2011-14123. Use of Small Area Fair Market Rents for Project Base Vouchers in the Dallas TX Metropolitan Area

AGENCY:

Office of the Assistant Secretary for Public and Indian Housing, HUD.

ACTION:

Notice.

SUMMARY:

This notice clarifies the use of Small Area Fair Market Rents (SAFMRs) for Project-Based Vouchers (PBVs) located in the Dallas, TX, metropolitan area. This notice follows Federal Register notices published on August 4, 2010, and October 4, 2010, that proposed and established, respectively, Fiscal Year (FY) 2011 SAFMRs for the Housing Choice Voucher (HCV) program in the Dallas, TX, HUD Metropolitan Fair Market Rent Area (MHFA). The October 4, 2010, notice provides that all public housing agencies (PHAs) in the 8-county Dallas, TX, MHFA are required to use SAFMRs for the voucher program. Today's notice clarifies the use of the SAFMRs by PBV projects located in the 8-county Dallas, TX, MHFA.

FOR FURTHER INFORMATION CONTACT:

Laure Rawson, Director, Housing Voucher Management and Operations Division, Office of Public and Indian Housing, Room 4210, 451 7th Street, SW., Washington, DC 20410-0500; telephone number 202-402-2425 (this is not a toll-free number). Persons with hearing or speech impairments may access this number through TTY by calling the toll-free Federal Relay Service at telephone number 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

On August 4, 2010 (75 FR 46958), HUD published for public comment its proposed FY 2011 Fair Market Rents (FMRs) in accordance with Section 8(c)(1) of the United States Housing Act of 1937 (USHA) (42 U.S.C. 1437f(c)(1)). 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 (nonluxury) nature with suitable amenities. In addition, all rents subsidized under the HCV program must meet reasonable rent standards.

The August 4, 2010, notice also proposed SAFMRs for the Dallas, TX MHFA. HUD described the methodology for determining SAFMRs in a May 18, 2010, (75 FR 27808) Federal Register notice. Specifically, HUD noted that the methodology for calculating FMRs based on current Office of Management and Budget (OMB) metropolitan area definitions allows HUD Section 8 Voucher Tenants access to different parts of a metropolitan area. However, because FMRs are generally set at the 40th percentile of the metropolitan rent distribution, certain neighborhoods may not have many units available in the FMR range. To provide voucher holders with the opportunity to move to areas of greater opportunity, HUD's May 18, 2010, notice proposed the use of a methodology to set FMRs at a more granular level, using areas defined by U.S. Postal Service ZIP Codes in metropolitan areas. For nonmetropolitan areas, HUD would continue to use counties as the basis for publishing FMRs. HUD published its final notice establishing its SAFMR Demonstration on April 20, 2011 (76 FR 22122).

HUD's October 4, 2010 notice (75 FR 61253), established FY 2011 SAFMRs for the HCV program in the Dallas, TX, HMFA. Specifically, the October 4, 2010, notice provided that all PHAs operating in the 8-county, Dallas TX, HMFA are required to use the SAFMRs. Specific SAFMRs for the 8-county Dallas TX, HMFA were provided in Schedule B Addendum to the October 4, 2010, notice. All other programs that use FMRs were instructed to use area-wide FMRs as provided by Schedule B of the notice for Dallas, TX, HMFA.

II. Use of SAFMRs for Project-Based Vouchers in the Dallas Metropolitan Area

HUD's notice requiring the use of SAFMRs has created a concern for the financial viability of some properties with PBVs in the Dallas TX, HMFA. In the PBV program, the amount of rent to the owner may not exceed the lowest of an amount determined by the PHA not to exceed 110% of the FMR, the reasonable rent, or the rent requested by the owner. Some of the Zip Codes in the 8-county, Dallas TX HMFA, SAFMR have FMRs that decreased in value by as much as 35 percent. These decreases may put the some PBV properties at risk for financial failure because the original financing was based on the higher area wide FMR.

As a result, this notice clarifies that PBV units for which a notice of owner selection was issued in accordance with 24 CFR 983.51(d) prior to June 8, 2011, will not be subject to the SAFMRs. This includes PBVs that are currently under a Housing Assistance Payment (HAP) contract. The area-wide FMRs will continue to apply to these PBV units, thus ensuring the viability of PBV projects that were in the development pipeline and had obtained financing based on area-wide FMRs. However, any PBVs for which a notice-of-owner selection is issued after June 8, 2011 will be subject to the SAFMRs.

Dated: May 31, 2011.

Deborah Hernandez,

General Deputy Assistant Secretary for Public and Indian Housing.