[Federal Register: December 1, 2005 (Volume 70, Number 230)]
[Notices]
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From the Federal Register Online via GPO Access [wais.access.gpo.gov]
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Part III
Department of Housing and Urban Development
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Section 8 Housing Assistance Payments Program--Contract Rent Annual
Adjustment Factors, Fiscal Year 2006; Notice
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-5031-N-01]
Section 8 Housing Assistance Payments Program--Contract Rent
Annual Adjustment Factors, Fiscal Year 2006
AGENCY: Office of the Assistant Secretary for Policy Development and
Research, HUD.
ACTION: Notice of revised contract rent Annual Adjustment Factors.
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SUMMARY: This notice announces revised Annual Adjustment Factors (AAFs)
for adjustment of Section 8 contract rents for specified programs.
These factors apply to housing assistance payment contract
anniversaries for calendar months commencing after the date of
publication of this notice. The AAFs are based on residential rent and
utilities time-series cost indices from the Bureau of Labor Statistics
Consumer Price Index (CPI) surveys.
EFFECTIVE DATE: December 1, 2005.
FOR FURTHER INFORMATION CONTACT: David Vargas, Senior Advisor, Housing
Voucher Management and Operations Division, Office of Public Housing
and Voucher Programs, (202) 708-0477 can respond to questions relating
to the Section 8 Voucher, Certificate, and Moderate Rehabilitation
programs; Mark Johnston, 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; Willie Spearmon, Director, Office of Housing Assistance and
Grant Administration, Office of Housing, (202) 708-3000, for questions
relating to all other Section 8 programs. Marie L. Lihn, Economic and
Market Analysis Division, Office of Policy Development and Research
(202) 708-0590, is the contact for technical information regarding the
development of the factors 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 (800) 877-8339 (TTY). (Other than the
``800'' TTY number, the above-listed telephone numbers are not toll-
free.)
SUPPLEMENTARY INFORMATION: In addition to being published in the
Federal Register, this data will be available electronically from the
HUD data information page: http://www.huduser.org/datasets/aaf.html.
I. Methodology
AAFs are calculated using CPI data on rents and utilities for all
metropolitan areas with metropolitan-area specific CPI estimates. AAFs
for other areas are calculated using HUD RDD telephone and mail
surveys. AAFs are rent change factors. Two types of AAFs are
calculated. One type is a gross rent change factor that should be used
when the primary utility (normally heating) is included in the rent.
The other type is a shelter rent (i.e., rents without utilities) factor
that should be used when the primary utility is not included in rent.
Decennial census data are used to establish the relationship between
gross rents and shelter rents.
CPI Surveys
For specific metropolitan areas where CPI surveys are conducted,
changes in the shelter rent and utilities components are calculated
based on the most recent CPI annual average change data. In this
publication, the rent and utility CPIs for metropolitan areas are based
on changes in the index from 2003 to 2004. The ``Highest Cost Utility
Included'' column in Schedule C is calculated by weighting the rent and
utility change factors using the corresponding components of gross rent
in a particular area as calculated in the 2000 Census. The ``Highest
Cost Utility Excluded'' column in Schedule C is calculated by
eliminating the utility portion of the gross rent change factor.
For areas not covered by a specific metropolitan CPI survey, HUD
uses the CPI surveys for the Northeast, South, Midwest, or West region,
as appropriate. Rent and utility change factors are calculated from
2003 to 2004. For areas assigned Census Region CPI factors, both
metropolitan and non-metropolitan areas received the same factor.
Geographic Areas
The current and former metropolitan areas that use specific CPI
factors are listed alphabetically in the tables, according to the
metropolitan area where appropriate. Each AAF applies to a specified
geographic area and to units of all bedroom sizes. AAFs are provided:
For separate metropolitan areas, including counties that
are currently designated as non-metropolitan, but are part of the
metropolitan area defined in the local CPI survey.
For the four Census Regions for those metropolitan and
non-metropolitan areas that are not covered by the local CPI surveys.
The AAFs shown in Schedule C use the same Office of Management and
Budget (OMB) metropolitan area definitions, as revised by HUD, that are
used in the FY2006 Fair Market Rents.
Area Definitions in Schedule C
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 metropolitan or non-metropolitan counties receive the
regional CPI for that Census Region.
The AAF area definitions shown in Schedule C are listed in
alphabetical order by state. The associated CPI division is shown next
to each state name. Areas whose AAFs are determined by local CPI
surveys are listed first. All metropolitan areas with local CPI surveys
have separate AAF schedules and are shown with their corresponding
county definitions or as metropolitan counties. The regional CPI
metropolitan and nonmetropolitan counties of each state are listed
after the metropolitan CPI areas (in those states that have such
areas). 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 South Region 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 West Region AAFs.
II. Applying AAFs to Various Section 8 Programs
AAFs established by this notice are used to adjust contract rents
for units assisted in certain Section 8 housing assistance payments
programs during the original (i.e., pre-renewal) term of the Housing
Assistance Payments (HAP) contract. Three categories of Section 8
programs use the AAFs:
Category 1--The Section 8 New Construction and Substantial
Rehabilitation programs and the Section 8 Moderate Rehabilitation
program.
Category 2--The Section 8 Loan Management (LM) and Property
Disposition (PD) programs.
Category 3--The Section 8 Project-based Certificate (PBC) program.
Each Section 8 program category uses the AAFs differently. The
specific HAP contract, program regulation, program requirement, or law
determines the application of the AAFs. Restrictions to the use of AAF
are discussed below:
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Renewal Rents. AAFs are not used to determine renewal rents after
expiration of the original Section 8 HAP contract (either for projects
where the Section 8 HAP contract is renewed under a restructuring plan
adopted under 24 CFR part 401; or renewed without restructuring under
24 CFR part 402). In general, renewal rents are determined by applying
a state-by-state operating cost adjustment factor (OCAF) published by
HUD.
Budget-based Rents. AAFs are not used for budget-based rent
adjustments. For projects receiving Section 8 subsidies under the LM
program (24 CFR part 886, subpart A) or under the PD program (24 CFR
part 886, subpart C), contract rents 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.
Certificate Program. In the past, AAFs were used to adjust the
contract rent (including manufactured home space rentals) in the
tenant-based certificate program. However, this program has been
terminated. All tenancies in the tenant-based certificate program have
been converted to the Housing Choice Voucher Program. AAFs are still
used for adjustment of contract rent for outstanding HAP contracts
under the project-based certificate program.
Moderate Rehabilitation Program. 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. For the other covered programs, the AAF is applied to the whole
amount of the pre-adjustment contract rent.
III. Adjustment Procedures
This section of the notice provides a broad description of
procedures for adjusting the contract rent. Technical details and
requirements are 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
the three program categories:
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-adjustment contract rent will not be
decreased by application of comparability.
In all other cases (i.e., unless the 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 (24 CFR Part 886, Subpart A)
and Property Disposition Program (24 CFR 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 Project-Based Certificate Program
The following procedures are used to adjust contract rent for
outstanding HAP contracts in the Section 8 PBC program:
The Table 2 AAF is always used. The Table 1 AAF is not
used.
The Table 2 AAF is always applied before determining
comparability (rent reasonableness).
Comparability always applies. If the comparable rent level
is lower than the rent to owner (contract rent) as adjusted by
application of the Table 2 AAF, the comparable rent level will be the
new rent to owner.
IV. When To Use Reduced AAFs (From AAF Table 2)
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 0.01:
For all tenancies assisted in the Section 8 Project-Based
Certificate program.
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).
To implement the law, HUD publishes two separate AAF Tables,
contained in Schedule C, Tables 1 and 2 of this notice. The difference
between Table 1 and Table 2 is that each AAF in Table 2 is 0.01 less
than the corresponding AAF in Table 1. Where an AAF in Table 1 would
otherwise be less than 1.0, it is held harmless at 1.0; the
corresponding AAF in Table 2 will also be held harmless at 1.0.
V. How To Find the AAF
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, i.e., where the owner pays for the
highest cost utility. 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.
The applicable AAF is selected as follows:
Determine whether Table 1 or Table 2 is applicable. In
Table 1 or Table 2, locate the AAF for the geographic area where the
contract unit is located.
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Determine whether the highest cost utility is or is not
included in contract rent for the contract unit.
If highest cost utility is included, select the AAF from
the column for ``highest cost included''. If highest cost utility is
not included, select the AAF from the column for ``utility excluded''.
Accordingly, HUD publishes these Annual Adjustment Factors for the
Section 8 Housing Assistance Payments programs as set forth in the
Tables.
Dated: November 18, 2005.
Darlene F. Williams,
Assistant Secretary for Policy Development and Research.
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[FR Doc. 05-23506 Filed 11-30-05; 8:45 am]
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