[Federal Register Volume 59, Number 145 (Friday, July 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18496]
[[Page Unknown]]
[Federal Register: July 29, 1994]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner
24 CFR Part 888
[Docket No. R-94-1697; FR-3598-F-02]
RIN 2502-AG17
Section 8 Housing Assistance Payments Program: Contract Rent
Annual Adjustment Factors--Revision to ``Rounding'' Factor
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD
ACTION: Final rule.
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SUMMARY: This final rule revises the method for ``rounding'' contract
rents. Before issuance of this rule, the applicable HUD regulations
provided for adjustment to be made to the contract rent of a dwelling
unit by rounding the computed monthly contract rent that contains a
fractional dollar amount to the next higher whole dollar amount. (The
monthly contract rent was rounded to the next higher whole dollar
amount even when the dollar fraction was as low as .01.) Through this
final rule, HUD revises this adjustment procedure by providing for
contract rents that contain fractional dollar amounts of .01 to .49 to
be rounded to the next lower dollar amount, and for contract rents that
contain fractional dollar amounts of .50 to .99 to be rounded to the
next higher dollar amount. The purpose of this rule is to provide for a
``rounding'' procedure that is more consistent with standard industry
practices, and that more accurately reflects actual rent adjustments.
EFFECTIVE DATE: August 29, 1994.
FOR FURTHER INFORMATION CONTACT: Barbara Hunter, Acting Director,
Planning and Procedures Division, Office of Housing, Department of
Housing and Urban Development, 451 Seventh Street, S.W., Room 6180,
Washington, D.C. 20410. Telephone (202) 708-3944 (voice) or (202) 708-
4594 (TDD). (These are not toll-free numbers.)
SUPPLEMENTARY INFORMATION:
I. Background--The Former ``Rounding'' Procedure
Before issuance of this final rule, 24 CFR 888.203(b) provided as
follows:
The adjusted monthly amount of the Contract Rent of a dwelling
unit shall be determined by multiplying the Contract Rent in Effect
on the anniversary date of the contract by the applicable Automatic
Annual Adjustment Factor (see paragraph (a) of this section) and
rounding the result to the next higher whole dollar amount.
The former rounding procedure provided for all contract rents that
contain fractional dollar amounts to be rounded to the next higher
whole dollar, regardless of the fractional amount. HUD determined that
there are approximately two million dwelling units receiving section 8
assistance, and the former rounding procedure (a procedure that
provides for a dollar fraction as low as .01 to be rounded up) costs
about $24 million in annual section 8 subsidies (2,000,000 units x $1
per unit x 12 months = $24,000,000). Accordingly, HUD determined that
a change was necessary to make its rounding procedure consistent with
generally accepted mathematical principles, and to bring disbursement
of section 8 subsidies more in line with a housing authority's or
project owner's actual section 8 subsidy needs.
II. December 28, 1993 Proposed Rule
On December 28, 1993 (58 FR 68615), HUD published a proposed rule
that would have revised the rounding procedure in Sec. 888.203(b) to
provide for fractional dollar amounts of .01 to .50 to be rounded down,
and for fractional dollar amounts of .51 to .99 to be rounded up.
In the preamble to the proposed rule, HUD acknowledged that the
proposed change to the rounding procedure would adjust section 8
contract rents by an average of fifty cents per-unit per-month less
than contracts rents are adjusted under the procedure used to date. HUD
also noted in the preamble that the rounding procedure used to date
provided many housing authorities and owners with section 8 subsidies
substantially beyond their section 8 assistance needs. Because HUD's
resources are tightly constrained, even as the need for housing
assistance intensifies, it is important that HUD use existing resources
more efficiently. More efficient use of section 8 subsidies will help
HUD meet increased demands for housing assistance. The anticipated
savings in section 8 subsidies from the change in the rounding
procedure can be used to help other low-income families who need
housing assistance.
The December 28, 1993 proposed rule provided for a 60-day public
comment period. The comment period expired on February 28, 1994, and by
this date, HUD received 12 comments. The public comments and HUD's
response to these comments are discussed in Sections III and IV of the
preamble.
III. Final Rule--A ``Rounding'' Procedure More Consistent With
Standard Industry Practices
In response to public comment, the final rule revises the rounding
procedure set forth in the December 28, 1993 proposed rule. The final
rule provides for fractional dollar amounts of .01 to .49 to be rounded
down, and fractional dollar amounts of .50 to .99 to be rounded up.
Three commenters supported HUD's proposal to change the rounding
procedure, but stated that the proposed revision was not consistent
with generally accepted mathematical principles. The commenters stated
that under generally accepted mathematical principles, rounding occurs
as follows: .01 to .49 DOWN, and .50 to .99 UP. The commenters
expressed concern that HUD's departure from standard practice would
lead to confusion, and result in increased time and expense for owners.
Increased time would result from the need on the part of owners to be
cognizant that HUD's rounding procedure is slightly different from that
generally used. Increased expense would result from the need on the
part of many owners to revise existing computer software programs to
accommodate HUD's ``unique'' rounding procedure.
HUD agreed with the commenters, and as noted above, the final rule
adopts the standard ``rounding'' method. In the final rule,
Sec. 888.203(b) provides as follows:
The adjusted monthly amount of the Contract Rent of a dwelling
unit shall be determined by multiplying the Contract Rent in effect
on the anniversary date of the contract by the applicable Automatic
Annual Adjustment Factor (see paragraph (a) of this section) and
rounding the result as follows:
(1) If the result contains a fractional dollar amount ranging
from $0.01 to $0.49, round to the next lower whole dollar amount;
(2) If the result contains a fractional dollar amount ranging
from $0.50 to $0.99, round to the next higher whole dollar amount.
IV. Public Comment
In addition to the commenters who supported a change to the
rounding method, but not the change proposed by HUD, four commenters
expressed their support for the proposed rule with no recommendations
for change. Other comments, and HUD's response to these comments, are
as follows:
Comment. One commenter supported the change to the rounding factor
but stated that it strongly opposed retroactive implementation of the
rule.
Response. The rule does not provide for retroactive application.
The revised rounding procedure applies to only future rents as they are
adjusted on the anniversary dates of the Housing Assistance Payment
(HAP) contracts.
Comment. Four commenters opposed the change to the rounding
procedure, and stated that the savings anticipated by the change will
be substantially less because of the increased rents allowed under
requests for special adjustments.
Response. Reduced rent increases that result from a change in the
rounding procedure do not constitute an eligible justification for
special adjustments. Special adjustments are available only when
increases in expenses have resulted from substantial general increases
in real property taxes, utility rates, or other similar costs. HUD does
not believe that the reduction of rents resulting from a change in the
rounding procedure will be so substantial as to adversely affect
project owners.
Comment. Three commenters stated that the application of a revised
rounding factor to existing contracts is legally questionable.
Response. As noted above, there is no retroactive application of
the rule. Additionally, the HAP contracts and the section 8 regulations
do not prohibit HUD from revising the ``rounding'' procedure for
contract rents.
Comment. One commenter stated that the preamble to the proposed
rule made the assertion that many housing authorities and project
owners are provided with section 8 subsidies substantially beyond their
section 8 assistance needs. The commenter stated that HUD must take
into consideration projects that need all of their section 8
assistance.
Response. HUD believes that the revised rounding factor, which is
based on generally accepted mathematical principles, and is consistent
with standard industry practices, presents a balanced approach to the
former rounding method which did, in fact, provide many owners with
section 8 subsidies beyond their needs. (Again, the previous procedure
provided for a dollar fraction as low as .01 to be rounded up to the
next whole dollar.) As noted earlier in this preamble, while the
revised rounding method will result in some reduction in section 8
subsidies, HUD does not believe that the reduction will be so
substantial as to adversely affect project owners, including those that
need all of their section 8 assistance.
Comment. One commenter stated that the Automatic Annual Adjustment
Factor has a built-in downward bias, which, together with the revision
to the rounding factor, will substantially reduce section 8 assistance.
Response. The Automatic Annual Adjustment Factors (AAFs) are
computed so as to eliminate as many sources of bias as is practicable.
There is no effort on the part of HUD to establish the AAFs in a way
that would be detrimental to project owners.
V. Other Matters
Environmental Impact
An environmental assessment is unnecessary because statutorily
required establishment and review of rent schedules that do not
constitute a development decision affecting the physical condition of
specific project areas or building sites are categorically excluded
from the Department's National Environmental Policy Act procedures
under 24 CFR 50.20(1).
Impact on Small Entities
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this final rule before publication, and,
by approving it, certifies that this final rule would not have a
significant economic impact on a substantial number of small entities.
The rule will result in reduced section 8 subsidies for a substantial
number of housing authorities (the reduction in subsidies will extend
to all housing authorities, and is not limited to small housing
authorities) and project owners. However, the reduced section 8
subsidies will not result in a significant economic impact on these
entities because a substantial number of these authorities and project
owners are currently receiving section 8 subsidies considerably beyond
their actual section 8 housing assistance needs. The savings in section
8 subsidies achieved by this rule will result in disbursement of
section 8 subsidies to additional housing authorities and project
owners. Thus, the rule would not result in a significant economic
impact on a substantial number of small entities within the meaning of
the order.
Federalism Impact
The General Counsel, as the Designated Official under section 6(a)
of Executive Order No. 12612, Federalism, has determined that this
final rule would not have a substantial, direct effect on the States or
their political subdivisions or on the relationship between the Federal
government and the States, or on the distribution of power or
responsibilities among the various levels of government. The rule
relates solely to the method of determining Federal financial
assistance--that is, the method of determining the amount of section 8
assistance needed by a housing authority or project owner, based on the
procedure for computing adjusted contract rent. This matter does not
affect the States or their political subdivisions or the distribution
of power or responsibilities among the various levels of government.
Impact on the Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this final rule will not
have a potential significant impact on family formation, maintenance,
and general well-being, and thus is not subject to review under the
order. No significant change in existing HUD policies or programs will
result from promulgation of this rule, as those policies and programs
relate to family concerns.
Regulatory Agenda
This rule was listed as sequence number 1608 in the Department's
Semiannual Agenda of Regulations published on April 25, 1994 (59 FR
20424, 20453) under Executive Order 12866 and the Regulatory
Flexibility Act.
List of Subjects in 24 CFR Part 888
Grant programs--housing and community development, Rent subsidies.
Accordingly, 24 CFR part 888 is amended as follows:
PART 888--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--FAIR
MARKET RENTS AND CONTRACT RENT ANNUAL ADJUSTMENT FACTORS
1. The authority citation for part 888 continues to read as
follows:
Authority: 42 U.S.C. 1437c, 1437f, and 3535(d).
2. In Sec. 888.203, paragraph (b) is revised to read as follows:
Sec. 888.203 Use of contract rent automatic annual adjustment factors.
* * * * *
(b) The adjusted monthly amount of the Contract Rent of a dwelling
unit shall be determined by multiplying the Contract Rent in effect on
the anniversary date of the contract by the applicable Automatic Annual
Adjustment Factor (see paragraph (a) of this section) and rounding the
result as follows:
(1) If the result contains a fractional dollar amount ranging from
$0.01 to $0.49, round to the next lower whole dollar amount;
(2) If the result contains a fractional dollar amount ranging from
$0.50 to $0.99, round to the next higher whole dollar amount.
Dated: July 20, 1994.
Jeanne K. Engel,
General Deputy Assistant Secretary for Housing--Federal Housing
Commissioner.
[FR Doc. 94-18496 Filed 7-28-94; 8:45 am]
BILLING CODE 4210-27-P
