66888 Federal Register / Vol. 65, No. 216 / Tuesday, November 7, 2000 / Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

24 CFR Part 888

[Docket No. FR–4626–N–01]

Section 8 Housing Assistance

Payments Program; Contract Rent

Annual Adjustment Factors, Fiscal

Year 2001

AGENCY: Office of the Secretary, HUD.

ACTION: Notice of Revised Contract Rent

Annual Adjustment Factors.

SUMMARY: This Notice announces

revised Annual Adjustment Factors

(AAFs) for adjustment of Section 8

contract rents on housing assistance

payment contract anniversaries from

October 1, 2000. The AAFs are based on

a formula using data on residential rent

and utilities cost changes from the most

current Bureau of Labor Statistics

Consumer Price Index (CPI) survey and

from HUD’s Random Digit Dialing

(RDD) rent change surveys.

EFFECTIVE DATE: October 1, 2000.

FOR FURTHER INFORMATION CONTACT:

Gerald J. Benoit, Operations Division,

Office of Rental Assistance, Office of

Public and Indian Housing [(202) 708–

0477], for questions relating to the

Section 8 Voucher, Certificate, and

Moderate Rehabilitation programs;

Allison Manning, Office of Special

Needs Assistance Programs, Office of

Community Planning and Development,

(202) 708–1234, for questions regarding

the Single Room Occupancy Moderate

Rehabilitation program; Frank M.

Malone, Acting Director, Office of Asset

Management and Disposition, Office of

Housing (202) 708–3730, for questions

relating to all other Section 8 programs;

and Lynn A. Rodgers, Economic and

Market Analysis Division, Office of

Policy Development and Research, (202)

708–0590, for technical information

regarding the development of the

schedules for specific areas or the

methods used for calculating the AAFs.

Mailing address for above persons:

Department of Housing and Urban

Development, 451 Seventh Street, SW,

Washington, DC 20410. Hearing-or

speech-impaired persons may contact

the Federal Information Relay Service at

1–800–877–8339 (TTY). (Other than the

‘‘800’’ TTY number, the above-listed

telephone numbers are not toll-free.)

SUPPLEMENTARY INFORMATION: This

Notice explains how AAFs are applied

to various Section 8 programs.

The first section of the Notice

identifies to which programs and under

what circumstances AAFs apply. The

second section explains when and how

to apply the statutory 1 percent

reduction to AAFs. The third section

describes the actual adjustment

procedures.

Next the Notice explains the content

and applicability of the two AAF tables

included in this Notice and provides

detailed information on the

geographical coverage of each AAF area.

The Notice then explains how to apply

AAFs to manufactured home space

rentals in the Section 8 tenant-based

certificate program.

The Notice closes with a brief

explanation of how HUD calculates

AAFs.

I. Applicability of AAFs to Various

Section 8 Programs

AAFs established by this Notice are

used to adjust contract rents for units

assisted in certain Section 8 housing

assistance payments programs, during

the term of the HAP contract. There are

three categories of Section 8 programs

that use the AAFs:

Category 1—The Section 8 new

construction and substantial

rehabilitation programs and the

moderate rehabilitation program.

Category 2—The Section 8 loan

management (LM) and property

disposition (PD) programs.

Category 3—The Section 8 tenantbased certificate program, the projectbased certificate program and the

project-based voucher program.

Each Section 8 program category uses

the AAFs differently. The specific

application of the AAFs is determined

by the law, the HAP contract, and

appropriate program regulations or

requirements.

AAFs are not used in the following

cases:

• AAFs are not used to determine

renewal rents after expiration of the

original Section 8 HAP contract (either

for projects where the Section 8 HAP

contract is renewed under a

restructuring plan adopted under 24

CFR part 401; or renewed without

restructuring under 24 CFR part 402). In

general, renewal rents are based on the

applicable state-by-state operating cost

adjustment factor (OCAF) published by

HUD; the OCAF is applied to the

previous year’s contract rent minus debt

service.

• AAFs are not used for the Section

8 tenant-based voucher program.

(However, AAFs are used for the

Section 8 project-based voucher

program and project-based certificate

program.)

• AAFs are not used for budget-based

rent adjustments. Contract rents for

projects receiving Section 8 subsidies

under the loan management program (24

CFR part 886, subpart A) and for

projects receiving Section 8 subsidies

under the property disposition program

(24 CFR part 886, subpart C) are

adjusted, at HUD’s option, either by

applying the AAFs or by budget-based

adjustments in accordance with 24 CFR

207.19(e). Budget-based adjustments are

used for most Section 8/202 projects.

Under the Section 8 moderate

rehabilitation program (both the regular

program and the single room occupancy

program), the public housing agency

(PHA) applies the AAF to the base rent

component of the contract rent, not the

full contract rent. For the other covered

programs, the AAF is applied to the

whole amount of the contract rent.

II. Use of Reduced AAF

In accordance with Section 8(c)(2)(A)

of the United States Housing Act of

1937 (42 U.S.C. 1437f(c)(2)(A)), the AAF

is reduced by .01:

• For all tenancies in the Section 8

tenant-based certificate program. (This

program is being converted to the

Section 8 tenant-based voucher

program. See 24 CFR 982.502. The last

tenancies under the tenant-based

certificate program will terminate by

September 29, 2001.)

• For all tenancies assisted in the

Section 8 project-based certificate

program.

• In other Section 8 programs, for a

unit occupied by the same family at the

time of the last annual rent adjustment

(and where the rent is not reduced by

application of comparability (rent

reasonableness)).

The law provides that:

Except for assistance under the certificate

program, for any unit occupied by the same

family at the time of the last annual rental

adjustment, where the assistance contract

provides for the adjustment of the maximum

monthly rent by applying an annual

adjustment factor and where the rent for a

unit is otherwise eligible for an adjustment

based on the full amount of the factor, 0.01

shall be subtracted from the amount of the

factor, except that the factor shall not be

reduced to less than 1.0. In the case of

assistance under the certificate program, 0.01

shall be subtracted from the amount of the

annual adjustment factor (except that the

factor shall not be reduced to less than 1.0),

and the adjusted rent shall not exceed the

rent for a comparable unassisted unit of

similar quality, type, and age in the market

area. 42 U.S.C. 1437f(c)(2)(A).

To implement the law, HUD

publishes two separate AAF Tables,

contained in Schedule C, Tables 1 and

2 of this notice. Each AAF in Table 2

has been computed by subtracting 0.01

from the annual adjustment factor in

Table 1.

Federal Register / Vol. 65, No. 216 / Tuesday, November 7, 2000 / Rules and Regulations 66889

III. Adjustment Procedures

This section of the notice is intended

to provide a broad description of

adjustment procedures. Technical

details and requirements are described

in HUD notices. The notices are issued

by the Office of Housing and the Office

of Public and Indian Housing.

Because of statutory and structural

distinctions among the various Section

8 programs, there are separate rent

adjustment procedures for three

program categories:

• The Section 8 new construction and

substantial rehabilitation programs

(including the Section 8 state agency

program); and the moderate

rehabilitation programs (including the

moderate rehabilitation single room

occupancy program).

• The Section 8 loan management

(LM) Program (Part 886, Subpart A) and

property disposition (PD) Program (Part

886 Subpart C).

• The Section 8 certificate program

(including the tenant-based certificate

and the project-based certificate

program) and the Section 8 projectbased voucher program.

HUD has not yet issued regulations

for the Section 8 project-based voucher

program. At this time, the project-based

voucher program is administered in

accordance with the PBC program

regulations, and contract rents are

adjusted in the same manner as in the

Section 8 PBC program.

Category 1: Section 8 New Construction,

Substantial Rehabilitation and

Moderate Rehabilitation Programs

In the Section 8 New Construction

and Substantial Rehabilitation

programs, the published AAF factor is

applied to the pre-adjustment contract

rent. In the Section 8 Moderate

Rehabilitation program, the published

AAF is applied to the pre-adjustment

base rent.

For category 1 programs, the Table 1

AAF factor is applied before

determining comparability (rent

reasonableness). Comparability applies

if the pre-adjustment gross rent (preadjustment contract rent plus any

allowance for tenant-paid utilities) is

above the published FMR.

If the comparable rent level (plus any

initial difference) is lower than the

contract rent as adjusted by application

of the Table 1 AAF, the comparable rent

level (plus any initial difference) will be

the new contract rent. However, the preadjustment contract rent will not be

decreased by application of

comparability.

In all other cases (i.e., unless the

contract rent is reduced by

comparability):

• The Table 1 AAF is used for a unit

occupied by a new family since the last

annual contract anniversary.

• The Table 2 AAF is used for a unit

occupied by the same family as at the

time of the last annual contract

anniversary.

Category 2: The Loan Management

Program (LM; Part 886, Subpart A) and

Property Disposition Program (PD; Part

886 Subpart C)

At this time, rent adjustment by the

AAF in the Category 2 programs is not

subject to comparability. (Comparability

will again apply if HUD establishes

regulations for conducting

comparability studies under 42 U.S.C.

1437f(c)(2)(C).) Rents are adjusted by

applying the full amount of the

applicable AAF under this notice.

The applicable AAF is determined as

follows:

• The Table 1 AAF is used for a unit

occupied by a new family since the last

annual contract anniversary.

• The Table 2 AAF is used for a unit

occupied by the same family as at the

time of the last annual contract

anniversary.

Category 3: Section 8 Certificate

Program (tenant-based and projectbased) and the Section 8 Project-based

Voucher Program

The same adjustment procedure is

used for rent adjustment in

(1) The tenant-based certificate

program (24 CFR 983.519),

(2) The project-based certificate

program (24 CFR part 983),

(3) The project-based voucher

program (24 CFR part 983). The

following procedures are used:

• The Table 2 AAF is always used;

the Table 1 AAF is not used.

• The Table 2 AAF is always applied

before determining comparability (rent

reasonableness).

• Comparability always applies. If the

comparable rent level is lower than the

rent to owner (contract rent) as adjusted

by application of the Table 2 AAF, the

comparable rent level will be the new

rent to owner.

AAF Tables

The AAFs are contained in Schedule

C, Tables 1 and 2 of this notice. There

are two columns in each table. The first

column is used to adjust contract rent

for units where the highest cost utility

is included in the contract rent—i.e.,

where the owner pays for the highest

cost utility. The second column is used

where the highest cost utility is not

included in the contract rent—i.e.,

where the tenant pays for the highest

cost utility.

AAF Areas

Each AAF applies to a specified

geographic area and to units of all

bedroom sizes. AAFs are provided:

• For the metropolitan parts of the ten

HUD regions exclusive of CPI areas;

• For the nonmetropolitan parts of

these regions; and

• For separate metropolitan AAF

areas for which local CPI survey data are

available.

With the exceptions discussed below,

the AAFs shown in Schedule C use the

Office of Management and Budget’s

(OMB) most current definitions of

metropolitan areas. HUD uses the OMB

Metropolitan Statistical Area (MSA) and

Primary Metropolitan Statistical Area

(PMSA) definitions for AAF areas

because of their close correspondence to

housing market area definitions.

The exceptions are for certain large

metropolitan areas, where HUD

considers the area covered by the OMB

definition to be larger than appropriate

for use as a housing market area

definition. In those areas, HUD has

deleted some of the counties that OMB

had added to its revised definitions. The

following counties are deleted from the

HUD definitions of AAF areas:

Metropolitan area Deleted counties

Chicago, IL ........................................... DeKalb, Grundy and Kendall Counties.

Cincinnati-Hamilton, OH–KY–IN .......... Brown County, Ohio; Gallatin, Grant and Pendleton Counties in Kentucky; and Ohio County, Indiana.

Dallas, TX ............................................. Henderson County.

Flagstaff, AZ–UT .................................. Kane County, UT.

New Orleans, LA .................................. St. James Parish.

Washington, DC–VA–MD–WV ............. Berkeley and Jefferson Counties in West Virginia; and Clarke, Culpeper, King George and Warren

counties in Virginia.

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Separate AAFs are listed in this

publication for the above counties. They

and the metropolitan area of which they

are a part are identified with an asterisk

(*) next to the area name. The asterisk

indicates that there is a difference

between the OMB metropolitan area and

the HUD AAF area definition for these

areas.

To make certain that they are using

the correct AAFs, users should refer to

the area definitions section at the end of

Schedule C. For units located in

metropolitan areas with a local CPI

survey, AAFs are listed separately. For

units located in areas without a local

CPI survey, the appropriate HUD

regional Metropolitan or

Nonmetropolitan AAFs are used.

The AAF area definitions shown in

Schedule C are listed in alphabetical

order by State. The associated HUD

region is shown next to each State

name. Areas whose AAFs are

determined by local CPI surveys are

listed first. All metropolitan CPI areas

have separate AAF schedules and are

shown with their corresponding county

definitions or as metropolitan counties.

Listed after the metropolitan CPI areas

(in those states that have such areas) are

the non-CPI metropolitan and

nonmetropolitan counties of each State.

In the six New England States, the

listings are for counties or parts of

counties as defined by towns or cities.

Puerto Rico and the Virgin Islands use

the Southeast AAFs. All areas in Hawaii

use the AAFs identified in the Table as

‘‘STATE: Hawaii,’’ which are based on

the CPI survey for the Honolulu

metropolitan area. The Pacific Islands

use the Pacific/Hawaii Nonmetropolitan

AAFs. The Anchorage metropolitan area

uses the AAFs based on the local CPI

survey; all other areas in Alaska use the

Northwest/Alaska Nonmetropolitan

AAFs.

Section 8 Certificate Program AAFs for

Manufactured Home Spaces

For a manufactured home space rental

in the Section 8 tenant-based certificate

program, the AAFs in this publication

identified as ‘‘Highest Cost Utility

Included’’ are to be used to adjust the

rent to owner for the manufactured

home space. The applicable AAF is

determined by reference to the

geographic listings contained in

Schedule C, as described in the

preceding section.

How Factors Are Calculated

For Areas With CPI Surveys

(1) Changes in the shelter rent and

utilities components were calculated

based on the most recent CPI annual

average change data.

(2) The ‘‘Highest Cost Utility

Included’’ column in Schedule C was

calculated by weighting the rent and

utility components with the

corresponding components from the

1990 Census.

(3) The ‘‘Highest Cost Utility

Excluded’’ column in Schedule C was

calculated by eliminating the effect of

heating costs that are included in the

rent of some of the units in the CPI

surveys.

For Areas Without CPI Surveys

(1) HUD used random digit dialing

(RDD) regional surveys to calculate

AAFs. The RDD survey method is based

on a sampling procedure that uses

computers to select a statistically

random sample of rental housing, dial

and keep track of the telephone calls,

and process the responses. RDD surveys

are conducted to determine the rent

change factors for the metropolitan parts

(exclusive of CPI areas) and

nonmetropolitan parts of the 10 HUD

regions, a total of 20 surveys.

(2) The change in rent with the

highest cost utility included in the rent

was calculated using the average of the

ratios of gross rent in the current year

RDD survey divided by the previous

year’s for the respective metropolitan or

nonmetropolitan parts of the HUD

region.

(3) The change in rent with the

highest cost utility excluded (i.e., paid

separately by the tenant) was calculated

in the same manner, after subtracting

the median values of utilities costs from

the gross rents in the two years. The

median cost of utilities was determined

from the units in the RDD sample which

reported that all utilities were paid by

the tenant.

Other Matters

Environmental Impact

An environmental assessment is

unnecessary, since revising Annual

Adjustment Factors is categorically

excluded from the Department’s

National Environmental Policy Act

procedures under 24 CFR 50.19(c)(6).

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic

Assistance program number for Lower

Income Housing Assistance programs

(Section 8) is 14.156.

Accordingly, the Department

publishes these Annual Adjustment

Factors for the Section 8 Housing

Assistance Payments Programs as set

forth in the following tables which will

not appear in the Code of Federal

Regulations.

Dated: October 25, 2000.

Andrew Cuomo,

Secretary.

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[FR Doc. 00–28458 Filed 11–6–00; 8:45 am]

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