 
2016, 2017 and 2018. The 2016 data are adjusted to be denominated in 
2018 dollars using the growth in Consumer Price Index (CPI)-based 
gross rents measured between 2016 and 2018. Similarly, the 2017 
gross rent data is adjusted to 2018 denominated dollars using the 
growth in CPI-based gross rents measured between 2017 and 2018.
    \4\ To be used in the three-year average calculation, the 5-year 
estimates must be minimally statistically qualified; that is, the 
margin of error of the estimates must be less than half the size of 
the estimate.
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    HUD has updated base rents each year using annually updated 5-year 
data made available since FY 2012. HUD also updates base rents for 
Puerto Rico FMRs using data collected between 2014 and 2018 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 2021. Under this method, 
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.\5\ The calculation of the recent mover factor 
is described below.
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    \5\ HUD's regulations at 24 CFR 888.113(a) 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-mover factor to these rents. HUD 
calculates the recent-mover factor as the change between the 5-year 
2014-2018 standard quality two-bedroom gross rent and the 1-year 2018 
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 2021 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'' 1-year recent-mover ACS data for 
the FMR area is tested for statistical reliability.\6\ 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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    \6\ ``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 sub-areas 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 2021 FMR documentation system available at:
https://www.huduser.gov/portal/datasets/fmr.html#2021_query. Applying 
the recent-mover factor to the standard quality base rent produces an 
``as of'' 2018 recent mover two-bedroom gross rent for the FMR area.

C. Other Rent Survey Data

    HUD calculated base rents for the insular areas using data 
collected during the 2010 decennial census of American Samoa, Guam, the 
Northern Mariana Islands, and the Virgin Islands beginning with the FY 
2016 FMRs.\7\ This 2010 base year data is updated through 2018 for the 
FY 2021 FMRs using the growth in national ACS data.
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    \7\ 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 21 areas where the FY 2021 FMRs are based on locally 
collected survey data which are more recent than the 2018 ACS. For 
larger metropolitan areas that have valid ACS one-year recent-mover 
data, survey data may not be any older than the mid-point of the 
calendar year for the ACS one-year data. Since the ACS one-year data 
used for the FY 2021 FMRs is from 2018, larger areas may not use survey 
data collected before June 30, 2018 for the FY 2021 FMRs. Smaller areas 
without statistically reliable 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. The following list enumerates the areas 
with local areas surveys and the year of the survey data:
     Survey data from 2017 is used to adjust the FMRs for Hood 
River County, OR; Wasco County, OR; Hawaii County, HI; and Jonesboro, 
AR HMFA.
     Survey data from 2018 is used to adjust the FMR for 
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; Asheville, NC HUD Metro FMR Area; Eugene-Springfield, OR 
MSA; Portland, ME HUD Metro FMR Area; Santa Maria-Santa Barbara, CA 
MSA; Worcester, MA HUD Metro FMR Area; and Guam.
     Survey data from 2020 is used to calculate the FMRs for 
Santa Cruz-Watsonville, CA MSA.

D. Updates From 2018 to 2019

    HUD updates the ACS-based ``as of'' 2018 rent through 2019 using 
the annual change in gross rents measured through the Consumer Price 
Index (CPI) from 2018 to 2019 (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 Consolidated Metropolitan Statistical Areas (CMSA) to 
smaller Core-Based Statistical Area (CBSA) 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 estimated these areas' FMRs using regional 
CPI beginning with the FY 2020 FMRs and continues the use of regional 
CPI factors in FY 2021. 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 2018 to 2019 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 2019 to FY 2021 using local and 
regional forecasts of the CPI gross rent data. Riverside-San 
Bernardino-Ontario, CA MSA as a newly designated Class A city (it was 
previously part of the Los Angeles-Riverside-Orange County, CA CMSA) 
has data for a CPI update factor, but does not have enough data for a 
trend factor forecast; therefore, until there is sufficient history to 
create a

[[Page 49669]]

credible local trend factor forecast 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, 2019 Federal 
Register notice (84 FR 26141), 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 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. For FY 2021, in the NIM models, HUD is 
using economic projections that account for the COVID-19 impacts on the 
economy .\8\
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    \8\ Congressional Budget Office (CBO) economic projections, May 
2020.
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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 
2021 FMRs have been updated using average data from three five-year ACS 
data series (2012-2016, 2013-2017, and 2014-2018). 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 ensure an adequate distributional fit in these 
bedroom ratio calculations 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 2021 FMR estimates, HUD set the bedroom 
interval ranges as follows: Efficiency FMRs are constrained to fall 
between 0.66 and 0.86 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 1.14 and 1.32 of 
the two-bedroom FMR; and four-bedroom FMRs (again, prior to adjustment) 
must be between 1.26 and 1.61 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.\9\ 
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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    \9\ 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).\10\
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    \10\ 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 2021 Small 
Area FMRs may be no less than 90 percent of the FY 2020 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 2021 Small Area FMRs may be no less than 90 percent of the 
greater of the FY 2020 metropolitan area-wide FMRs or the applicable FY 
2020 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 2021 FMR Documentation System, available at 
https://www.huduser.gov/portal/datasets/fmr.html#2021_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 2021, the 
national minimum rent is $734. 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. Small Area FMRs

    Small Area FMRs for all metropolitan areas are listed in the Small 
Area FMR Schedule. Other Metropolitan PHAs operating in areas where the 
Small Area FMR is not required to be used and interested in using Small 
Area FMRs in the operation of their Housing Choice Voucher program 
should contact their

[[Page 49670]]

local HUD field office to request approval from HUD to do so.
    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. 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.\11\
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    \11\ For example, for FY 2021 Small Area FMRs, HUD averages the 
gross rents from 2016, 2017, and 2018 5-Year ACS estimates. The 2016 
and 2017 gross rent estimates would be adjusted to 2018 dollars 
using the metropolitan area's gross rent CPI adjustment factors.
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    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. 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 2021 Small Area FMRs, HUD has updated the rent ratios 
to use an average of the rent ratios calculated from the 2012-2016, 
2013-2017, and 2014-2018 5-year ACS estimates.

V. Request for Public Comments and FMR Reevaluations

    HUD will continue to accept public comments on the methods HUD uses 
to calculate FY 2021 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 2021 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 multi-
jurisdictional areas, PHA(s) representing at least half of the voucher 
tenants in the FMR area, must agree that the reevaluation is necessary.
    2. For a re-evaluation to occur, the requestor(s) must supply HUD 
with data more recent than the 2018 ACS data used in the calculation of 
the FY 2021 FMRs. HUD requires data on gross rents paid in the FMR area 
for standard quality rental housing units occupied by recent movers. 
The data delivered must be sufficient for HUD to calculate a 40th and 
50th percentile two-bedroom rent.\12\ 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.
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    \12\ Although there are no longer 50th percentile FMRs, HUD must 
calculate 50th percentile rents for the Success Rate Payment 
Standard under 24 CFR 982.503(e).
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    3. On or about October 2, 2020 HUD will post a list, at https://www.huduser.gov/portal/datasets/fmr.html, of the areas requesting 
reevaluations and where FY 2020 FMRs remain in effect. 42 U.S.C. 
1437f(c)(1)(B) includes the following: ``The Secretary shall establish 
a procedure for public housing agencies and other interested parties to 
comment on such fair market rentals and to request, within a time 
specified by the Secretary, reevaluation of the fair market rentals in 
a jurisdiction before such rentals become effective.'' Therefore, areas 
where valid reevaluation requests are submitted continue to use FY 2020 
FMRs whether the FY 2021 FMRs are lower or higher than the FY 2020 
FMRs.
    4. Data for reevaluations must be supplied to HUD no later than 
Friday January 8, 2021. On Monday January 11, 2021, 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 2021 FMRs effective in these areas. All survey responses 
gathered as part of the survey efforts should be delivered to HUD. In 
addition to the survey data, HUD requires a current utility schedule in 
order to evaluate the survey responses. Finally, HUD encourages PHAs to 
evaluate their survey data to ensure the survey provides the expected 
results. Should PHAs or their contractors undertake this evaluation, 
HUD requests that this analysis also be submitted.
    5. HUD will use the data delivered by January 8, 2021 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's responses to comments filed during 
the comment period for this notice.
    6. Any data supporting a change in FMRs supplied after January 8, 
2021 will be incorporated into FY 2022 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

[[Page 49671]]

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 2021 FMR Documentation 
System (available at: https://www.huduser.gov/portal/datasets/fmr.html#2021_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. Staff from HUD's Program 
Parameters and Research Division will work with PHAs in areas 
requesting reevaluations to provide the minimum number of survey cases 
required to ensure that data submitted for reevaluation represent a 
statistically valid sample.
    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 2021 FMR section 
under the ``Documents'' tab 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 2018 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.

VI. 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 10, 2020.
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 2021 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 August 15, 
2017. The adjustments made to the 2000

[[Page 49672]]

definitions to separate subparts of these areas where FMRs or median 
incomes would otherwise change significantly are continued. In 
addition, to limit FMR changes based solely on geography and to provide 
FMRs at the smallest possible area of geography, no counties were added 
to existing metropolitan areas beginning with changes to metropolitan 
area definitions from the 2010 Census and implemented in the FY 2016 
FMRs. All counties added to existing metropolitan areas are treated as 
separate counties for FMR calculations and new metropolitan areas of 
more than one county will have separate FMRs for each county in that 
new MSA. 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 the average of the last three 
years. If that is not available, then the FMR of the larger 
encompassing geography is used, which is the MSA for a metropolitan 
county and the non-metropolitan portion of a State for a non-
metropolitan county.
    The specific counties and New England towns and cities within each 
state in MSAs and HMFAs were not changed by the August 2017 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

    The Metropolitan and Non-Metropolitan Area FMR Schedule s is 
available at https://www.huduser.gov/portal/datasets/fmr.html and shows 
the FMRs for zero-bedroom through four-bedroom units. The Small Area 
FMR Schedule 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.

3. Arrangement of FMR Areas and Identification of Constituent Parts

    a. The Metropolitan and Non-Metropolitan FMR Area Schedule lists 
FMRs alphabetically by state, by metropolitan 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. 2020-17717 Filed 8-13-20; 8:45 am]
BILLING CODE 4210-67-P