[Federal Register Volume 66, Number 109 (Wednesday, June 6, 2001)]
[Rules and Regulations]
[Pages 30566-30624]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-14275]



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Part III





Department of Housing and Urban Development





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24 CFR Part 982



Exception Payment Standard to Offset Increase in Utility Costs in the 
Housing Choice Voucher Program; Interim Rule

Federal Register / Vol. 66, No. 109 / Wednesday, June 6, 2001 / Rules 
and Regulations

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 982

[Docket No. FR 4672-I-01]
RIN 2577--AC29


Exception Payment Standard to Offset Increase in Utility Costs in 
the Housing Choice Voucher Program

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Interim rule.

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SUMMARY: Currently, increased energy costs in some parts of the country 
have had an adverse impact on the ability of applicants and 
participants in the Housing Choice Voucher program to either lease a 
unit while paying no more than 40 percent of their income for rent, or, 
once having leased a unit, to continue to pay both rent and the higher 
utility costs. Therefore, HUD is temporarily approving higher exception 
payment standard amounts for certain PHAs that have adopted a new 
utility allowance schedule after October 1, 2000 of between 110% and 
120% of the Fair Market Rents (FMRs) without requiring the Public 
Housing Agency (PHA) to seek HUD approval, in order to mitigate the 
adverse impact of increased energy costs. HUD will calculate these 
exception payment standards using new rental data (reflected in 
proposed FMRs for FY 2002 published at 66 FR 23770 (May 9, 2001)) with 
the result that in areas where energy costs have increased 
substantially the exception payment standard amount will be between 
110% and 120% of current FMRs. These exception payment standards are 
published in the Federal Register as appendix A immediately following 
this rule. HUD is also permitting these exception payment standard 
amounts to be used at interim reexaminations of families until 
September 30, 2001.
    The provisions of this interim rule apply only for the balance of 
the federal fiscal year ending September 30, 2001. The proposed fair 
market rents for FY 2002 published at 66 FR 23770 (May 9, 2001) reflect 
the increased cost of utilities.

DATES: Comment Due Date: August 6, 2001.
    Effective Date: This Interim Rule is effective July 6, 2001.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Rules Docket Clerk, Office of General Counsel, Room 
10276, Department of Housing and Urban Development, 451 Seventh Street, 
SW, Washington, DC 20410-0500. Communications should refer to the above 
docket number and title. Facsimile (FAX) comments are not acceptable. A 
copy of each communication submitted will be available for public 
inspection and copying between 7:30 a.m. and 5:30 p.m. weekdays at the 
above address.

FOR FURTHER INFORMATION CONTACT: Gerald J. Benoit, Office of Public and 
Indian Housing, Department of Housing and Urban Development, 451 
Seventh Street, SW, Room 4210, Washington, DC 20410; telephone (202) 
708-0477 (this is not a toll-free number). Persons with hearing or 
speech impairments may access these numbers via TTY by calling the 
Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

Background

    Section 8 of the United Housing Act of 1937 (the Act)(42 
U.S.C.1437f) authorizes housing assistance to assist lower income 
families in obtaining decent, safe, and sanitary housing. The amount of 
the housing assistance payment in the housing choice voucher program is 
limited by the payment standard amounts adopted by the PHA based on the 
HUD published FMR for designated areas of the country. The FMR for an 
area is the amount that would be needed to pay gross rent (shelter plus 
all utilities except telephone) for privately owned rental housing.
    The payment standard amount is the maximum subsidy amount available 
to pay for rent and family-furnished utilities. Families searching for 
housing may fail to find units that meet the housing quality standards 
for the program because the cost of rent plus family-furnished 
utilities for many of these units, particularly in a tight rental 
market, exceeds the current payment standard amounts that do not 
reflect the higher cost of energy since publication of the FY 2001 FMRs 
(see 65 FR 57658, September 25, 2000). Also, an increasing number of 
families are having difficulty finding standard quality units without 
paying more than 40 percent of their adjusted income for rent at 
initial occupancy, which is precluded by law. Also, current 
participants are affected because they have to pay more out-of-pocket 
for rent and family-furnished utilities. As a result, some families 
have rent burdens that exceed 50 percent of their income.

I. Use of Payment Standard Amounts

    HUD has determined that it is appropriate to take special steps to 
permit PHAs to increase payment standard amounts to reflect the recent 
significant increases in utility expenses for natural gas and 
petroleum. The rule allows PHAs to establish exception payment standard 
amounts calculated using updated data on the costs of rents and 
utilities (which are reflected in proposed FMRs for FY 2002 published 
at 66 FR 23770 (May 9, 2001).) This increase in the exception payment 
standard amounts is necessary to prevent any hardship on families who 
are currently searching for housing but who, because of increased 
utility costs, are unable to find units for which the gross rent 
(including the cost of all utilities) falls within current established 
PHA payment standard amounts that are limited to 110 percent of the 
published fair market rent.
    Appendix A, published in the Federal Register immediately following 
this rule, lists the HUD approved maximum exception payment standard 
amounts for each unit size in each fair market rent area. These are the 
maximum HUD approved exception payment standard amounts, and are capped 
at 120 percent of the 40th percentile rent under 24 CFR 888.113. Some 
housing authorities have set their payment standards based on 50th 
percentile rents under 65 FR 58870 (October 2, 2000) in order to 
deconcentrate areas of poverty and promote residential choice. Those 
PHAs may use either the appendix A amounts or 110% of their FMRs as the 
exception payment standard amounts. The use of the exception payment 
standard amounts on appendix A is only approved for those PHAs that 
have adopted a new utility allowance schedule after October 1, 2000.
    Permission for PHAs to establish new maximum payment standard 
amounts without HUD approval will continue in effect only until HUD 
publishes new fair market rents for effect on or about October 1, 2001. 
If HUD has approved the PHA adoption of exception payment standard 
amounts that are higher than the maximum exception payment standard 
amounts published by HUD in appendix A of this interim rule, HUD 
approval to use those higher maximum payment standard amounts will 
continue in effect. The PHA's establishment of the revised payment 
standard amounts may not result in rents higher than 120% of current 
FMRs without HUD approval under the procedures in 24 CFR 982.503(c)(3).
    This interim rule gives a PHA the flexibility to adjust the payment 
standard amounts on its payment standard schedule up to the maximum 
HUD-approved exception payment standard amounts in appendix A to

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increase the amount of a participant's subsidy to cover the increased 
cost of utilities. A PHA should review its utility allowance schedule 
to determine if there has been a recent increase in utility costs of 10 
percent or more in the cost of utilities and that increase is reflected 
in the utility allowance schedule adopted by the PHA after September 
30, 2000. For a PHA to establish these exception payment standards it 
is not sufficient that the cost of any one utility increased by more 
than 10 percent. Instead, the PHA must determine that the total cost of 
all utilities for a typical two-bedroom unit has increased by more than 
10 percent based on the difference between the new utility allowance 
schedule and the previous schedule.
    PHAs should review their current payment standard amounts to 
determine if they are adequate to meet the increased cost of utilities 
in the community based on average consumption rates. If the payment 
standard amounts are not adequate to meet the increased utility costs, 
the PHA should increase the payment standard by an appropriate amount 
up to the maximum exception payment standard amount permitted by this 
interim rule and appendix A.

II. Methodology and Source of Data

    HUD's standard methodology for incorporating changes in utility 
costs into FMRs relies on the most current CPI data on annual changes 
in residential utility costs. Annual rather than point-to-point monthly 
comparisons (e.g., July 1999 to July 2000) are used because monthly 
utility price indices are volatile and often not reflective of the 
annualized cost of utilities.
    In developing the proposed FMRs for FY 2002, HUD has determined 
that the methodology using CPI data does not adequately capture the 
unusual increases in natural gas prices that occurred at the end of 
calendar year 2000. This methodology captures a 17 percent increase in 
natural gas prices from 1999 to 2000, but December 1999 to December 
2000 prices increased by an average of 37 percent and Department of 
Energy projections for 2002 are very similar to the December 2000 
prices. For purposes of estimating FY 2002 FMRs, the Department has 
therefore modified the natural gas inflation component to use December-
to-December costs when available, and to use second half to second half 
of the year figures for CPI areas where December 2000 data were not 
available. This is a one-time change made to respond to unusual 
circumstances; HUD expects to return to the CPI-based methodology next 
year.

III. Rule Change

    In addition to publishing the maximum exception payment standard 
amounts in appendix A, this rule revises the existing program 
regulations at 24 CFR 982.503(b)(2) and (c)(2), and 982.505(c)(4) to 
allow the PHA to adopt these exception payment standard amounts when 
calculating a family's housing assistance at the next annual 
reexamination or any interim reexamination conducted as a result of a 
family request for relief based on a significant increase in utility 
costs. This modification to allow use of these exception payment 
standard amounts at interim reexamination applies only through 
September 30, 2001, when it expires.

IV. Findings and Certifications

Justification for Interim Rulemaking
    In general, the Department publishes a rule for public comment 
before issuing a rule for effect, in accordance with its own 
regulations on rulemaking, 24 CFR part 10. However, part 10 does 
provide for exceptions from that general rule. One of these exceptions 
is where public comment is ``impracticable, unnecessary, or contrary to 
the public interest.'' In this case, delaying the effective date for 
public comment would be contrary to the public interest. The nation is 
experiencing a significant increase in the cost of utilities, 
especially natural gas and petroleum. Due to the increased utility 
costs in some areas, families in the housing choice voucher program are 
having current difficulty finding affordable housing or, if already 
housed, they are having difficulty paying for utilities. At this time, 
HUD has available current FMR data which, while not yet in effect, if 
used as a basis to calculate exception payments, would allow HUD to 
approve exception payment standards above current FMRs within its 
existing regulatory authority. This step should be taken as quickly as 
possible to alleviate hardship in areas where there has been an 
unexpected sharp increase in utility costs. The comments received 
within the 60-day comment period will be considered during development 
of final FMRs for publication on October 1, 2001.
Regulatory Flexibility Act
    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed and approved this interim rule, and in so 
doing certifies that this rule will not have a significant economic 
impact on a substantial number of small entities. This rule permits 
Housing Authorities to use an exception payment standard based on new 
data, essentially allowing them to approve payment standards of up to 
120% of FMR without HUD approval for the purpose of accommodating 
increased utility costs in certain areas.
Environmental Impact
    This rule and appendix A involve establishment of rate or cost 
determinations and related external administrative requirements and 
procedures which do not constitute a development decision that affects 
the physical condition of specific project areas or building sites. 
Accordingly, under 24 CFR 50.19(c)(6), this rule and appendix A are 
categorically excluded from environmental review under the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321).
Executive Order 13132, Federalism
    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on State and local governments and 
is not required by statute, or preempts State law, unless the relevant 
requirements of section 6 of the Executive Order are met. This rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on State and local governments or preempt State 
law within the meaning of the Executive Order.
Executive Order 12866
    The Office of Management and Budget (OMB) reviewed this interim 
rule under Executive Order 12866, Regulatory Planning and Review. OMB 
determined that this interim rule is a ``significant regulatory 
action,'' as defined in section 3(f) of the Order, (but not 
economically significant, as provided in section 3(f)(1) of the Order). 
Calculations by HUD show that the impact of the new exception payment 
standards will be slight, an increase of four dollars per month for the 
average voucher holder. Increases in energy costs generally translate 
to low percentage increases in rent costs; for example, a 50% increase 
in natural gas prices would increase FMRs by only 1%. This is because 
natural gas comprises only 27% of utility costs and utility costs 
average only 8-15% of total rent costs in metropolitan areas. With 
approximately 1.5 million voucher holders, the cost through September 
of 2001 (when new

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FMRs will go into effect) will be significantly less than the threshold 
provided in section 3(f)(1) of the Order. For these reasons, HUD 
concludes that the rule is not economically significant within the 
meaning of the Order.
    Any changes made to this interim rule subsequent to its submission 
to OMB are identified in the docket file, which 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.
Unfunded Mandates Reform Act
    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4; approved March 22, 1995) (UMRA) establishes requirements for Federal 
agencies to assess the effects of their regulatory actions on State, 
local, and tribal governments, and on the private sector. This interim 
rule does not impose any Federal mandates on any State, local, or 
tribal governments, or on the private sector, within the meaning of the 
UMRA.
Catalog of Federal Domestic Assistance.
    The Catalog of Federal Domestic Assistance number applicable to the 
program affected by this rule is 14.871.

List of Subjects in 24 CFR Part 982

    Grant programs--housing and community development, Housing, Low- 
and moderate-income housing, Rent subsidies, Reporting and 
recordkeeping requirements.

    For the reasons stated in the preamble, HUD amends 24 CFR part 982 
as follows:

PART 982--SECTION 8 TENANT BASED ASSISTANCE: HOUSING CHOICE VOUCHER 
PROGRAM

    1. The authority citation for 24 CFR part 982 continues to read as 
follows:

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

    2. Amend 24 CFR 982.503 as follows:
    a. Revise the first sentence of paragraph (b)(2);
    b. Add a second sentence to paragraph (c)(2)(i); and
    c. Add a new paragraph (c)(2)(iii).
    The additions and revisions read as follows:


Sec. 982.503  Voucher tenancy: Payment standard amount and schedule.

* * * * *
    (b) * * *
    (2) Except as provided in paragraph (c)(2)(iii) of this section, 
the PHA must request HUD approval to establish a payment standard 
amount that is higher or lower than the basic range. * * *
    (c) * * *
    (2)(i) * * * The PHA may establish an exception payment standard 
amount from above 110 percent of the published FMR to 120 percent of 
the published FMR, in accordance with paragraph (c)(2)(iii) of this 
section, without requesting approval from HUD. * * *
    (iii) Until September 30, the PHA may establish an exception 
payment standard amount for all or part of an FMR area in accordance 
with maximum payment standard amounts published in the Federal Register 
between September 25, 2000 and September 30, 2001 without requesting 
HUD approval, under the following conditions:
    (A) The payment standard amounts referenced in paragraph 
(c)(2)(iii) are the maximum payment standard amounts until October 1, 
2001 unless HUD has approved the PHA's establishment of a higher 
payment standard amount;
    (B) The PHA's establishment of the maximum payment standard amounts 
in pragraph (c)(2)(iii)(A) of this section does not result in a payment 
standard amount that is greater than 120% of the published FMR;
    (C) The PHA has adopted a new utility allowance schedule after 
October 1, 2000 which reflects that the total cost of all utilities for 
a typical two-bedroom unit has increased by more than ten percent based 
on the difference between the new utility allowance schedule and the 
previous schedule; and
    (D) The current payment standard amounts are not adequate to meet 
increased utility costs at 100% of the FMR.
* * * * *

    3. Amend 24 CFR 982.505 by revising paragraph (c)(4) to read as 
follows:


Sec. 982.505  Voucher tenancy: How to calculate housing assistance 
payment.

* * * * *
    (c) * * *
    (4) Increase in the payment standard amount during the HAP contract 
term. If the payment standard amount is increased during the term of 
the HAP contract, the increased payment standard amount shall be used 
to calculate the monthly housing assistance payment for the family 
beginning at the effective date of the family's first regular 
reexamination on or after the effective date of the increase in the 
payment standard amount, except that, until September 30, 2001, if the 
PHA increases the payment standard amount pursuant to 24 CFR 
982.503(b)(2) and (c)(2), the new payment standard amount shall be used 
to calculate the monthly housing assistance payment for the family 
beginning at the family's first regular or first interim reexamination 
on or after the effective date of the increase in the payment standard 
amount.
* * * * *

    Dated: May 14, 2001.
Mel Martinez,
Secretary.

    Note: The following appendix will not appear in the Code of 
Federal Regulations.


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[FR Doc. 01-14275 Filed 6-5-01; 8:45 am]
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