[Federal Register Volume 74, Number 188 (Wednesday, September 30, 2009)]
[Notices]
[Pages 50552-50664]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-23477]



[[Page 50551]]

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Part III





Department of Housing and Urban Development





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Final Fair Market Rents for Fiscal Year 2010 for the Housing Choice 
Voucher Program and Moderate Rehabilitation Single Room Occupancy 
Program; Notice

Federal Register / Vol. 74 , No. 188 / Wednesday, September 30, 2009 
/ Notices

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5328-N-02]


Final Fair Market Rents for Fiscal Year 2010 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 of Final Fair Market Rents (FMRs) for Fiscal Year (FY) 
2010.

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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 FY 2010 FMRs for all areas that reflect 
the estimated 40th and 50th percentile rent levels trended to April 1, 
2010. The FY 2010 FMRs are based on 2000 Census data updated with more 
current survey data. For FY 2010, FY 2009 FMRs are updated using 2007 
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 2007 FMRs based on Census and 
ACS data have been updated with CPI data through the end of 2008 and 
then trended to April 2010, the mid-point of FY 2010.

DATES: Effective Date: The FMRs published in this notice are effective 
on October 1, 2009.

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 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 FY 2010 FMRs 
is available at http://www.huduser.org/datasets/fmr/fmrs/index.asp?data=fmr10.

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. Areas that currently have 50th percentile FMRs are 
evaluated for progress in voucher tenant deconcentration after three 
years in the program. Continued eligibility is determined using HUD 
administrative data that show levels of voucher tenant concentration. 
The levels of voucher holder 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. For FY 2009, there were 14 areas that were designated as 
50th percentile areas. Ten current 50th percentile FMR areas were not 
evaluated this year because they have not completed three years of 
program participation. These 10 areas, listed below, will complete 
their three-year program period and be evaluated to determine if they 
remain 50th percentile FMR areas in the proposed FY 2012 FMR 
publication.

 FY 2009 50th-Percentile FMR Areas Not Slated for Eligibility Evaluation
           and Continuing With 50th-Percentile FMRs in FY 2010
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Albuquerque, NM MSA.
Bradenton-Sarasota-Venice, FL MSA.
Chicago-Naperville-Joliet, IL HMFA.
Denver-Aurora, CO MSA.
Hartford-West Hartford-East Hartford, CT HMFA.
Houston-Baytown-Sugar Land, TX HMFA.
Kansas City, MO-KS, HMFA.
Milwaukee-Waukesha-West Allis, WI MSA.
Richmond, VA HMFA.
Tacoma, WA HMFA.
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    The remaining four current 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 four areas is shown 
below.

[[Page 50553]]



  FY 2009 50th-Percentile FMR Areas Reviewed for Eligibility as FY 2010
                        50th-Percentile FMR Areas
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Dallas, TX HMFA.
Fort Lauderdale, FL HMFA.
San Diego-Carlsbad-San Marcos, CA MSA.
West Palm Beach-Boca Raton, FL HMFA.
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    Two of the four current 50th percentile areas eligible for review 
fail to qualify for the 50th percentile FMR program for FY 2010. One of 
these areas, San Diego-Carlsbad-San Marcos, CA MSA, no longer qualifies 
for the 50th-percentile FMR program because the area no longer meets 
the voucher holder 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 area with the largest number of program participants. This 
area will be reviewed annually to see if its concentration changes to 
above 25 percent so it can be reinstated as a 50th percentile area. The 
San Diego-Carlsbad-San Marcos, CA MSA could re-qualify as 50th 
percentile FMR areas as early as the FY 2011 FMRs.
    As noted in the publication of proposed FY 2010 FMRs, the Dallas, 
TX HMFA failed to deconcentrate over the three-year period. Under 
current regulations, the Dallas, TX HMFA is not eligible for 
participation in the 50th percentile FMR program until FY 2013. The 
Dallas, TX HMFA will be reviewed in time for the proposed FY 2013 FMRs 
to determine if they can meet 50th percentile FMR criteria.
    Two of the four areas reviewed will continue to use 50th percentile 
FMRs for another three-year period. These two areas will not be re-
evaluated until FY 2013.

  FY 2009 50th-Percentile FMR Areas Evaluated and Continuing With 50th-
                       Percentile FMRs in FY 2010
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Fort Lauderdale, FL HMFA.
West Palm Beach-Boca Raton, FL HMFA.
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    For FY 2010, five areas that were not designated as 50th percentile 
FMRs in FY 2009 were evaluated to determine if they met all of the 
qualifications for designation this year. All five of these areas are 
50th percentile areas effective October 1st for a three-year period 
beginning with the FY 2010 FMRs. These areas are listed in the table 
below.

   Areas Reviewed for Eligibility as FY 2010 50th-Percentile FMR Areas
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Baltimore-Towson, MD MSA.
Grand Rapids-Wyoming, MI HMFA.
New Haven-Meriden, CT HMFA.
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA.
Washington-Arlington-Alexandria, DC-VA-MD HMFA.
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    In total, 17 areas will have 50th percentile FMRs in FY 2010, 
including 10 areas that will be evaluated for FY 2012, two areas that 
passed review and will be re-evaluated for FY 2013, and five areas that 
did not have 50th percentile FMRs in FY 2009, and will also be 
evaluated for FY 2013. Included in these five newly-designated 50th 
percentile FMR areas is Washington, DC, which was not considered a 50th 
percentile FMR area in the proposed publication because the reporting 
rate for the area was less than 85 percent. Additional data was 
provided by the DC Housing Authority, the analysis was completed, and 
all 50th percentile criteria were met.

III. Proposed FY 2010 FMRs

    On August 4, 2009 (74 FR 38716), HUD published proposed FY 2010 
FMRs. As noted in the preamble to the proposed FMRs, the FMRs for FY 
2010 reflect the use of both one-year and three-year 2007 ACS data to 
update June 2006 rent estimates for each area. In addition, the FY 2010 
FMRs include all changes made to metropolitan area definitions made by 
the Office of Management and Budget (OMB), as of November 2008.
    During the comment period, which ended September 2, 2009, HUD 
received 10 public comments on the proposed FY 2010 FMRs. None of the 
comments received included the data needed to support FMR changes. 
Several of these comments expressed that proposed FY 2010 FMRs are 
incorrect for their respective market areas. The comments received are 
discussed in more detail later in this notice.

IV. FMR Methodology

    The FY 2010 FMRs are based on current OMB metropolitan area 
definitions that were first used in the FY 2006 FMRs. The changes OMB 
made to the Metropolitan Area Definitions in November 2008 are 
incorporated. This means that there are five Metropolitan Statistical 
Area (MSA) name changes that reorder, add, or delete a primary city 
name. Additionally, three micropolitan areas were re-defined as 
metropolitan areas: Cape Girardeau-Jackson, MO-IL MSA, Manhattan, KS 
MSA, Mankato-North Mankato, MN MSA. 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 FY 2006 FMRs.
    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://www.huduser.org/datasets/fmr/CensusRentData/.

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

    As in all post-FY 2006 FMR publications, FY 2010 FMRs start with 
base rents generated using Census 2000 long form survey data. They are 
updated with American Community Survey (ACS) data and Bureau of Labor 
Statistics Consumer Price Index (CPI) data. FY 2010 FMRs are FY 2009 
FMRs updated by replacing the CPI data used for FY 2009 FMRS with ACS 
2007 survey data and updated CPI data. Specifically, the FY 2009 rent 
(as of date: April, 2009) is deflated to June 2006 by dividing it by 18 
months of CPI data representing June 2006 through December 2007 
inflation, and the usual 15 month trend factor. This June 2006 rent is 
the best and most recent rent estimate available using only ACS survey 
and eliminating all other update data. It is this rent that is updated 
with additional ACS data and new CPI data.
    In order to preserve additional information gathered by HUD through 
random digit dialing (RDD) surveys, areas surveyed after June 2007 are 
updated separately, the details of which can be found at the Web site 
listed above.

B. Updates from 2006 to 2007--2007 ACS

    ACS survey data continues to be applied to areas based on the type 
of area (CBSA, metropolitan sub-area, or non-metropolitan county), the 
amount of survey data available, and the reliability of the survey 
estimates. Both one- and three-year ACS 2007 data are used to update 
June 2006 rents. All areas are updated with the change from 2006 to 
2007 in State or metropolitan one-year standard quality median rents. 
In a methodological update from previous years' estimates intended to 
minimize fluctuations in rents due to survey error, these rent changes 
are

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tested for statistical significance \1\ before being applied to 2006 
rents. Any state or metropolitan level change that is not statistically 
significant is not applied, that is the updated 2007 rent is the same 
as the 2006 rent. Metropolitan level rent changes are used for CBSA 
areas and sub-areas that have more than 200 standard quality cases in 
2006 and 2007. All other areas are updated with state level rent 
changes. For sub-areas, State and CBSA change factors continue to be 
selected based on which factor brings the sub-area rent closer to the 
CBSA-wide rent. Sub-areas which have 200 or more local standard quality 
survey observations are updated with their local area update factor.
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    \1\ The change is considered statistically significant if Z > 
1.645 where (see equation above) and EST<INF>1</INF> = ACS 2007. 
Estimate, EST<INF>2</INF> = ACS 2006 Estimate, SE<INF>1</INF> = 
Standard Error of Estimate 1 and SE<INF>2</INF> = Standard Error of 
Estimate 2.
[GRAPHIC] [TIFF OMITTED] TN30SE09.063

    After all areas have been updated with a standard quality median 
rent change, local areas with estimates that reflect more than 200 one-
year recent mover cases are evaluated further. If the updated rent is 
outside the confidence interval of the ACS recent mover estimate, the 
updated rent is replaced with the ACS recent mover rent estimate. In 
areas without 200 or more one-year ACS recent mover observations, but 
with 200 or more three-year ACS recent mover observations, the three 
year estimate \2\ is used if it is statistically different from the 
updated 2007 rent based on the standard quality median rent change. 
This process creates a June 2007 rent.
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    \2\ The recent mover estimate from the three year data includes 
all those who moved in the most recent 24 month period. That means 
that no 2005 survey data are included in this three-year recent 
mover classification and the likelihood of having a valid (with 200 
or more cases) three-year recent mover rent is lower for these 
estimates.
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C. Updates From 2007 to 2008

    ACS 2007 data updates the June 2006 rents used in the FY 2009 FMRs 
forward by 12 months to June 2007. Six months of 2007 and 12 months of 
2008 CPI rent and utilities price index data are used to update the 
June 2007 rents to the end of 2008. 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 2008 to 2010

    The national 1990 to 2000 average annual rent increase trend of 
1.03 is applied to end-of-2008 rents for 15 months, to derive the 
proposed FY 2010 FMRs.
    The area-specific data and computations used to calculate proposed 
FY 2010 FMRs and FMR area definitions can be found at http://www.huduser.org/datasets/fmr/fmrs/index.asp?data=fmr10.

E. 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=fmr10.
    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 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 10 public comments were received on the proposed FY 2010 
FMRs. Two of the comments filed were concerned with HUD's presentation 
of proposed FMR data. These comments requested that HUD publish both 
the current proposed and most recent final FMRs together in a 
spreadsheet. The concept of comparing proposed rents to current 
effective rents is relevant so HUD has added this comparison to its on-
line documentation system to provide interested users with a comparison 
of current year proposed rents to final rents from the previous year. 
This functionality will only be available in the proposed FMR 
documentation systems.
    Several commenters expressed concern with either increases or 
decreases in their FMRs. HUD will shortly be issuing guidance on cost-
related issues in the housing voucher

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program including the setting of payment standards. However, as a 
reminder, whether there is a decrease or an increase in the FY 2010 
FMR, a PHA is not required to decrease or increase the dollar amount of 
their payment standards unless the FMR results in the payment standard 
being outside the basic range of 90-to-110 percent of the FMR.
    A comment from the Housing Authority of the City of Reno stated 
that proposed FY 2010 FMRs are too high. The Reno comment claims that 
no increase in its FMR is needed and asks HUD to hold its FMRs at the 
FY 2009 level. Reno includes an analysis that states that the three-
percent annual trend factor is the cause of the increase in Reno's FMR 
from FY 2009 to FY 2010, and requests that HUD revise its trend factor 
downward. However, the actual source of the increase comes from the 
nearly 6-percent increase in ACS measured 2 bedroom rents between 2006 
and 2007. No data were submitted by the Housing Authority to support 
their claim that FMRs are too high in the area, but because the 
increase in the FMR for Reno is based on an update factor using 
standard quality, not recent mover, ACS data between 2006 ACS and 2007 
ACS HUD will conduct a RDD survey in the area to see if more current 
rents support a lower FMR.
    A real estate management firm serving customers in New Bedford, MA 
commented that FMRs are too low for their professionally managed and 
maintained communities; therefore, their communities will not be able 
to accommodate voucher tenants. The comment specifically requested that 
HUD not conduct a RDD survey. Absent sufficient data reflecting rent 
levels that exist in the entire FMR area, HUD has no mechanism for 
adjusting FMRs in this area.
    The Oklahoma City Housing Authority commented that the proposed 3.5 
percent decrease in FMRs for the Oklahoma City, OK MSA is not 
justified. They cite a 3-percent increase in aggregate rental rates per 
square foot between 2007 and 2008 as quoted from a full-service 
commercial real estate firm as the basis for the objection. The 
decrease in the proposed FY 2010 FMR for Oklahoma City, OK is driven by 
a 1-year 2007 ACS recent-mover survey result that measured a 
statistically significant drop in two-bedroom unit rents between 2006 
and 2007. This 2007 ACS result qualifies as the new basis for the 
Oklahoma City FMR. Activity in the rental market subsequent to 2007 is 
measured by 18 months of CPI rent and utility indexes and the 
traditional trend factor. These indexes lend credence to the quoted 
increases in rental rates. From mid-2007 to the end of 2007 this CPI 
measured increase was approximately 2 percent and from the end of 2007 
to the end of 2008, this increase was approximately 5 percent. However, 
because the 2007 ACS survey result indicates that the base rent in 
Oklahoma City was too high in 2007, this downward adjustment is 
necessary.
    The Lafayette Housing Authority disagrees with HUD's decision to 
increase FMRs for the Lafayette, IN HUD Metro FMR Area ``when funding 
for the HCV program continues to lag so far behind that we must 
continue to decrease the number of households we can assist.'' The 1.4 
percent increase in the FMR for Lafayette is based on measured 
increases in rent and utility indexes in the CPI and is the most 
current data available for the area.
    The Minot Housing Authority serving Ward County, North Dakota filed 
a comment that FMRs are too low in the area. The Minot area has 
experienced an extremely low vacancy rate due to increased energy 
exploration and production in the area. Additionally, a substantial 
expansion of personnel at the Minot Air Force Base will place 
additional strain on the housing market of the area. Minot is currently 
using a success rate payment standard to increase its FY 2009 FMRs, but 
claims that increased payment standards are still needed. HUD will 
survey this area and will publish a revision to the FMRs once the study 
is completed and if statistically different rent results are obtained.
    The Department of Housing for the Commonwealth of Puerto Rico 
submitted a comment stating that FMRs throughout the entire 
Commonwealth are too low. They base this assertion on the claim that 
CPI measures of rent and utility increases measured for the South 
Census region do not accurately reflect the price changes experienced 
in Puerto Rico. Between 2000 and 2006, the Department of Labor and 
Human Resources of the Government of Puerto Rico created a CPI measure 
for Puerto Rico in consultation with officials from the U.S. Department 
of Commerce's Bureau of Labor Statistics. HUD was not aware of this 
activity so previous FMRs have not included this Puerto Rico specific 
CPI data. HUD will incorporate consideration of this new CPI index into 
its FMR Process Review.
    The National Association of Housing and Redevelopment Officials 
(NAHRO) submitted a general comment not specific to any FMR area. In 
their comment, NAHRO recommends multiple topics for future improvement 
of both the FMR and the Income Limit methodology. Briefly, these topics 
include: (1) HUD's implementation of the OMB area definitions in FY 
2006; (2) use of tenant data when developing Annual Adjustment Factors; 
(3) continuation of HUD's Hold Harmless policy for Income Limits 
(Comments referencing HUD's Hold Harmless policy should be referred to 
Docket No. FR-5323-N-01 published on September 14th); (4) enhancements 
to the methodology for identifying sub-standard housing units in the 
ACS; (5) the relationship between quality of the rental housing stock 
and FMRs, (6) determination of 50th percentile FMR areas; (7) 
improvements in HUD's RDD methodology; (8) the impact of HUD's 
definition of ``recent movers'' and ``stayers'' on FMRs; and (9) 
exception payment standards. In the preamble to the proposed FY 2010 
FMR notice, HUD solicited topics for inclusion in future FMR notices 
regarding reforms and changes to the FMR methodology. HUD will 
incorporate this list of topics into future discussions dealing with 
FMR reform.
    A comment filed by the National Association of Home Builders (NAHB) 
made four specific requests: (1) Conduct RDD surveys in the areas with 
a decrease of more than 5 percent; (2) incorporate language into 
proposed and final FMR notices concerning the adjustments made by HUD 
to control for the presence of inadequate and subsidized units; (3) 
explain the way that a particular area becomes eligible for 50th 
percentile FMRs; and (4) the loss of the 50th percentile FMR 
designation in the Dallas, TX HUD Metro FMR Area.
    FY 2010 proposed FMRs include two areas that experience more than a 
5 percent decline in FMRs. One is San Diego, CA, whose decline is a 
result of the loss of the 50th percentile, and the other is Ann Arbor, 
MI. 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 current law. FMRs for both of these areas are 
based on local ACS survey results; conducting an RDD 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.
    NAHB has requested additional language be added to FMR publications 
concerning adjustments made to source data to account for sub-standard 
and subsidized units. In response to a similar comment from NAHB last 
year HUD published a document outlining the procedure for these 
adjustments. A link to this document is available within

[[Page 50556]]

the FY 2010 on-line documentation wherever the adjustments are made to 
the underlying data distributions and not just in determining the 2000 
Census Base rent as reported by NAHB. HUD believes that the on-line 
documentation system is the best venue for discussing methodological 
details and believes that interested parties will be able to find the 
explanation at the appropriate location within the on-line system.
    HUD continues to provide specific details regarding the 50th 
percentile status for all areas meeting the eligibility requirements 
for inclusion in this program. In response to the NAHB request that HUD 
include information regarding ``success rate payment standards'' HUD 
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.
    Finally, with regard to the loss of 50th percentile standing for 
the Dallas, TX HUD Metro FMR area, NAHB recommends that HUD ``look 
further into the circumstances of areas that stand to lose the 50th 
percentile designation because of failure to materially deconcentrate 
in three years.'' Furthermore, NAHB suggests that there may be 
instances where an additional year is warranted. Current program 
regulations do not allow for an additional year of eligibility for 
areas that do not deconcentrate over the three-year period.

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. For FY 2010, HUD received no comments or data 
concerning manufactured home space rents.
    All approved exceptions to these rents that were in effect in FY 
2009 were updated to FY 2010 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 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 23, 2009.
Raphael W. Bostic,
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 
FY2010 FMRs reflect a change in metropolitan area definitions. HUD is 
using the

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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 FY2010 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.
BILLING CODE 4310-55-P

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[FR Doc. E9-23477 Filed 9-29-09; 8:45 am]
BILLING CODE 4210-67-C