95806 Federal Register / Vol. 89, No. 232 / Tuesday, December 3, 2024 / Notices 

information documenting their 

qualifications as addressed in the Act 

and this notice. In furtherance of 

Executive Order 14035, Executive Order 

on Diversity, Equity, and Inclusion, and 

Accessibility in the Federal Workforce 

(E.O. 14035, 86 FR 34593), HUD seeks 

for the MHCC to reflect the diversity of 

stakeholders in the housing market. The 

nomination website listed above, 

therefore, contains questions to elicit 

demographic information. Nominees 

may briefly summarize why they want 

to be a member of the MHCC and 

include unique skills, knowledge, and 

experiences that they would bring to 

inform the work of the committee. 

Individuals may nominate themselves. 

HUD recommends that the application 

for nomination be accompanied by a 

resume. 

Additional Information 

The Department will make 

appointments and reappointments from 

nominations submitted in response to 

this Notice. Also, individuals that 

applied earlier this calendar year do not 

need to reapply; pursuant to this notice 

those applications are on file and may 

be considered for future appointments. 

Current MHCC members whose first 

term ends on December 31, 2024, are 

eligible for reappointment, but will need 

to submit their nomination to be 

considered. 

To be considered for appointment to 

a position of an MHCC member whose 

term will expire in December of 2024 or 

to fill any MHCC vacancy that currently 

exists, the application must be 

submitted by January 2, 2025. 

Appointments will be made at the 

discretion of the Secretary. 

Julia R. Gordon, 

Assistant Secretary for Housing—Federal 

Housing Commissioner. 

[FR Doc. 2024–28235 Filed 12–2–24; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

[Docket No. FR–6493–N–01] 

Section 8 Housing Assistance 

Payments Program—Annual 

Adjustment Factors, Fiscal Year 2025 

AGENCY: Office of the Assistant 

Secretary for Policy Development and 

Research, Department of Housing and 

Urban Development, HUD. 

ACTION: Notice of fiscal year (FY) 2025 

Annual Adjustment Factors (AAFs). 

SUMMARY: The United States Housing 

Act of 1937 requires that certain 

assistance contracts signed by owners 

participating in the Department’s 

Section 8 housing assistance payment 

programs provide annual adjustments to 

monthly rentals for units covered by the 

contracts. For owners subject to a 

Reserve for Replacement deposit 

requirement, HUD also requires that the 

amount of the required deposit be 

adjusted each year by the AAF. This 

notice announces FY 2025 AAFs for 

adjustment of contract rents on the 

anniversary of those assistance 

contracts. The factors are based on a 

formula using residential rent and 

utility cost changes from the most recent 

annual Bureau of Labor Statistics 

Consumer Price Index (CPI) survey and 

market rents from a total of six possible 

private sector rent data sources. AAFs 

continue to be based on the shelter and 

gross rent inflation factors methodology 

used in HUD’s Fair Market Rent 

calculation that was adopted in FY 

2024. 

DATES: The FY 2025 AAFs are effective 

December 3, 2024. 

FOR FURTHER INFORMATION CONTACT: 

Ryan Jones, Director, Management and 

Operations Division, Office of Housing 

Voucher Programs, Office of Public and 

Indian Housing, 202–708–1380, for 

questions relating to the Moderate 

Rehabilitation programs (not the Single 

Room Occupancy program); Norman A. 

Suchar, Director, Office of Special 

Needs Assistance Programs, Office of 

Community Planning and Development, 

202–402–5015, for questions regarding 

the Single Room Occupancy (SRO) 

Moderate Rehabilitation program; 

Jennifer Larson, Director, Office of Asset 

Management, Office of Multifamily 

Housing, 202–402–7769, for questions 

relating to all other Section 8 programs; 

and Adam Bibler, Director, Program 

Parameters and Research Division, 

Office of Policy Development and 

Research, 202–402–6057, for technical 

information regarding the development 

of the schedules for specific areas or the 

methods used for calculating the AAFs. 

The mailing address for these 

individuals is: Department of Housing 

and Urban Development, 451 7th Street 

SW, Washington, DC 20410. HUD 

welcomes and is prepared to receive 

calls from individuals who are deaf or 

hard of hearing, as well as individuals 

with speech or communication 

disabilities. To learn more about how to 

make an accessible telephone call, 

please visit https://www.fcc.gov/ 

consumers/guides/telecommunicationsrelay-service-trs. 

SUPPLEMENTARY INFORMATION: The AAFs 

are applied at the anniversary of 

Housing Assistance Payment (HAP) 

contracts for which rents are to be 

adjusted using the AAF for those 

calendar months commencing after the 

effective date of this notice. The amount 

that an owner is required to deposit to 

the Reserve for Replacement account is 

also adjusted annually by the most 

recently published AAF, at the HAP 

contract anniversary. AAFs are distinct 

from, and do not apply to the same 

properties as, Operating Cost 

Adjustment Factors (OCAFs). OCAFs 

are annual factors used to adjust rents 

for project-based rental assistance 

contracts issued under Section 8 of the 

United States Housing Act of 1937 and 

renewed under section 515 or section 

524 of the Multifamily Assisted Housing 

Reform and Affordability Act of 1997 

(MAHRA). HUD has published OCAFs 

for 2024 in the Federal Register at 88 FR 

83571. The AAFs are also distinct from 

Renewal Funding Inflation Factors 

which help determine renewal funding 

for public housing agencies operating 

the Housing Choice Voucher program. A 

separate Federal Register notice, to be 

published following the passage of FY 

2025 HUD appropriations, will contain 

the 2025 Renewal Funding Inflation 

Factors. 

Tables showing AAFs will be 

available electronically from the HUD 

data information page at http://

www.huduser.gov/portal/datasets/ 

aaf.html. 

I. Applying 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 payment programs during the 

initial (i.e., pre-renewal) term of the 

HAP contract. There are two categories 

of Section 8 programs that use the 

AAFs: 

Category 1: The Section 8 New 

Construction, Substantial 

Rehabilitation, and Moderate 

Rehabilitation programs; and 

Category 2: The Section 8 Loan 

Management Set-Aside (LMSA) and 

Property Disposition (PD) programs. 

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: 

Renewal Rents. AAFs are not used to 

determine renewal rents after expiration 

of the original Section 8 HAP contract. 

In general, renewal rents are established 

in accordance with the statutory 

provision in MAHRA, as amended, 

under which the HAP is renewed. After 


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Federal Register / Vol. 89, No. 232 / Tuesday, December 3, 2024 / Notices 95807 

renewal, annual rent adjustments will 

be provided in accordance with 

MAHRA. 

Budget-based Rents. AAFs are not 

used for budget-based rent adjustments. 

For projects receiving Section 8 

subsidies under the LMSA program (24 

CFR part 886, subpart A) and for 

projects receiving Section 8 subsidies 

under the PD program (24 CFR part 886, 

subpart C), contract rents are adjusted, 

at HUD’s option, either by applying the 

AAFs or by budget-based adjustments in 

accordance with 24 CFR 886.112(b) and 

24 CFR 886.312(b). Budget-based 

adjustments are used for most Section 8/ 

202 projects. 

Housing Choice Voucher Program. 

AAFs are not used to adjust rents in the 

Tenant-Based or the Project-Based 

Voucher programs. 

Reserve for Replacement. The amount 

that an owner is required to deposit to 

the Reserve for Replacement account is 

adjusted annually by the AAF at the 

HAP contract anniversary. 

II. Adjustment Procedures 

This section of the notice provides a 

broad description of procedures for 

adjusting the contract rent. Technical 

details and requirements are described 

in HUD notices H 2002–10 (Section 8 

New Construction and Substantial 

Rehabilitation, Loan Management, and 

Property Disposition) and PIH 97–57 

(Moderate Rehabilitation). HUD 

publishes two separate AAF Tables, 

Table 1 and Table 2. The difference 

between Table 1 and Table 2 is that each 

AAF in Table 2 is 0.01 less than the 

corresponding AAF in Table 1. Where 

an AAF in Table 1 would otherwise be 

less than 1.0, it is set at 1.0, as required 

by statute; the corresponding AAF in 

Table 2 will also be set at 1.0, as 

required by statute. Because of statutory 

and structural distinctions among the 

various Section 8 programs, there are 

separate rent adjustment procedures for 

the three program categories: 

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 (both the regular 

program and the single room occupancy 

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 Fair Market Rent 

(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): 

• Table 1 AAF is used for a unit 

occupied by a new family since the last 

annual contract anniversary. 

• 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: Section 8 Loan Management 

Program (24 CFR Part 886, Subpart A) 

and Property Disposition Program (24 

CFR Part 886, Subpart C) 

Category 2 programs are not currently 

subject to comparability. Comparability 

will again apply if HUD establishes 

regulations for conducting 

comparability studies under 42 U.S.C. 

1437f(c)(2)(C). 

The applicable AAF is determined as 

follows: 

• Table 1 AAF is used for a unit 

occupied by a new family since the last 

annual contract anniversary. 

• 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: Reserve for Replacement 

The amount of the deposit to the 

Reserve for Replacement account must 

be increased annually using the most 

recently published ‘‘AAF with Highest 

Utility Excluded’’ for the Metropolitan/ 

Region in which the project is located 

as described in Section IV below. This 

adjustment must be made without 

regard to vacancies. 

III. When To Use Reduced AAFs (From 

AAF Table 2) 

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 0.01: 

In 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: 

[F]or 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 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). 

Legislative history for this statutory 

provision states that ‘‘the rationale [for 

lower AAFs for non-turnover units is] 

that operating costs are less if tenant 

turnover is less . . . .’’ (see Department 

of Veteran Affairs and Housing and 

Urban Development, and Independent 

Agencies Appropriations for 1995, 

Hearings Before a Subcommittee of the 

Committee on Appropriations 103d 

Cong., 2d Sess. 591 (1994)). The 

Congressional Record also states the 

following: 

Because the cost to owners of turnoverrelated vacancies, maintenance, and 

marketing are lower for long-term stable 

tenants, these tenants are typically charged 

less than recent movers in the unassisted 

market. Since HUD pays the full amount of 

any rent increases for assisted tenants in 

section 8 projects . . . HUD should expect to 

benefit from this ‘tenure discount.’ Turnover 

is lower in assisted properties than in the 

unassisted market, so the effect of the current 

inconsistency with market-based rent 

increases is exacerbated. (140 Cong. Rec. 

8659, 8693 (1994)). 

IV. How To Find the AAF 

AAF Table 1 and Table 2 are posted 

on the HUD User website at http://

www.huduser.gov/portal/datasets/ 

aaf.html. Both tables provide the 

Regional and Metropolitan Component 

Areas to be used in selecting a project’s 

geographic area for the AAF. For 

projects located in non-metropolitan 

areas, select the Query Tool, AAF 

Documentation, State, then county to 

determine which Metropolitan 

Component Area to use when selecting 

the AAF for the project. 

There are two numeric columns in 

each AAF table. The first column is 

used to adjust contract rent for rental 

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. 

The applicable AAF is selected as 

follows: 

• Determine whether Table 1 or Table 

2 is applicable. In Table 1 or Table 2, 


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95808 Federal Register / Vol. 89, No. 232 / Tuesday, December 3, 2024 / Notices 

locate the AAF for the geographic area 

where the contract unit is located. 

• Determine whether the highest cost 

utility is or is not included in contract 

rent for the contract unit. 

• If highest cost utility is included, 

select the AAF from the column for 

‘‘Highest Cost Utility Included.’’ If 

highest cost utility is not included, 

select the AAF from the column for 

‘‘Highest Cost Utility Excluded.’’ 

V. Methodology 

AAFs are rent inflation factors. Two 

types of rent inflation factors are 

calculated for AAFs: gross rent factors 

and shelter rent factors. The gross rent 

factor accounts for inflation in the cost 

of both the rent of the residence and the 

utilities used by the unit; the shelter 

rent factor accounts for the inflation in 

the rent of the residence but does not 

reflect any change in the cost of utilities. 

The gross rent inflation factor is 

designated as ‘‘Highest Cost Utility 

Included’’ and the shelter rent inflation 

factor is designated as ‘‘Highest Cost 

Utility Excluded.’’ HUD calculates the 

AAFs based on the shelter and gross 

rent inflation factors used in FMR 

calculations. The source data for AAFs 

therefore come from the 23 local and 4 

regional CPI components (rent of 

primary residence and household fuels 

and utilities), depending on the location 

of the AAF area, and are combined with 

available measures of private data 

sources in calculating a weighted 

average shelter and gross rent inflation 

factor. The private measures of rent 

used by HUD are the RealPage average 

effective rent per unit; Moody’s 

Analytics REIS average market rent; 

CoStar Group average effective rent; 

CoreLogic, Inc. single-family combined 

3-bedroom median rent; Apartment List 

Rent Estimate; and Zillow Observed 

Rent Index. 

In calculating the AAF from these 

data, HUD first takes the annual average 

of each statistic, then its year-to-year 

change. HUD then takes the mean of 

changes from all available sources for 

each area. Next, HUD takes an average 

of this private-sector measure of rent 

inflation with rent inflation as captured 

by the CPI for the area, where the 

private-sector measure is weighted at 

approximately 75 percent and the CPI 

rent inflation measure is weighted at 

approximately 25 percent. HUD has 

determined these weights by comparing 

the national average of the private rent 

changes and changes in CPI rent of 

primary residence to changes in the 

national average of recent mover rents 

from the American Community Survey 

(ACS) from 2018 through 2022. HUD 

weights the private data averages and 

overall CPI rent of primary residence in 

such a way as to minimize the root 

mean squared error between the 

resulting average and the ACS recent 

mover rents. For future AAFs, HUD will 

update the weights by adding the most 

recent years of ACS recent mover rents, 

private rent data, and CPI rent of 

primary residence to the analysis. 

HUD uses a local measure of private 

rent inflation for markets that are 

covered by at least three of the six 

available sources of private rent data. 

HUD combines this local measure of 

rent inflation with either the local 

metropolitan area CPI rent of primary 

residence for the 23 areas where such 

data exist or the regional CPI rent in 

areas without a local index. For areas 

without at least three of the six private 

rent data sources available, HUD uses a 

regional average of private rent inflation 

factors alongside the regional CPI rent of 

primary residence. HUD constructs the 

regional average by taking the rental 

unit weighted average of the change in 

rents of each area in a region that does 

have private rent data coverage. This 

ensures that smaller areas that are not 

directly covered by the private sources 

will still have current rental market 

conditions taken into account in the 

calculation of the rent inflation factor 

for such areas. 

The results of the above calculation 

are the ‘‘Highest Cost Utility Excluded’’ 

AAF. For the ‘‘Highest Cost Utility 

Included’’ AAF, HUD averages the 

result of this step with the year-to-year 

change in the CPI housing fuels and 

utilities index for the area in order to 

make the resulting inflation measure 

reflective of gross rents. 

VI. Area Definitions 

To make certain that they are using 

the correct AAFs, users should refer to 

the Area Definitions Table section at 

https://www.huduser.gov/portal/ 

datasets/aaf.html. Furthermore, users 

can also search for AAF area definitions 

using an online lookup tool available on 

HUD User at the link in the previous 

sentence. AAFs are based on the 

updated metropolitan area definitions 

published by the Office of Management 

and Budget (OMB) on September 14, 

2018, and first incorporated by the U.S. 

Census Bureau into the 2019 ACS data 

and the corresponding FY 2022 FMRs. 

On July 21, 2023, OMB published 

Bulletin No. 23–01, which contains 

revisions to metropolitan area 

definitions. However, the U.S. Census 

Bureau has not yet incorporated these 

revisions into the data available to HUD, 

and therefore HUD is not using these 

new definitions for FY 2025. 

Solomon Greene, 

Principal Deputy Assistant Secretary for 

Policy Development and Research. 

[FR Doc. 2024–28314 Filed 12–2–24; 8:45 am] 

BILLING CODE 4210–67–P 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

[Docket No. FR–6474–N–01] 

Notice of Partial Claim Electronic 

Delivery Alternative Demonstration 

AGENCY: Office of the Assistant 

Secretary for Housing—Federal Housing 

Commissioner, HUD. 

ACTION: Notice, with request for 

comments. 

SUMMARY: This notice announces the 

Partial Claim Electronic Delivery 

Alternative Demonstration (the 

Demonstration). Under the 

Demonstration, participating mortgagees 

will submit digital copies of partial 

claim promissory notes and subordinate 

mortgages (PC Documents) to HUD 

instead of originals, which they will 

retain and provide to HUD upon 

request. The Demonstration will include 

any mortgagees that elect to participate 

but will only include partial claim 

subordinate mortgages secured by 

mortgage properties where the use of 

digital copies is permissible under 

applicable law. When the 

Demonstration ends, HUD will evaluate 

its success, determine whether to 

permanently implement the 

Demonstration processes, and identify 

any other necessary changes. 

DATES: Comments are due no later than 

February 3, 2025. Following the 

conclusion of the 60-day comment 

period, HUD will fully evaluate 

submitted comments and may modify 

the design of the Demonstration. HUD 

will then issue another notice 

announcing the start date of the 

Demonstration and will also publish a 

mortgagee letter with further 

information. 

ADDRESSES: There are two methods for 

submitting public comments. All 

submissions must refer to the above 

docket number and title. 

1. Electronic Submission of 

Comments. Comments may be 

submitted electronically through the 

Federal eRulemaking Portal at 

www.regulations.gov. HUD strongly 

encourages commenters to submit 

comments electronically. Electronic 

submission of comments allows the 

commenter maximum time to prepare 


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