58870 Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

24 CFR Parts 888, 982, 985

[Docket No. FR 4606–I–01]

RIN 2501–AC75

Fair Market Rents: Increased Fair

Market Rents and Higher Payment

Standards for Certain Areas

AGENCY: Office of the Secretary, HUD.

ACTION: Interim rule.

SUMMARY: This interim rule implements

HUD’s new fair market rent (FMR)

policy. The new FMR policy targets

relief to areas where higher FMRs are

needed to help families, assisted under

HUD’s Housing Choice Voucher

Program as well as other HUD programs,

find and lease decent and affordable

housing. With respect to the Housing

Choice Voucher Program, the policy

provides that where necessary to ensure

the effective operation of this program,

PHAs will be allowed to set their

payment standards based on the 50th

percentile rent rather than the published

40th percentile FMR. This aspect of the

policy is designed to ensure that

families with housing vouchers have

access to at least half of all available

units in those areas. In addition, the

new FMR policy increases FMRs to the

50th percentile in those metropolitan

areas where an FMR increase is most

needed to promote residential choice,

help families move closer to areas of job

growth, and deconcentrate poverty.

Where it is determined that an FMR

increase is needed in a metropolitan

area, the increased FMR applies to all

the HUD programs that use FMRs in that

metropolitan area.

DATES: Effective Date: December 1, 2000.

Comment Due Date: November 16, 2000.

ADDRESSES: Interested persons are

invited to submit written comments

regarding this interim rule to the Rules

Docket Clerk, Office of General Counsel,

Room 10276, Department of Housing

and Urban Development, 451 Seventh

Street, SW., Washington, DC 20410.

Comments should refer to the above

docket number and title. A copy of each

comment submitted will be available for

public inspection and copying between

7:30 a.m. and 5:30 p.m. weekdays at the

above address. Facsimile (FAX)

comments will not be accepted.

FOR FURTHER INFORMATION CONTACT:

Gerald J. Benoit, Director, Real Estate

and Housing Performance Division,

Office of Public and Assisted Housing

Delivery, Office of Public and Indian

Housing, Department of Housing and

Urban Development, Room 4210, 451

Seventh Street, SW., Washington, DC

20410–8000, telephone number (202)

708–0477; or Lynn A. Rodgers,

Economic and Market Analysis

Division, Office of Economic Affairs,

Office of Policy Development and

Research, Department of Housing and

Urban Development, Room 8224, 451

Seventh Street, SW., Washington, DC

20410–8000, telephone number (202)

708–0590. Persons with hearing or

speech impairments may access this

number via TTY by calling the toll-free

Federal Information Relay Service at 1–

800–877–8339. (Other than the ‘‘800’’

TTY number, telephone numbers are

not toll free.)

SUPPLEMENTARY INFORMATION:

I. HUD’s New FMR Policy

HUD’s new FMR policy, being

implemented through this interim rule,

is designed to achieve two fundamental

program objectives: (1) Ensuring that

low-income families are successful in

finding and leasing decent and

affordable housing; and (2) ensuring that

low-income families have access to a

broad range of housing opportunities

throughout a metropolitan area. To

achieve the first objective, the policy

provides that for the Housing Choice

Voucher program, PHAs will be allowed

to set their payment standards based on

the 50th percentile rent rather than the

published 40th percentile FMR in areas

where families are having difficulty

using housing vouchers to find and

lease decent and affordable housing. To

achieve the second objective, FMRs will

be increased to the 50th percentile in

those metropolitan areas where a FMR

increase is most needed to promote

residential choice, help families move

closer to areas of job growth, and

deconcentrate poverty. Where it is

determined that a FMR increase is

needed in a metropolitan area, the

increased FMR applies to all the HUD

programs that use FMRs in that area.

Section II of this preamble which

immediately follows further discusses

how HUD intends to achieve these two

objectives through its new FMR policy.

II. Increasing the Proportion of

Voucher-Holders That Find Housing

and Expanding Housing Opportunities

Throughout the Metropolitan Area

Ensuring that voucher-holders are

successful in finding decent affordable

housing. In many areas, HUD’s current

FMRs based on the 40th percentile rent

are adequate to allow low-income

families with housing vouchers to find

and lease decent and affordable

housing. In some areas, however, these

FMRs are inadequate to enable these

families to lease decent and affordable

units. HUD’s new FMR policy

authorizes PHAs to use voucher

payment standards based on a 50th

percentile rent (rather than the

published 40th percentile FMR) where

fewer than three-fourths of the families

issued vouchers succeed in using them

to find and lease housing.

Unlike HUD’s former certificate

program, in which maximum subsidy

levels were governed by the FMR,

maximum subsidies under the new

Housing Choice Voucher program are

governed by a ‘‘payment standard.’’

Rather than being required to set

subsidy levels at the FMR that applies

to the entire FMR area—which may be

too low or too high for the particular

communities they serve—PHAs have

discretion, without requesting HUD

approval, to set voucher payment

standard amounts anywhere between 90

and 110 percent of the published FMR

for each unit size. PHAs also may set

different payment standard amounts

within this range for designated parts of

the FMR area. This gives PHAs

substantial flexibility to adapt the

voucher program to local market

conditions.

Most PHAs can run a successful

voucher program within this normal 90

to 110 percent range of the current

published 40th percentile FMR. In some

cases, however, even the maximum 110

percent of the FMR is too low to enable

families to find suitable housing with a

voucher. The new policy addresses this

problem by providing that where a PHA

has increased its voucher payment

standard to 110 percent of the FMR, but

still finds that fewer than 75 percent of

all families issued rental vouchers over

the course of six months have become

participants in the voucher program, the

PHA will be eligible to set its payment

standard based on a 50th percentile rent

(rather than the published 40th

percentile FMR).

PHAs that qualify for the higher

payment standard amounts will still

retain the flexibility to vary their

payment standard amounts. The range

of payment standards available to them

will simply be 90 to 110 percent of a

50th percentile rent (rather than 90 to

110 percent of a published 40th

percentile FMR).

This policy which is directed to

achieving higher success rates among

voucher-holders in finding decent and

affordable housing is implemented in

§ 982.503(e).

Ensuring that low-income families

have access to a broad range of housing

opportunities throughout the

metropolitan area. Another objective of

the new policy is to ensure that lowincome families are free to move to

Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Rules and Regulations 58871

neighborhoods of their choice

throughout the metropolitan area—to

have access to a broad range of housing

opportunities. Families should not be

restricted by low subsidy levels to a

narrow range of neighborhoods, and in

particular should not be restricted to

areas of high poverty concentration.

Moreover, to promote welfare-to-work

objectives, families with tenant-based

rental assistance should have access to

housing in areas of job growth or with

good transportation access to job

centers.

To advance this objective, the new

policy provides that HUD will increase

FMRs to the 50th percentile in

metropolitan areas where there is both:

concentration among voucher-holders

and evidence suggesting that this

problem may be due to the distribution

of affordable rental units in the area.

This two-part test ensures that scarce

resources are properly targeted on the

areas most in need of assistance. As a

first step in identifying the areas in need

of assistance, there obviously needs to

be evidence of concentration among

low-income families. Because this

concentration may be due to low FMRs

or to other factors that are unrelated to

FMRs, such as family choice, HUD has

added a second test to identify those

areas where affordable rental housing is

not well-distributed throughout the

metropolitan area.

Specifically, HUD will increase FMRs

to the 50th percentile for metropolitan

areas that HUD determines meet the

following criteria at the time of annual

publication of the FMRs:

• The FMR area contains at least 100

census tracts;

• 70 percent or fewer of the census

tracts with at least 10 two bedroom

rental units are census tracts in which

at least 30 percent of the two bedroom

rental units have gross rents at or below

the two bedroom FMR set at the 40th

percentile rent; and

• 25 percent or more of the tenantbased rental program participants in the

FMR area reside in the five percent of

the census tracts within the FMR area

that have the largest number of program

participants.

For the purposes of this analysis,

census tracts have been identified as

‘‘accessible’’ to voucher-holders where

at least 30 percent of the two-bedroom

rental units in the tract fell below the

40th percentile FMR in the last

decennial census.

Because mobility is an issue primarily

for large metropolitan areas, this aspect

of the new FMR policy provides for

FMR increases only in metropolitan

areas with more than 100 census tracts.

A PHA with jurisdiction in an area

with a published FMR at the 50th

percentile rent to provide a broad range

of housing opportunities may choose to

establish its payment standards between

90 and 110 percent of the 50th

percentile FMR in accordance with

§ 982.503(b)(1)(i). However, in the event

a PHA determines that its jurisdiction

does not require higher payment

standards based on the 50th percentile

the PHA may request HUD approval to

keep or establish payment standards

below 90 percent of the 50th percentile

FMR in accordance with § 982.503(b)(2).

This aspect of the new FMR policy

which is directed at ensuring a broad

range of housing opportunities for

section 8 voucher holders is being

implemented in § 888.113(c).

As provided in this rule, there may be

circumstances in which PHAs that had

been authorized to use FMRs set at the

50th percentile rent may be required to

use FMRs set at the 40th percentile rent.

This would occur if the FMR were set

at the 50th percentile rent to provide a

broad range of housing opportunities

throughout a metropolitan area for three

years, but the concentration of voucher

holders in the metropolitan area did not

lessen and the PHA issuing the voucher

did not meet minimum deconcentration

objectives. HUD’s existing regulations in

24 CFR part 982 provide that a family

is not subject to a subsidy reduction

because of a reduction in the payment

standard until the second regular

reexamination of family income and

composition following such a payment

standard reduction. After this protection

period of 13 to 24 months, depending

on the timing of recertifications for a

family, the family would no longer be

protected from the reduction in federal

subsidy and thus would have to pay a

greater share of rent or move. This rule

would provide the same level of

protection for families who live in an

area where PHAs are no longer

authorized to use the 50th percentile

FMR.

III. PHA Performance Measurement

HUD is committed to ensuring that its

funding to PHAs is spent in an efficient

manner that achieves the desired

programmatic outcomes. HUD believes

that PHAs that adopt payment standard

amounts based on the 50th percentile

rent to increase success rates of families

leasing housing must be held

accountable for results through the use

of new performance measurements.

Accordingly, the interim rule amends

HUD’s Section 8 Management

Assessment Program (SEMAP)

regulations in 24 CFR 985.3(p) to

provide how the PHA’s actions to

increase success rates may be measured.

To similar effect, PHAs that choose to

utilize the higher FMRs awarded to

promote mobility and deconcentration

(as indicated by the adoption of

payment standards in excess of the new

50th percentile FMR) will be measured

under SEMAP to determine their

progress in achieving deconcentration.

To allow time for the full effects of the

higher FMRs or payment standards to be

felt, the new SEMAP measures will not

apply during the first year in which the

50th percentile rent is utilized.

IV. This Interim Rule and Related

Initiatives

HUD believes that implementation of

the new FMR policy through this

interim rule (as described above and

reflected in the regulatory text that

follows) will increase the effectiveness

of HUD’s programs in assisting families

find and lease decent and affordable

housing, and increase the pool of

housing units available for rent by

voucher holders. HUD recognizes,

however, that increasing FMRs and

allowing PHAs to adopt a higher

payment standard may not be sufficient

to achieve the results HUD is seeking

through this new policy. HUD

recognizes that PHAs must also promote

and assist the families they serve by

providing better housing search

assistance. HUD will promote PHA

efforts and initiatives to enhance the

level and scope of housing search

assistance provided and increase the

availability of information that explains

how the voucher program works.

V. Specific Issues for Comment

HUD seeks comments on its new FMR

policy and the implementation of this

policy as provided in this interim rule.

HUD specifically seeks comment on the

following issues:

1. HUD solicits comment on whether

the higher FMRs adopted to ensure that

low-income families have access to a

broad range of housing opportunities

throughout the metropolitan area should

apply to all HUD programs that use

FMRs or just to the Housing Choice

Voucher program. Currently, HUD

publishes a single FMR for each

bedroom size in each FMR area. If the

higher FMRs were applied only to the

Housing Choice Voucher program, and

the current FMRs were applied to other

HUD programs, HUD would be required

to publish two different sets of FMRs for

the same FMR area which could cause

confusion. On the other hand, utilizing

the higher FMRs in connection with

other HUD programs would have cost

and policy implications.

58872 Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Rules and Regulations

Among other purposes, the FMRs

published by HUD are used (1) to

establish payment standards for the

Housing Choice Voucher program; (2) to

determine initial contract rents in new

commitments for Section 8 projectbased assistance (e.g., the project-based

voucher program); (3) to determine

whether comparability applies to

adjustment of contract rents during the

term of an existing Housing Assistance

Payments contract in the Section 8 new

construction, substantial rehabilitation

and moderate rehabilitation programs;

(4) as a limit on renewal rents for certain

Section 8 projects; and (5) to determine

eligibility for mark-up-to-market and the

maximum rent that may be granted for

that program. FMRs are also used to

determine subsidy levels in the HOME

tenant-based rental assistance program

and maximum rent levels in multifamily

rental housing developed with HOME

funds. HUD welcomes comments that

assess the costs and benefits of utilizing

the higher FMRs in connection with

HUD programs other than the Section 8

Housing Choice Voucher Program.

2. HUD invites proposals on how best

to allow State, regional, and multijurisdictional PHAs to justify and

implement the success-rate payment

standard, including whether multijurisdictional PHAs should be able to

request success rate payment standards

for only one or more jurisdictions, and

if so, what data should be required to

justify such a request and measure

performance.

3. HUD also solicits comments on the

SEMAP requirements that will apply to

PHAs that take advantage of the 50th

percentile rent under the terms of this

rule. Although the SEMAP rule changes

will take effect on the published

effective date, the new SEMAP

standards will not be implemented for

rating purposes until the second PHA

fiscal year following implementation of

higher payment standards based on the

50th percentile FMR. The final rule,

responding to any comments received

on the rule, will be published for effect

before any ratings are assigned for the

new SEMAP standards.

VI. Publication of FMRs

Section 8(c) of the U.S. Housing Act

of 1937 (1937 Act) requires the

Secretary of HUD to publish FMRs

periodically, but not less frequently

than annually. HUD’s regulations reflect

this statutorily required process. Section

888.115 provides that HUD will publish

FMRs at least annually. Both section

8(c) of the 1937 Act and § 888.115 also

provide that HUD first publish proposed

FMRs and provide a comment period for

the proposed FMRs of at least 30 days.

For the areas that meet the three criteria

described earlier in this preamble, HUD

will be publishing at a later date the

proposed FMRs at the 50th percentile

for comment.

VII. Justification for Interim

Rulemaking

In general, HUD publishes a rule for

public comment before issuing a rule for

effect, in accordance with its own

regulations on rulemaking at 24 CFR

part 10. Part 10, however, provides for

exceptions from that general rule where

HUD finds good cause to omit advance

notice and public participation. The

good cause requirement is satisfied

when the prior public procedure is

‘‘impracticable, unnecessary, or contrary

to the public interest’’ (24 CFR 10.1).

HUD finds that good cause exists to

publish this rule for effect without a

delay in effectiveness that would result

from first soliciting public comment, in

that such a delay in the implementation

of this rule would be contrary to the

public interest.

With the recent merger of HUD’s

tenant-based certificate and voucher

programs into a new Housing Choice

Voucher program, HUD has made

significant strides in increasing housing

choice for voucher holder families.

However, even with HUD’s own

investment in expanding the supply of

affordable housing and a booming

economy, there are a record number of

families with worst case housing needs.

The nation’s strong economy is actually

pushing up rents, and as the economy

has grown stronger, it has become more

difficult in some markets for voucher

holders to find affordable housing. In

many communities, Housing Choice

vouchers holders are literally being

priced out of the market, and some

recipients are being forced to return

their vouchers because they cannot find

suitable housing that qualifies under

HUD’s existing FMR policy. Families

have a minimum of 60 days in which to

locate suitable housing; PHAs have the

discretion to extend this search time.

Over the last several months, PHAs,

low-income families, and State and

local officials have contacted HUD

about the increasing shortage of

available affordable housing in certain

metropolitan areas and their increasing

concern about the growing number of

voucher holders who are unsuccessful

in finding and leasing affordable

housing. Those involved in and affected

by this housing issue acknowledge that

HUD has done much to increase

housing choice, but have requested that

HUD take action to increase the pool of

rental housing options affordable to

families with vouchers, and thereby

make housing choice a real opportunity

for all voucher holders. These

constituents advise that HUD’s Fair

Market Rents are unrealistically low in

certain rental markets, and that HUD’s

FMRs must be raised to reflect the

changing market conditions and assist

voucher holder.

Issuance and implementation of this

rule, which puts in place the new FMR

policy described in this preamble,

responds to these concerns. The new

FMR policy will significantly increase

the pool of housing affordable to

voucher holders in difficult rental

markets. While HUD’s new FMR policy

does not adopt all measures requested

by HUD constituents to address housing

availability problems and concentration

of poverty, the rule is a significant step

forward in resolving these concerns.

The new FMR policy, when

implemented, will offer relief to those

areas where market conditions are

contributing to difficulties that voucher

holders experience in successfully using

Housing Choice vouchers.

Delaying the effectiveness of this rule

to first solicit prior public comment

would only contribute to the significant

housing problems already documented

and experienced in these areas. As

noted, HUD has heard from the public

on this issue and their comments have

been that FMRs need to be raised as

soon as possible to a level that will

provide relief in tight markets.

For the reasons stated above, HUD

believes that good cause exists to

publish this rule for effect without prior

public comment. HUD also recognizes,

however, the value of public comment

in the development of its regulations.

HUD has, therefore, issued this rule on

an interim basis and has provided the

public with a 45-day comment period.

HUD welcomes comment on the

regulatory amendments made by this

interim rule. The public comments will

be addressed in the final rule.

VIII. Findings and Certifications

Environmental Impact

A Finding of No Significant Impact

with respect to the environment as

required by the National Environmental

Policy Act (42 U.S.C. 4321–4374) is

unnecessary, since the Housing Choice

Voucher Program is categorically

excluded from the Department’s

National Environmental Policy Act

procedures under 24 CFR 50.19(c)(d).

Regulatory Planning and Review

The Office of Management and Budget

(OMB) reviewed this rule under

Executive Order 12866, Regulatory

Planning and Review. OMB determined

Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Rules and Regulations 58873

that this rule is an ‘‘economically

significant regulatory action’’ under

section 3(f) of the Order because this

rule when fully implemented will have

an annual effect on the economy of $100

million or more. In accordance with the

Executive Order and OMB’s

determination, HUD has prepared an

economic analysis for this rule.

HUD’s economic analysis estimates

the increased level of transfers that

would result from implementation of

the interim rule. The economic analysis

measures transfers because in economic

terms, HUD’s tenant-based program

provide transfers from the general

population to program participants,

transfers that enable the program

participants to enjoy better housing and

have more income left over after rent for

other needs. Changes in the regulations

governing these transfers do not

generate costs or benefits in economic

terms and, therefore, the economic

analysis does not involve a comparison

of costs and benefits. The actual

increase in transfers in the year with

highest increase (year 5 of the five years

studied) is $174 million. This is 1.8

percent of total program transfers that

year. The economic analysis assumes

the new FMR policy provided by this

rule would be implemented in Fiscal

Year 2001. The economic analysis for

this rule, which presents HUD’s detailed

analysis, is available for public

inspection in the office of the

Department’s Rules Docket Clerk, Room

10276, 451 Seventh Street, SW,

Washington, DC 20410–0500.

Additionally, any changes made to

this rule as a result of review under

Executive Order 12866 are identified in

the docket file for this rule, which is

also available for public inspection in

the Office of the Rules Docket Clerk.

Congressional Review of Major Final

Rules

This rule is a ‘‘major rule’’ as defined

in Chapter 8 of 5 U.S.C. The rule will

be submitted for Congressional review

in accordance with this chapter at the

final rule stage.

Regulatory Flexibility Act

The Secretary has reviewed this rule

before publication and by approving it

certifies, in accordance with the

Regulatory Flexibility Act (5 U.S.C.

605(b)), that this rule would not have a

significant economic impact on a

substantial number of small entities

because FMRs do not change the rent

from that which would be charged if the

unit were not in the program. While

HUD has determined that this rule

would not have a significant economic

impact on a substantial number of small

entities, HUD welcomes any comments

regarding alternatives to this rule that

would meet HUD’s objectives, as

described in this preamble, and would

be less burdensome to small entities.

Federalism Impact

Executive Order 13132 (entitled

‘‘Federalism’’) prohibits an agency from

publishing any rule that has federalism

implications if the rule either imposes

substantial direct compliance costs on

State and local governments and is not

required by statute, or the rule preempts

State law, unless the agency meets the

consultation and funding requirements

of section 6 of the Executive Order. This

rule would not have federalism

implications and would not impose

substantial direct compliance costs on

State and local governments or preempt

State law within the meaning of the

Executive Order.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates

Reform Act of 1995 (2 U.S.C. 1531–

1538), establishes requirements for

Federal agencies to assess the effects of

regulatory actions on State, local, and

tribal governments, and the private

sector. This rule does not impose any

Federal mandates on any State, local, or

tribal governments or the private sector

within the meaning of Unfunded

Mandates Reform Act of 1995.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic

Assistance program number if 14.156,

Lower-Income Housing Assistance

Program (Section 8).

List of Subjects

24 CFR Part 888

Grant programs—housing and

community development, Rent

subsidies.

24 CFR Part 982

Grant program—housing and

community development, Rent

subsidies.

24 CFR Part 985

Grant programs—housing and

community development, Rent

subsidies.

Accordingly, title 24 of the Code of

Federal Regulations is amended as

follows:

PART 888—SECTION 8 HOUSING

ASSISTANCE PAYMENT PROGRAM—

FAIR MARKET RENTS AND

CONTRACT RENT ANNUAL

ADJUSTMENT FACTORS

1. The authority citation for part 888

continues to read as follows:

Authority: 42 U.S.C. 1437c, 1437f, and

3535(d).

2. In § 888.113, paragraph (a) is

revised, paragraphs (b) through (e) are

redesignated as paragraphs (d) through

(g), the heading of newly redesignated

paragraph (f) is revised, newly

redesignated paragraph (g) is revised,

and new paragraphs (b) and (c) are

added to read follows:

§ 888.113 Fair market rents for existing

housing: Methodology.

(a) Basis for setting fair market rents.

Fair Market Rents (FMRs) are estimates

of rent plus the cost of utilities, except

telephone. FMRs are housing marketwide estimates of rents that provide

opportunities to rent standard quality

housing throughout the geographic area

in which rental housing units are in

competition. The level at which FMRs

are set is expressed as a percentile point

within the rent distribution of standard

quality rental housing units in the FMR

area. FMRs are set at either the 40th or

50th percentile rent—the dollar amount

below which the rent for 40 or 50

percent of standard quality rental

housing units falls. The 40th or 50th

percentile rent is drawn from the

distribution of rents of all units that are

occupied by recent movers.

Adjustments are made to exclude public

housing units, newly built units and

substandard units.

(b) Setting FMRs at the 40th or 50th

percentile rent. Generally HUD will set

the FMRs at the 40th percentile rent.

HUD will set FMRs at the 50th

percentile only in accordance with

paragraph (c) of this section.

(c) Setting FMRs at the 50th percentile

rent to provide a broad range of housing

opportunities throughout a metropolitan

area. (1) HUD will set the FMRs at the

50th percentile rent for all unit sizes in

each metropolitan FMR area that meets

all of the following criteria at the time

of annual publication of the FMRs:

(i) The FMR area contains at least 100

census tracts;

(ii) 70 percent or fewer of the census

tracts with at least 10 two bedroom

rental units are census tracts in which

at least 30 percent of the two bedroom

rental units have gross rents at or below

the two bedroom FMR set at the 40th

percentile rent; and

(iii) 25 percent or more of the tenantbased rental program participants in the

58874 Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Rules and Regulations

FMR area reside in the 5 percent of the

census tracts within the FMR area that

have the largest number of program

participants.

(2) If the FMRs are set at the 50th

percentile rent in accordance with

paragraph (c)(1) of this section, HUD

will set the FMRs at the 50th percentile

rent for a total of three years.

(i) At the end of the three-year period,

HUD will continue to set the FMRs at

the 50th percentile rent only so long as

the concentration measure for the

current year is less than the

concentration measure at the time the

FMR area first received an FMR set at

the 50th percentile rent. HUD will

publish FMRs based on the 40th

percentile rent for FMR areas that do not

qualify for continued use of the 50th

percentile rent.

(ii) For purposes of this section, the

term ‘‘concentration measure’’ means

the percentage of tenant-based rental

program participants in the FMR area

who reside in the 5 percent of the

census tracts within the FMR area that

have the largest number of program

participants.

(iii) FMR areas that do not meet the

test for continued use of FMRs set at the

50th percentile will be ineligible to use

FMRs set at the 50th percentile for a

period of three years.

(iv) A PHA whose jurisdiction

includes one or more FMR areas that are

no longer eligible to use FMRs set at the

50th percentile may be eligible for a

higher payment standard under

§ 982.503(f).

* * * * *

(f) Unit size adjustments. ***

(g) Manufactured home space rental.

The FMR for a manufactured home

space rental (for the voucher program

under part 982 of this title) is:

(1) 40 percent of the FMR for a two

bedroom unit; or

(2) When approved by HUD on the

basis of survey data submitted in public

comments, either the 40th or 50th

percentile as applicable of the rental

distribution of manufactured home

spaces for the FMR area. HUD accepts

public comments requesting revision of

the proposed manufactured home

spaces FMRs for areas where space

rentals are thought to differ from 40

percent of the FMR for a two-bedroom

unit. To be considered for approval, the

comments must contain statistically

valid survey data that show either the

40th or 50th percentile manufactured

home space rent (including the cost of

utilities for the manufactured home) for

the FMR area. Once approved, the

revised manufactured home space FMRs

establish new base-year estimates that

will be updated annually using the same

data used to update the FMRs.

PART 982—SECTION 8 TENANT

BASED ASSISTANCE: HOUSING

CHOICE VOUCHER PROGRAM

3. The authority citation for part 982

continues to read as follows:

Authority: 42 U.S.C. 1437f and 3535(d).

4. In § 982.503, paragraphs (b)(2),

(c)(2) and the introductory paragraph of

(c)(3)(i) are revised, paragraph (e) is

redesignated as paragraph (g), and new

paragraphs (e) and (f) are added to read

as follows:

§ 982.503 Voucher tenancy: Payment

standard amount and schedule.

* * * * *

(b) * * *

(2) The PHA must request HUD

approval to establish a payment

standard amount that is higher or lower

than the basic range. HUD has sole

discretion to grant or deny approval of

a higher or lower payment standard

amount. Paragraphs (c) and (e) of this

section describe the requirements for

approval of a higher payment standard

amount (‘‘exception payment standard

amount’’).

(c) HUD approval of exception

payment standard amount. ***

(2) Above 110 percent of FMR to 120

percent of published FMR. (i) The HUD

Field Office may approve an exception

payment standard amount from above

110 percent of the published FMR to

120 percent of the published FMR

(upper range) if the HUD Field Office

determines that approval is justified by

either the median rent method or the

40th or 50th percentile rent method as

described in paragraph (c)(2)(i)(B) of

this section (and that such approval is

also supported by an appropriate

program justification in accordance with

paragraph (c)(4) of this section).

(A) Median rent method. In the

median rent method, HUD determines

the exception payment standard amount

by multiplying the FMR times a fraction

of which the numerator is the median

gross rent of the exception area and the

denominator is the median gross rent of

the entire FMR area. In this method,

HUD uses median gross rent data from

the most recent decennial United States

census, and the exception area may be

any geographic entity within the FMR

area (or any combination of such

entities) for which median gross rent

data is provided in decennial census

products.

(B) 40th or 50th percentile rent

method. In this method, HUD

determines that the area exception

payment standard amount equals either

the 40th or 50th percentile of rents for

standard quality rental housing in the

exception area. HUD determines

whether the 40th or 50th percentile rent

applies in accordance with the

methodology described in § 888.113 of

this title for determining FMRs. A PHA

must present statistically representative

rental housing survey data to justify

HUD approval.

(ii) The HUD Field Office may

approve an exception payment standard

amount within the upper range if

required as a reasonable accommodation

for a family that includes a person with

disabilities.

(3) Above 120 percent of published

FMR. (i) At the request of a PHA, the

Assistant Secretary for Public and

Indian Housing may approve an

exception payment standard amount for

the total area of a county, PHA

jurisdiction, or place if the Assistant

Secretary determines that:

* * * * *

(e) HUD approval of success rate

payment standard amounts. In order to

increase the number of voucher holders

who become participants, HUD may

approve requests from PHAs whose

FMRs are computed at the 40th

percentile rent to establish higher,

success rate payment standard amounts.

A success rate payment standard

amount is defined as any amount

between 90 percent and 110 percent of

the 50th percentile rent, calculated in

accordance with the methodology

described in § 888.113 of this title.

(1) A PHA may obtain HUD Field

Office approval of success rate payment

standard amounts provided the PHA

demonstrates to HUD that it meets the

following criteria:

(i) Fewer than 75 percent of the

families to whom the PHA issued rental

vouchers during the most recent 6

month period for which there is success

rate data available have become

participants in the voucher program;

(ii) The PHA has established payment

standard amounts for all unit sizes in

the entire PHA jurisdiction within the

FMR area at 110 percent of the

published FMR for at least the 6 month

period referenced in paragraph (e)(1)(i)

of this section and up to the time the

request is made to HUD; and

(iii) The PHA has a policy of granting

automatic extensions of voucher terms

to at least 90 days to provide a family

who has made sustained efforts to locate

suitable housing with additional search

time.

(2) In determining whether to approve

the PHA request to establish success

rate payment standard amounts, HUD

will consider whether the PHA has a

Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Rules and Regulations 58875

SEMAP overall performance rating of

‘‘troubled’’. If a PHA does not yet have

a SEMAP rating, HUD will consider the

PHA’s SEMAP certification.

(3) HUD approval of success rate

payment standard amounts shall be for

all unit sizes in the FMR area. A PHA

may opt to establish a success rate

payment standard amount for one or

more unit sizes in all or a designated

part of the PHA jurisdiction within the

FMR area.

(f) Payment standard protection for

PHAs that meet deconcentration

objectives. Paragraph (f) of this section

applies only to a PHA with jurisdiction

in an FMR area where the FMR had

previously been set at the 50th

percentile rent to provide a broad range

of housing opportunities throughout a

metropolitan area, pursuant to

§ 888.113(c), but is now set at the 40th

percentile rent.

(1) Such a PHA may obtain HUD Field

Office approval of a payment standard

amount based on the 50th percentile

rent if the PHA scored the maximum

number of points on the

deconcentration bonus indicator in

§ 985.3(h) in the prior year, or in two of

the last three years.

(2) HUD approval of payment

standard amounts based on the 50th

percentile rent shall be for all unit sizes

in the FMR area that had previously

been set at the 50th percentile rent

pursuant to § 888.113(c). A PHA may

opt to establish a payment standard

amount based on the 50th percentile

rent for one or more unit sizes in all or

a designated part of the PHA

jurisdiction within the FMR area.

* * * * *

PART 985—SECTION 8 MANAGEMENT

ASSESSMENT PROGRAM (SEMAP)

5. The authority citation for part 985

continues to read as follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437f

and 3535(d).

6. Section 985.3 is amended by

amending paragraph (h)(1) introductory

text to add two new sentences to the

beginning of the paragraph and adding

a new paragraph (p) to read as follows:

§ 985.3 Indicators, HUD verification

methods and ratings.

* * * * *

(h) Deconcentration bonus. (1)

Submission of deconcentration data in

the HUD-prescribed format for this

indicator is mandatory for a PHA using

one or more payment standard

amount(s) that exceed(s) 100 percent of

the published FMR set at the 50th

percentile rent to provide access to a

broad range of housing opportunities

throughout a metropolitan area in

accordance with § 888.113(c) of this

title, starting with the second full PHA

fiscal year following initial use of

payment standard amounts based on the

FMR set at the 50th percentile rent.

Submission of deconcentration data for

this indicator is optional for all other

PHAs. * * *

* * * * *

(p) Success rate of voucher holders.

(1) This indicator shows whether

voucher holders were successful in

leasing units with voucher assistance.

This indicator applies only to PHAs that

have received approval to establish

success rate payment standard amounts

in accordance with § 982.503(e). This

indicator becomes initially effective for

the second full PHA fiscal year

following the date of HUD approval of

success rate payment standard amounts.

(2) HUD verification method: MTCS

Report.

(3) Rating (5 points): (i) The

proportion of families issued rental

vouchers during the last PHA fiscal year

that have become participants in the

voucher program is more than the

higher of:

(A) 75 percent; or

(B) The proportion of families issued

rental vouchers that became participants

in the program during the six month

period utilized to determine eligibility

for success rate payment standards

under § 982.503(e)(1) plus 5 percentage

points; and

(ii) The percent of units leased during

the last PHA fiscal year was 95 percent

or more, or the percent of allocated

budget authority expended during the

last PHA fiscal year was 95 percent or

more following the methodology of

§ 985.3(n).

Dated: September 12, 2000.

Andrew Cuomo,

Secretary.

[FR Doc. 00–24922 Filed 9–29–00; 8:45 am]

BILLING CODE 4210–32–P