[Federal Register Volume 89, Number 157 (Wednesday, August 14, 2024)]
[Notices]
[Pages 66127-66133]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18002]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6479-N-01]


Fair Market Rents for the Housing Choice Voucher Program, 
Moderate Rehabilitation Single Room Occupancy Program, and Other 
Programs; Fiscal Year 2025

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

ACTION: Notice of fiscal year (FY) 2025 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 year. This 
notice describes the methods used to calculate the FY 2025 FMRs and 
lists the procedures for Public Housing Agencies (PHAs) to request 
reevaluations of their FMRs as required by HOTMA.

DATES: 
    Comment Due Date: October 1, 2024.
    Implementation Date of Revised FMRs: October 1, 2024, 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 2025 FMRs. 
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 or reevaluation requests:
    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 submitted 
electronically through the https://www.regulations.gov website can be 
viewed by other submitters and interested members of the public.

[[Page 66128]]

Commenters or reevaluation requestors should follow the 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.

    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 FMR reevaluation.

FOR FURTHER INFORMATION CONTACT: For technical information on the 
methodology used to develop FMRs or a listing of all FMRs, please call 
the HUD USER information line at 800-245-2691 or access the information 
on the HUD USER website at https://www.huduser.gov/portal/datasets/fmr.html. HUD welcomes and is prepared to receive calls from 
individuals who are deaf or hard of hearing, as well as from 
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.
    Questions related to the use of FMRs or voucher payment standards 
should be directed to the respective local HUD program staff or the 
Office of Public and Indian Housing Customer Service Center at https://www.hud.gov/program_offices/public_indian_housing/about/css. Questions 
on how to conduct FMR surveys may be addressed to the electronic 
mailbox for the Program Parameters and Research Division at 
[email protected].
    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 Publishing Office website. Complete documentation of 
the methods and data used to compute each area's FY 2025 FMRs is 
available at https://www.huduser.gov/portal/datasets/fmr.html#2025_query. FY 2025 FMRs are available in a variety of 
electronic formats at https://www.huduser.gov/portal/datasets/fmr.html, 
including in PDF and Microsoft Excel. Small Area FMRs for all 
metropolitan FMR areas and nonmetropolitan areas are available in 
Microsoft Excel format at: https://www.huduser.gov/portal/datasets/fmr/smallarea/index.html. For informational purposes, HUD also publishes 
50th percentile rents for all FMR areas at https://www.huduser.gov/portal/datasets/50per.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. The FMR is also used 
to determine the Performance Based Contract Administration Fee in 
Multifamily Housing. In general, the FMR for an area is the amount that 
a tenant would need 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. 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.
    HUD's methodology for calculation FMRs is described in Section III. 
HUD first adopted this methodology for the calculation of FY 2024 FMRs, 
and it is unchanged for FY 2025.

II. Publication of FMRs

    Section 8(c)(1) of the USHA,\1\ as amended by HOTMA (Pub. L. 114-
201, enacted 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 2025 FMRs are available at 
https://www.huduser.gov/portal/datasets/fmr.html and will become 
effective on October 1, 2024. This notice also provides procedures for 
FMR reevaluation requests.
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    \1\ 42 U.S.C. 1437f.
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III. FMR Methodology

    This section provides a brief overview of how HUD computes the FY 
2025 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#2025_query.

A. Geographic Area Definitions

    The FY 2025 FMRs are based on the updated metropolitan area 
definitions published by the Office of Management and Budget (OMB) on 
September 14, 2018 and first incorporated by the Census Bureau into the 
2019 American Community Survey (ACS) data, and the corresponding FY 
2022 FMRs. On July 21, 2023, OMB published Bulletin No. 23-01 which 
contains revisions to metropolitan area definitions. However, the 
Census Bureau has not yet incorporated these revisions into the data 
available to HUD, and therefore HUD is not using these new definitions 
for FY 2025.
    Pursuant to section 107(a) of HOTMA (Pub. L. 114-201) for FY 2025, 
HUD is adding Westchester County, NY to the New York, NY HUD 
Metropolitan Fair Market Rent Area. Westchester County, NY will remain 
a separate median family income and income limit area pursuant to 42 
U.S.C. 1437(b)(2)(D).

B. Base Year Rents

    For FY 2025 FMRs, HUD uses the U.S. Census Bureau's 5-year ACS data

[[Page 66129]]

collected between 2018 and 2022 as the ``base rents'' for the FMR 
calculations. These data are the most current ACS data available at the 
time that HUD calculates the FY 2025 FMRs. 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 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 
meeting 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 uses 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 are not available, 
using the two-bedroom rent data within the next largest geographic 
area. For a metropolitan subarea, the next largest area is its 
containing metropolitan area. For a non-metropolitan area, the next 
largest area is the state non-metropolitan portion.
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    \3\ For FY 2025, the three years of ACS data in question are 
2020, 2021 and 2022. HUD adjusts the 2020 and 2021 data to be 
denominated in 2022 dollars using the growth in Consumer Price Index 
(CPI)-based gross rents measured between those years and 2022.
    \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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C. Recent-Mover Factors

    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 
2018-2022 standard quality two-bedroom gross rent and the 1-year 2022 
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, HUD sets the recent-mover factor 
to 1. When the recent-mover factor is greater than one and calculated 
for the same geographic area as the base rent, HUD is, in effect, 
replacing the base rent with the recent-mover rent for that area.
    In determining the recent mover factor, HUD first considers the 
rents of households who moved into their unit only in the current ACS 
year. For ACS 2022, this means that the maximum length of time for a 
household to have lived in its current unit and still be considered a 
recent mover under this definition would be 11 months. HUD applies the 
same two statistical reliability checks to each ACS recent mover 
estimate as it does for the base rent estimate. First, the estimate 
must be supported by at least 100 sample cases from the ACS. Second, 
the estimate must have a margin of error that is smaller than half the 
estimate itself. HUD first considers the estimate for two-bedroom 
units, then for units of all bedroom sizes. For areas without an ACS 
estimate meeting these criteria, HUD next checks the estimate tabulated 
from two-year recent movers. If the local two-year recent mover 
estimates are not reliable, HUD considers the estimates for 
increasingly larger areas of geography.

D. Other Rent Survey Data

    HUD calculates base rents for the insular areas using data 
collected during the 2010 decennial census of American Samoa, the 
Northern Mariana Islands, and the Virgin Islands beginning with the FY 
2016 FMRs.\5\ HUD updates the 2010 base year data to 2022 using the 
growth in national ACS data for the FY 2025 FMRs. Note that while the 
2010 decennial census also included Guam, HUD uses the result of a more 
recent rent survey in calculating the FMRs for Guam, as discussed in 
the following paragraph. HUD is working with the Census Bureau to 
provide special tabulations of the 2020 Island Area Census and hopes to 
include these data in FY 2026 FMRs.
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    \5\ The ACS is not conducted in the Pacific Islands (Guam, 
Northern Mariana Islands 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. HUD uses the 
results gathered by this long form survey for the FY 2025 FMRs.
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    HUD does not use ACS data to establish the base rent or recent-
mover factor in cases where it has locally collected survey data which 
are more recent than the 2022 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 2025 FMRs is from 
2022, larger areas with valid one-year recent mover data may not use 
other survey data collected before June 30, 2022 for the FY 2025 FMRs. 
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. For FY 2025 FMRs, the following are 
Metropolitan Statistical Areas (MSAs), HUD Metro FMR Areas, or non-
metropolitan counties that have FMRs based on local ad hoc surveys:
    (1) HUD uses survey data from 2019 to calculate the FMRs for Guam.
    (2) HUD uses survey data from 2021 to calculate the FMRs for Iron 
County, UT; Knox County, ME; Lincoln County, ME; Transylvania County, 
NC; and Waldo County, ME.
    (3) HUD uses survey data from 2022 to calculate the FMRs for Grand 
Rapids-Wyoming, MI HUD Metro FMR Area; Hawaii County, HI; Hood River 
County, OR; Salinas, CA MSA; Seattle-Bellevue, WA HUD Metro FMR Area; 
and Wasco County, OR.
    (4) HUD uses survey data from 2023 to calculate the FMRs for San 
Benito County, CA HUD Metro FMR Area; Santa Cruz-Watsonville, CA MSA; 
and Urban Honolulu, HI MSA.

E. Gross Rent Inflation Adjustment Factors

    The ACS recent mover rent estimates as described above produce a 
rent value that is ``as of'' 2022. To account for inflation, HUD 
adjusts this value using an inflation factor that captures rent growth 
from 2022 to 2023. HUD uses a local measure of private rent inflation 
for markets that are covered by at least three of the six available 
sources of private rent data. HUD combines this local measure of rent 
inflation with either the local metropolitan area CPI rent of primary 
residence for the 23 areas where such data exist, or the regional CPI 
rent in areas without a local index.
    HUD uses both private data and the CPI in an attempt to fully and 
accurately measure recent mover rent inflation. Research has shown that 
private data often provide a timelier measure of recent mover rent 
inflation than the CPI, which is constructed by measuring the rents of 
both in-place and new tenants. However, the CPI provides other 
advantages as a measure of rent inflation, such as consisting of a 
representative sample of all housing units, measuring rent in the same 
units

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over time (a ``repeat rent'' sample), and adjusting for the aging of 
units.
    The private measures of rent used by HUD are the ApartmentList Rent 
Estimate, CoStar Group average effective rent, CoreLogic, Inc., single-
family combined 3-bedroom median rent, Moody's Analytics REIS average 
market rent, RealPage average effective rent per unit, and Zillow 
Observed Rent Index. In calculating a measure of inflation from these 
data, HUD first takes the annual average of each statistic, then its 
year-to-year change. HUD then takes the mean of the changes from all 
available sources for each area.
    Next, HUD takes an average of this private-sector measure of rent 
inflation with rent inflation as captured by the CPI for the area, 
where the private-sector measure is weighted at approximately 75 
percent and the CPI rent inflation measure is weighted at approximately 
25 percent. HUD has determined and updated these weights by comparing 
the national average of the private rent changes and changes in CPI 
rent of primary residence to changes in the national average of recent 
mover rents from the ACS from 2018 through 2022. HUD weights the 
private data averages and overall CPI rent of primary residence in such 
a way as to minimize the root mean squared error between the resulting 
average and the ACS recent mover rents. For future FMRs, HUD will 
continue update the weights by adding the most recent years of ACS 
recent mover rents, private rent data, and CPI rent of primary 
residence to the analysis.
    For areas without at least three of the six private rent data 
sources available, HUD uses a regional average of private rent 
inflation factors alongside the regional CPI rent of primary residence 
using the nationally derived weights described above. HUD constructs 
the regional average by taking the rental unit weighted average of the 
change in rents of each area in a region that does have private rent 
data coverage. This ensures that smaller areas which are not covered by 
the private sources directly still have current rental market 
conditions taken into account in the calculation of the rent inflation 
factor for such areas.
    Finally, HUD averages the result of this step with the year-to-year 
change in the CPI housing fuels and utilities index for the area in 
order to make the resulting inflation measure reflective of gross 
rents. The results of this step are gross rent estimates that are ``as 
of'' 2023.

F. Trend Factor Forecasts

    Following the application of the appropriate gross rent inflation 
factor, HUD trends the gross rent estimate from 2023 to FY 2025 using a 
trend factor which is based on local or regional forecasts of CPI gross 
rent data. HUD derived a trend factor for each Class A CPI area and 
Class B/C CPI region using 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 chose the actual model used for each CPI area's trend factor based 
on which model generates the lowest Root Mean Square Error (RMSE) 
statistic and applied the trend factors to the corresponding FMR areas. 
HUD established the type of model for each forecast (NIM, LIM, or PTS) 
for the FY 2020 FMRs. HUD had previously stated it would reassess the 
model selections during the calculation of the FY 2025 FMRs. However, 
due to the high degree of volatility that occurred in rental markets 
from 2020-2023, HUD believes that evaluating model performance during 
this period will not result in the best long term model selection. More 
details on the trend factor forecasts are available in the June 5, 2019 
Federal Register notice (84 FR 26141) and are available at https://www.federalregister.gov/documents/2019/06/05/2019-11763/proposed-changes-to-the-methodology-used-for-estimating-fair-market-rents.

G. Bedroom Rent Adjustments

    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. The bedroom ratios HUD uses in the calculation of FY 
2025 FMRs are calculated from three five-year ACS data series (2016-
2020, 2017-2021, and 2018-2022). 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, 
HUD uses the bedroom ratios for the area's larger parent geography.
    To ensure an adequate distributional fit in these bedroom ratio 
calculations for individual 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 2025 FMR estimates, HUD sets the bedroom 
interval ranges as follows: efficiency FMRs are constrained to fall 
between 0.69 and 0.87 of the two-bedroom FMR; one-bedroom FMRs must be 
between 0.76 and 0.90 of the two-bedroom FMR; three-bedroom FMRs (prior 
to the adjustments described below) must be between 1.11 and 1.29 of 
the two-bedroom FMR; and four-bedroom FMRs (again, prior to adjustment) 
must be between 1.23 and 1.56 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.
    HUD further adjusts the rents for three-bedroom and larger units to 
reflect HUD's policy to set higher rents for these units.\6\ 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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    \6\ 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).\7\
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    \7\ 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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H. Minimum FMRs

    All FMRs are subject to a minimum rent based on state or national 
non-metropolitan area median rent. HUD calculates a population-weighted 
median two-bedroom FMR across all non-metropolitan counties or county-
equivalents of each state, which, for the purposes of FMRs, is the 
state minimum

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rent. State-minimum rents for each FMR area are available in the FY 
2025 FMR Documentation System, available at https://www.huduser.gov/portal/datasets/fmr.html#2025_query. HUD also calculates the population 
weighted median FMR rent across all non-metropolitan areas of the 
country, which, for the purposes of FMRs, is the national non-
metropolitan rent. For FY 2025, the national non-metropolitan rent is 
$933. The applicable minimum rent for a particular area is the lower of 
the state or national non-metropolitan median. Each area's two-bedroom 
FMR must be no less than the applicable minimum rent.

I. Limit on FMR Decreases

    HUD's regulations at 24 CFR 888.113 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 HUD has 
required the use of Small Area FMRs in the administration of their 
voucher programs since 2018, the FY 2025 Small Area FMRs may be no less 
than 90 percent of the FY 2024 Small Area FMRs. For newly designated 
mandatory Small Area FMR areas under the October 23, 2023 notice 
``Small Area Fair Market Rents in the Housing Choice Voucher Program--
Metropolitan Areas Subject to Small Area Fair Market Rents'', the FY 
2025 Small Area FMRs may be no less than 90 percent of the greater of 
the FY 2024 metropolitan area wide FMRs or the applicable FY 2024 Small 
Area FMR, as Small Area FMRs were not yet in effect for these areas in 
FY 2024. For all other metropolitan areas, the FY 2025 Small Area FMRs 
may be no less than 90 percent of the greater of the FY 2024 
metropolitan area wide FMRs or the applicable FY 2024 Small Area FMR. 
The following table demonstrates these scenarios:

------------------------------------------------------------------------
                                FY 2025 ``floor''     FY 2026 ``floor''
        Type of area           for small area FMRs   for small area FMRs
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Areas where the use of Small  90 percent of FY      90 percent of FY
 Area FMRs was mandatory       2024 Small Area       2025 Small Area
 prior to FY 2025, or have     FMRs.                 FMRs.
 optionally used Small Area
 FMRs before FY 2025.
Areas where the use of Small  Higher of 90 percent  90 percent of FY
 Area FMRs is mandatory as     of FY 2024 Small      2025 Small Area
 of FY 2025 or optionally      Area FMRs and 90      FMRs.
 begin to use Small Area       percent of FY 2024
 FMRs in FY 2025.              Metropolitan FMRs.
All other areas.............  Higher of 90 percent  Higher of 90 percent
                               of FY 2024 Small      of FY 2025 Small
                               Area FMRs and 90      Area FMRs and 90
                               percent of FY 2024    percent of FY 2025
                               Metropolitan FMRs.    Metropolitan FMRs.
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    PHAs operating in areas where the calculated FMR is lower than the 
published FMR (i.e., those areas where HUD has limited the decrease in 
the annual change in the FMR to 10 percent) may request payment 
standards below the basic range (24 CFR 982.503(d)) and reference the 
``unfloored'' rents (i.e., the unfinalized FMRs calculated by HUD prior 
to application of the 10-percent-decrease limit) depicted in the FY 
2025 FMR Documentation System (available at: https://www.huduser.gov/portal/datasets/fmr.html#2025_query).

IV. Small Area FMRs

A. SAFMR Mandatory Use

    HUD lists Small Area FMRs for all areas in the Small Area FMR 
Schedule. PHAs operating in areas where the use of Small Area FMRs is 
not mandated should notify HUD of their use of Small Area FMRs in the 
operation of their Housing Choice Voucher program.
    On October 25, 2023, HUD published the notice ``Small Area Fair 
Market Rents in the Housing Choice Voucher Program--Metropolitan Areas 
Subject to Small Area Fair Market Rents'', which requires 41 additional 
metropolitan areas to use Small Area Fair Market Rents in the 
administration of the Housing Choice Voucher program beginning in FY 
2025.\8\ These areas are as follows:
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    \8\ 88 FR 73352, available at: https://www.huduser.gov/portal/sites/default/files/pdf/federal-register-notice-2023.pdf.

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

B. SAFMR Methodology

    Newly for FY 2025, HUD has calculated SAFMRs for both metropolitan 
and non-metropolitan areas. The methodology for calculating SAFMRs is 
as follows:
    First, 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 are 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.

[[Page 66132]]

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 calculates 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 are used because the two-bedroom gross rent data are 
not statistically reliable, HUD converts the one-bedroom or three-
bedroom 40th percentile gross rent to a two-bedroom equivalent rent 
using the bedroom ratios for the ZCTA's parent metropolitan or non-
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 2025 Small Area FMRs, HUD averages the 
gross rents from 2020, 2021, and 2022 5-Year ACS estimates. The 2020 
and 2021 gross rent estimates would be adjusted to 2022 dollars 
using the metropolitan area's gross rent CPI adjustment factors.
---------------------------------------------------------------------------

    For ZCTAs without usable gross rent data by bedroom count, HUD 
calculates Small Area FMRs using the rent ratio method. To calculate 
Small Area FMRs using a rent ratio, HUD divides the median gross rent 
across all bedrooms for the ZCTA by the similar median gross rent for 
the metropolitan or non-metropolitan area of the ZCTA. If a ZCTA does 
not have reliable rent data at the all-bedroom level, HUD will then 
check to see if the ZCTA borders other ZCTAs that themselves have 
reliable rent data. If at least half of a ZCTA's ``neighbors'' have 
such data, HUD will use the weighted average of those estimates as the 
basis for the Small Area FMR 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 substitutes the median gross rent 
for the county containing the ZIP code in the numerator of the rent 
ratio calculation. HUD multiplies this rent ratio by the current two-
bedroom FMR for the metropolitan or non-metropolitan area containing 
the small area to generate the current year two-bedroom FMR 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 2025 Small Area FMRs, HUD has updated the rent ratios 
to use an average of the rent ratios calculated from the 2016-2020, 
2017-2021, and 2018-2022 5-year ACS estimates.
    HUD limits each two-bedroom Small Area FMR to be no more than 150 
percent of the two-bedroom FMR for the metropolitan or non-metropolitan 
area where the ZIP code is located.

V. Request for Public Comments and FMR Reevaluations

    HUD accepts public comments on the methods HUD uses to calculate FY 
2025 FMRs and requests for reevaluation of FMRs for specific areas for 
30 days after the publication of this notice. HUD lacks the 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.

A. FMR Reevaluations

    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.''
    PHAs or other parties interested in requesting HUD's reevaluation 
of their area's FY 2025 FMRs, as provided for under section 8(c)(1)(B) 
of USHA, must follow the following procedures:
    (1) By the end of the 30-day comment period, PHAs or other parties 
must submit reevaluation requests through https://www.regulations.gov/ 
or directly to HUD as described in the Addresses section 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) The requestor(s) must supply HUD with data more recent than the 
2022 ACS data used in the calculation of the FY 2025 FMRs. HUD requires 
data on gross rents paid in the FMR area for occupied standard quality 
rental housing units. Occupied recent mover units (defined as those who 
moved in the past 24 months, although a shorter definition may also be 
used at the requestor's discretion) provide the best data. The data 
delivered must be sufficient for HUD to calculate a 40th percentile 
two-bedroom gross rent. Should this type of data not be available, 
requestors may gather this information using the survey guidance 
available at https://www.huduser.gov/portal/datasets/fmr/NoteRevisedAreaSurveyProcedures.pdf and https://www.huduser.gov/portal/datasets/fmr/PrinciplesforPHA-ConductedAreaRentSurveys.pdf.
    (3) Areas where valid reevaluation requests are submitted may 
continue to use FY 2024 FMRs, or may use the FY 2025 FMRs. Commenters 
should indicate whether they wish to maintain the FY 2024 or implement 
the FY 2025 FMR during the revaluation period as part of their 
reevaluation request. PHAs requesting reevaluation in areas newly 
designated as SAFMR areas must adopt SAFMRs, but they may be the FY 
2024 SAFMRs or FY 2025 SAFMRs during the reevaluation period. Following 
the comment period, HUD will post a list, at https://www.huduser.gov/portal/datasets/fmr.html, of the areas requesting reevaluations where 
FY 2024 FMRs remain in effect.
    (4) PHAs or other parties must supply data for reevaluations to HUD 
no later than Friday, January 10, 2025. All survey responses of rental 
units gathered as part of the survey efforts should be delivered to HUD 
via email. New for FY 2025, HUD requests that survey responses include 
the ZIP Code or comparable small-area identifier (such as Census tract) 
of the housing unit. In addition to the survey data, HUD requires a 
current utility schedule to evaluate the survey responses. Finally, HUD 
encourages PHAs to evaluate their survey data to ensure the survey 
supports their request. Should PHAs or their contractors undertake this 
evaluation, HUD requests that this analysis also be submitted.
    HUD will use the data delivered by January 10, 2025 to reevaluate 
the FMRs and following the reevaluation, HUD will post revised FMRs in 
April of 2025 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. By January 
17, 2025, HUD will post at https://www.huduser.gov/portal/datasets/fmr.html a listing of the areas that requested FMR reevaluations and 
continued effect of the FY2024 FMRs, but did not deliver data, making 
the FY 2025 FMRs effective in these areas. HUD will incorporate any 
data supporting a change in FMRs supplied after January 10, 2025 into 
the FY 2026 FMRs.

[[Page 66133]]

Questions on how to conduct FMR surveys may be addressed to the Program 
Parameters and Research Division at [email protected].
    For small metropolitan areas without one-year ACS data and non-
metropolitan counties, HUD has developed a method of 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 a PHA to 
submit a valid survey consisting of as few as 100 one-bedroom, two-
bedroom, and three-bedroom units.
    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 throughout 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 are required to get 100 eligible 
survey responses which means they should have at least 5,000 rental 
units, taking in to account survey non-response rates and the fact that 
some units will fail to qualify. PHAs may conduct surveys of groups of 
non-metropolitan counties to increase the number of rental units that 
are surveyed, but HUD must approve all county-grouped surveys in 
advance. HUD cautions 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, HUD advises 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. HUD staff are available to work 
with PHAs in areas requesting re-evaluations to provide the minimum 
number of survey cases required to ensure that data submitted for re-
evaluation represent a statistically valid sample. In cases where a 
submitted sample is not representative, HUD may attempt to weight the 
sample cases prior to calculating 40th percentile rent estimates.
    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.

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.

Solomon Greene,
Principal Deputy Assistant Secretary for Policy Development and 
Research.

Fair Market Rents for the Housing Choice Voucher Program

Schedule B--General Explanatory Notes

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 schedule lists the constituent counties (and New England 
towns and cities) included in each metropolitan FMR area 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. The schedule lists two non-metropolitan counties alphabetically 
on each line of the non-metropolitan county listings.
    d. Similarly, the schedule lists the New England towns and cities 
included in a non-metropolitan county immediately following the county 
name.

[FR Doc. 2024-18002 Filed 8-13-24; 8:45 am]
BILLING CODE 4210-67-P