2012-18874. Proposed Fair Market Rents for the Housing Choice Voucher Program and Moderate Rehabilitation Single Room Occupancy Program Fiscal Year 2013

AGENCY:

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

ACTION:

Notice of Proposed Fiscal Year (FY) 2013 Fair Market Rents (FMRs).

SUMMARY:

Section 8(c)(1) of the United States Housing Act of 1937 (USHA) requires the Secretary to publish FMRs periodically, but not less than annually, adjusted to be effective on October 1 of each year. The primary uses of FMRs are to determine payment standards for the Housing Choice Voucher (HCV) program, to determine initial renewal rents for some expiring project-based Section 8 contracts, to determine initial rents for housing assistance payment contracts in the Moderate Rehabilitation Single Room Occupancy program, and to serve as rent ceilings in the HOME program. Today's notice provides proposed FY 2013 FMRs for all areas that reflect the estimated 40th and 50th percentile rent levels trended to April 1, 2013. The FY 2013 FMRs are based on using 5-year, 2006-2010 data collected by the American Community Survey (ACS). These data are updated by one-year ACS data using areas where statistically valid one-year ACS data is available. The Consumer Price Index (CPI) rent and utility indexes are used to further update the data from 2010 to the end of 2011. HUD continues to use ACS data in different ways according to how many two-bedroom standard-quality and recent-mover sample cases are available in the FMR area or its Core-Based Statistical Area (CBSA).

The proposed FY 2013 FMR areas are based on current Office of Management and Budget (OMB) metropolitan area definitions and include HUD modifications that were first used in the determination of FY 2006 FMR areas. Changes to the OMB metropolitan area definitions through December 2009 are incorporated; there have been no further metropolitan area definitions changes.

The proposed FY 2013 FMRs in this notice reflect several updates to the methodology used to calculate FMRs. First, HUD has updated the bedroom ratios used to calculate 0, 1, 3 and 4 bedroom FMRs based on the 2 bedroom FMR. The new bedroom ratios are constructed using 2006-2010 5-year ACS data. The methodology for calculating the bedroom ratios is very similar to the method used when the bedroom ratios were based on 2000 decennial census long-form data. Second, these FMRs reflect a new trend factor calculation methodology which HUD stated would be implemented in its proposed FY 2012 FMR publication on August 19, 2011 (76 FR 52058). This trend factor is based on national gross rent data and will change annually.

DATES:

Comment Due Date: September 4, 2012.

ADDRESSES:

Interested persons are invited to submit comments regarding the proposed 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” section. There are two methods for submitting public comments.

1. Submission of Comments by Mail. Comments may be submitted by mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW., Room 10276, Washington, DC 20410-0500. Due to security measures at all federal agencies, however, submission of comments by mail often results in delayed delivery. To ensure timely receipt of comments, HUD recommends that comments submitted by mail be submitted at least two weeks in advance of the public comment deadline.

2. Electronic Submission of Comments. Interested persons may submit comments electronically through the Federal eRulemaking Portal at http://www.regulations.gov. HUD strongly encourages commenters to submit comments electronically. Electronic submission of comments allows the commenter maximum time to prepare and submit a comment, ensures timely receipt by HUD, and enables HUD to make them immediately available to the public. Comments submitted electronically through the http://www.regulations.gov Web site can be viewed by other commenters and interested members of the public. Commenters should follow instructions provided on that site to submit comments electronically.

Note:

To receive consideration as public comments, comments must be submitted through one of the two methods specified above. Again, all submissions must refer to the docket number and title of the rule.

No Facsimile Comments. Facsimile (Fax) comments are not acceptable.

Public Inspection of Public Comments. All properly submitted comments and communications 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 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. Copies of all comments submitted are available for inspection and downloading at http://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 Web site http://www.huduser.org/​portal/​datasets/​fmr.html. FMRs are listed at the 40th or 50th percentile in Schedule B. For informational purposes, 40th percentile recent-mover rents for the areas with 50th percentile FMRs will be provided in the HUD FY 2013 FMR documentation system at http://www.huduser.org/​portal/​datasets/​fmr/​fmrs/​docsys.html&​data=​fmr13 and 50th percentile rents for all FMR areas will be published at http://www.huduser.org/​portal/​datasets/​50per.html after publication of final FY 2013 FMRs.

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 or concerning further methodological explanations may be addressed to Marie L. Lihn or Peter B. Kahn, Economic and Market Analysis Division, Office of Economic Affairs, Office of Policy Development and Research, telephone [phone]. Persons with hearing or speech impairments may access this number through TTY by calling the toll-free Federal Relay Service at 800-877-8339. (Other than the HUD USER information line and TDD numbers, telephone numbers are not toll-free.)

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 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). 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. In addition, all rents subsidized under the HCV program must meet reasonable rent standards. HUD's regulations at 24 CFR 888.113 permit it to establish 50th percentile FMRs for certain areas.

Electronic Data Availability: This Federal Register notice will be available electronically from the HUD User page at SUPPLEMENTARY INFORMATION: Federal Register notices also are available electronically from SUPPLEMENTARY INFORMATION: the U.S. Government Printing Office Web site. Complete documentation of the methodology and data used to compute each area's proposed FY 2013 FMRs is available at S UPPLEMENTARY INFORMATION: Proposed FY 2013 FMRs are available in a variety of electronic formats at http://www.huduser.org/​portal/​datasets/​fmr.html. FMRs may be accessed in PDF format as well as in Microsoft Excel. Small Area FMRs based on proposed FY 2013 Metropolitan Area Rents are available in Microsoft Excel format at the same web address. Please note that these Small Area FMRs are for reference only, except where they are used by public housing agencies (PHAs) participating in the Small Area FMR demonstration.

II. Procedures for the Development of FMRs

Section 8(c) of the USHA requires the Secretary of HUD to publish FMRs periodically, but not less frequently than annually. Section 8(c) states, in part, as follows:

Proposed fair market rentals for an area shall be published in the Federal Register with reasonable time for public comment and shall become effective upon the date of publication in final form in the Federal Register. Each fair market rental in effect under this subsection 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, of rents for existing or newly constructed rental dwelling units, as the case may be, of various sizes and types in this section.

HUD's regulations at 24 CFR part 888 provide that HUD will develop proposed FMRs, publish them for public comment, provide a public comment period of at least 30 days, analyze the comments, and publish final FMRs. (See 24 CFR 888.115.)

In addition, HUD's regulations at 24 CFR 888.113 set out procedures for HUD to assess whether areas are eligible for FMRs at the 50th percentile. Minimally qualified areas ^[1] are reviewed each year unless not qualified to be reviewed. Areas are not qualified to be reviewed if they have been made a 50th-percentile area within the last three years or have lost 50th-percentile status for failure to de-concentrate within the last three years.

In FY 2012 there were 21 areas using 50th-percentile FMRs. Of these 21 areas, 7 of them have completed three years of program participation and are due for re-evaluation. The following table lists these 7 areas.

FY 2012 50th-Percentile FMR Areas Reevaluated for Eligibility in FY 2013

Baltimore-Towson, MD MSA	Fort Lauderdale, FL HMFA.2
Grand Rapids-Wyoming, MI HMFA	New Haven-Meriden, CT HMFA.
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA	Washington-Arlington-Alexandria, DC-VA-MD HMFA.
West Palm Beach-Boca Raton, FL HMFA

Only 5 of the 7 areas up for re-evaluation will continue to be 50th-percentile FMR areas:

FY 2012 50th-Percentile FMR Areas That Continue as 50th-Percentile Areas, Next Evaluation in FY 2016

Baltimore-Towson, MD MSA	Fort Lauderdale, FL HMFA.
New Haven-Meriden, CT HMFA	Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA.
West Palm Beach-Boca Raton, FL HMFA

The Washington-Arlington-Alexandria, DC-VA-MD HMFA did not deconcentrate and will not be eligible for evaluation for three years, until the FY 2016 FMRs are evaluated. Additionally, the Grand Rapids-Wyoming, MI HMFA “graduated” from the 50th- percentile FMR program. This means that the concentration of HCV tenants is below what is required to be eligible for a 50th-percentile FMR. Under current 50th percentile regulations, the Grand Rapids-Wyoming, MI HMFA will be evaluated annually and may return to the program in the future.

Of the remaining 14 50th-percentile FMR areas that were not eligible for review in FY 2013, only one area, Bergen-Passaic, NJ HMFA will complete three years in the program next year and be reviewed for the FY 2014 FMRs. Lastly, the Richmond, VA HUD Metro FMR Area, which graduated from the 50th percentile program in FY 2012, re-enters the program in FY 2013 and will next be evaluated in FY 2016.

In summary, there will be 20 50th-percentile FMR areas in FY 2013. These areas are indicated by an asterisk in Schedule B, where all FMRs are listed by state.

III. FMR Methodology

This section provides a brief overview of how the FY 2013 FMRs are computed. For complete information on how FMR areas are determined, and on how each area's FMRs are derived, see the online documentation at http://www.huduser.org/​portal/​datasets/​fmr/​fmrs/​docsys.html&​data=​fmr13.

The proposed FY 2013 FMRs are based on current OMB metropolitan area definitions and standards that were first used in the FY 2006 FMRs. OMB changes to the metropolitan area definitions through December 2009 are incorporated. There have been no area definition changes published by OMB since the publication of the FY 2012 FMRs; therefore, the FY 2013 area definitions are the same as those used in FY 2012. HUD anticipates that OMB will publish new area definitions in 2013. Depending on the timing of this release, HUD will incorporate the new area definitions into either the FY 2014 or FY 2015 proposed FMRs.

A. Base Year Rents

The U.S. Census Bureau released standard tabulations of 5-year ACS data collected between 2006 through 2010 in December of 2011. For FY 2013 FMRs, HUD used the 2006-2010 5-year ACS data to update the base rents set in FY 2012 using the 2005-2009 5-year ACS data.

FMRs are historically based on gross rents for recent movers (those who have moved into their current residence in the last 24 months). However, due to the way the 5-year ACS data are constructed, HUD developed a new methodology for calculating recent-mover FMRs in FY 2012. As in FY 2012, all areas are assigned as a base rent the estimated two-bedroom standard quality 5-year gross rent from the ACS.^[3] Because HUD's regulations mandate that FMRs must be published as recent mover gross rents, HUD continues to apply a recent mover factor to the standard quality base rents assigned from the 5-year ACS data. Calculation of the recent mover factor is described below.

No local area rent surveys were conducted in 2011 or 2012 by HUD or PHAs, but the surveys conducted in 2010, for Williamsport, PA and Pike County, PA continue to be applied.

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. In preparation for calculating the Proposed FY 2013 FMRs, the Department reviewed the methodology for calculating the recent mover factor from the FY 2012 process and made several improvements. The primary change is that HUD no longer compares the standard quality gross rent to the recent mover gross rent to determine if the two statistics are significantly different.^[4] For the FY 2012 FMRs, if the two rents were determined to be statistically different the recent mover factor was calculated as the percentage increase of the recent mover gross rent over the standard quality gross rent. In cases where the two gross rents were not statistically different, the recent mover factor was set to one. As described below, HUD calculates a similar percentage increase as the FY 2013 factor using data from the smallest geographic area containing the FMR area where the recent mover gross rent is statistically reliable.^[5] The following describes the process for determining the appropriate recent mover factor. The revised recent mover factor process results in 91 percent of FMR areas having a recent mover factor greater than one in FY 2013 compared to only 38 percent in FY 2012.

In general, HUD uses the 1 year ACS based two-bedroom statistically reliable recent mover gross rent estimate from the smallest geographic area encompassing the FMR area to calculate the recent mover factor. Some areas' recent mover factors will be calculated using data collected just for the FMR area. Other areas' recent mover factor will be based on larger geographic areas. For metropolitan areas that are sub-areas of larger metropolitan areas, the order is subarea, metropolitan area, state metropolitan area, and state. Metropolitan areas that are not divided follow a similar path from FMR area, to state metropolitan areas, to state. In nonmetropolitan areas the recent mover factor is based on the FMR area, the state nonmetropolitan area, or if that is not available, on the basis of the whole state. The recent mover factor is calculated as the percentage change between the 5-year 2006-2010 two-bedroom gross rent and the 1 year 2010 recent mover two-bedroom gross rent for the recent mover factor area. Recent mover factors are not allowed 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. The process for calculating each area's recent mover factor is detailed in the FY 2013 Proposed FMR documentation system available at: http://www.huduser.org/​portal/​datasets/​fmr/​fmrs/​docsys.html&​data=​fmr13.

This process produces an “as of” 2010 recent mover two-bedroom base gross rent for the FMR area.^[6]

C. Updates From 2010 to 2011

The ACS based “as of” 2010 rent is updated through the end of 2011 using the annual change in CPI from 2010 to 2011. As in previous years, HUD uses Local CPI data for FMR areas with at least 75 percent of their population within Class A metropolitan areas covered by local CPI data. HUD uses Census region CPI data for FMR areas in Class B and C size metropolitan areas and nonmetropolitan areas without local CPI update factors. Following the application of the appropriate CPI update factor, HUD converts the “as of” 2011 CPI adjusted rents to “as of” December 2011 rents by multiplying each rent by the national December 2011 CPI divided by the national annual 2011 CPI value. HUD does this in order to apply an exact amount of the annual trend factor to place the FY 2013 FMRs as of the mid-point of the 2013 fiscal year.

D. Trend From 2011 to 2013

On March 9, 2011 (76 FR 12985), HUD published a notice requesting public comment regarding the manner in which it calculates the trend factor used in determining FMR estimates to meet the statutory requirement that FMRs be “trended so the rentals will be current for the year to which they apply.” HUD's notice provided several proposed alternatives to the current trend factor and requested comments on the alternatives as well as suggestions of other ideas. In its publication of the proposed FY 2012 FMRs on August 19, 2011, (76 FR 52058) HUD discussed these comments and announced that a new trend factor would be used in the FY 2013 FMRs. HUD calculates the trend factor as the annualized change in median gross rents as measured between the 1 year 2005 ACS and the 1 year 2010 ACS. The median gross rent in 2005 was $728 and $855 in 2010. The overall change is 17.45% and the annualized change is 3.27%. Over a 15-month time period, the effective trend factor is 4.1%

E. Bedroom Rent Adjustments

HUD calculates the primary FMR estimates for two-bedroom units. This is generally the most common sized rental unit and, therefore, the most reliable to survey and analyze. Formerly, after each Decennial Census, HUD calculated rent relationships between two-bedroom units and other unit sizes and used them to set FMRs for other units. HUD did this because it is much easier to update two-bedroom estimates and to use pre-established cost relationships with other bedroom sizes than it is to develop independent FMR estimates for each bedroom size. For FY 2013 Proposed FMRs, HUD has updated the bedroom ratio adjustment factors using 2006-2010 5-year ACS data using similar methodology to what was implemented when calculating bedroom ratios using 2000 Census data to establish rent ratios.

HUD again made adjustments to the bedroom ratios using 2006-2010 5-year ACS data for areas with local bedroom-size intervals above or below what are considered reasonable ranges, or where sample sizes are inadequate to accurately measure bedroom rent differentials. Experience has shown that highly unusual bedroom ratios typically reflect inadequate sample sizes or peculiar local circumstances that HUD would not want to utilize in setting FMRs (e.g., luxury efficiency apartments that rent for more than typical one-bedroom units). HUD established bedroom interval ranges based on an analysis of the range of such intervals for all areas with large enough samples to permit accurate bedroom ratio determinations. These ranges are: efficiency FMRs are constrained to fall between 0.59 and 0.81 of the two-bedroom FMR; one-bedroom FMRs must be between 0.74 and 0.84 of the two-bedroom FMR; three-bedroom FMRs must be between 1.15 and 1.36 of the two-bedroom FMR; and four-bedroom FMRs must be between 1.24 and 1.64 of the two-bedroom FMR. HUD adjusts bedroom rents for a given FMR area if the differentials between bedroom-size FMRs were inconsistent with normally observed patterns (i.e., efficiency rents are not allowed to be higher than one-bedroom rents and four-bedroom rents are not allowed to be lower than three-bedroom rents).

HUD further adjusts the rents for three-bedroom and larger units to reflect HUD's policy to set higher rents for these units than would result from using unadjusted market rents. 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 bonuses of 8.7 percent to the unadjusted three-bedroom FMR estimates and adds 7.7 percent to the unadjusted four-bedroom FMR estimates. The FMRs for unit sizes larger than four bedrooms are 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 units are 0.75 times the zero-bedroom (efficiency) FMR.

For low-population, nonmetropolitan counties with small or statistically insignificant 2006-2010 5-year ACS recent-mover rents, HUD uses state non-metropolitan data to determine bedroom ratios for each bedroom size. HUD made this adjustment to protect against unrealistically high or low FMRs due to insufficient sample sizes.

IV. Manufactured Home Space Surveys

The FMR used to establish payment standard amounts for the rental of manufactured home spaces in the HCV program is 40 percent of the FMR for a two-bedroom unit. HUD will consider modification of the manufactured home space FMRs where public comments present statistically valid survey data showing the 40th-percentile manufactured home space rent (including the cost of utilities) for the entire FMR area.

All approved exceptions to these rents that were in effect in FY 2012 were updated to FY 2013 using the same data used to estimate the HCV program FMRs. If the result of this computation was higher than 40 percent of the new two-bedroom rent, the exception remains and is listed in Schedule D. The FMR area definitions used for the rental of manufactured home spaces are the same as the area definitions used for the other FMRs.

V. Small Area Fair Market Rents

Public housing authorities in the Dallas, TX HMFA continue to be the only PHAs managing their voucher programs using Small Area Fair Market Rents (SAFMRs). These FMRs are listed in Schedule B addendum. The department anticipates announcing additional PHAs authorized to operate using SAFMRs in the notice of Final FY 2013 FMRs.

SAFMRs are calculated using a rent ratio determined by dividing 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. This rent ratio is multiplied by the current two- bedroom rent for the entire metropolitan area containing the small area to generate the current year two-bedroom rent for the small area. In small areas where the median gross rent is not statistically reliable, HUD substitutes the median gross rent for the county containing the ZIP code in the numerator of the rent ratio calculation. For proposed FY 2013 SAFMRs, HUD has implemented two changes to the rent ratio calculation methodology. First, HUD has updated the 2005-2009 5-year ACS based ZIP code median gross rent data with 2006-2010 5-year ZIP Code Tabulation Area (ZCTA) median gross rent data. Next, HUD has expanded the criteria for determining the statistical reliability of the small area rent data in order to ensure that more SAFMRs are based on the data for the small area as opposed to using data from the parent county as a proxy.^[7]

VI. Request for Public Comments

HUD seeks public comments on the methodology used to calculate FY 2013 Proposed FMRs and the FMR levels for specific areas. Comments on FMR levels must include sufficient information (including local data and a full description of the rental housing survey methodology used) to justify any proposed changes. Changes may be proposed in all or any one or more of the unit-size categories on the schedule. Recommendations and supporting data must reflect the rent levels that exist within the entire FMR area.

For the supporting data, HUD recommends the use of professionally conducted surveys to test the accuracy of FMRs for areas where there is a sufficient number of Section 8 units to justify the survey cost of approximately $25,000—$35,000. Areas with 2,000 or more program units usually meet this cost criterion, and areas with fewer units may meet it if actual rents for two-bedroom units are significantly different from the FMRs proposed by HUD.

PHAs in nonmetropolitan areas may, in certain circumstances, conduct surveys of groups of 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 counties where FMRs are based on the combined rents in the cluster of FMR areas will not have their FMRs revised unless the grouped survey results show a revised FMR statistically different from the combined rent level.

The survey methodology has recently changed with mail surveys being the preferred method for conducting surveys, because of the lower cost and greater number of survey results. These surveys, however, take almost twice as long to conduct and random digit dialing surveys may be conducted as well. The methodology for both types of surveys and the survey instruments is posted on the HUD USER Web site, at the bottom of the FMR page: http://www.huduser.org/​portal/​datasets/​fmr.html.

Other survey methodologies are acceptable in providing data to support comments if the survey methodology can provide statistically reliable, unbiased estimates of the gross rent. 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 2006-2010 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.

Most surveys cover only one- and two-bedroom units, which has statistical advantages. If the survey is statistically acceptable, HUD will estimate FMRs for other bedroom sizes using ratios based on the 2006-2010 5-year ACS data. 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.

HUD will consider increasing manufactured home space FMRs where public comment demonstrates that 40 percent of the two-bedroom FMR is not adequate. In order to be accepted as a basis for revising the manufactured home space FMRs, comments must include a pad rental survey of the mobile home parks in the area, identify the utilities included in each park's rental fee, and provide a copy of the applicable public housing authority's utility schedule.

As stated earlier in this Notice, HUD is required to use the most recent data available when calculating FMRs. Therefore, in order to re-evaluate an area's FMR, HUD requires more current rental market data than the 2010 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 when determining the areas HUD will select for HUD-funded local are rent surveys using the limited survey budget available.

VII. Environmental Impact

This Notice involves the establishment of fair market rent 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 proposed to be amended as shown in the Appendix to this notice:

Dated: July 27, 2012.

Erika C. Poethig,

Acting Assistant Secretary for Policy Development and Research.

Fair Market Rents for the Housing Choice Voucher Program

Schedules B and D—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 is using the metropolitan CBSAs, which are made up of one or more counties, as defined by the Office of Management and Budget (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 2012 proposed FMRs incorporates the current OMB definitions of metropolitan areas based on the CBSA standards as implemented with 2000 Census data, but makes adjustments to the definitions to separate subparts of these areas where FMRs or median incomes would otherwise change significantly if the new area definitions were used without modification. In CBSAs where subareas are established, it is HUD's view for programmatic purposes that the geographic extent of the housing markets are not yet the same as the geographic extent of the CBSAs, but may become so in the future as the social and economic integration of the CBSA component areas increases. Modifications to metropolitan CBSA definitions are made according to a formula as described below.

Metropolitan area CBSAs (referred to as MSAs) may be modified to allow for subarea FMRs within MSAs based on the boundaries of old FMR areas (OFAs) within the boundaries of new MSAs. (OFAs are the FMR areas defined for the FY 2005 FMRs. Collectively they include 1999-definition MSAs/Primary Metropolitan Statistical Areas (PMSAs), metro counties deleted from 1999-definition MSAs/PMSAs by HUD for FMR purposes, and counties and county parts outside of 1999-definition MSAs/PMSAs referred to as nonmetropolitan counties.) Subareas of MSAs are assigned their own FMRs when the subarea 2000 Census Base Rent differs by at least 5 percent from (i.e., is at most 95 percent or at least 105 percent of) the MSA 2000 Census Base Rent, or when the 2000 Census Median Family Income for the subarea differs by at least 5 percent from the MSA 2000 Census Median Family Income. MSA subareas, and the remaining portions of MSAs after subareas have been determined, are referred to as HMFAs to distinguish these areas from OMB's official definition of MSAs.

The specific counties and New England towns and cities within each state in MSAs and HMFAs are listed in Schedule B.

2. Bedroom Size Adjustments

Schedule B shows the FMRs for zero-bedroom through four-bedroom units. The Schedule B addendum shows Small Area FMRs for PHAs operating using Small Area FMRs within the Dallas, TX HMFA. The FMRs for unit sizes larger than four bedrooms are calculated by adding 15 percent to the four-bedroom FMR for each extra bedroom. For example, the FMR for a five-bedroom unit is 1.15 times the four-bedroom FMR, and the FMR for a six-bedroom unit is 1.30 times the four-bedroom FMR. FMRs for single-room-occupancy (SRO) units are 0.75 times the zero-bedroom FMR.

3. Arrangement of FMR Areas and Identification of Constituent Parts

a. The FMR areas in Schedule B are listed alphabetically by metropolitan FMR area and by nonmetropolitan county within each state. The exception FMRs for manufactured home spaces in Schedule D are listed alphabetically by state.

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 nonmetropolitan counties are listed alphabetically on each line of the non-metropolitan county listings.

d. The New England towns and cities included in a nonmetropolitan county are listed immediately following the county name.

Footnotes

1.  As defined in 24 CFR 888.113(c), a minimally qualified area is an area with at least 100 census tracts where 70 percent or fewer of the census tracts with at least 10 two bedroom rental units are census tracts in which at least 30 percent of the two bedroom rental units have gross rents at or below the two bedroom FMR set at the 40th percentile rent. This continues to be evaluated with 2000 Decennial Census information. Although the 2006-2010 5-year ACS tract level data is available, HUD's administrative data on tenant locations (used in the calculation of concentration) has not yet been updated to use the 2010 Census Tract area definitions. Once this administrative data is updated, HUD will implement the 5-year ACS data as the basis for determining if areas are minimally qualified for 50th percentile status.

2.  

HMFA stands for HUD Metropolitan FMR Area.

3.  For areas with a two-bedroom standard quality gross rent from the ACS that have a margin of error greater than the estimate or no estimate due to inadequate sample in the 2010 5-year ACS, HUD uses the two-bedroom state non-metro rent for non-metro areas.

4.  The statistical comparison test used, the z-test, assumes that the samples from which the 2 statistics are calculated are independent. Because recent mover responders are also part of the standard quality responders, the two samples are not independent.

5.  For the purpose of the recent mover factor calculation, statistically reliable is where the recent mover gross rent has a margin of error that is less than the estimate itself.

6.  The Pacific Islands (Guam, Northern Marianas and American Samoa) as well as the US Virgin Islands are not covered by ACS data. As part of the 2010 Decennial Census, these areas were covered by a long-form survey. The results gathered by this long form survey are not expected to be available until later in 2012. Therefore, HUD uses the national change in gross rents, measured between 2009 and 2010 to update last year's FMR for these areas. Puerto Rico is covered by the Puerto Rico Community Survey within the American Community Survey; however, the gross rent data produced by the 2006-2010 ACS are not sufficient to adequately house voucher holders in Puerto Rico. This is due to the limited ability to eliminate units that do not pass the voucher program's housing quality standards. Consequently, HUD is updating last year's FMRs for Puerto Rico using the change in rents measured from all of Puerto Rico measured between the 2009 and 2010. For details behind these calculations, please see HUD's Proposed FY 2013 FMR documentation system available at: http://www.huduser.org/​portal/​datasets/​fmr/​fmrs/​docsys.html&​data=​fmr13.

7.  HUD has provided numerous detailed accounts of the calculation methodology used for Small Area Fair Market Rents. Please see our Federal Register notice of April 20, 2011 (76 FR 22125) for more information regarding the calculation methodology. Also, HUD's Proposed FY 2013 FMR documentation system available at (http://www.huduser.org/​portal/​datasets/​fmr/​fmrs/​docsys.html&​data=​fmr13) contains detailed calculations for each ZIP code area in the Dallas, TX HMFA.