[Federal Register Volume 88, Number 205 (Wednesday, October 25, 2023)]
[Notices]
[Pages 73352-73354]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-23685]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6426-N-01]


Small Area Fair Market Rents in the Housing Choice Voucher 
Program Metropolitan Areas Subject to Small Area Fair Market Rents

AGENCY: Office of the Assistant Secretary for Policy Development and 
Research and the Office of the Assistant Secretary for Public and 
Indian Housing, U.S. Department of Housing and Urban Development (HUD).

ACTION: Notice.

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SUMMARY: In 2016, HUD completed a final rule requiring the use of Small 
Area Fair Market Rents (SAFMRs) in certain metropolitan areas to use in 
the administration of the Housing Choice Voucher (HCV) program. These 
areas were based on certain selection criteria and values. These 
criteria are: at least 2,500 HCVs must be under lease in the 
metropolitan FMR area; at least 20 percent of the standard quality 
rental stock within the metropolitan FMR area is in small areas (ZIP 
codes) where the Small Area FMR is more than 110 percent of the 
metropolitan FMR; the percentage of voucher families living in 
concentrated low-income areas within the area must be at least 25 
percent; the measure of the percentage of voucher holders living in 
concentrated low-income areas relative to all renters within these 
areas over the entire metropolitan area exceeds 155 percent (or 1.55); 
and the vacancy rate for the metropolitan area is higher than 4 
percent. This notice lists the metropolitan areas that will be subject 
to Small Area FMRs based on the final rule's requirement that HUD 
``make new area designations every 5 years thereafter as new data 
becomes available.''

DATES: Implementation date: October 1, 2024.

FOR FURTHER INFORMATION CONTACT: Questions on this notice may be 
addressed to Peter Kahn, Associate Deputy Assistant Secretary, Office 
of Policy Development, Office of Policy Development and Research, HUD 
Headquarters, 451 7th Street SW, Room 8106, Washington, DC 20410, 
telephone number (202) 402-2409; or via email at [email protected]. 
HUD welcomes and is prepared to receive calls from individuals who are 
deaf or hard of hearing, as well as individuals with speech or 
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.
    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.

SUPPLEMENTARY INFORMATION:

I. Background

    On November 16, 2016, HUD published a final rule entitled 
``Establishing a More Effective Fair Market Rent (FMR) System; Using 
Small Area Fair Market Rents (Small Area FMRs) in Housing Choice 
Voucher Program Instead of the Current 50th Percentile FMRs'' (81 FR 
80567) (``final rule'' or ``Small Area FMRs final rule''). As HUD 
explained in the 2016 Rule, Small Area FMRs complement HUD's other 
efforts to support households in making informed choices about units 
and neighborhoods with the goal of increasing the share of households 
that choose to use their vouchers in low poverty opportunity areas. In 
the final rule, HUD announced amendments to HUD's FMR regulations 
applicable to the HCV program. Also on November 16, 2016, HUD published 
a Federal Register notice entitled ``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) (``November 2016 notice'') which established the values for the 
selection criteria and listed the initial metropolitan areas that are 
subject to SAFMRs implemented through the Small Area FMRs final rule.
    The final rule included a requirement that HUD make new area 
designations every 5 years as new data becomes

[[Page 73353]]

available. Because the PHAs operating in the areas mandated in the 
November 2016 notice began using SAFMRs beginning on April 1, 2018, it 
is now appropriate for HUD to undertake the evaluation of new data and 
identify additional areas where SAFMRs will be required.

II. Policy Development Process and Stakeholder Engagement

    Staff from the Office of Policy Development and Research (PD&R) and 
the Office of Public and Indian Housing (PIH) engaged in a process of 
stakeholder outreach and policy development to learn about the 
implementation of SAFMRs. HUD engaged local PHAs, researchers, and key 
stakeholders, including fair housing groups, to better understand PHAs' 
implementation of SAFMRs and their impact on families.
    PD&R and PIH held listening sessions with PHAs in several 
metropolitan areas that were required to adopt SAFMRs under the 2016 
rule. Overall, HUD heard from 19 PHAs across these metropolitan areas, 
as well as from a statewide agency managing the Housing Choice Voucher 
program.
    HUD also met with researchers conducting research on the impacts of 
SAFMRs. PD&R has provided data licenses to four research teams to 
conduct SAFMR analyses, and two of those teams presented initial 
findings using HUD's administrative data. (The other research teams do 
not yet have research findings to share.)
    In the policy development process, HUD sought answers to two basic 
categories of questions:
    (1) What challenges did PHAs experience in the implementation and 
administration of SAFMRs? How could HUD improve the policy to make 
implementation easier?
    (2) How did the use of SAFMRs impact families with vouchers? Is 
there evidence that the use of SAFMRs expanded housing choices and 
opportunity, particularly their ability to access higher-rent, lower-
poverty areas?
    HUD listening sessions with PHAs focused on their experience with 
implementing SAFMRs, including administrative burdens. PHAs emphasized 
that implementation required changes to IT systems, staff training, 
revision of materials and briefings for tenants, and a process of 
landlord education. While experience varied, many PHAs found the 
implementation challenging in one or more of these areas, at least 
initially. Many PHAs also felt that the rollout of the initial SAFMRs 
happened too quickly, and that PHAs should have at least six months--or 
perhaps a year--to implement the program. Nearly all PHAs also 
emphasized the importance of additional training and technical 
assistance to implement SAFMRs.
    The academic research teams' preliminary data analysis using HUD's 
administrative records identified the following key findings:
    New voucher recipients were more likely to move to low-poverty 
neighborhoods after SAFMRs were implemented. The program reduced their 
overall concentration in low-rent, high-poverty neighborhoods. This 
finding held across demographic groups, including households of color 
and those with children. However, the magnitude of these positive 
effects is modest. These findings for newly admitted families are 
consistent with those from prior studies, such as HUD's 2017 interim 
evaluation of the SAFMR demonstration at five sites. The latter study, 
however, found much larger increases in the share of existing voucher 
holders that moved to high-rent areas following SAFMR implementation.
    SAFMRs did not affect the success of households with vouchers in 
leasing up (i.e., the number of households leasing up within 180 days), 
even for high-barrier households or those living in zip codes where 
SAFMRs were lower than FMRs.
    These researchers have not yet examined the financial impacts of 
SAFMRs on PHAs, including the average HAP paid by PHAs. HUD's 2017 
study found, however, that average per unit costs (PUCs) and housing 
assistance payments (HAPs) declined after SAFMR implementation, as 
increased costs in higher-rent areas were more than offset by lower 
costs in lower-rent areas.
    HUD's staff undertook an analysis of PHA PUC information between 
2015 and 2022. While the average PUC in the mandated metropolitan areas 
is higher than the average PUC in 2 control groups identified as part 
of the analysis, there is little discernible difference in the annual 
change in average PUC in each of these areas. In other words, PUCs did 
not rise more quickly in mandated metropolitan areas than in other 
metropolitan areas. The control groups where those areas that met four 
of the five criteria and three of the five criteria in 2016.\1\
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    \1\ Note: All areas used as control groups met the 2,500 voucher 
units under lease criteria.
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III. Selection Parameters for Identifying Small Area FMRs Area

    Following the outreach process, HUD's analysis of administrative 
data and the evaluation of updated selection criteria, HUD deliberated 
on the appropriate next steps. Following these deliberations, HUD 
committed to provide: adequate technical assistance, opportunities for 
peer-to-peer training, additional program materials, and additional 
training for HUD field office staff.
    Through this notice, HUD is affirming the same selection values 
used to determine the first cohort of metropolitan FMR areas subject to 
SAFMRs for use in the administration of tenant-based assistance under 
the HCV program in this next round of determinations.\2\ Metropolitan 
FMR areas meeting the following requirements will be subject to Small 
Area FMRs consistent with 24 CFR 888.113(c):
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    \2\ 24 CFR 888.113(c)(4) states, in part, that SAFMR 
designations are permanent; therefore, the first cohort of areas 
remain required SAFMR areas and were not reevaluated.
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    (i) There are at least 2,500 HCVs under lease, counted using HUD 
administrative data as of December 31, 2022;
    (ii) At least 20 percent of the standard quality rental stock, 
within the metropolitan FMR area is in small areas (ZIP codes) where 
the Small Area FMR is more than 110 percent of the metropolitan FMR, 
measured using HUD's special tabulations of American Community Survey 
(ACS) data through the distribution of Adjusted Standard Quality Rental 
Units, and FY 2023 Fair Market Rents; \3\
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    \3\ For criteria (ii)-(iv) the specifics of how the criteria is 
calculated is found in the Notice of Proposed Rulemaking, available 
at https://www.huduser.gov/portal/datasets/fmr/fmr2016p/SAFMR-Notice-Proposed-Rule.pdf.
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    (iii) The percentage of voucher families living in concentrated 
low-income areas within the area must be at least 25 percent calculated 
using 2023 designations of Qualifies Census Tracts and 2021 ACS 5-year 
tabulations of renter occupied units;
    (iv) The measure of the percentage of voucher holders living in 
concentrated low-income areas relative to all renters within these 
areas over the entire metropolitan area exceeds 155 percent (or 1.55) 
using the 2023 designations of Qualified Census Tracts; and
    (v) The vacancy rate for the metropolitan area is higher than 4 
percent calculated as the average of the vacancy rates for each area 
calculated

[[Page 73354]]

from the 2018, 2019 and 2021 1-year ACS tabulations.\4\
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    \4\ The calculation of the vacancy rate is defined in the Final 
Rule, available at https://www.huduser.gov/portal/datasets/fmr/fmr2016f/SAFMR-Final-Rule.pdf.
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    The additional metropolitan FMR Areas that meet these requirements 
are as follows:

Akron, OH MSA
Augusta-Richmond County, GA-SC HUD Metro FMR Area
Beaumont-Port Arthur, TX MSA
Birmingham-Hoover, AL HUD Metro FMR Area
Buffalo-Cheektowaga-Niagara Falls, NY MSA
Charleston-North Charleston, SC MSA
Chattanooga, TN-GA MSA
Cincinnati, OH-KY-IN HUD Metro FMR Area
Cleveland-Elyria, OH MSA
Columbus, OH HUD Metro FMR Area
Dayton-Kettering, OH MSA
Des Moines-West Des Moines, IA HUD Metro FMR Area
Detroit-Warren-Livonia, MI HUD Metro FMR Area
Fort Wayne, IN MSA
Greensboro-High Point, NC HUD Metro FMR Area
Harrisburg-Carlisle, PA MSA
Indianapolis-Carmel, IN HUD Metro FMR Area
Jersey City, NJ HUD Metro FMR Area
Kansas City, MO-KS HUD Metro FMR Area
Knoxville, TN HUD Metro FMR Area
Los Angeles-Long Beach-Glendale, CA HUD Metro FMR Area
Louisville, KY-IN HUD Metro FMR Area
Memphis, TN-MS-AR HUD Metro FMR Area
Miami-Miami Beach-Kendall, FL HUD Metro FMR Area
Mobile, AL HUD Metro FMR Area
Montgomery, AL MSA
Nashville-Davidson--Murfreesboro--Franklin, TN HUD Metro FMR Area
Oklahoma City, OK HUD Metro FMR Area
Omaha-Council Bluffs, NE-IA HUD Metro FMR Area
Orlando-Kissimmee-Sanford, FL MSA
Oxnard-Thousand Oaks-Ventura, CA MSA
Phoenix-Mesa-Scottsdale, AZ MSA
Raleigh, NC MSA
San Jose-Sunnyvale-Santa Clara, CA HUD Metro FMR Area
Seattle-Bellevue, WA HUD Metro FMR Area
St. Louis, MO-IL HUD Metro FMR Area
Tucson, AZ MSA
Tulsa, OK HUD Metro FMR Area
Virginia Beach-Norfolk-Newport News, VA-NC HUD Metro FMR Area
Wichita, KS HUD Metro FMR Area
Winston-Salem, NC HUD Metro FMR Area

    Consistent with the first cohort of Small Area FMR designated areas 
and as stated in 24 CFR 888.113(c)(4), these designations are 
permanent.

IV. Additional Information

    Since the first cohort of mandatory Small Area FMR areas were 
required to begin using Small Area FMRs in the administration of the 
tenant-based voucher programs in April of 2018, this notice fulfills 
HUD's 5-year requirement under the Small Area FMR final rule. Setting 
the implementation date of this notice as October 1, 2024, provides 
sufficient time for PHAs operating in the newly announced required 
areas to acquire sufficient training and provides time for further 
market analysis to prepare to set their payments standards using Small 
Area FMRs instead of metropolitan area-wide FMRs. Finally, setting an 
implementation date of October 1, 2024, provides that PHAs operating in 
this second cohort of mandatory areas, under normal voucher program 
operations, must have their payment standards aligned with the Small 
Area FMRs in their operating areas by January 1, 2025. Should a PHA 
operating in these 41 areas wish to begin using Small Area FMRs in the 
administration of their voucher programs prior to October 1, 2024, they 
will need to seek HUD permission pursuant to an opt-in decision by a 
PHA under 24 CFR 888.113(c)(3): ``A PHA administering an HCV program in 
a metropolitan area not subject to the application of Small Area FMRs 
may opt to use Small Area FMRs by seeking approval from HUD's Office of 
Public and Indian Housing (PIH) through written request to PIH.'' Until 
the SAFMRs take effect for PHAs in the 41 metropolitan areas identified 
in this Notice, any decision by a PHA to use SAFMRs is an opt-in 
decision, consistent with 24 CFR 88.113(c)(3) and Section 5(b) of PIH 
Notice 2018-01.
    If a PHA operating in one these 41 areas is unable to implement 
Small Area FMRs within the timeframes provided in this notice, they may 
petition HUD for a temporary exemption as specified in 24 CFR 888.113 
(c)(4), which states in part, ``HUD may suspend a Small Area FMR 
designation from a metropolitan area, or may temporarily exempt a PHA 
in a Small Area FMR metropolitan area from use of Small Aree FMRs, when 
HUD by notice make a documented determination that such action is 
warranted. Actions that may serve as the basis of a suspension of Small 
Area FMRs are: (i) A Presidentially declared disaster area that results 
in the loss of a substantial number of housing units; (ii) A sudden 
influx of displaced households needing permanent housing; or (iii) 
Other events as determined by the Secretary.'' For additional guidance, 
PHAs who want to petition HUD for an exemption should refer to section 
9 of PIH Notice 2018-01, available at https://www.hud.gov/sites/dfiles/PIH/documents/PIH-2018-01.pdf.

Solomon J. Greene,
Principal Deputy Assistant Secretary for Policy Development and 
Research.
Dominique Blom,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 2023-23685 Filed 10-23-23; 4:15 pm]
BILLING CODE 4210-67-P