22122 Federal Register / Vol. 76, No. 76 / Wednesday, April 20, 2011 / Notices 

Dated: March 29, 2011. 

Joseph F. Smith, 

General Deputy Assistant Secretary for 

Housing—Federal Housing Commissioner. 

[FR Doc. 2011–9504 Filed 4–19–11; 8:45 am] 

BILLING CODE 4210–67–P 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

[Docket No. FR–5413–N–02] 

Section 8 Housing Choice Voucher 

Program—Demonstration Project of 

Small Area Fair Market Rents in 

Certain Metropolitan Areas, Discussion 

of Comments, and Request for 

Participation 

AGENCY: Office of the Assistant 

Secretary for Policy Development and 

Research, HUD. 

ACTION: Final notice establishing the 

Small Area Fair Market Rent (FMR) 

Demonstration Project and requesting 

participation from metropolitan public 

housing agencies. 

SUMMARY: Today’s notice provides 

HUD’s responses to comments filed in 

response to a May 18, 2010, notice (75 

FR 27808) announcing HUD’s intent to 

operate a small area FMR demonstration 

project in several metropolitan areas. 

The purpose of this demonstration 

project is to provide voucher holders 

with the opportunity to move to areas of 

greater opportunity. This notice 

provides additional details regarding the 

operation of the tenant-based Housing 

Choice Voucher (HCV) program in areas 

selected to participate in the 

demonstration, establishes the criteria 

for selecting public housing agencies 

(PHAs) for participation in the 

demonstration, and requests interested 

PHAs to apply for participation in the 

demonstration according to instructions 

published in this notice. Metropolitan 

PHAs that would like to participate in 

the small area FMR demonstration 

project may apply, as discussed later in 

this notice, with an anticipated 

selection date of July 1, 2011. In order 

to assess the impact of the 

demonstration, participating PHAs will 

be expected to provide HUD with 

additional data specified in this notice 

beyond what is normally required. 

DATES: Date to request participation in 

demonstration: June 6, 2011. 

ADDRESSES: Interested persons are 

invited to request participation in the 

small area FMR demonstration by 

submitting a request to the Office of 

General Counsel, Rules Docket Clerk, 

Department of Housing and Urban 

Development, 451 Seventh Street, SW., 

Room 10276, Washington, DC 20410– 

0001. Communications should refer to 

the above docket number and title and 

should contain the information 

specified in the ‘‘Request to Participate’’ 

section. 

Public Inspection of Requests. All 

requests to participate submitted to 

HUD will be available, without charge, 

for public inspection and copying 

between 8 a.m. and 5 p.m. weekdays at 

the above address. Due to security 

measures at the HUD Headquarters 

building, an advance appointment to 

review the requests to participate must 

be scheduled by calling the Regulations 

Division at 202–708–3055 (this is not a 

toll-free number). 

FOR FURTHER INFORMATION CONTACT: For 

technical information on the 

methodology used to develop small area 

FMRs, please contact Peter B. Kahn or 

Marie L. Lihn, Economic and Market 

Analysis Division, Office of Economic 

Affairs, Office of Policy Development 

and Research, telephone number 202– 

708–0590 (this is not a toll-free 

number). Persons with hearing or 

speech impairments may access this 

number through TTY by calling the tollfree Federal Information Relay Service 

at 800–877–8339. The small area FMR 

dataset, Federal Register notices, and 

links to participation requests (as well 

as comments to the original May 18, 

2010, notice) are available on the HUD 

Web site at http://www.huduser.org/

portal/datasets/fmr.html. The HUD 

USER information line at 800–245–2691 

may answer questions on this 

information. (Other than the TDD 

numbers and the HUD USER 

information line, telephone numbers are 

not toll free.) 

Electronic Data Availability: This 

Federal Register notice is available 

electronically from the HUD User Web 

site at http://www.huduser.org/portal/

datasets/fmr.html. Federal Register 

notices also are available electronically 

at http://www.gpo.gov/fdsys/browse/ 

collection.action?collectionCode=FR, 

the U.S. Government Printing Office 

Web site. A system for looking up small 

area FMRs based on Final Fiscal Year 

(FY) 2011 FMRs is available at http://

www.huduser.org/portal/datasets/fmr/

fmrs/index_sa.html. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Section 8 of the United States 

Housing Act of 1937 (42 U.S.C. 1437f) 

(USHA) authorizes housing assistance to 

aid lower-income families in renting 

safe and decent housing. In the HCV 

program, the FMR is the basis for 

determining the ‘‘payment standard 

amount’’ used to calculate the maximum 

monthly subsidy for an assisted family 

(see 24 CFR 982.503). In general, the 

FMR for an area is the amount that 

would be needed to pay the gross rent 

(shelter rent plus utilities) of privately 

owned, decent, and safe rental housing 

of a modest (nonluxury) nature with 

suitable amenities. In addition, all rents 

subsidized under the HCV program 

must meet reasonable rent standards. 

Currently, FMRs are calculated for all 

nonmetropolitan counties and 

metropolitan areas. The same FMR is 

available throughout a nonmetropolitan 

county or metropolitan area, which 

generally is comprised of several 

metropolitan counties. FMRs in a 

metropolitan area represent the 40thpercentile (or in special circumstances 

the 50th-percentile) gross rent of the 

entire HUD-defined metropolitan area. 

PHAs may set a payment standard 

within 90 percent to 110 percent of the 

FMR. PHAs may determine that 

payment standards that are higher than 

110 percent, or lower than 90 percent, 

are needed to make the HCV program 

work in subareas of their market; in 

such an instance, a PHA would request 

HUD approval for a payment standard 

below 90 percent or an exception 

payment standard above 110 percent. 

This request could not represent more 

than 50 percent of the population of the 

area (see 24 CFR 982.503). 

On May 18, 2010, HUD published a 

notice in the Federal Register (75 FR 

27808) seeking public comment on a 

small area FMR demonstration project. 

Today’s notice discusses those 

comments and provides an opportunity 

for PHAs to volunteer for the 

demonstration project that will begin 

later in FY 2011. 

The Housing Choice Voucher (HCV) 

program is the only HUD program 

where small area FMRs will be used 

during the demonstration. All other 

programs must use the area-wide FMRs 

listed in Schedule B of the current FMR 

Federal Register notice (75 FR 61253, 

October 4, 2010). HUD expects that 

small area FMRs will provide HCV 

tenants with greater ability to move into 

opportunity areas, which are where 

jobs, transportation, and educational 

opportunities exist, and will reduce 

undue subsidy in lower-rent areas. 

Small area FMRs will alter some 

administrative responsibilities of PHAs 

that administer HCV programs, but it is 

unclear what the net effect on 

administrative costs will be. A copy of 

the Federal Register notice announcing 

this program can be accessed at http:// 

www.huduser.org/portal/datasets/fmr/

fmr2010f/Small_Area_FMRs.pdf. 


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Federal Register / Vol. 76, No. 76 / Wednesday, April 20, 2011 / Notices 22123 

II. Discussion of Public Comments 

In response to its notice seeking 

comments on HUD’s proposal to 

establish a small area FMR 

demonstration project, HUD received 19 

comments by the close of the comment 

period on July 19, 2010. HUD requested 

comments on specific questions. These 

questions and other issues raised by the 

commenters that concern the small area 

FMR demonstration project will be 

addressed in this section. 

Most of the commenters support the 

small area FMR demonstration project, 

noting that it provides real benefits to 

HCV program participants. 

Opposition to Demonstration From 

PHAs Operating in Nonmetropolitan 

Counties 

Comments: Two PHA administrators 

of nonmetropolitan housing agencies 

expressed opposition to the 

implementation of small area FMRs. 

One was concerned about the increased 

administrative burden of administering 

so many more payment schedules with 

the ‘‘rollout’’ of small area FMRs 

nationally; the other was concerned 

about covering the costs of portability 

when a small area FMR is significantly 

above the current area-wide FMR. 

HUD Response: For the first 

commenter, it should be noted that even 

with a national rollout of small area 

FMRs, HUD does not plan to extend this 

new policy to nonmetropolitan 

counties. This means that the number of 

payment standards will not increase in 

such areas, which should alleviate this 

concern. 

Regarding the second comment 

concerning portability, voucher 

portability and funding replacement are 

components of the HCV program 

regardless of the geography over which 

FMRs are defined. FMRs and payment 

standards vary considerably across the 

country under current policy, so a 

tenant may already move from a lowpayment standard area to a highpayment standard area. The extent to 

which small area FMRs would make 

this issue a larger problem is not clear. 

Small area FMRs are intended to 

provide HCV holders with greater access 

to all parts of metropolitan areas and 

more opportunity to find suitable 

housing. Portability is an important 

component of the HCV program, and 

any limitations placed on portability 

would negatively impact tenants’ ability 

to obtain decent housing. 

Opposition to and Concern Over 

Demonstration Because FMRs Are Used 

in Financing Affordable Projects 

Comments: A commenter expressed 

opposition to the small area FMR 

demonstration project, on the basis that 

rental properties that have been 

developed and operated under federal 

and state housing programs may be 

adversely impacted. Such programs 

target affordable housing development 

to distressed areas as part of a plan to 

foster redevelopment and stabilize 

neighborhoods. Rents are restricted to 

ensure that they are affordable to very 

low- and low-income households. These 

projects have little additional cash flow 

available after paying debt service and 

operating costs, to absorb unanticipated 

negative shocks. For properties that rely 

on HCV use to support long-term 

financing, a permanent hold-harmless 

provision was recommended. 

Other commenters, while not opposed 

to the demonstration project, asked 

HUD to apply small area FMRs to the 

HCV program and other programs 

carefully, as there could be serious 

unintended consequences. Specifically, 

several commenters were concerned 

with the application of small area FMRs 

to project-based voucher (PBV) 

developments and other projects that 

use FMRs for rents. 

HUD Response: During the 

demonstration, the HCV program is the 

only program that will use small area 

FMRs, and only in those areas, and by 

those PHAs, selected for the 

demonstration. To address the concerns 

regarding project-based vouchers 

(PBVs), PBV units for which a notice-ofowner selection was issued in 

accordance with 24 CFR 983.51(d), as of 

the effective date of the PHA’s 

participation in the demonstration, will 

not be subject to the small Area FMRs. 

This includes PBVs that are currently 

under a Housing Assistance Payment 

(HAP) contract. The area-wide FMRs 

will continue to apply to these PBV 

units, thus ensuring the viability of PBV 

projects that were in the development 

pipeline and had obtained financing 

based on area-wide FMRs. However, any 

PBVs for which a notice-of-owner 

selection is issued after the PHA is 

selected to participate in the 

demonstration will be subject to the 

small area FMRs. PHAs interested in 

project-based units and owners 

interested in participating in the PBV 

program after a PHA is participating in 

the demonstration should be aware of 

the small area FMRs in place, and 

owners will be able to project costs and 

plan accordingly. HUD will monitor this 

issue closely throughout the 

demonstration, will continue to assess 

the likely impact of small area FMRs on 

other programs, and will provide 

another opportunity for public comment 

on the issue at a future date. 

Opposition to Use of 2000 Census Data 

in Determining Small Area FMRs 

Comment: Several commenters asked 

HUD to delay the small area FMR 

demonstration project until the 5-year 

American Community Survey (ACS) 

data are published. The notice 

announcing the demonstration project 

specified HUD would use 2000 Census 

data to determine the small area FMRs 

for the demonstration project. Many 

commenters were concerned that the 5- 

year data would be significantly 

different from the 2000 Census data and 

that significant adjustment to the small 

area FMRs would be disruptive. One 

commenter wanted HUD to update 

FMRs every 3 years rather than every 5 

years, because he stated that most of the 

new data is available on a 3-year basis. 

HUD Response: HUD intends to use 

the 5-year ACS data to calculate small 

area FMRs for PHAs participating in the 

demonstration. However, due to timing, 

the special tabulations of 5-year ACS 

data that are required for calculating 

small area FMRs are not available with 

the publication of this notice requesting 

applications for the small area FMR 

demonstration. Therefore, PHAs that 

choose to apply for the demonstration 

based on the rent data currently 

available that are selected for 

participation in the demonstration will 

be given the opportunity to opt out of 

the demonstration after reviewing the 

small area FMRs calculated using the 5- 

year ACS data. Due to the nature of the 

ACS, it is unlikely that 3-year 

tabulations of data will be available for 

all metropolitan ZIP Codes. Therefore, 

HUD has not requested special 

tabulations of 3-year data. 

Length of Demonstration Unclear 

Comments: Several commenters 

stated that HUD has been unclear about 

the length of the demonstration project. 

Most commenters agreed that the 

demonstration project has to be for more 

than 2 years, because existing tenants 

will not feel the impact of small area 

FMRs until their second recertification. 

Several commenters requested that the 

demonstration project last 5 years. One 

commenter did not feel the need to 

establish a demonstration project and 

urged HUD to change to small area 

FMRs without testing the impact. 

HUD Response: At a minimum, PHAs 

selected to participate in the 

demonstration will operate using small 

area FMRs for the HCV program until 

FY 2013. 


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Opposition to Demonstration Because 

Voucher Holders May Pick Very 

Expensive Neighborhoods 

Comment: One commenter appeared 

to oppose the concept of small area 

FMRs, noting that HCV holders may 

choose housing in high-income areas, 

where rents may be as high as the 80th 

percentile of the metropolitan area 

rents. The commenter said that this rent 

is inappropriate, because deeply 

assisted housing serves only 25 percent 

of the households eligible for housing 

assistance. 

HUD Response: The purpose of the 

small area FMR demonstration is to 

expand the options available to HCV 

holders within participating 

metropolitan areas. Small area FMRs 

will be approximately the 40th 

percentile rent in each ZIP Code area. 

Small area FMRs are calculated using 

the relationship of the ZIP Code-based 

rent and the core-based statistical area 

(CBSA) rent as applied to the 40th 

percentile FMR for that metropolitan 

area. In addition, as noted in the 

following section, small area FMRs will 

be capped at 150 percent of the 

metropolitan area FMR. If the voucher 

holder’s selected unit passes the rent 

reasonableness determination, HUD has 

no objection to the tenant renting the 

unit in question. In fact, giving tenants 

access to previously inaccessible 

neighborhoods is an intended outcome 

of the small area FMR demonstration. 

Implementation of the Small Area FMRs 

Comment: Although HUD requested 

comments specifically concerning caps 

and floors, many commenters 

sidestepped this issue, instead asking 

HUD to phase-in decreases for small 

area FMRs. Some commenters suggested 

that HUD allow increases in FMRs 

immediately but wait for the family’s 

second re-examination for decreases to 

take effect. Several other commenters 

noted that the proposed legislation 

known as the Section Eight Voucher 

Reform Act (SEVRA) includes an annual 

phase-in policy of 10 percent and 

requested that this methodology be 

followed for the small area FMR 

demonstration project. Some preferred a 

lower phase-in level of 5 percent per 

year. 

HUD Response: HUD agrees that there 

should be a phase-in of decreases in the 

small area FMR demonstration project, 

and the proposed caps and floors will be 

consistent with the Department’s longterm vision for the Section 8 HCV 

program. Consequently, HUD will 

impose a 10 percent floor on annual 

decreases in small area FMRs under the 

demonstration project. There will be no 

additional annual cap except for the 150 

percent cap on the ratio of the ZIP Code 

area to the FMR area, as discussed 

below. 

Items Where HUD Specifically 

Requested Comments 

1. Should HUD Institute caps and floors 

on small area FMRs? The current cap is 

150 percent of the metropolitan FMR, 

and the current floor is the state 

nonmetropolitan minimum FMR. Are 

these appropriate, or should they be 

changed or eliminated? 

Comments: Several commenters 

suggested that a 150 percent cap seemed 

arbitrary. There were suggestions to 

establish a national rather than a local 

FMR cap, or to establish area-specific 

caps based on the 90th FMR percentile. 

HUD was urged to study the use of the 

150 percent cap to ensure that few areas 

had FMRs set at below-market rents. 

Few commenters addressed the issue of 

a floor on small area FMRs. Those 

commenters approved of the use of the 

state minimum FMR as a floor. 

HUD Response: HUD intends to 

maintain the state minimum as its small 

area FMR floor in conjunction with 

current practice. Based on 2000 

Decennial Census data, the 150 percent 

cap applies to approximately 170 of the 

more than 17,000 metropolitan ZIP 

Codes, so the 150 percent cap would not 

meaningfully restrict voucher tenants’ 

choices. While this cap is only in effect 

for a small percentage of small areas, 

HUD intends to maintain the 150 

percent cap during the demonstration 

project as one mechanism for ensuring 

that HCV program funds are used as 

judiciously as possible. 

2. Should HUD revise the 50thpercentile FMR policy or eliminate it, 

and why? 

Comments: Many commenters 

supported the continued use of 50thpercentile FMRs, calculated on the basis 

of the core-based statistical area (CBSA) 

or the metropolitan Statistical Area 

(MSA). One commenter noted that HUD 

should develop regulations that allow 

the use of higher FMRs when local 

market conditions reduce program 

success rates and utilization. One 

commenter felt that the use of 50thpercentile FMRs would no longer be 

necessary once small area FMRs are 

used by all metropolitan areas. 

However, HUD was cautioned to be 

careful in transitioning these areas to 

40th-percentile FMRs. 

HUD Response: HUD will base small 

area FMRs on the 40th-percentile rent. 

From a practical standpoint, the 

regulatory standard for qualifying for a 

50th-percentile FMR (i.e., there must be 

at least 100 census tracts in the FMR 

area) is not one that will be met by 

PHAs if they are selected to participate 

in the small area FMR demonstration 

project since there are no ZIP Code areas 

with at least 100 census tracts. In 

addition, in certain small area FMR 

demonstration project ZIP Codes, FMRs 

could increase by as much as 50 percent 

in a single year. Contrast this with the 

increase from a 40th- to a 50thpercentile FMR, which without 

exception results in a 7 to 8 percent 

increase in FMRs. HUD will not 

eliminate the 50th-percentile policy for 

metropolitan FMR areas not 

participating in the small area FMR 

demonstration project. 

3. Are there any instances where an 

exception payment standard policy 

might still be useful? 

Comments: Most commenters 

supported the continuation of exception 

payment standards, not only for 

nonmetropolitan areas once the program 

is rolled out nationally, but for 

metropolitan areas where there are 

substantial rent differences within a ZIP 

Code. Several commenters cited ZIP 

Codes in their service areas where 

exception payment standards would be 

helpful. In addition, commenters want 

to be sure that HUD continues to issue 

special exception payment standards for 

disabled tenants or for disaster areas. 

HUD Response: Exception payment 

standards are a valuable tool available to 

PHAs to further assist tenants in finding 

suitable homes. Small area FMRs are 

also intended to provide tenants with 

access to portions of metropolitan areas 

where previous FMRs have been 

insufficient. With respect to PHAs 

chosen to participate in the 

demonstration project, HUD would like 

to work directly with such agencies to 

determine appropriate areas for 

exception payment standards. The 

regulations regarding family requests for 

exception payment standards as a 

reasonable accommodation for a person 

with disabilities will continue to apply. 

4. Do small area FMRs increase the 

administrative burden of PHAs, and, if 

so, how can the burden be reduced? 

Comments: Tenant advocacy groups 

either did not address the issue or 

assumed administrative burden changes 

would not be significant, because rent 

reasonableness studies may no longer be 

required. PHAs and their advocacy 

groups were, for the most part, 

concerned about an increase in 

administrative burden, with some 

advocating an increase in administrative 


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Federal Register / Vol. 76, No. 76 / Wednesday, April 20, 2011 / Notices 22125 

fees for agencies participating in the 

small area FMR demonstration project. 

One commenter suggested that HUD 

eliminate the rent reasonableness 

requirement for PHAs using small area 

FMRs to ensure that their administrative 

burden is reduced. In most cases, PHAs 

operating in large cities produce a single 

set of payment standards, so moving to 

dozens or even hundreds of different 

FMRs without eliminating rent 

reasonableness will significantly 

increase administrative burden. Another 

commenter stated that HUD should be 

able to use the ZIP Code FMRs in place 

of rent reasonableness determinations 

and that HUD should evaluate whether 

rent reasonableness studies will be 

required in the future. 

HUD Response: Since rent 

reasonableness is a statutory 

requirement, HUD cannot eliminate or 

waive it. Additionally, although 

demonstration project FMRs will be 

based on ZIP Codes, the wide variation 

in housing quality and rents within ZIP 

Codes mean that PHAs must continue to 

conduct rent reasonableness 

determinations. However, as part of the 

evaluation of the demonstration, HUD 

will evaluate whether the small area 

FMRs reduce the number of units with 

rents outside an initial rent 

reasonableness determination. 

5. Is the proposed rounding protocol of 

$25 appropriate, or should small area 

FMRs be rounded to a larger or smaller 

amount? 

Comments: FMRs are currently 

rounded to the nearest dollar; several 

commenters did not want this to 

change. One commenter supported the 

proposed rounding protocol to the 

nearest $25, as a measure that helps 

reduce administrative burdens for 

PHAs. No commenter specifically 

addressed the question of whether state 

minimums and small area FMRs should 

be rounded before application or 

addressed the timing of subsequent 

rounding. 

HUD Response: HUD believes there 

are several benefits to rounding small 

area FMRs. These include, but are not 

limited to, reducing the number of 

payment standards PHAs will have to 

administer and limiting the year-to-year 

fluctuations that adding new survey 

data annually is likely to impose. HUD 

also recognizes that in some cases, 

rounding to the nearest 25 dollars may 

be too large and contribute to the annual 

fluctuation in FMRs that HUD is trying 

to alleviate. For example, if in year one, 

the unrounded small area FMR is $512, 

with 25 dollar rounding the published 

FMR would be $500. If in the next year, 

the unrounded FMR is $513, the 

rounded value would be $525—a 5 

percent change for a $1 change in the 

underlying rent. Therefore, in order to 

maintain the benefits of rounding small 

area FMRs while limiting the impact of 

rounding, HUD will round small area 

FMRs to the nearest 10 dollars. 

6. Should the demonstration be open to 

smaller metropolitan areas than those 

meeting the size criterion for 50thpercentile FMR eligibility? 

Comments: Several public interest 

group commenters suggested that 

smaller metropolitan areas be allowed to 

participate in the demonstration project; 

however, the only comments received 

from small, nonmetropolitan areas were 

opposed to rolling out small area FMRs 

in their communities. The issue of 

portability and the reimbursement for 

higher FMRs was of great concern to 

several commenters representing small 

PHAs. One commenter noted that PHAs 

do not necessarily know if their FMR 

area meets the size criterion for 50thpercentile FMR eligibility (100 census 

tracts) and asked HUD to provide this 

information. 

HUD Response: HUD will not limit 

participants in the demonstration 

project to those in areas of 100 census 

tracts or more, because HUD recognizes 

that eligibility to participate in the 

Demonstration project must result in a 

representation of the range of 

metropolitan areas. 

7. Should affordable housing 

concentration criterion be a 

consideration in the selection of 

participating areas? 

Comments: One commenter 

considered this as a worthwhile 

criterion and requested that HUD 

provide information on poverty and 

racial concentration by ZIP Code. 

HUD Response: HUD must select 

areas with as many different 

characteristics as possible to try to learn 

as much as possible about 

implementation issues that would occur 

with a national rollout of small area 

FMRs (though limited to metropolitan 

areas). Additionally, HUD plans to 

study the effect of the demonstration on 

PHAs, tenants, landlords, program costs, 

etc. Therefore, it will be important to 

have a diverse selection of participants. 

The selection criteria for participation 

in the demonstration project are 

enumerated below in the ‘‘Small Area 

FMR demonstration Details’’ section of 

this notice. 

8. Is the 80 percent-of-voucher-tenants 

standard for applicants’ eligibility to 

participate in the demonstration project 

appropriate? 

Comments: Several commenters 

requested that this requirement be 

relaxed. One large PHA noted that its 

market area did not meet the 80 percentof-voucher-tenants criteria and that 

other PHAs in its metropolitan area 

would have less need for small area 

FMRs. 

HUD Response: HUD’s initial 

rationale for suggesting that PHAs 

representing 80 percent of voucher 

holders in a metropolitan area must 

agree to participate in the demonstration 

project before being allowed to 

participate was based on the premise 

that small area FMRs would be set for 

the entire metropolitan area, not just for 

the PHAs that desire participation. This 

requirement, however, has changed so 

that now only those PHAs in the 

metropolitan area that agree to 

participate in the demonstration project 

will set their FMRs at the small area 

FMR. Other PHAs in the metropolitan 

area will continue to use the area-wide 

FMR. The specific selection criteria are 

discussed in the ‘‘Small Area FMR 

Demonstration Details’’ of this notice, 

but the 80 percent threshold is no longer 

a minimum criteria. 

9. Is demonstrated past use of multiple 

payment standards an appropriate 

criterion for participation? 

Comments: Several commenters 

contend that past or current use of 

multiple payment standards should not 

be a factor in determining which FMR 

areas are selected for the small area 

FMR demonstration project. 

Commenters stressed that for the 

demonstration project to be valid, it 

should be as representative as possible 

of the subset of PHAs in large 

metropolitan areas that will eventually 

use small area FMRs. 

HUD Response: Because of their 

experience, PHAs already operating 

with multiple payment standards 

should be able to implement small area 

FMRs relatively easily. However, to 

ensure that HUD selects a diverse set of 

PHAs and areas, while avoiding any 

notion of preselection preference, this 

criterion will not be used as a 

preference for selecting demonstration 

participants. Please see the section titled 

‘‘Small Area FMR Demonstration 

Details’’ of this notice for specific details 

regarding the selection of participants. 

III. Small Area FMR Methodology 

In calculating small area FMRs, HUD 

will use the methodology set forth in the 


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22126 Federal Register / Vol. 76, No. 76 / Wednesday, April 20, 2011 / Notices 

1For ZIP Codes that cross county boundaries, the 

Median Gross Rent in the numerator is calculated 

as the rental unit weighted average of the Median 

Gross rents for each county containing the ZIP 

Code. 

2The current decennial data is not robust enough 

to lead HUD to believe that updating bedroom ratios 

on a more frequent basis would provide meaningful 

changes. The current bedroom ratios are 

constrained by ranges that reflect the average 

relationship to the two-bedroom rent and, for the 

three-bedroom and four-bedroom rents, bonuses 

have been added to assist with the operation of the 

Section 8 HCV program. 

May 18, 2010, Federal Register notice 

announcing the demonstration, with the 

following changes: (1) HUD intends to 

use the 5-year ACS data to calculate 

small area FMRs for the demonstration 

project, and (2) HUD will round small 

area FMRs to the nearest $10 instead of 

the nearest $25. In summary, HUD will 

calculate a rental rate ratio for each ZIP 

Code area within a metropolitan area in 

the following manner: 

Rental Rate Ratio = Median Gross Rent 

for ZIP Code area/Median Gross Rent 

for CBSA 

If the ZIP Code within the CBSA does 

not have 1,000 cash rental units, then 

the rental rate relationship is calculated 

as: 

Rental Rate Ratio = Median Gross Rent 

STCO/Median Gross Rent of the CBSA 

where STCO is the county within the 

state containing the ZIP Code.1 For 

metropolitan areas, FMRs will be 

calculated and published for each small 

area. HUD chose ZIP Codes because 

they localize rents, and a unit’s ZIP 

Code is easily identifiable by PHAs, 

landlords, and tenants. 

The individual ZIP-Code-level, twobedroom FMR for each part of the FMR 

area is the product of the rental rate 

ratio and the two-bedroom FMR for that 

area’s CBSA, as calculated using 

methods employed for past 

metropolitan area FMR estimates (for a 

description of the methodology 

currently in place to calculate FMRs, 

please see HUD’s Federal Register 

notice (75 FR 61254) announcing Final 

FY 2011 FMRs). HUD then compares 

this product to the state 

nonmetropolitan minimum, twobedroom rent for the state in which the 

area is located and, if the ZIP Code rent 

determined using the rental rate ratio is 

less than the minimum, the ZIP Code 

rent is set at the nonmetropolitan 

minimum for that state. HUD will 

calculate the relationship between twobedroom units and other bedroom sizes 

from the 5-year ACS for the 

metropolitan area for the large area of 

geography. HUD anticipates updating 

the bedroom rental rate ratios once 

every 5 years when the 5-year ACS 

sample is replaced.2 As discussed in the 

‘‘Response to Comments’’ section, the 

final calculated rents are then rounded 

to the nearest $10. Small area FMRs 

based on 2000 Decennial Census data 

and Final FY 2011 FMRs for all 

metropolitan areas are available for 

viewing and download from the Internet 

at http://www.huduser.org/portal/

datasets/fmr.html. 

IV. Small Area FMR Demonstration 

Details 

Selection of Participants 

In the May 18, 2010, notice, HUD 

proposed that entire CBSAs be named 

demonstration areas (i.e., all PHAs 

operating in the CBSA would 

participate, whether all PHAs apply or 

not). The primary reason for this was to 

facilitate comparison of participating 

CBSAs to nonparticipating CBSAs. 

However, HUD has determined that the 

demonstration will be served best by 

PHAs that actively volunteer to 

participate. Therefore, only PHAs that 

apply will take part in the 

demonstration, but a preference will be 

given to areas where a larger share of 

PHAs covering a larger share of HCV 

tenants in the area apply to participate. 

The following lists the selection 

criteria for participation: 

1. Percentage of Voucher Tenants in 

the CBSA Covered by applying PHAs 

(calculated by HUD using HUD’s 

administrative data). [Weighted 35 

percent]; 

2. Percentage of PHAs in the CBSA 

Covered by applying PHAs in the CBSA 

(calculated by HUD using HUD’s 

administrative data). [Weighted 35 

percent]; 

3. Concentration of Voucher 

Tenants—The concentration of voucher 

tenants will be measured using the same 

metric that is used to determine if an 

area qualifies for 50th-percentile FMRs 

(25 percent or more of voucher tenants 

in the CBSA reside in 5 percent of the 

census tracts for the CBSA). See 24 CFR 

888.113 (c)(iii). [Weighted 10 percent]; 

4. Racial Segregation—In order to 

affirmatively further fair housing, a 

CBSA’s racial segregation will be 

assessed based on the non-Hispanic 

White/all minority Dissimilarity Index 

calculated at the census tract level for 

the CBSA from 2010 Decennial Census 

data. [Weighted 10 percent]; 

5. Dissimilarity of rents within the 

area—Using an unbiased measure of the 

dispersion of rent ratios. [Weighted 10 

percent]. 

The CBSAs containing the applicant 

PHAs will be ranked according to each 

of the statistics specified above, and 

then a weighted average ranking will be 

calculated according to the weights 

specified above. The highest-ranking 

PHA applicant groups will be chosen 

subject to the requirements for selecting 

representatives of the different types of 

metropolitan areas described below. 

In addition to the scored criteria 

above, HUD has established criteria for 

evaluating a PHA’s administrative 

capacity in order to participate in this 

demonstration. All applicants must 

meet the following threshold 

requirements: 

1. Reporting Requirements. Each 

applicant must meet PIC reporting 

requirements. All PHAs are required to 

submit Family Reports (form HUD– 

50058) for at least 95 percent of voucher 

families leased at the end of the last 

quarter prior to the application deadline 

date as verified by the PIC Delinquency 

Report. All PHAs must also be timely in 

their reporting. 

2. SEMAP. Each applicant must not be 

designated as troubled for its most 

recently assessed fiscal year. 

HUD will also evaluate the PHA on 

the following areas: 

3. Administrative Capacity. The 

Office of Field Operations will be 

consulted regarding administrative 

capacity. In making this determination, 

the field office may consider things such 

as any unresolved program management 

findings from an Inspector General’s 

audit, HUD management review or 

Independent Public Accountant (IPA) 

audit for the PHA’s HCV program, fraud 

or misconduct, or other significant 

program compliance problems that were 

not resolved or were in the process of 

being resolved prior to the application 

deadline. 

4. Litigation. The PHA must not be 

involved in litigation where HUD 

determines that the litigation may 

seriously impede the ability of the 

applicant to administer the vouchers. 

Number of Participants 

In order to create similar groups of 

metropolitan areas for analysis of the 

demonstration, all metropolitan areas 

were classified based on five general 

categories of characteristics: 

demographics, economic conditions, 

PHA structure, tenant characteristics, 

and housing market conditions. HUD 

assigned 31 variables to one of these 5 

categories, and standardized and 

weighted the variables to maintain equal 

weight across categories. Based on the 

results of the analysis of these 

characteristics, the metropolitan areas 

have been clustered into 5 groups. Each 

metropolitan area in the same group has 

similar characteristics. For each area 

with PHAs participating in the 

demonstration, for the purposes of 

evaluating the demonstration, HUD will 


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Federal Register / Vol. 76, No. 76 / Wednesday, April 20, 2011 / Notices 22127 

identify a similar area from the same 

group where no PHAs are participating. 

If applications permit, at least one 

PHA or PHA applicant group in the five 

metropolitan areas will be selected to 

participate in the demonstration—at 

least one metropolitan area from each of 

the five groups. This will allow for 

analysis of demonstration differences or 

similarities across characteristics of the 

areas (groups). 

PHA Administrative Responsibilities 

In determining whether to apply for 

this demonstration, PHAs should 

consider the additional administrative 

and programmatic factors that will be 

impacted by implementing small area 

FMRs, including but not limited to the 

following: 

1. Converting software to handle 

larger numbers of payment standards; 

2. Additional outreach and briefings 

for families and landlords on new FMR 

methodology and how this affects the 

payment standards; 

3. Developing additional briefing 

materials for new housing markets; 

4. Revising current forms and briefing 

packages; 

5. Financial analysis to determine 

appropriate payment standards and 

ongoing monitoring of financial 

impacts; 

6. Staff training; 

7. Ability to manage additional 

workload; and 

8. Potential changes to rent 

reasonableness determinations/ 

methodology. 

HUD will provide technical assistance 

and assist PHAs throughout the 

demonstration to reduce the burden of 

these activities as much as possible. 

PHA Reporting Requirements 

HUD needs to evaluate the 

demonstration project in terms of 

effectiveness in meeting the primary 

goal of improving tenants’ housing 

choices in areas of opportunity. In 

addition, the administrative changes for 

PHAs participating in the demonstration 

project must also be evaluated. All 

PHAs in the demonstration project will 

be required to report additional data to 

HUD, in addition to the normal HCV 

program reporting requirements. 

Information such as the following will 

be requested concerning the following 

topics: 

a. Additional procedures 

implemented to brief tenants and 

owners on small area FMRs and collect 

information on demonstration project; 

b. Impact/interaction with current 

rent reasonableness determinations; 

c. Software/systems issues; 

d. Impact on staffing and resources; 

e. Any funding-related impact; 

f. Success rate for new HCVs; must be 

able to be compare with success rate 

prior to the demonstration project; 

g. Time taken for new families to use 

an HCV; 

h. Lease-up rate, for new families; 

must be able to compare with lease-up 

rate prior to the demonstration project; 

i. Number of participants who elect to 

move and the differential in the FMR/ 

payment standard; race, age of head of 

household, number of children, and 

ages of children must be reported; 

j. Reason given by new participants 

and existing participant for their 

location choice; 

k. Changes in landlord retention and 

recruitment; 

l. Number of vouchers issued and the 

number of families that successfully 

lease a unit. In accordance with PIH 

Notice 2010–25, PHAs are expected to 

enter the issuance of vouchers in PIC; 

and 

m. Voucher holders requesting to use 

portability to move into demonstration 

areas to take advantage of small area 

FMRs and the number of those families 

who were successful in leasing up in 

higher and lower FMR areas. 

Program Operation 

Participating PHAs will use small area 

FMRs as the basis for setting payment 

standards for the tenants that they serve. 

PHAs applying to participate in the 

demonstration and operating in areas 

that are currently eligible for 50thpercentile FMRs will use small area 

FMRs calculated using 40th-percentile 

rents. All existing program rules will 

apply under this demonstration project. 

Implementation Date 

HUD will work with each of the PHAs 

selected to participate in the 

demonstration to determine the 

implementation date of the small area 

FMRs based on individual PHA 

circumstances. However, HUD will 

expect all PHAs to have the small area 

FMRs fully operational no later than 90 

days after the selection date. 

Applicability of Small Area FMRs to 

Project-based Vouchers 

The small area FMRs will not apply 

to project-based vouchers (PBVs) for 

which a notice of owner selection was 

issued in accordance with 24 CFR 

983.51(d) as of the effective date of the 

PHA’s participation in the 

demonstration (i.e., the date that the 

small area FMRs go into effect for the 

PHA). This includes units currently 

under HAP contract. However, any 

PBVs for which a notice of owner 

selection is issued after the effective 

date of the PHA’s participation in the 

demonstration will be subject to the 

small area FMRs. In cases where the 

small area FMRs are not applicable to 

PBV units, the area-wide FMRs will 

continue to apply. 

V. Requests for Participation in the 

Small Area FMR Demonstration Project 

Any PHA operating an HCV program 

in a metropolitan area may apply to 

participate in the small area FMR 

demonstration. Due to the flexibility 

already provided to PHAs operating in 

the Moving To Work (MTW) program, 

HUD does not believe that MTW PHAs 

need to be included in the 

demonstration in order to use small area 

FMRs. Therefore, HUD will not consider 

the HCVs of an MTW agency when 

determining the proportion of the 

metropolitan area’s HCVs that a PHA (or 

group of PHAs) represent. This does not 

preclude MTW agencies, however, from 

participating in the small area FMR 

demonstration. 

A PHA wishing to be considered for 

inclusion in the demonstration should 

respond with a letter to HUD signed by 

its executive director. PHAs applying 

jointly should submit a single letter 

signed by all of the participating PHAs’ 

executive directors. The letter must 

include a resolution from the PHA 

Board of Commissioners authorizing the 

PHA to participate in the 

demonstration. (In the case of a joint 

letter, a resolution for each participating 

PHA is required.) The request letters 

should include the PHAs’ affirmative 

declaration to participate and include 

the number of vouchers the PHAs 

collectively administer in the 

metropolitan area. Additionally, the 

application should include an 

attachment describing the expected 

financial impact of implementing small 

area FMRs in the PHAs jurisdiction. 

Letters should be addressed to: Small 

Area FMR Demonstration Project 

Applications, Office of General Counsel, 

Rules Docket Clerk, Department of 

Housing and Urban Development, 451 

Seventh Street, SW., Room 10276, 

Washington, DC 20410–0001. 

Once the response period has ended, 

HUD will compile all of the selection 

criteria data and determine which areas 

will be selected to participate. The 

executive directors of the selected PHAs 

will be contacted, and a final roster of 

participants, along with updated small 

area FMRs based on 2005–2009 ACS 

data, will be published in a Federal 

Register notice. 

VI. Paperwork Reduction Act 

In accordance with the Section 3507 

of the Paperwork Reduction Act of 1995 


srobinson on DSKHWCL6B1PROD with NOTICES
22128 Federal Register / Vol. 76, No. 76 / Wednesday, April 20, 2011 / Notices 

(44 U.S.C. 4321), HUD will request 

approval from the Office of Management 

and Budget (OMB) to collect data under 

the reporting requirements that PHAs 

are not currently providing. 

VII. Environmental Impact 

This notice involves the 

establishment of a small area FMR 

demonstration project, which does not 

constitute a development decision 

affecting the physical condition of 

specific project areas or building sites. 

Accordingly, under 24 CFR 50.19(c)(6), 

this notice is categorically excluded 

from environmental review under the 

National Environmental Policy Act of 

1969 (42 U.S.C. 4321). 

Dated: April 7, 2011. 

Raphael W. Bostic, 

Assistant Secretary for Policy Development 

and Research. 

[FR Doc. 2011–9501 Filed 4–19–11; 8:45 am] 

BILLING CODE 4210–67–P 

DEPARTMENT OF THE INTERIOR 

Notice of Intent To Accept Proposals, 

Select One Lessee, and Contract for 

Hydroelectric Power Development at 

the Granby Dam Outlet, a Feature of 

the Colorado-Big Thompson (C–BT) 

Project, Colorado 

AGENCY: Bureau of Reclamation, 

Interior. 

ACTION: Notice of intent. 

SUMMARY: Promoting responsible 

development of renewable energy and 

moving the Nation toward a clean 

energy future is a top priority of the 

Department of the Interior. The 

Department signed a Memorandum of 

Understanding in March 2010 intended 

to focus on opportunities for 

development of environmentally 

sustainable hydropower at existing 

Bureau of Reclamation (Reclamation) 

facilities. The Department, acting 

through Reclamation, will consider 

proposals for non-Federal development 

of hydroelectric power at Granby Dam 

Outlet of the C–BT, Colorado. 

Reclamation is considering such 

hydroelectric power development under 

a lease of power privilege. No Federal 

funds will be available for such 

hydroelectric power development. The 

Department will prioritize projects that 

appropriately balance increased energy 

generation with consideration of 

environmental impacts. The Western 

Area Power Administration (Western) 

would have the first opportunity to 

purchase and/or market the power that 

would be generated by such 

development under a lease of power 

privilege. The C–BT is a Reclamation 

project. This Notice presents 

background information, proposal 

content guidelines, information 

concerning selection of one or more 

non-Federal entities to develop 

hydroelectric power at Granby Dam 

Outlet, and power purchasing and/or 

marketing considerations. Interested 

entities are invited to submit a proposal 

on this project. 

DATES: A written proposal and seven 

copies must be submitted on or before 

1 p.m. (MDT), on August 19, 2011. A 

proposal will be considered timely only 

if it is received in the office of the Lease 

of Power Privilege Coordinator by or 

before 1 p.m. (MDT) on the designated 

date. Interested entities are cautioned 

that delayed delivery to this office due 

to failures or misunderstandings of the 

entity and/or of mail, overnight, or 

courier services will not excuse lateness 

and, accordingly, are advised to provide 

sufficient time for delivery. Late 

proposals will not be considered. 

ADDRESSES: Written proposals and 

seven copies should be sent to Mr. 

George Gliko, Lease of Power Privilege 

Coordinator (GP–2200), Bureau of 

Reclamation, Great Plains Regional 

Office (GP–2200), P.O. Box 36900, 

Billings, MT 59107–6900. 

Information related to Western’s 

purchasing and/or marketing the power 

may be obtained at Western Area Power 

Administration, Rocky Mountain 

Region, Attn: Dave Neumayer, Power 

Marketing Manager, 5555 East 

Crossroads Blvd., Loveland, Colorado 

80538, Telephone: (970) 461–7322. 

Information related to the operation 

and maintenance of Granby Dam and 

Reservoir may be obtained at Northern 

Colorado Water Conservancy District, 

220 Water Avenue, Berthoud, Colorado 

80513, Telephone: (970) 532–7700. 

FOR FURTHER INFORMATION CONTACT: Mr. 

George Gliko at (406) 247–7651. 

Reclamation will be available to meet 

with interested entities only upon 

written request to the Lease of Power 

Privilege Coordinator at the above 

address. Reclamation reserves the right 

to schedule a single meeting and/or visit 

to address at one time, the questions of 

all entities that have submitted 

questions or requested site visits. 

SUPPLEMENTARY INFORMATION: The C–BT, 

located in central Colorado, was 

authorized for construction, including 

hydroelectric power, by the Department 

of the Interior Appropriations Act, 1938 

(1938 Act), Public Law 75–249, 50 Stat. 

564 (August 9, 1937). Specifically, the 

1938 Act appropriates funds for the 

Project’s ‘‘construction in accordance 

with the plan described in Senate 

Document No. 80, Seventy-fifth 

Congress, First Session * * * ’’ 50 Stat. 

595. As part of the C–BT, the United 

States constructed Granby Dam. The 

Northern Colorado Water Conservancy 

District (District), under its contracts 

with the United States, has certain 

operation, maintenance, replacement, 

and repayment responsibilities and 

obligations concerning the C–BT, which 

includes such responsibility for Granby 

Dam and Reservoir. Reclamation 

recently released its Hydropower 

Resource Assessment (March 2011), 

which estimated that hydropower at 

Granby Dam is economically feasible to 

develop (benefit-cost ratio 1.16, 

including green incentives), and that 

there is a potential capacity of 484 kW. 

The Assessment may be viewed in its 

entirety at http://www.usbr.gov/power/. 

Reclamation is considering 

hydroelectric power development at 

Granby Dam Outlet through a lease of 

power privilege. A lease of power 

privilege is a congressionally authorized 

alternative to Federal hydroelectric 

power development. A lease of power 

privilege grants to a non-Federal entity 

the right to utilize C–BT for non-Federal 

electric power generation and sale, 

consistent with project purposes. Leases 

of power privilege have terms not to 

exceed 40 years. The general authority 

for lease of power privilege under 

Reclamation law includes, among 

others, the Town Sites and Power 

Development Act of 1906 (43 U.S.C. 

522) and the Reclamation Project Act of 

1939 (43 U.S.C. 485h(c)) (1939 Act). 

Reclamation will be the lead Federal 

agency for ensuring compliance with 

the National Environmental Policy Act 

(NEPA) of any lease of power privilege 

considered in response to this Notice. 

Leases of power privilege may be issued 

only when Reclamation, upon 

completion of the NEPA process, 

determines that the affected 

hydroelectric power sites are 

environmentally acceptable. Any lease 

of power privilege at Granby Dam Outlet 

must accommodate existing contractual 

commitments related to operation and 

maintenance of such existing facilities, 

and must meet the requirements of 

applicable law. 

Western would have the first 

opportunity to purchase and/or market 

the power that would be generated 

under any lease of power privilege. 

Under this process, Western would 

either purchase and market the power as 

Loveland Area Power power or market 

the power independently by first 

offering it to preference entities and 

secondly to non-preference entities. 

All costs incurred by the United 

States related to development and 


srobinson on DSKHWCL6B1PROD with NOTICES