Federal Register, Volume 73 Issue 189 (Monday, September 29, 2008)

[Federal Register Volume 73, Number 189 (Monday, September 29, 2008)]
[Notices]
[Pages 56638-56698]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-22793]

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Part II

Department of Housing and Urban Development

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Final Fair Market Rents for Fiscal Year 2009 for the Housing Choice
Voucher Program and Moderate Rehabilitation Single Room Occupancy
Program; Notice

Federal Register / Vol. 73, No. 189 / Monday, September 29, 2008 /
Notices

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5223-N-02]

Final Fair Market Rents for Fiscal Year 2009 for the Housing
Choice Voucher Program and Moderate Rehabilitation Single Room
Occupancy Program

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

ACTION: Notice.

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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 standard amounts for
the Housing Choice Voucher program, to determine initial renewal rents
for some expiring project-based Section 8 contracts, to determine
initial rents for housing assistance payment (HAP) contracts in the
Moderate Rehabilitation Single Room Occupancy program (Mod Rehab), and
to serve as a rent ceiling in the HOME rental assistance program.
Today's notice provides final FY2009 FMRs for all areas that reflect
the estimated 40th and 50th percentile rent levels trended to April 1,
2009. The FY2009 FMRs are based on 2000 Census data updated with more
current survey data. For FY2009, FY2008 FMRs are updated using 2006
American Community Survey (ACS) data, and more recent Consumer Price
Index (CPI) rent and utility indexes. 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). Revised 2006 FMRs based on Census and
ACS data have been updated with CPI data through the end of 2007 and
then trended to April 2009, the mid-point of FY2009.

DATES: Effective Date: The FMRs published in this notice are effective
on October 1, 2008.

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
at the following link on the HUD Web site: http://www.huduser.org/datasets/fmr.html. FMRs are listed at the 40th or 50th percentile in
Schedule B. An asterisk before the FMR area name identifies a 50th
percentile area.
Any 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 further methodological explanations
may be addressed to Marie L. Lihn or Lynn A. Rodgers, Economic and
Market Analysis Division, Office of Economic Affairs, Office of Policy
Development and Research, telephone number 202-708-0590. Persons with
hearing or speech impairments may access this number through TTY by
calling the toll-free Federal Information Relay Service at 800-877-
8339. (Other than the HUD USER information line and TTY 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 areas. In the Housing Choice Voucher 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 Housing Choice Voucher program must meet
reasonable rent standards. The interim rule published on October 2,
2000, (65 FR 58870), established 50th percentile FMRs for certain
areas.
Electronic Data Availability: This Federal Register notice is
available electronically from the HUD Web site at http://www.hudclips.org. Federal Register notices also are available
electronically from the U.S. Government Printing Office Web site,
http://www.gpoaccess.gov/fr/index.html. Complete documentation of the
methodology and data used to compute each area's Final FY2009 FMRs is
available at http://www.huduser.org/datasets/fmr/fmrs/index.asp?data=fmr09.

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.

The Department'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. For FY2009, no new areas became eligible for 50th
percentile rents. Current areas are evaluated for progress in
deconcentration every three years after becoming 50th percentile areas.
Continued eligibility is determined based on HUD administrative data
that show levels of poverty concentration. The levels of poverty
concentration must be above 25 percent and show a decrease in
concentration since the last evaluation. At least 85 percent of the
voucher units in the area must be used to make this determination.
Twenty-four of the current 28 50th percentile FMR areas had been in the
program for a three-year period and were reviewed to determine if
deconcentration had occurred. A list of these 24 areas is shown below.

FY2008 50th Percentile FMR Areas Reviewed for Eligibility as FY2009
50th Percentile FMR Areas

Albuquerque, NM MSA
Austin-Round Rock, TX MSA
Baltimore-Towson, MD MSA
Bradenton-Sarasota-Venice, FL MSA
Chicago-Naperville-Joliet, IL HMFA
Denver-Aurora, CO MSA
Fort Worth-Arlington, TX HMFA
Grand Rapids-Wyoming, MI HMFA
Hartford-West Hartford-East Hartford, CT HMFA
Honolulu, HI MSA
Houston-Baytown-Sugar Land, TX HMFA
Kansas City, MO-KS, HMFA
Las Vegas-Paradise, NV MSA
Milwaukee-Waukesha-West Allis, WI MSA
New Haven-Meriden, CT HMFA
Orange County, CA HMFA
Phoenix-Mesa-Scottsdale, AZ MSA
Providence-Fall River, RI-MA HMFA
Richmond, VA HMFA
Riverside-San Bernardino-Ontario, CA MSA

[[Page 56639]]

Tacoma, WA HMFA
Tucson, AZ MSA
Virginia Beach-Norfolk-Newport News, VA-NC MSA
Washington-Arlington-Alexandria, DC-VA-MD HMFA

Fourteen of the 24 current 50th percentile areas eligible for
review failed to qualify for the 50th percentile FMR program for
FY2009. Two of these areas, as shown below, no longer qualify for the
50th-percentile FMR program because they no longer meet the poverty
concentration standards set out in the 50th percentile FMR program, at
24 CFR 888.113. Based on current tenant data, less than 25 percent of
the tenant-based rental program participants reside in the 5 percent of
census tracts in the metropolitan areas with the largest number of
program participants. These areas will be reviewed annually to see if
this concentration changes to above 25 percent so they can be
reinstated as 50th percentile areas. These two areas could re-qualify
as 50th percentile FMR areas as early as the FY2010 FMRs.

FY2008 50th Percentile FMR Areas Not Eligible for FY2009 50th
Percentile FMRs Because Voucher Tenant Concentrations Have Fallen Below
the Eligibility Threshold

Grand Rapids-Wyoming, MI HMFA
Providence-Fall River, RI-MA HMFA

Three additional areas initially did not meet the minimum reporting
criteria of 85 percent of resident records. Based on comments,
additional data submitted by these areas was found in a separate
database, and subsequent examination of all data found reporting levels
above 85 percent. However all three areas also showed a failure to
deconcentrate over the three-year period when they were using 50th
percentile FMRs. These areas will lose their 50th percentile FMRs for
FY2009 but will be eligible for re-evaluation and possible re-
instatement of 50th percentile FMRs in FY2010. These areas are not
being removed from consideration for the 50th percentile FMR program
for a period of three years, for failing the test of deconcentration,
because they were not notified of this failure in time for them to
provide comments, and it was an error by HUD that led to this failure.
These areas are listed below:

FY2008 50th Percentile FMR Areas Not Eligible for FY2009 50th
Percentile FMRs Because Proposed FY2009 FMR Publication Found Low
Reporting Rates

Baltimore-Towson, MD MSA
Washington-Arlington-Alexandria, DC-VA-MD HMFA
New Haven-Meriden, CT HMFA

As notified in the publication of proposed FY2009 FMRs, the table
below shows nine areas that failed to deconcentrate over the 3-year
period. Deconcentration of tenants is the primary objective of the 50th
percentile program and failure to make any progress to deconcentrate
tenants over a 3-year period disqualifies an otherwise eligible area
for 3 years. These areas are not eligible for participation in the 50th
percentile FMR program until FY2012. They will be reviewed in time for
the proposed FY2012 FMRs to determine if they can meet 50th percentile
FMR criteria.

FY2008 50th Percentile FMR Areas Not Eligible for FY2009 50th
Percentile FMRs for Failure To Deconcentrate Voucher Tenants

Austin-Round Rock, TX MSA
Honolulu, HI MSA
Orange County, CA HMFA
Riverside-San Bernardino-Ontario, CA MSA
Virginia Beach-Norfolk-Newport News, VA-NC MSA
Fort Worth-Arlington, TX HMFA
Las Vegas-Paradise, NV MSA
Phoenix-Mesa-Scottsdale, AZ MSA
Tucson, AZ MSA

Ten of the 24 areas reviewed will continue to use 50th percentile
FMRs for another three-year period. These ten areas will not be re-
evaluated until FY2012.

FY2008 50th Percentile FMR Areas Evaluated and Continuing with 50th
Percentile FMRs in FY2009

Albuquerque, NM MSA
Chicago-Naperville-Joliet, IL HMFA
Hartford-West Hartford-East Hartford, CT HMFA
Kansas City, MO-KS HMFA
Richmond, VA HMFA
Bradenton-Sarasota-Venice, FL MSA
Denver-Aurora, CO MSA
Houston-Baytown-Sugar Land, TX HMFA
Milwaukee-Waukesha-West Allis, WI MSA
Tacoma, WA HMFA

In addition to these 10 areas, 4 current 50th percentile FMR areas
were not evaluated this year because they have not completed 3 years of
program participation, so there are 14 areas that will have 50th
percentile FMRs in FY2009. These four areas, listed below, will
complete their 3-year program period and be evaluated to determine if
they remain 50th percentile FMR areas in the proposed FY2010 FMR
publication.

FY2008 50th Percentile FMR Areas Not Slated for Eligibility Evaluation
and Continuing with 50th Percentile FMRs in FY2009

Dallas, TX HMFA
San Diego-Carlsbad-San Marcos, CA MSA
Fort Lauderdale, FL HMFA
West Palm Beach-Boca Raton, FL HMFA

III. Proposed FY2009 FMRs

On June 12, 2008 (73 FR 33530), HUD published proposed FY2009 FMRs.
As noted in the preamble to the proposed FMRs, the FMRs for FY2009
reflect the use of the 2006 ACS data to update 2005 rent estimates for
metropolitan areas. In addition, the FY2009 FMRs include all changes
made to metropolitan area definitions made by the Office of Management
and Budget (OMB), as of November 2007.
During the comment period, which ended August 1, 2008, HUD received
26 public comments on the proposed FY2009 FMRs. None of the comments
received included the data needed to support FMR changes. Several of
the comments expressed concern over recent utility increases and the
failure of the FY2009 FMRs to take into account these increases. There
were also comments received on the loss of 50th percentile FMRs
resulting from low reporting rates. The comments received are discussed
in more detail later in this notice.

IV. FMR Methodology

The FY2009 FMRs are based on current OMB metropolitan area
definitions that were first used in the FY2006 FMRs. The changes OMB
made to the Metropolitan Area Definitions in November 2007 are
incorporated. This means that there are six Metropolitan Statistical
Area (MSA) name changes that reorder, add, or delete a primary city
name.\1\ The area definitions based on 2000 Census data have the
advantages of providing more relevant commuting interchange standards
and more current measures of housing market relationships than those
based on 1990 Census data and used prior to the FY2006 FMRs.
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\1\ The change from Sarasota-Brandenton-Venice, FL MSA to
Bradenton-Sarasota-Venice, FL MSA includes a change in the primary
city name and a change in the metropolitan code from 42260 to 14600.
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At HUD's request, the Census Bureau prepared a special publicly
releasable census file that permits almost exact replication of HUD's
2000 Base Rent calculations, except for areas with few rental units.
This data set is located on HUD's HUD USER Web site at http://

[[Page 56640]]

www.huduser.org/datasets/fmr/CensusRentData/.

A. Data Sources--2000 Census and American Community Survey

FY2009 FMRs are based on changes in rents measured by differences
in ACS data collected in 2005 and 2006 and updated with CPI data. For
FY2008 FMRs, HUD developed 2005 rent estimates based on updating 2000
Census gross rent data with more current survey data from the Census
Bureau's 2005 ACS, the first full year of implementation for the ACS.
FY2009 FMRs use data from the 2006 ACS to update these 2005 rent
estimates. While the Census Bureau intends for the ACS to replace the
Decennial Census sample ``long form'' for collecting detailed
socioeconomic data, the ACS has several important distinctions from the
decennial long form. These include:
The ACS is conducted on a continuous ``rolling'' basis
throughout the year, so survey responses do not correspond to a
particular date, whereas the long form responses were as of the Census
date of April 1. This has implications for the ``as-of'' date assumed
for ACS-based rents. The ``as-of'' date for ACS-based rents is set at
June 30 of the ACS year.
The ACS has an initial sample size (before non-response
attrition) of about one-fifth that of the decennial long form, which
surveyed approximately one out of every six households. This means that
an adequate sample size for one-year ACS data will be available only
for very large population geographic areas, and that data for smaller
areas will be accumulated over 3 or 5 years to form the basis of
decennial long-form-equivalent estimates.
As detailed in the notices announcing the proposed and final FY2008
FMRs, HUD replaced the accumulated 2001 through 2005 FMR update factors
from various sources with 2005 ACS data. The preamble for the final
FY2008 FMR Notice (72 FR 55940) provides a description of how the 2005
ACS data, and in some cases Random Digit Dialing surveys (RDDs)
conducted in 2001 through 2005, were used in the FY2008 FMRs. Further
details regarding the calculation of FY2008 FMRs are available using
HUD's online Final FY2008 Documentation System, available at http://www.huduser.org/datasets/fmr/fmrs/index.asp?data=fmr08.

B. Updates From 2005 to 2006

State or local 2006 ACS data are used to update a June 2005-
calculated gross rent from the FY2008 FMRs to June 2006. The same
categories of use, depending upon the sizes of the available rental
unit samples in the FMR areas, were applied to the 2006 ACS data as had
been applied to the 2005 data. There are two exceptions to the
similarity of processing 2005 ACS data and 2006 ACS data. First, the
update factor reflecting changes in rents for the parts of the state
not included in FMR areas covered by local ACS data was discontinued
for two reasons: (1) The variance in rent change between 2005 and 2006
for these areas was much larger than that for full states and it was
not clear whether these changes reflected differences in markets or
area composition, or if they reflected survey anomalies; and (2) basing
an underlying geography on factors that change annually (such as the
identity of FMR areas covered by local ACS data) and which cannot be
determined until the survey data have been processed presents a
complexity that could not be resolved in a manner that allowed for
timely delivery of data. Consequently, for FY2009, all state-based
update factors are calculated for the entire state.
Second, HUD-defined ``HMFAs'' in metropolitan areas (CBSAs) where
no subarea uses the CBSA gross rent as the basis of its FMR, are no
longer tested to determine which update factor, the state or the CBSA,
brings the subarea closer to the CBSA. The state update factor is now
used for these cases. This change was made because review of the data
and discussions with field economists indicated that forcing these
subareas toward CBSA-area values moved the rent in the wrong direction.

C. Updates From 2006 to 2007

The 2006 ACS data brought the 2005 data used in the FY2008 FMRs
forward by 12 months to June 2006. The CPI is used to update the June
2006 FMRs to the end of 2007. Local CPI data are used for FMR areas
with at least 75 percent of their population within Class A
metropolitan areas covered by local CPI data. Census region CPI data
are used for FMR areas in Class B and C size metropolitan areas and
nonmetropolitan areas without local CPI update factors.

D. Updates From 2007 to 2009

The national 1990 to 2000 average annual rent increase trend of 3
percent (1.03) is applied to end-of-2007 rents for 1.25 years, to
derive the final FY2009 FMRs.

E. Additional Rent Surveys and Other Data

In early 2008, surveys were conducted in several areas of Wyoming,
Colorado, Utah, and Texas where, as a result of increased oil and gas
drilling activity, housing agencies have experienced significant rental
housing market pressure. Most of these areas have experienced several
years of problems managing the voucher program. These surveys show that
rents in these areas are higher than previously estimated. All of these
surveys met HUD standards for statistical significance (i.e., the
survey result trended to April 2008 was statistically different from
the April 2008 FY2008 FMRs at a 95 percent level of confidence). These
RDD survey results became effective in FY2008 with the publication of
the proposed FY2009 FMRs.
Three additional RDD surveys are underway. HUD is currently
conducting surveys in New Orleans, Hattiesburg, MS and Pearl River
County, MS in its ongoing effort to monitor rental housing markets in
Katrina and Rita affected areas because of HUD's concern about FMR
accuracy in these fluid housing markets and at the request of local
PHAs. Results from these surveys will be published as soon as they are
available.
The area-specific data and computations used to calculate proposed
FY2009 FMRs and FMR area definitions can be found at http://www.huduser.org/datasets/fmr/fmrs/index.asp?data=fmr09.

F. Large Bedroom Rents

FMR estimates are calculated for two-bedroom units. This generally
is the most common size of rental units, and therefore the most
reliable to survey and analyze. After each decennial census, rent
relationships between two-bedroom units and other unit sizes are
calculated and used to set FMRs for other units. This is done 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. This was last
done using 2000 Census data. A publicly releasable version of the data
file used that permits derivations of rent ratios is available at
http://www.huduser.org/datasets/fmr/CensusRentData/index.html. Rent
ratio derivations are also shown in the FMR documentation system at
http://www.huduser.org/datasets/fmr/fmrs/index.asp?data=fmr09.
The rents for three-bedroom and larger units continue to reflect
HUD's policy to set higher rents for these units than would result from
using normal 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

[[Page 56641]]

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.
A further adjustment was made using 2000 Census data in
establishing rent ratios for areas with local bedroom-size intervals
above or below what are considered to be reasonable ranges or where
sample sizes are inadequate to accurately measure bedroom rent
differentials. HUD's 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). Bedroom interval ranges were established based on an
analysis of the range of such intervals for all areas with large enough
samples to permit accurate bedroom ratio determinations. The ranges
used were: Efficiency units are constrained to fall between 0.65 and
0.83 of the two-bedroom FMR; one-bedroom units must be between 0.76 and
0.90 of the two-bedroom unit; three-bedroom units must be between 1.10
and 1.34 of the two-bedroom unit; and four-bedroom units must be
between 1.14 and 1.63 of the two-bedroom unit. Bedroom rents for a
given FMR area were then adjusted if the differentials between bedroom-
size FMRs were inconsistent with normally observed patterns (i.e.,
efficiency rents were not allowed to be higher than one-bedroom rents
and four-bedroom rents were not allowed to be lower than three-bedroom
rents).
For low-population, nonmetropolitan counties with small census
recent-mover rent samples, census-defined county group data were used
in determining rents for each bedroom size. This adjustment was made to
protect against unrealistically high or low FMRs due to insufficient
sample sizes. The areas covered by this estimation method had less than
the HUD standard of 200 two-bedroom census-tabulated observations.

V. Public Comments

A total of 26 public comments were received on the proposed FY2009
FMRs. Over one-half of these comments were from housing agencies in
Vermont and Maine and they expressed concern with managing the recent
sharp increase in the cost of fuel oil, which is the primary heating
fuel in these states. Although the FY2009 FMRs for most areas in
Vermont represent an increase of more than 9 percent, the comments
stated that this increase was not sufficient. In Maine, there was no
effective increase in the FY2009 FMRs and they were also seeking relief
from the heating fuel increases. HUD reviewed data on heating fuel
increases from the Department of Energy's Energy Information
Administration and from the Bureau of Labor Statistics Consumer Price
Index. Both data sources show an increase of approximately 70 percent
in residential fuel oil costs compared with last winter. Approximately
30 percent of this increase is included in the 2007 CPI that is used in
calculating the FY2009 FMRs. The remaining 40 percent increase in fuel
oil costs could be incorporated by using the CPI through June of 2008,
replacing 6 months of trend. Using the updated rent and utility CPI
through June 2008, however, results in less than a 2 percent increase
in the FMR for these areas. This is because utility costs are not a
significant share of the gross rent; a change in one component of
utility costs does not result in a significant change in rent.
Comments concerning Greensboro, NC and New York City included data;
however, these data are not acceptable. None of the data were
sufficient to determine new FMRs. The Greensboro, NC data included
average rents by housing type and bedroom size based on a small amount
of survey data. There were three major problems with this submission.
First, actual data was not submitted, only average rents. FMRs are
based on 40th percentile rents not on average rents. Without actual
data, it is not possible to determine the 40th percentile rent for this
area. Using a percentile point within a distribution reduces survey
problems with unusually high or low rents and allows smaller samples to
be used. Second, the sample size was not sufficient to determine the
reliability of the estimate. There must be sufficient information to
justify any proposed changes to HUD's estimation of FMRs. Third, there
was no documentation on how the survey was conducted so there was no
way to determine if the sample was random. Recommendations and
supporting data must reflect the rent levels that exist within the
entire FMR area. The data must be statistically significant, and
newspaper ads are specifically excluded. The qualifications on the
acceptance of data and conducting statistically significant surveys
were discussed in the preamble to the proposed FMRs and should be
followed when providing comments.
New York City submitted its rent stabilization report that was the
basis of a 4.5 percent increase for rent stabilized units in FY2009.
The 4.5 percent increase is based on ensuring increases in landlords'
operating costs are met. The FY2009 FMR for New York City shows no
increase from FY2008 to FY2009. However, as submitted in their comment,
rent stabilization increases in New York City have been 3.5 percent,
2.75 percent, 4.25 percent, 3 percent and 4.5 percent from 2003 to
2008, for a total of 19.3 percent. Two-bedroom FMRs in New York City
have experienced a 22.9 percent increase during the same period. New
York's justification for an increase in FMRs is that new voucher
holders will have a difficult time finding units at the same amount as
last year, when rent stabilization landlords are getting a 4.5 percent
increase in rents. However, they do not comment on the level of the
FMR, nor do they provide data to support the contention that the final
FMR for New York City should be higher than the proposed FMR.
A comment filed by the National Association of Home Builders (NAHB)
made three specific requests: (1) Limit all FMR decreases to 5 percent
or, conduct RDD surveys in all areas with increases of more than 5
percent; (2) improve the description of the methodology used by HUD to
control for the presence of inadequate and subsidized units; and (3)
clarify HUD's intentions for 50th percentile re-evaluation and notify
areas about success rate payment standards. The NAHB also commended HUD
on its continuing FMR bonus for Katrina and Rita impacted areas.
FY2009 proposed FMRs include two areas that experience more than a
5 percent decline in FMRs. One is Providence, RI, whose decline is a
result of the loss of the 50th percentile FMR, and the other is Santa
Barbara-Santa Maria, CA. HUD is required by law to use the most recent,
reliable data available in estimating FMRs. Limiting either increases
or decreases would be counter to the law as HUD interprets and
implements it. There is no reason to assume that such declines do not
occur as rents and utilities change over time. Proposed FMRs for both
Providence and Santa Barbara are based on local ACS surveys with
significantly larger samples than would be achievable with an RDD.
Conducting an RDD

[[Page 56642]]

would use scarce resources to produce less reliable data than that
available from the ACS. In addition, no comments were filed by any
party within either of the two areas.
In response to the NAHB request for a full description of HUD's
methodology in establishing its cutoff rent at the 75th percentile of
the regional public housing rent, HUD has added the methodology of the
cutoff rent as a link in our FY2009 FMR documentation system.
In response to the NAHB request that HUD use firmer language to
describe its intentions with respect to 50th percentile areas, firmer
language has been added to this preamble. HUD commends the NAHB for
being mindful of small PHAs who might not be aware of the success rate
payment standard policy and reiterates here that all of the rules and
conditions for becoming eligible for and for maintaining eligibility of
50th percentile status are given in 24 CFR 888.113 and 24 CFR 982.503,
including the rules applying to the success rate payment standard.
The Council of Large Public Housing Authorities (CLAPHA), the
Housing Authority of Baltimore and the Fairfax County Redevelopment and
Housing Authority all commented on the loss of the 50th percentile FMR.
CLAPHA and Baltimore are primarily concerned that the methodology used
to evaluate the reporting rates for Moving-to-Work (MTW) agencies is
faulty and should be reviewed. HUD has reviewed its methodology and
found that this is the case. There is MTW data available that was not
used in the initial FY2009 50th percentile evaluation. The three areas
designated as failing to meet an 85 percent reporting rate, do meet
this reporting rate with inclusion of MTW data; however, the data also
show that all three areas (Baltimore, New Haven, and Washington, DC)
failed to deconcentrate over the three-year period from 2005 to 2008.
Failure to deconcentrate eliminates an area from eligibility for three
years, while failure to report eliminates an area only until they have
85 percent reporting, at which point, the three year deconcentration
clock starts over again. This error was found too late to provide an
opportunity for the parties to be notified and to comment on, so these
three areas will lose their 50th percentile FMR status for the FY2009
FMRs, but will be reviewed for a new three-year 50th percentile FMR
program beginning with the FY2010 FMRs. Public housing authorities
impacted by the loss of 50th percentile status are referred to 24 CFR
982.503(f), which provides payment standard protection for PHAs that
meet deconcentration objectives.
The Mansfield Housing Authority, representing three towns in
southern Connecticut that are part of the Hartford-West Hartford-East-
Hartford, CT MSA, requested higher FMRs and referred us to its comments
filed in the FY2008 FMRs. Last year we suggested that they look into
exception rents for these towns and determine if they would qualify.
This year we evaluated the towns and determined that Storrs would
qualify for an exception at 111 percent and Coventry would qualify for
an exception at 116 percent. Mansfield does not qualify for an
exception rent. The Housing authority could request that PIH grant
exceptions for the other towns, if it can show there is a program need.
The City of San Jose Housing Department and Menola Land, LLC from
Billings, Montana both submitted comments that their FMRs were too low
but neither comment contained sufficient data that could be used to re-
evaluate proposed FMRs and adjust them.

VI. Manufactured Home Space Surveys

The FMR used to establish payment standard amounts for the rental
of manufactured home spaces in the Housing Choice Voucher 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. HUD modified manufactured home space FMRs for Seattle-
Bellevue, WA, based on 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
FY2008 were updated to FY2009 using the same data used to estimate the
Housing Choice Voucher program FMRs if the respective FMR area's
definition remained the same. If the result of this computation was
higher than 40 percent of the re-benchmarked 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. Areas with definitional
changes that previously had exceptions to their manufactured housing
space rental FMRs are requested to submit new surveys to justify
higher-than-standard space rental FMRs if they believe higher space
rental allowances are needed.

VII. HUD Rental Housing Survey Guides

For the supporting data, HUD recommends the use of professionally
conducted RDD telephone 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 $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. In addition, HUD has developed
a version of the RDD survey methodology for smaller, nonmetropolitan
PHAs. This methodology is designed to be simple enough to be done by
the PHA itself, rather than by professional survey organizations, at a
cost of $5,000 or less.
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
will 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 above the
combined rent level.
PHAs that plan to use the RDD survey technique should obtain a copy
of the appropriate survey guide. Larger PHAs should request HUD's
survey guide entitled ``Random Digit Dialing Surveys; A Guide to Assist
Larger Public Housing Agencies in Preparing Fair Market Rent
Comments.'' Smaller PHAs should obtain the guide entitled ``Rental
Housing Surveys: A Guide to Assist Smaller Public Housing Agencies in
Preparing Fair Market Rent Comments.'' These guides, in Microsoft Word
format, are available from HUD USER at HUD's Web site at the following
address: http://www.huduser.org/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

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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 decennial census should be used as a
means of verifying if a sample is representative of the FMR area's
rental housing stock.
Most surveys of FMR areas cover only one- and two-bedroom units. If
the survey is statistically acceptable, HUD will estimate FMRs for
other bedroom sizes using ratios based on the decennial census. 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.
Accordingly, the Fair Market Rent Schedules, which will not be
codified in 24 CFR Part 888, are amended as follows:

Dated: September 22, 2008.
Darlene F. Williams,
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--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. The
FY2009 FMRs reflect a change in metropolitan area definitions. HUD is
using the metropolitan Core Based Statistical Areas (CBSA), which are
made up of one or more counties, as defined by the 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 FY2009. 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 sub-areas
are established, it is HUD's view 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 Metropolitan Statistical
Areas or MSAs) may be modified to allow for sub-area 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 FY2005 FMRs.
Collectively, they include 1999 definition MSAs/PMSAs, metropolitan
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.) Sub-areas of MSAs
are assigned their own FMRs when the sub-area 2000 Census Base Rent
differs by at least 5 percent from the MSA 2000 Census Base Rent (i.e.,
by at most 95 percent or at least 105 percent), or when the 2000 Census
Median Family Income for the sub-area differs by at least 5 percent
from the MSA 2000 Census Median Family Income. MSA sub-areas, and the
remaining portions of MSAs after sub-areas have been determined, are
referred to as HUD Metro FMR Areas (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 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 rents for manufactured home spaces FMRs are listed
alphabetically in Schedule D.
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 nonmetropolitan county listings.
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[FR Doc. E8-22793 Filed 9-26-08; 8:45 am]
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