![](media/image1.emf){width="0.5659722222222222in"
height="0.5493055555555556in"} **U.S. Department of Housing and Urban
Development**

Office of Public and Indian Housing

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Special Attention of: **Notice PIH 2002-20 (HA)**

Public Housing Directors; Issued: August 15, 2002

Field Economists; Public Housing Expires: Indefinite

Agencies Administering Section 8
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Programs Cross References:

Notice PIH 2000-46 (HA)

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**Subject: Housing Choice Voucher Program - Area Exception Payment**

**Standard Review and Reporting Instructions**

**1. [PURPOSE]{.underline}**. This Notice explains how area exception
payment standard amounts are determined and reviewed, and provides an
overview of changes specified in the housing choice voucher program.
Also, included are reporting instructions for approved area exceptions.

> An "exception payment standard amount" is a payment standard amount on
> the public housing agency (PHA) payment standard schedule that exceeds
> 110 percent of the published fair market rent (FMR). The exception
> payment standard amount is used for units in a designated part of an
> FMR area. Use of an exception payment standard amount must be approved
> by HUD.

**2. [APPLICABILITY]{.underline}.** This Notice is applicable to public
housing agencies (PHAs) administering the housing choice voucher
program.

**3. [DEFINITIONS]{.underline}.**

> *Basic range*. Payment standard amount at a level between
>
> 90 percent and 110 percent of the published FMR.

*Exception area*. A designated part of an FMR area.

> *Exception payment standard amount*. A payment standard
>
> amount that exceeds 110 percent of the published FMR.
>
> *Payment standard*. The maximum monthly assistance payment for a
> family assisted in the voucher program (before deducting the total
> tenant payment by the family).
>
> *Payment standard schedule*. The payment standard schedule
>
> establishes payment standard amounts by unit size (number
>
> of bedrooms) for each FMR area in the PHA jurisdiction.
>
> *Place.* An incorporated place or a U.S. Census designated place. An
> incorporated place is established by State law and includes cities,
> boroughs, towns and villages. A U.S. Census designated place is the
> statistical counterpart of an incorporated place.
>
> *Special exception*. Exception payment standard amount at
>
> a level above 120 percent of the published FMR.
>
> *Upper range*. Exception payment standard amount at a level
>
> from above 110 percent to 120 percent of the published FMR.

**4. [POLICY]{.underline}.** HUD publishes the FMRs for each market area
in the United States. The PHA must adopt a payment standard schedule
that establishes voucher payment standard amounts for each FMR area in
the PHA jurisdiction. For each FMR area, the PHA must establish payment
standard amounts for each unit size (number of bedrooms). The PHA
voucher payment standard schedule shall establish a single payment
standard amount for each unit size. For each unit size, the PHA may
establish a single payment standard amount for the whole FMR area, or
may establish a separate payment standard amount for designated parts of
the FMR area.

Under the housing choice voucher program (24 CFR 982.503(b)), the PHA
may establish the payment standard amount at any level between 90
percent and 110 percent of the published FMR (basic range) for all or
any part of the FMR area. The HUD field office, upon request from a PHA,
may approve a payment standard amount below 90 percent of the published
FMR or from above 110 percent to 120 percent of the published FMR (upper
range) for a designated part of the FMR area (called an exception area).
In addition, the law now permits exceptions above 120 percent of the
published FMR ("special exceptions") for a designated part of the FMR
area. Special exceptions must be approved by the Assistant Secretary for
Public and Indian Housing.

> Further, exception payment standards may be approved for manufactured
> home space rentals.
>
> Use of exception payment standard amounts results in increased per
> unit costs for the PHA housing choice voucher program. These increased
> costs will be reflected in the amount of budget authority for renewal
> funding increments approved by HUD in accordance with the Renewal of
> Expired Annual Contributions Contracts Final Rule, published in the
> [Federal Register]{.underline} on October 21, 1999. The PHA must
> monitor its program expenditures to ensure that it continues to
> operate within the funding levels available under its consolidated
> annual contributions contract.
>
> The following summarizes major provisions of the housing choice
> voucher program rule on HUD approval of exception payment standard
> amounts (attachment 1 contains the full rule text):
>
> **a. Field Office Approval of Exception Payment Standard Amounts from
> 110 Percent to 120 Percent of Published FMR.**
>
> \(1\) Upon request from a PHA, the HUD field office may approve an
> exception payment standard amount from above 110 percent to 120
> percent of the published FMR for a designated part of the FMR area.
>
> \(2\) The HUD field office may approve an exception payment standard
> amount for all units or for all units of a given unit size (number of
> bedrooms) leased in a designated exception area.
>
> \(3\) The total population of all exception payment standard areas in
> an FMR area may not include more than 50 percent of the total
> population of the FMR area.
>
> \(4\) The field office will determine area exception payment standards
> by either of the two following methods.
>
> \(a\) [Median Rent Method]{.underline}. The HUD field office may
> approve an exception payment standard amount (not exceeding 120
> percent of the published FMR) equal to the amount calculated by
> multiplying the FMR by the ratio of the median gross rent of the
> exception area to the median of the entire FMR area.
>
> \(b\) [40th or 50th Percentile Rent Method]{.underline}. The HUD field
> office may approve an exception payment standard amount (not exceeding
> 120 percent of the published FMR) that equals either the 40^th^ or
> 50^th^ percentile of rents for standard quality rental housing in the
> exception area. The HUD field office determination of the 40th or 50th
> percentile rent amount must be based on statistically representative
> rental housing survey data provided by the PHA. The 40th or 50th
> percentile rent method can be used if the field office believes that
> rent relationships between the exception area and the entire FMR area
> have changed substantially since the most recent census.
>
> \(5\) HUD will not approve an area exception payment standard amount
> unless it is needed for the following program-related reasons:
>
> \(a\) To enable families to find housing outside areas of high poverty
> (this provision may also apply to families seeking to retain housing
> in areas outside high poverty areas); or
>
> \(b\) Because voucher holders have trouble finding housing for lease
> under the program within the term of the voucher.
>
> \(6\) Any PHA with jurisdiction in the exception area may use the
> HUD-approved exception payment standard amount.
>
> \(7\) HUD may withdraw or modify any approved area exception payment
> standard.
>
> **b. Headquarters Approval of Special Exception Payment Standard
> Amounts Above 120 Percent of the Published FMR.**
>
> \(1\) At the request of a PHA, the Assistant Secretary for Public and
> Indian Housing (PIH) may approve a special exception above 120 percent
> of published FMR for the **total area** of a county, PHA jurisdiction,
> or place if it is determined that all of the following are applicable:
>
> \(a\) such approval is necessary to prevent financial hardship for
> families,
>
> \(b\) such approval is supported by census rent differentials or
> statistically representative rental housing survey data (as described
> in paragraph 4a(4), above) to justify HUD approval in accordance with
> the methodology described in 24 CFR Part 888.113, and

c.  such approval is also supported by an appropriate program-related
    justification listed under paragraph 4a(5) above.

> \(2\) The population within all exception rent areas in an FMR area
> may not include more than 50 percent of the total population of the
> FMR area. This limitation includes all exceptions of more than 110
> percent of the published FMR, including special exceptions of more
> than 120 percent, but excluding exceptions for manufactured home space
> rents.
>
> \(3\) HUD will not approve an exception payment standard amount unless
> the area exception payment standard is needed for the following
> program-related reasons:
>
> \(a\) To enable families to find housing outside areas of high poverty
> (this provision may also apply to families seeking to retain housing
> in areas outside high poverty areas); or
>
> \(b\) Because voucher holders have trouble finding housing for lease
> under the program within the term of the voucher.
>
> \(4\) Use of a special exception payment standard may not result in
> the participants paying less than total tenant payment. If the gross
> rent is less than the special exception payment standard, the housing
> assistance payment is equal to the gross rent minus the total tenant
> payment.
>
> \(5\) HUD will only approve a special exception after 6 months from
> the date of HUD approval of a 120 percent exception payment standard
> for the total area of a county, PHA jurisdiction, or place.

6.  The PHA must submit documentation that demonstrates approval of the
    special exception is necessary to prevent financial hardship for
    families in the exception area, e.g., the number of program
    participants residing in the exception area(s) as well as the
    average rent burden for these families.

7.  

> \(7\) Any PHA with jurisdiction in the exception area may use the
> HUD-approved exception payment standard amount.
>
> \(8\) HUD may withdraw or modify any approved area exception payment
> standard.
>
> **c. Field Office Approval of Exception Payment Standard Amounts Below
> the Basic Range**.
>
> \(1\) The HUD field office may approve an exception payment standard
> amount that is lower than the basic range (below 90% of the published
> FMR) upon request by a PHA. The data sources (census or survey) used
> to justify an approval of exception payment standard amounts below the
> basic range are the same as the data used for exception payment
> standard amounts from 110 percent to 120 percent of the published FMR.
>
> \(2\) The HUD field office will consider appropriate factors,
> including rent burden of participant families. The HUD field office
> will not approve a payment standard below the basic range if the
> family share for more than 40 percent of the participants in the PHA's
> voucher program for applicable unit sizes exceeds 30 percent of
> adjusted monthly income. The field office may use the PHA's most
> recent examinations of family income to make this determination.

**d. Exceptions for Manufactured Home Space Rents.**

> \(1\) The PHA may set the payment standard within 90 to 110 percent of
> the published FMR for manufactured home spaces, for any or all of the
> space rentals in its area, without HUD approval. The PHA must request
> HUD approval of exception payment standard amounts below 90 percent or
> above 110 percent of the published FMR.
>
> \(2\) Geographic area exception payment standards for manufactured
> home spaces may be set for areas not to exceed 50 percent of the FMR
> area's population, in the range from above 110 to 120 percent of the
> fair market rent for manufactured home space rentals. Such exception
> payment standards must be supported by current survey information
> covering all or most of the manufactured home spaces in the exception
> area. The exception payment standard is the 40th or 50th percentile of
> the distribution of gross pad rents---pad rent plus the cost of
> tenant-paid utilities. If desired, the survey may use the expected
> cost of utilities based on the PHA's utility allowance schedule.
>
> \(3\) The 50 percent population limitation for manufactured home space
> rents is managed separately from the 50 percent population limitation
> for the regular housing choice voucher program.

**5. [ROLES AND RESPONSIBILITIES]{.underline}.**

> a*.* **[Approval of Payment Standard Amounts from 110 to 120 percent
> of Published FMR.]{.underline}** Area exception payment standard
> amounts are to be approved by the HUD field office public housing
> director based on the field economist's review and determination that
> the PHA documentation supports an increase in payment standard
> amounts. Public housing staff will determine if the program-related
> reason for the request is justified. The field economist will provide
> the relevant census rent data to the PHA upon request and review the
> PHA submission for consistency with these data. The field economist
> will also review and recommend approval of requests for which rental
> housing survey data are submitted to document the current 40th or 50th
> percentile rent of the exception area.
>
> The field economist will notify the public housing director of the
> percent of the population of the FMR area that is included in the
> exception area. After approval, the public housing staff will notify
> all PHAs having jurisdiction in the exception area of the approved
> exception payment standard amounts.
>
> **b. [Approval of Special Exception Payment Standard Amounts Above 120
> percent of Published FMR]{.underline}.** The roles and
> responsibilities of the field office public housing director and the
> field economist in reviewing the PHA request for exception payment
> standard amounts are the same except that field economists are
> responsible only for reviewing the requirements cited in paragraphs
> 4b(1)(b) and (2). Field office public housing staff will conduct the
> review for the other requirements in paragraph 4b. When the field
> office review is completed, the package must be forwarded to the
> Assistant Secretary for PIH, Office of Public and Assisted Housing
> Delivery, Attention: Real Estate and Housing Performance Division
> (REHPD) for approval. The cover memorandum must provide a brief
> discussion of the issues, justification for the request and the field
>
> office's recommendation. The cover memorandum must also include a
> signature block for the Assistant Secretary's approval or disapproval.
> REHPD will notify the Director of the Office of Public Housing of the
> approval or disapproval of the request or of modifications, if any, to
> the request. After approval, the public housing staff will notify all
> PHAs having jurisdiction in the exception area of the approved
> exception payment standard amounts.

**6. [REVIEW INSTRUCTIONS FOR ALL EXCEPTION PAYMENT STANDARD AMOUNTS
ABOVE AND BELOW THE BASIC RANGE]{.underline}**. All requests for area
exception payments standard amounts will be reviewed to ensure that the
following requirements are met:

> a\. The PHA has identified the area covered by the exception payment
> standard amount(s). The exception area should be generally equivalent
> to a submarket of the FMR area, and must be defined in terms of census
> boundaries, e.g., a county within a multi-county FMR area, an
> incorporated place, a minor civil division, or an aggregation of
> contiguous census tracts (with a list of the individual tracts). An
> exception area should not consist of a single census tract, except
> possibly in a nonmetropolitan area where one tract may comprise a
> major part of the community or a relatively large area comparable to a
> submarket. The field economist can assist the PHA if help is needed in
> relating the exception area to census geography.
>
> b\. After the PHA has identified the exception area, the field
> economist will inform the PHA and PIH staff of the 1990 census rent
> differential between the exception area and the FMR area. The basis
> for this comparison is the ratio of the median gross rent (including
> utilities) of all rental units in the exception area to the median
> gross rent of all units in the FMR area. When several areas are being
> combined into one exception area, a weighted average of the median
> gross rent should be computed, using the number of occupied rental
> units as the weight. Requests may be for all bedroom size categories
> or for individual bedroom size categories. If the sample size permits,
> it is acceptable to compute exception payment standards for specific
> bedroom sizes.
>
> See Attachment 2A for sources of Census data.
>
> **c.** In most cases, PHAs will find that 1990 Census rents can be
> used to document the exception percentage. If the PHA has a strong
> reason to believe that the rent relationship between the exception
> area and the FMR area has changed significantly since the 1990 Census,
> it may conduct a rental housing survey of the area it wishes to have
> approved as an exception area. Such surveys generally are to be
> carried out in accordance with the statistical survey standards for
> FMR comments. Before advising the PHA to undertake one of these
> surveys, the field economist should contact Headquarters EMAD to
> discuss the specific circumstances and survey alternatives. If the
> exception area is relatively small, the survey standards possibly can
> be relaxed. Also, if the area has had a random digit dialing (RDD)
> survey, it may be possible to use the results as the basis for an
> exception.
>
> d\. For areas with FMRs based on State minimum FMRs, the area
> exception rent percentage will be the difference between the census
> relationship and the State minimum adjustment. (For example, if a
> county's FMR has already been increased by 5% through use of the State
> minimum, and the census gross rent for the exception area is 16% above
> the entire FMR area, the exception can only be for 11%.) Headquarters
> EMAD will supply a list of these adjustments.
>
> e\. The PHA request must document the program-related reason why the
> payment standard exception is being requested and provide supporting
> information.
>
> \(1\) For area exception payment standard amounts intended to help
> families move from high poverty areas, the PHA must provide
> information showing that program units are being found mostly in high
> poverty areas, that there are very few assisted families in the area
> for which the exception is being requested, and that voucher holders
> cannot find units in the area.
>
> \(2\) For area exception payment standard amounts requested because
> voucher holders are having difficulty finding housing, the PHA will
> want to include documentation showing that the percentage of units
> under lease is low and has been falling. A leasing rate below 90
> percent is generally considered to be low. A historic series showing
> the monthly experience of the current year and the annual experience
> of recent years can be used to make this point. Another scenario for
> documenting the need for this type of exception would be to show that
> the success rate of voucher holders is low. Based on the last major
> study, the national experience has been that 87 percent of voucher
> holders become participants. PHAs may also want to document that a
> large percentage of voucher holders have been granted voucher term
> extensions in a recent period, for example the last 6 months to a
> year, and how the percentage has increased from previous experience.
>
> \(3\) For area exception payment standards amounts requested to
> prevent financial hardships for program participants, the PHA will
> want to include documentation on rent burdens for all program families
> residing in the exception area and in the PHA jurisdiction outside any
> requested or approved exception areas. This documentation should show
> what the projected rent burdens for these families would be if the
> requested area exception payment standard amounts are approved.
>
> The preceding is illustrative of the types of information HUD
> considers acceptable for documenting the need for area exception
> payment standard amounts. It is not meant to be definitive and should
> not preclude the evaluation of other relevant information submitted by
> PHAs.
>
> However, a program-related reason cannot be to raise payment standards
> to satisfy the FMR requirements of a specific project. Area exceptions
> payments standard amounts are intended to help voucher holders expand
> their areas of housing opportunities, not to provide relief for
> individual projects.
>
> f\. The request must be reviewed by the field economist to ensure that
> no more than 50 percent of the population of the FMR area will be
> covered by the requested exception area and all existing exception
> areas. **(This review is not required for exception areas for which
> exception payment standard amounts are approved below the basic
> range).** If the exception area is included within the jurisdiction of
> more than one HUD office, the field economists will have to coordinate
> with each other to ensure that all exceptions approved for the
> exception area do not exceed 50 percent of the population. In
> exception areas where there are likely to be more requests for
> exceptions than can be approved, the field economists and public
> housing
>
> directors should prioritize these requests, for example, by giving
> priority to PHAs with large numbers of program units and the highest
> prevailing rent levels.

g.  Each exception approved below the basic range (below 90 percent) or
    in the upper range (from 110 to 120 percent), and the associated
    information, are to be entered by the field economist on one of the
    worksheets attached to this notice. Copies of the worksheet must be
    sent to the Supervisory/Regional Economist and to Headquarters EMAD
    at the time of the approval. Supervisory/Regional Economists are
    responsible for monitoring all exceptions approved to ascertain that
    they comply with the above requirements.

**9. [EFFECTIVE DATE AND RENEWAL]{.underline}.**

> a\. Area exception payments standards are effective upon the approval
> date. At the request of the PHA, they may be renewed at the Census
> rent differential or RDD-based percentage differential when higher
> FMRs are published for effect in the [Federal Register]{.underline} if
> the PHA provides documentation describing that program-related
> circumstances continue to require the exception.
>
> b\. In accordance with the program rule, HUD may withdraw or modify
> approval to use an exception payment standard amount at any time.
> Among the reasons that HUD may choose to modify an exception payment
> standard amount are:
>
> \(1\) the PHA has provided new information about program needs;
>
> \(2\) there is new information about rent relationships among
> sub-areas of the FMR area;
>
> \(3\) or there are competing exception areas that would result in over
> 50 percent of the FMR area's population being covered.
>
> The field office public housing director has the authority to withdraw
> or modify all exceptions.

**10. [RELATIONSHIP OF CURRENT EXCEPTIONS TO REDUCTIONS IN FMR LEVEL OR
STANDARD]{.underline}.**

> a\. When FMRs are reduced, the field economist should monitor each FMR
> area to assure that previously approved exceptions based on census
> intervals are reduced proportionately. In this instance, approval
> letters must be re-issued to PHAs.
>
> b\. Exceptions for areas that have documented their actual rents
> through a survey should remain at the same dollar level, even if the
> FMR decreases and the exception percentage goes over 120 percent.

**11. [CURRENT LIST OF APPROVED AREA EXCEPTION RENTS]{.underline}.** A
current list of approved area exception rents entered in the
Headquarters EMAD database can be obtained by contacting the local HUD
field office.

**12. [FURTHER INFORMATION]{.underline}.** Any program-specific
questions pertaining to the housing choice voucher program should be
addressed to the Real Estate and Housing Performance Division in the
Office of Public and Assisted Housing Delivery, at (202) 708-0477.
Questions related specifically to the approval of area exception payment
standards (e.g., rental housing survey data, exception areas) should be
directed to the Economic and Market Analysis Division in the Office of
Economic Affairs, at (202) 708-0590.

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Michael Liu, Assistant Secretary

for Public and Indian Housing

**Attachments**

**[Attachment 1]{.underline}** is an excerpt of the housing choice
voucher program rule.

**[Attachment 2]{.underline}** provides three versions of the worksheet
and instructions for reporting the exceptions.

**[Attachment 2A]{.underline}** is the form that has been used in the
past. It is most useful when there is only one exception area in an FMR
area. If desired, this form may be filled out in Excel format.

Sources of census data are shown in the instructions below. However,
even if there is only one exception area in an FMR area, the use of
Attachments 2B or 2C which contain the same information in a form that
is easier for HUD's record keeping is recommended.

[**Attachment 2B** **and 2C**]{.underline} are Excel worksheets intended
for reporting multiple exceptions within an FMR area (they may also be
used to report single exceptions). In addition to summarizing all
exceptions in one easy-to-read page, it greatly simplifies data entry
and processing for all concerned. It can also be printed and filled out
manually, but the range and edit checks built into the Excel spreadsheet
would then be inactive. In

Attachment 2B, the exception percent is entered, and the worksheet
computes the exception dollar amounts. Attachment 2C is similar except
that the exception dollar amounts are entered, and the worksheet
computes the percentages.

**Attachment 1: Excerpts from housing choice voucher program rule**[^1]

**[Section 982.503 Voucher tenancy: Payment standard amount and
schedule]{.underline}**

\...

\(c\) *[HUD approval of exception payment standard amount]{.underline}*.
(1) HUD discretion. At HUD\'s sole discretion, HUD may approve a payment
standard amount that is higher than the basic range for a designated
part of the fair market rent area (called an \`\`exception area\'\').
HUD may approve an exception payment standard amount in accordance with
this paragraph (c) of this section for all units, or for all units of a
given unit size, leased by program families in the exception area. Any
PHA with jurisdiction in the exception area may use the HUD-approved
exception payment standard amount.

\(2\) *[Above 110 percent of FMR to 120 percent of published
FMR]{.underline}.* (i) The HUD Field Office may approve an exception
payment standard amount from above 110 percent of the published FMR to
120 percent of the published FMR (upper range) if the HUD Field Office
determines that approval is justified by either the median rent method
or the 40th or 50th percentile rent method as described in paragraph
(c)(2)(i)(B) of this section (and that such approval is also supported
by an appropriate program justification in accordance with paragraph
(c)(4) of this section). The PHA may establish an exception payment
standard amount from above 110 percent of the published FMR to 120
percent of the published FMR, in accordance with paragraph (c)(2)(iii)
of this section, without requesting approval from HUD.

\(A\) *[Median rent method]{.underline}.* In the median rent method, HUD
determines the exception payment standard amount by multiplying the FMR
times a fraction of which the numerator is the median gross rent of the
exception area and the denominator is the median gross rent of the
entire FMR area. In this method, HUD uses median gross rent data from
the most recent decennial United States census, and the exception area
may be any geographic entity within the FMR area (or any combination of
such entities) for which median gross rent data is provided in decennial
census products.

\(B\) *[40th or 50th percentile rent method]{.underline}.* In this
method, HUD determines that the area exception payment standard amount
equals either the 40th or 50th percentile of rents for standard quality
rental housing in the exception area. HUD determines whether the 40th or
50th percentile rent applies in accordance with the methodology
described in Sec. 888.113 of this title for determining FMRs. A PHA must
present statistically representative rental housing survey data to
justify HUD

approval.

\(ii\) The HUD Field Office may approve an exception payment standard
amount within the upper range if required as a reasonable accommodation
for a family that includes a person with disabilities.

\(iii\) Until September 30, the PHA may establish an exception payment
standard amount for all or part of an FMR area in accordance with
maximum payment standard amounts published in the Federal Register
between September 25, 2000 and September 30, 2001 without requesting HUD
approval, under the following conditions:

\(A\) The payment standard amounts referenced in paragraph (c)(2)(iii)
are the maximum payment standard amounts until October 1, 2001 unless
HUD has approved the PHA\'s establishment of a higher payment standard
amount;

\(B\) The PHA\'s establishment of the maximum payment standard amounts
in paragraph (c)(2)(iii)(A) of this section does not result in a payment
standard amount that is greater than 120% of the published FMR;

\(C\) The PHA has adopted a new utility allowance schedule after October
1, 2000 which reflects that the total cost of all utilities for a
typical two-bedroom unit has increased by more than ten percent based on
the difference between the new utility allowance schedule and the
previous schedule; and

\(D\) The current payment standard amounts are not adequate to meet
increased utility costs at 100% of the FMR.

\(3\) *[Above 120 percent of FMR]{.underline}.* (i) At the request of a
PHA, the Assistant Secretary for Public and Indian Housing may approve
an exception payment standard amount for the total area of a county, PHA
jurisdiction, or place if the Assistant Secretary determines that:

\(A\) Such approval is necessary to prevent financial hardship for
families;

\(B\) Such approval is supported by statistically representative rental
housing survey data to justify HUD approval in accordance with the
methodology described in Sec. 888.113 of this title; and

\(C\) Such approval is also supported by an appropriate program
justification in accordance with paragraph (c)(4) of this section.

\(ii\) For purposes of paragraph (c)(3) of this section, the term
"place" is an incorporated place or a U.S. Census designated place. An
incorporated place is established by State law and includes cities,
boroughs, towns, and villages. A U.S. Census designated place is the
statistical counterpart of an incorporated place.

\(4\) *[Program justification]{.underline}.* (i) HUD will only approve
an exception payment standard amount (pursuant to paragraph (c)(2) or
paragraph (c)(3) of this section) if HUD determines that approval of
such higher amount is needed either:

\(A\) To help families find housing outside areas of high poverty, or

\(B\) Because voucher holders have trouble finding housing for lease
under the program within the term of the voucher.

\(ii\) HUD will only approve an exception payment standard amount
(pursuant to paragraph (c)(3) of this section) after six months from the
date of HUD approval of an exception payment standard pursuant to
paragraph (c)(2) of this section for the area.

\(5\) *[Population]{.underline}.* The total population of HUD-approved
exception areas in an FMR area may not include more than 50 percent of
the population of the FMR area.

\(6\) *[Withdrawal or modification.]{.underline}* At any time, HUD may
withdraw or modify approval to use an exception payment standard amount.

\(7\) *[Transition: Area exception rents approved prior to merger
date]{.underline}*. Subject to paragraph (c)(6) of this section, the PHA
may establish an exception payment standard amount up to the amount of a
HUD-approved area exception rent in effect at the merger date.

\(d\) HUD approval of payment standard amount below the basic range. HUD
may consider a PHA request for approval to establish a payment standard
amount that is lower than the basic range. At HUD\'s sole discretion,
HUD may approve PHA establishment of a payment standard lower than the
basic range. In determining whether to approve the PHA request, HUD will
consider appropriate factors, including rent burden of families assisted
under the program. HUD will not approve a lower payment standard if the
family share for more than 40 percent of participants in the PHA\'s
voucher program exceeds 30 percent of adjusted monthly income. Such
determination may be based on the most recent examinations of family
income.

\(e\) *[HUD approval of success rate payment standard
amounts]{.underline}*. In order to increase the number of voucher
holders who become participants, HUD may approve requests from PHAs
whose FMRs are computed at the 40th percentile rent to establish higher,
success rate payment standard amounts. A success rate payment standard
amount is defined as any amount between 90 percent and 110 percent of
the 50th percentile rent, calculated in accordance with the methodology
described in Sec. 888.113 of this title.

\(1\) A PHA may obtain HUD Field Office approval of success rate payment
standard amounts provided the PHA demonstrates to HUD that it meets the
following criteria:

\(i\) Fewer than 75 percent of the families to whom the PHA issued
rental vouchers during the most recent 6 month period for which there is
success rate data available have become participants in the voucher
program;

\(ii\) The PHA has established payment standard amounts for all unit
sizes in the entire PHA jurisdiction within the FMR area at 110 percent
of the published FMR for at least the 6 month period referenced in
paragraph (e)(1)(i) of this section and up to the time the request is
made to HUD; and

\(iii\) The PHA has a policy of granting automatic extensions of voucher
terms to at least 90 days to provide a family who has made sustained
efforts to locate suitable housing with additional search time.

\(2\) In determining whether to approve the PHA request to establish
success rate payment standard amounts, HUD will consider whether the PHA
has a SEMAP overall performance rating of "troubled". If a PHA does not
yet have a SEMAP rating, HUD will consider the PHA\'s SEMAP
certification.

\(3\) HUD approval of success rate payment standard amounts shall be for
all unit sizes in the FMR area. A PHA may opt to establish a success
rate payment standard amount for one or more unit sizes in all or a
designated part of the PHA jurisdiction within the FMR area.

\(f\) *[Payment standard protection for PHAs that meet deconcentration
objectives.]{.underline}* Paragraph (f) of this section applies only to
a PHA with jurisdiction in an FMR area where the FMR had previously been
set at the 50th percentile rent to provide a broad range of housing
opportunities throughout a metropolitan area, pursuant to Sec.
888.113(c), but is now set at the 40th percentile rent.

\(1\) Such a PHA may obtain HUD Field Office approval of a payment
standard amount based on the 50th percentile rent if the PHA scored the
maximum number of points on the deconcentration bonus indicator in Sec.
985.3(h) in the prior year, or in two of the last three years.

\(2\) HUD approval of payment standard amounts based on the 50th
percentile rent shall be for all unit sizes in the FMR area that had
previously been set at the 50th percentile rent pursuant to Sec.
888.113(c). A PHA may opt to establish a payment standard amount based
on the 50th percentile rent for one or more unit sizes in all or a
designated part of the PHA jurisdiction within the FMR area.

\(g\) *[HUD review of PHA payment standard schedules.]{.underline}* (1)
HUD will monitor rent burdens of families assisted in a PHA\'s voucher
program. HUD will review the PHA\'s payment standard for a particular
unit size if HUD finds that 40 percent or more of such families
occupying units of that unit size currently pay more than 30 percent of
adjusted monthly income as the family share. Such determination may be
based on the most recent examinations of family income.

\(2\) After such review, HUD may, at its discretion, require the PHA to
modify payment standard amounts for any unit size on the PHA payment
standard schedule. HUD may require the PHA to establish an increased
payment standard amount within the basic range.

INSERT ATTACHMENT 2

**ATTACHMENT 2A**

**WORKSHEET INSTRUCTIONS FOR REPORTING AREA FMR EXCEPTIONS**

Line 1. Field Office Name.

Line 2. Name of the FMR area in which the exception area is

> located (PMSA, MSA, or nonmetro county and State abbreviation).

Line 3. Name of the exception area, recording its definition

> in terms of census boundaries; for example, a listing of the county,
> incorporated place, minor civil division, or census tracts. If the
> area requires more than 24 characters to describe, summarize in 24
> characters or less and, on a separate sheet, describe the area
> precisely.

Line 4. Date the exception was approved.

Line 5. Population of the exception area. You should use

the 1990 census population, because that number is

used for database-matching purposes. (Do not use

updated numbers, as they cause confusion.

Census data may be obtained in several ways:

1.  The Census Bureau's Web site

(**http://venus.census.gov/cdrom/lookup**, STF3A

tables P3 (persons) and H43A (median gross

rent);

2.  Headquarters EMAD mainframe system for STF3A;

3.  Census publications:

CP-1: Population, except metropolitan areas

CP-1-1B: Population, metropolitan areas

CH-2: Gross rent, except metropolitan areas

CH-2-1B: Gross rent, metropolitan areas

4\. Community 2020 mapping software

Line 6. Population of the entire FMR area (see Line 5 for

data sources.)

Line 7. Calculate the percentage of population in the

exception area to the population in the FMR area

(line 5 divided by line 6.)

Line 8. Total population of all approved exception areas

within the FMR area.

Line 9. Calculate the percentage of population of all

exception areas within the FMR area to the popula-

tion of the entire FMR area (line 8 divided by the

line 6).

Line 10. Enter the approved exception rents for the area on

line 10a. Enter the FMRs in effect at the time the

exception was approved on line 10b. Calculate the

percentage by which the exception exceeds the FMR

by bedroom size (a divided by b) and enter the

results on line 10c.

Line 11. Check the basis of this exception---census or local

survey data?

INSERT ATTACHMENTS 2a,2b, and 2c

[^1]: 24 CFR Parts 982 Section 8 Tenant-Based Assistance: Housing Choice
    Voucher Program, [Code of Federal Regulations]{.underline}, April 1,
    2002.