[Federal Register Volume 87, Number 219 (Tuesday, November 15, 2022)]
[Notices]
[Pages 68513-68516]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24845]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6360-N-01]


Notice of Certain Operating Cost Adjustment Factors for 2023

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Notice; request for comment.

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SUMMARY: This notice establishes operating cost adjustment factors 
(OCAFs) for project-based assistance contracts issued under Section 8 
of the United States Housing Act of 1937 and renewed under the 
Multifamily Assisted Housing Reform and Affordability Act of 1997 
(MAHRA) for eligible multifamily housing projects having an anniversary 
date on or after February 11, 2023. OCAFs are annual factors used to 
adjust Section 8 rents renewed under section 515 or section 524 of 
MAHRA. Through this notice HUD also seeks public input on two proposed 
technical changes to its OCAF calculation method.

DATES: 
    Comment due date: December 15, 2022.
    Applicability date: February 11, 2023, unless HUD receives comment 
that would lead to the reconsideration of these proposed changes, as 
described below.

ADDRESSES: HUD invites interested persons to submit comments regarding 
changes to the OCAF calculation method. Communications must refer to 
the above docket number and title and should contain the information 
specified in the ``Request for Public Comments and FMR Reevaluations'' 
section. There are two methods for submitting public comments:
    1. 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

[[Page 68514]]

requestors should follow instructions provided on that site to submit 
comments or reevaluation requests electronically.
    2. Submission of Comments by Mail. Members of the public may submit 
comments or requests for reevaluation 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.

    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. HUD does not accept 
facsimile (FAX) comments or requests.

FOR FURTHER INFORMATION CONTACT: Jennifer Lavorel, Director, Office of 
Asset Management and Portfolio Oversight Program Administration Office, 
Department of Housing and Urban Development, 451 7th Street SW, 
Washington, DC 20410; telephone number 202-402-2515 (this is not a 
toll-free number). HUD welcomes and is prepared to receive calls from 
individuals who are deaf or hard of hearing, as well as individuals 
with speech and communication disabilities. To learn more about how to 
make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 514(e)(2) and section 524(c)(1) of the Multifamily Assisted 
Housing Reform and Affordability Act of 1997 (MAHRA) (42 U.S.C. 1437f 
note), as amended, require HUD to establish guidelines for the 
development of operating cost adjustment factors (OCAFs) for rent 
adjustments. Similar language is found in sections 524(a)(4)(C)(i), 
524(b)(1)(A), and 524(b)(3)(A) of MAHRA, all of which prescribe the use 
of the OCAF in the calculation of renewal rents. MAHRA gives HUD broad 
discretion in setting OCAFs, referring, for example, in sections 
524(a)(4)(C)(i), 524(b)(1)(A), 524(b)(3)(A), and 524(c)(1), to simply 
``an operating cost adjustment factor established by the Secretary.'' 
HUD uses a single methodology for establishing OCAFs. The sole 
limitation to this grant of authority is a specific requirement in each 
of the foregoing provisions that application of an OCAF ``shall not 
result in a negative adjustment.''
    OCAFs vary among states and territories. Contract rents are 
adjusted by applying the OCAF for the state or territory in which the 
subject project is located to that portion of the rent attributable to 
operating expenses exclusive of debt service.
    The OCAFs provided in this notice are applicable to eligible 
projects having a contract anniversary date on or after February 11, 
2023.

II. Proposed Changes to OCAF Methodology

    HUD seeks public input on the following proposed technical changes 
to its OCAF calculation methodology.
    Vintage of data. To calculate the inflation factor for each of the 
nine cost components that comprise the OCAF, HUD uses year-over-year 
data, pulling data as of May of each year. Beginning with the 2024 
OCAFs, HUD will begin to pull data in August of each year, to reduce 
the time lag between when OCAFs are calculated and when they go into 
effect.

    Note: To provide for OCAFs that are relatively generous in 2023, 
given historically high inflation levels, HUD calculated the cost 
component inflation factor for most of the cost components using a 
time period that exceeds 1 year. HUD used the most recent available 
data at the time of calculation for the numerator. For the 
denominator, HUD used the figure for the time period that was used 
in the calculation of the 2022 OCAFs. Going forward, HUD will revert 
to using year-over-year data for each component, subject to data 
availability.

    Insurance component data source. To calculate the inflation factor 
for the insurance component, HUD has used the Bureau of Labor 
Statistics Consumer Price Index, Tenants and Household Insurance Index. 
Beginning with the 2023 OCAFs, HUD instead uses the industry data for 
Direct property and casualty insurers-Commercial multiple peril 
insurance series from the Bureau of Labor Statistics, Producer Price 
Index, as it is the best metric for insurance costs for properties of 
leased rental housing.
    With respect to these proposed changes to OCAF methodology, HUD 
will consider all comments submitted not later than 30 days from the 
date of publication of this notice. Unless HUD receives comment that 
would lead to the reconsideration of these proposed changes, the 
changes will become effective on February 11, 2023. If HUD receives 
adverse comment that leads to reconsideration, HUD will notify the 
public via a revised notice issued immediately following the close of 
the comment period.

III. OCAF Data Sources

    OCAFs are calculated as the sum of weighted component cost changes 
for electricity, employee benefits/employee wages, fuel oil, goods/
supplies/equipment, insurance, natural gas, property taxes, and water/
sewer/trash, using publicly available indices. The weights used in the 
OCAF calculations for each of the nine cost component groupings are set 
using current percentages attributable to each of the nine expense 
categories. HUD calculates weights using three years of audited Annual 
Financial Statements from projects covered by OCAFs. The expenditure 
percentages for these nine categories have been found to be stable over 
time, and using three years of data increases their stability. The nine 
cost component weights are calculated at the state level, which is the 
lowest level of geographical aggregation with enough projects to permit 
statistical analysis. These data are not available for the Western 
Pacific Islands, so data for Hawaii are used as the best available 
indicator of OCAFs for these areas.
    HUD uses the best current price data sources for the nine cost 
categories in calculating annual change factors. State-level data for 
electricity, fuel oil, and natural gas from Department of Energy 
surveys are relatively current and continue to be used. Data on changes 
in employee benefits/employee wages, goods/supplies/equipment, 
insurance, property taxes, and water/sewer/trash costs are available 
only at the national level.
    The data sources used for the selected nine cost indicators are as 
follows:
     Electricity: Energy Information Agency (EIA), May 2022 
``Electric Power Monthly'' report, Table 5.6.B. HUD compares the 
estimate for January 2022 through May 2022 to the estimate for January 
2020 to December 2020. https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_06_b.
     Employee benefits: Bureau of Labor Statistics (BLS) ECI, 
Private Industry Benefits, All Workers (Series ID CIU2030000000000I), 
at the national level. HUD compares the second quarter 2022 to the 
first quarter of 2021. https://data.bls.gov/timeseries/CIU2030000000000I.

[[Page 68515]]

     Employee wages: Bureau of Labor Statistics (BLS) ECI, 
Private Industry Wages and Salaries, All Workers (Series ID 
CIU2020000000000I), at the national level. HUD compares the second 
quarter 2022 to the first quarter of 2021. https://data.bls.gov/timeseries/CIU2020000000000I.
     Fuel Oil: EIA U.S. Weekly Heating Oil and Propane Prices 
report. Average weekly residential heating oil prices in cents per 
gallon excluding taxes for the period from October 5, 2021, through the 
week of March 29, 2022, are compared to the average from October 5, 
2020, through the week of March 29, 2021. For the States with 
insufficient fuel oil consumption to have separate estimates, the 
relevant regional Petroleum Administration for Defense Districts (PADD) 
change between these two periods is used; if there is no regional PADD 
estimate, the U.S. change between these two periods is used. https://www.eia.gov/dnav/pet/pet_pri_wfr_a_EPD2F_PRS_dpgal_w.htm.
     Goods/Supplies/Equipment: Bureau of Labor Statistics (BLS) 
Consumer Price Index, All Items Less Food, Energy and Shelter (Series 
ID CUUR0000SA0L12E) at the national level. HUD compares the July 2022 
estimate to the estimate for May 2021. https://data.bls.gov/timeseries/CUUR0000SA0L12E.
     Insurance: Bureau of Labor Statistic (BLS) Producer Price 
Index, industry data for Direct property and casualty insurers-
Commercial multiple peril insurance (Series ID PCU5241265241265) at the 
national level. HUD compares the estimate for July 2022 to the estimate 
for May 2021. https://data.bls.gov/timeseries/PCU5241265241265.
     Natural Gas: Energy Information Agency, Natural Gas, 
Residential Energy Price, monthly prices in dollars per 1,000 cubic 
feet at the state level. HUD compares the estimate for January 2021 
through May 2022 to the estimate for January 2020 through December 
2020. Due to EIA data quality standards, several states were missing 
data for one or two months in 2021 and 2022; in these cases, data for 
these missing months were estimated using data from the surrounding 
months in that year and the relationship between that same month and 
the surrounding months in 2020. http://www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PRS_DMcf_a.htm.
     Property Taxes: Census Quarterly Summary of State and 
Local Government Tax Revenue--Table 1 https://www.census.gov/econ/currentdata/dbsearch?program=QTAX&startYear=2019&endYear=2021&categories=QTAXCAT1&dataType=T01&geoLevel=US&notAdjusted=1&submit=GET+DATA&releaseScheduleId=.
 Twelve-month property taxes are computed as the total of four quarters 
of tax receipts for the period from April through March. Total 12-month 
taxes are then divided by the number of occupied housing units to 
arrive at average 12-month tax per housing unit. HUD compares the 
estimate for April 2021 through March 2022 to the estimate for April 
2020 through March 2021.The number of occupied housing units is taken 
from U.S. Census Bureau's Current Population Survey/Housing Vacancy 
Survey (CPS/HVS) housing inventory estimates the estimates, Table 8: 
https://www.census.gov/housing/hvs/data/histtab8.xlsx.
     Water/Sewer/Trash: Consumer Price Index, All Urban 
Consumers, Water and Sewer and Trash Collection Services (Series ID 
CUUR00 00SEHG) at the national level. HUD compares the estimate for 
July 2022 to the estimate for May 2021. https://data.bls.gov/timeseries/CUUR0000SEHG.
    The sum of the nine cost component percentage weights equals 100 
percent of operating costs for purposes of OCAF calculations. To 
calculate the OCAFs, state-level cost component weights developed from 
AFS data are multiplied by the selected inflation factors. For 
instance, if wages in Virginia comprised 50 percent of total operating 
cost expenses and increased by 4 percent from 2021 to 2022, the wage 
increase component of the Virginia OCAF for 2023 would be 2.0 percent 
(50% * 4%). This 2.0 percent would then be added to the increases for 
the other eight expense categories to calculate the 2023 OCAF for 
Virginia. For states where the calculated OCAF is less than zero, the 
OCAF is floored at zero. The OCAFs for 2023 are included as an Appendix 
to this notice.

IV. Findings and Certifications Environmental Impact

    This notice sets forth rate determinations and related external 
administrative requirements and procedures that do not constitute a 
development decision affecting the physical condition of specific 
project areas or building sites. Accordingly, under 24 Code of Federal 
Regulations 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).

V. Paperwork Reduction Act

    This notice does not impact the information collection requirements 
already submitted to the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). In 
accordance with the Paperwork Reduction Act, an agency may not conduct 
or sponsor, and a person is not required to respond to, a collection of 
information unless the collection displays a currently valid OMB 
control number. The OMB control number associated with this collection 
is 2502-0587.

VI. Catalog of Federal Domestic Assistance Number

    The Catalog of Federal Domestic Assistance Number for this program 
is 14.195.

Julia R. Gordon,
Office of the Assistant Secretary for Housing, Federal Housing 
Administration Commissioner.

Appendix

Operating Cost Adjustment Factors for 2023

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Alabama........................................................      5.8
Alaska.........................................................      6.0
Arizona........................................................      5.7
Arkansas.......................................................      5.9
California.....................................................      7.1
Colorado.......................................................      5.9
Connecticut....................................................      6.1
Delaware.......................................................      5.8
District of Columbia...........................................      5.8
Florida........................................................      6.1
Georgia........................................................      5.6
Hawaii.........................................................      7.3
Idaho..........................................................      5.1
Illinois.......................................................      7.3
Indiana........................................................      6.4
Iowa...........................................................      5.0
Kansas.........................................................      5.5
Kentucky.......................................................      6.4
Louisiana......................................................      5.9
Maine..........................................................      8.3
Maryland.......................................................      6.6
Massachusetts..................................................      6.1
Michigan.......................................................      5.5
Minnesota......................................................      7.3
Mississippi....................................................      6.2
Missouri.......................................................      5.2
Montana........................................................      5.4
Nebraska.......................................................      5.9
Nevada.........................................................      6.2
New Hampshire..................................................      5.7
New Jersey.....................................................      5.3
New Mexico.....................................................      6.0
New York.......................................................      7.6
North Carolina.................................................      5.7
North Dakota...................................................      6.0
Ohio...........................................................      6.2
Oklahoma.......................................................      4.9
Oregon.........................................................      5.6
Pacific Islands................................................      7.3
Pennsylvania...................................................      5.8
Puerto Rico....................................................      6.3
Rhode Island...................................................      5.3
South Carolina.................................................      5.6
South Dakota...................................................      4.8
Tennessee......................................................      5.7
Texas..........................................................      5.7
Utah...........................................................      5.6
Vermont........................................................      6.0

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Virgin Islands.................................................      5.8
Virginia.......................................................      6.0
Washington.....................................................      5.9
West Virginia..................................................      6.6
Wisconsin......................................................      6.6
Wyoming........................................................      5.6
United States..................................................      6.1
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[FR Doc. 2022-24845 Filed 11-14-22; 8:45 am]
BILLING CODE 4210-67-P