[Federal Register Volume 63, Number 185 (Thursday, September 24, 1998)]
[Rules and Regulations]
[Pages 51224-51247]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-25568]
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Part V
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 888
Section 8 Housing Assistance Payments Program: Contract Rent Annual
Adjustment Factors, Fiscal Year 1999; Final Rule
Federal Register / Vol. 63, No. 185 / Thursday, September 24, 1998 /
Rules and Regulations
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 888
[Docket No. FR-4379-N-01]
Section 8 Housing Assistance Payments Program--Contract Rent
Annual Adjustment Factors, Fiscal Year 1999
AGENCY: Office of the Secretary, HUD.
ACTION: Notice of Revised Contract Rent Annual Adjustment Factors.
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SUMMARY: The United States Housing Act of 1937 requires that assistance
contracts signed by owners participating in the Department's Section 8
housing assistance payments programs provide for annual adjustment in
the monthly rentals for units covered by the contract. This notice
announces revised Annual Adjustment Factors (AAFs) for adjustment of
contract rents on assistance contract anniversaries from October 1,
1998. The factors are based on a formula using data on residential rent
and utilities cost changes from the most current Bureau of Labor
Statistics Consumer Price Index (CPI) survey and from HUD Random Digit
Dialing (RDD) rent change surveys.
EFFECTIVE DATE: October 1, 1998.
FOR FURTHER INFORMATION CONTACT: Gerald J. Benoit, Rental Assistance
Division, Office of Public and Indian Housing [(202) 708-0477], for
questions relating to the Section 8 Voucher, Certificate, and Moderate
Rehabilitation programs; Allison Manning, Office of Special Needs
Assistance Programs, Office of Community Planning and Development,
[(202) 708-1234] for questions regarding the Single Room Occupancy
Moderate Rehabilitation program; Frank M. Malone, Acting Director,
Office of Asset Management and Disposition, Office of Housing [(202)
708-3730], for questions relating to all other Section 8 programs; and
Alan Fox, Economic and Market Analysis Division, Office of Policy
Development and Research [(202) 708-0590; e-mail alan_fox@hud.gov],
for technical information regarding the development of the schedules
for specific areas or the methods used for calculating the AAFs.
Mailing address for above persons: Department of Housing and Urban
Development, 451 Seventh Street, SW, Washington, DC 20410. Hearing-or
speech-impaired persons may contact the Federal Information Relay
Service at 1-800-877-8339 (TTY). (Other than the ``800'' TTY number,
the above-listed telephone numbers are not toll-free.)
SUPPLEMENTARY INFORMATION:
Applicability of AAFs to Various Section 8 Programs
AAFs established by this Notice are used to adjust contract rents
for units assisted in the Section 8 housing assistance payments
programs. However, the specific application of the AAFs is determined
by the law, the HAP contract, and appropriate program regulations or
requirements.
AAFs are not used for the Section 8 voucher program or for over-FMR
tenancy (OFTO) in the Section 8 certificate program.
AAFs are not used for budget-based rent adjustments. Contract rents
for projects receiving Section 8 subsidies under the loan management
program (24 CFR part 886, subpart A) and for projects receiving Section
8 subsidies under the property disposition program (24 CFR part 886,
subpart C) are adjusted, at HUD's option, either by applying the AAFs
or by budget-based adjustments in accordance with 24 CFR 207.19(e).
Budget-based adjustments are used for most Section 8/202 projects.
Under the Section 8 moderate rehabilitation program (both the
regular program and the single room occupancy program), the public
housing agency (PHA) applies the AAF to the base rent component of the
contract rent, not the full contract rent.
Use of Reduced AAF
In accordance with Section 8(c)(2)(A) of the United States Housing
Act of 1937 (42 U.S.C. 1437f(c)(2)(A)), the AAF is reduced by .01:
--For regular tenancy in the Section 8 certificate program, for all
units.
--In other Section 8 programs, for a unit occupied by the same family
at the time of the last annual rent adjustment (and where the rent is
not reduced by application of comparability (rent reasonableness)).
The law provides that:
Except for assistance under the certificate program, for any
unit occupied by the same family at the time of the last annual
rental adjustment, where the assistance contract provides for the
adjustment of the maximum monthly rent by applying an annual
adjustment factor and where the rent for a unit is otherwise
eligible for an adjustment based on the full amount of the factor,
0.01 shall be subtracted from the amount of the factor, except that
the factor shall not be reduced to less than 1.0. In the case of
assistance under the certificate program, 0.01 shall be subtracted
from the amount of the annual adjustment factor (except that the
factor shall not be reduced to less than 1.0), and the adjusted rent
shall not exceed the rent for a comparable unassisted unit of
similar quality, type, and age in the market area. 42 U.S.C.
1437f(c)(2)(A).
This statutory language is now permanent law. Section 2004 of the
Balanced Budget Act of 1997 (Pub. L. 105-33, approved August 5, 1997)
provides that these provisions are in effect through fiscal year 1999
and thereafter.
To implement the law, HUD is again publishing two separate AAF
Tables, contained in Schedule C, Tables 1 and 2 of this notice. Each
AAF in Table 2 is computed by subtracting 0.01 from the annual
adjustment factor in Table 1.
Adjustment Procedures
The discussion in this Federal Register Notice is intended to
provide a broad orientation on adjustment procedures. Technical details
and requirements will be described in HUD notices (issued by the Office
of Housing and the Office of Public and Indian Housing).
Because of statutory and structural distinctions among the various
Section 8 programs, there are separate rent adjustment procedures for
three program categories:
--The Section 8 new construction and substantial rehabilitation
programs (including the Section 8 state agency program); and the
moderate rehabilitation programs (including the moderate rehabilitation
single room occupancy program).
--The Section 8 loan management (LM) Program (Part 886, Subpart A) and
property disposition (PD) Program (Part 886 Subpart C).
--The Section 8 certificate program (including the project-based
certificate (PBC) program).
Category 1: Section 8 New Construction, Substantial Rehabilitation and
Moderate Rehabilitation Programs
In the Section 8 New Construction and Substantial Rehabilitation
programs, the published AAF factor is applied to the pre-adjustment
contract rent. In the Section 8 Moderate Rehabilitation program, the
published AAF is applied to the pre-adjustment base rent.
For category 1 programs, the Table 1 AAF factor is applied before
determining comparability (rent reasonableness). Comparability applies
if the pre-adjustment gross rent (pre-adjustment contract rent plus any
allowance for tenant-paid utilities) is above the published FMR.
If the comparable rent level (plus any initial difference) is lower
than the contract rent as adjusted by application of the Table 1 AAF,
the comparable rent level (plus any initial difference) will be the new
contract rent. However, the pre-
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adjustment contract rent will not be decreased by application of
comparability.
In all other cases (i.e., unless contract rent is reduced by
comparability):
--The Table 1 AAF is used for a unit occupied by a new family since the
last annual contract anniversary.
--The Table 2 AAF is used for a unit occupied by the same family as at
the time of the last annual contract anniversary.
Category 2: The Loan Management Program (LM; Part 886, Subpart A) and
Property Disposition Program (PD; Part 886 Subpart C)
At this time, rent adjustment by the AAF in the Category 2 programs
is not subject to comparability. (Comparability will again apply if HUD
establishes regulations for conducting comparability studies under 42
U.S.C. 1437f(c)(2)(C).) Rents are adjusted by applying the full amount
of the applicable AAF under this notice.
The applicable AAF is determined as follows:
--The Table 1 AAF is used for a unit occupied by a new family since the
last annual contract anniversary.
--The Table 2 AAF is used for a unit occupied by the same family as at
the time of the last annual contract anniversary.
Category 3: Section 8 Certificate Program
The same adjustment procedure is used for rent adjustment in both
the tenant-based and project-based certificate programs. The following
procedures are used:
--The Table 2 AAF is always used in the Section 8 certificate program;
the Table 1 AAF is not used in this program.
--The Table 2 AAF is always applied before determining comparability
(rent reasonableness).
--Comparability always applies. If the comparable rent level is lower
than the contract rent as adjusted by application of the Table 2 AAF,
the comparable rent level will be the new contract rent.
(This adjustment procedure does not apply to an over-FMR (OFTO)
tenancy in the Section 8 certificate program.)
AAF Tables
The AAFs are contained in Schedule C, Tables 1 and 2 of this
notice. There are two columns in each table. The first column is used
to adjust contract rent for units where the highest cost utility is
included in the contract rent. The second column is used where the
highest cost utility is not included in the contract rent--i.e., where
the tenant pays for the highest cost utility.
AAF Areas
Each AAF applies to a specified geographic area and to units of all
bedroom sizes. AAFs are provided:
--For the metropolitan parts of the ten HUD regions exclusive of CPI
areas;
--For the nonmetropolitan parts of these regions; and
--For 99 separate metropolitan AAF areas for which local CPI survey
data are available.
With the exceptions discussed below, the AAFs shown in Schedule C
use the Office of Management and Budget's (OMB) most current
definitions of metropolitan areas. HUD uses the OMB Metropolitan
Statistical Area (MSA) and Primary Metropolitan Statistical Area (PMSA)
definitions for AAF areas because of their close correspondence to
housing market area definitions.
The exceptions are for certain large metropolitan areas, where HUD
considers the area covered by the OMB definition to be larger than
appropriate for use as a housing market area definition. In those
areas, HUD has deleted some of the counties that OMB had added to its
revised definitions. The following counties are deleted from the HUD
definitions of AAF areas.
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Metropolitan area Deleted counties
------------------------------------------------------------------------
Chicago, IL............................... DeKalb, Grundy and Kendall
Counties.
Cincinnati-Hamilton, OH-KY-IN............. Brown County, Ohio;
Gallatin, Grant and
Pendleton Counties in
Kentucky; and Ohio County,
Indiana.
Dallas, TX................................ Henderson County.
Flagstaff, AZ-UT.......................... Kane County, UT.
New Orleans, LA........................... St. James Parish.
Washington, DC-VA-MD-WV................... Berkeley and Jefferson
Counties in West Virginia;
and Clarke, Culpeper, King
George and Warren Counties
in Virginia.
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Separate AAFs are listed in this publication for the above
counties. They and the metropolitan area of which they are a part are
identified with an asterisk (*) next to the area name. The asterisk
indicates that there is a difference between the OMB metropolitan area
and the HUD AAF area definition for these areas.
To make certain that they are using the correct AAFs, users should
refer to the area definitions section at the end of Schedule C. For
units located in metropolitan areas with a local CPI survey, AAFs are
listed separately. For units located in areas without a local CPI
survey, the appropriate HUD regional Metropolitan or Nonmetropolitan
AAFs are used.
The AAF area definitions shown in Schedule C are listed in
alphabetical order by State. The associated HUD region is shown next to
each State name. Areas whose AAFs are determined by local CPI surveys
are listed first. All metropolitan CPI areas have separate AAF
schedules and are shown with their corresponding county definitions or
as metropolitan counties. Listed after the metropolitan CPI areas (in
those states that have such areas) are the non-CPI metropolitan and
nonmetropolitan counties of each State. In the six New England States,
the listings are for counties or parts of counties as defined by towns
or cities.
Puerto Rico and the Virgin Islands use the Southeast AAFs. All
areas in Hawaii use the AAFs identified in the Table as ``STATE:
Hawaii,'' which are based on the CPI survey for the Honolulu
metropolitan area. The Pacific Islands use the Pacific/Hawaii
Nonmetropolitan AAFs. The Anchorage metropolitan area uses the AAFs
based on the local CPI survey; all other areas in Alaska use the
Northwest/Alaska Nonmetropolitan AAFs.
Section 8 Certificate Program AAFs for Manufactured Home Spaces
The AAFs in this publication identified as ``Highest Cost Utility
Excluded'' are to be used to adjust manufactured home space contract
rents. The applicable AAF is determined by reference to the geographic
listings contained in Schedule C, as described in the preceding
section.
How Factors Are Calculated
For Areas With CPI Surveys
(1) Changes in the shelter rent and utilities components were
calculated based on the most recent CPI annual average change data.
(2) The ``Highest Cost Utility Included'' column in Schedule C was
calculated by weighting the rent and utility components with the
corresponding components from the 1990 Census.
(3) The ``Highest Cost Utility Excluded'' column in Schedule C was
calculated by eliminating the effect of heating costs that are included
in the rent of some of the units in the CPI surveys.
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For Areas Without CPI Surveys
(1) HUD used random digit dialing (RDD) regional surveys to
calculate AAFs. The RDD survey method is based on a sampling procedure
that uses computers to select a statistically random sample of rental
housing, dial and keep track of the telephone calls, and process the
responses. RDD surveys are conducted to determine the rent change
factors for the metropolitan parts (exclusive of CPI areas) and
nonmetropolitan parts of the 10 HUD regions, a total of 20 surveys.
(2) The change in rent with the highest cost utility included in
the rent was calculated using the average of the ratios of gross rent
in the current year RDD survey divided by the previous year's for the
respective metropolitan or nonmetropolitan parts of the HUD region.
(3) The change in rent with the highest cost utility excluded
(i.e., paid separately by the tenant) was calculated in the same
manner, after subtracting the median values of utilities costs from the
gross rents in the two years. The median cost of utilities was
determined from the units in the RDD sample which reported that all
utilities were paid by the tenant.
Other Matters
Environmental Impact
An environmental assessment is unnecessary, since revising Annual
Adjustment Factors is categorically excluded from the Department's
National Environmental Policy Act procedures under 24 CFR 50.19(c)(6).
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this Notice do not have federalism implications and, thus,
are not subject to review under the Order. The Notice merely announces
the adjustment factors to be used to adjust contract rents in the
Section 8 Housing Assistance Payment programs, as required by the
United States Housing Act of 1937.
The Catalog of Federal Domestic Assistance program number for Lower
Income Housing Assistance programs (Section 8) is 14.156.
Accordingly, the Department publishes these Annual Adjustment
Factors for the Section 8 Housing Assistance Payments Programs as set
forth in the following Tables:
Dated: September 17, 1998.
Andrew Cuomo,
Secretary.
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[FR Doc. 98-25568 Filed 9-23-98; 8:45 am]
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