72168 Federal Register / Vol. 70, No. 230 / Thursday, December 1, 2005 / Notices 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

[Docket No. FR–5031–N–01] 

Section 8 Housing Assistance 

Payments Program—Contract Rent 

Annual Adjustment Factors, Fiscal 

Year 2006 

AGENCY: Office of the Assistant 

Secretary for Policy Development and 

Research, 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 for specified programs. 

These factors apply to housing 

assistance payment contract 

anniversaries for calendar months 

commencing after the date of 

publication of this notice. The AAFs are 

based on residential rent and utilities 

time-series cost indices from the Bureau 

of Labor Statistics Consumer Price Index 

(CPI) surveys. 

EFFECTIVE DATE: December 1, 2005. 

FOR FURTHER INFORMATION CONTACT: 

David Vargas, Senior Advisor, Housing 

Voucher Management and Operations 

Division, Office of Public Housing and 

Voucher Programs, (202) 708–0477 can 

respond to questions relating to the 

Section 8 Voucher, Certificate, and 

Moderate Rehabilitation programs; Mark 

Johnston, 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; Willie 

Spearmon, Director, Office of Housing 

Assistance and Grant Administration, 

Office of Housing, (202) 708–3000, for 

questions relating to all other Section 8 

programs. Marie L. Lihn, Economic and 

Market Analysis Division, Office of 

Policy Development and Research (202) 

708–0590, is the contact for technical 

information regarding the development 

of the factors 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 

(800) 877–8339 (TTY). (Other than the 

‘‘800’’ TTY number, the above-listed 

telephone numbers are not toll-free.) 

SUPPLEMENTARY INFORMATION: In 

addition to being published in the 

Federal Register, this data will be 

available electronically from the HUD 

data information page: http:// 

www.huduser.org/datasets/aaf.html. 

I. Methodology 

AAFs are calculated using CPI data on 

rents and utilities for all metropolitan 

areas with metropolitan-area specific 

CPI estimates. AAFs for other areas are 

calculated using HUD RDD telephone 

and mail surveys. AAFs are rent change 

factors. Two types of AAFs are 

calculated. One type is a gross rent 

change factor that should be used when 

the primary utility (normally heating) is 

included in the rent. The other type is 

a shelter rent (i.e., rents without 

utilities) factor that should be used 

when the primary utility is not included 

in rent. Decennial census data are used 

to establish the relationship between 

gross rents and shelter rents. 

CPI Surveys 

For specific metropolitan areas where 

CPI surveys are conducted, changes in 

the shelter rent and utilities components 

are calculated based on the most recent 

CPI annual average change data. In this 

publication, the rent and utility CPIs for 

metropolitan areas are based on changes 

in the index from 2003 to 2004. The 

‘‘Highest Cost Utility Included’’ column 

in Schedule C is calculated by 

weighting the rent and utility change 

factors using the corresponding 

components of gross rent in a particular 

area as calculated in the 2000 Census. 

The ‘‘Highest Cost Utility Excluded’’ 

column in Schedule C is calculated by 

eliminating the utility portion of the 

gross rent change factor. 

For areas not covered by a specific 

metropolitan CPI survey, HUD uses the 

CPI surveys for the Northeast, South, 

Midwest, or West region, as appropriate. 

Rent and utility change factors are 

calculated from 2003 to 2004. For areas 

assigned Census Region CPI factors, 

both metropolitan and non-metropolitan 

areas received the same factor. 

Geographic Areas 

The current and former metropolitan 

areas that use specific CPI factors are 

listed alphabetically in the tables, 

according to the metropolitan area 

where appropriate. Each AAF applies to 

a specified geographic area and to units 

of all bedroom sizes. AAFs are 

provided: 

• For separate metropolitan areas, 

including counties that are currently 

designated as non-metropolitan, but are 

part of the metropolitan area defined in 

the local CPI survey. 

• For the four Census Regions for 

those metropolitan and nonmetropolitan areas that are not covered 

by the local CPI surveys. 

The AAFs shown in Schedule C use 

the same Office of Management and 

Budget (OMB) metropolitan area 

definitions, as revised by HUD, that are 

used in the FY2006 Fair Market Rents. 

Area Definitions in Schedule C 

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 metropolitan or nonmetropolitan counties receive the 

regional CPI for that Census Region. 

The AAF area definitions shown in 

Schedule C are listed in alphabetical 

order by state. The associated CPI 

division is shown next to each state 

name. Areas whose AAFs are 

determined by local CPI surveys are 

listed first. All metropolitan areas with 

local CPI surveys have separate AAF 

schedules and are shown with their 

corresponding county definitions or as 

metropolitan counties. The regional CPI 

metropolitan and nonmetropolitan 

counties of each state are listed after the 

metropolitan CPI areas (in those states 

that have such areas). 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 South Region 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 West Region AAFs. 

II. 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 payments programs during 

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

the Housing Assistance Payments (HAP) 

contract. Three categories of Section 8 

programs use the AAFs: 

Category 1—The Section 8 New 

Construction and Substantial 

Rehabilitation programs and the Section 

8 Moderate Rehabilitation program. 

Category 2—The Section 8 Loan 

Management (LM) and Property 

Disposition (PD) programs. 

Category 3—The Section 8 Projectbased Certificate (PBC) program. 

Each Section 8 program category uses 

the AAFs differently. The specific HAP 

contract, program regulation, program 

requirement, or law determines the 

application of the AAFs. Restrictions to 

the use of AAF are discussed below: 

Federal Register / Vol. 70, No. 230 / Thursday, December 1, 2005 / Notices 72169 

Renewal Rents. 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 determined 

by applying a state-by-state operating 

cost adjustment factor (OCAF) 

published by HUD. 

Budget-based Rents. AAFs are not 

used for budget-based rent adjustments. 

For projects receiving Section 8 

subsidies under the LM program (24 

CFR part 886, subpart A) or 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 207.19(e). 

Budget-based adjustments are used for 

most Section 8/202 projects. 

Certificate Program. In the past, AAFs 

were used to adjust the contract rent 

(including manufactured home space 

rentals) in the tenant-based certificate 

program. However, this program has 

been terminated. All tenancies in the 

tenant-based certificate program have 

been converted to the Housing Choice 

Voucher Program. AAFs are still used 

for adjustment of contract rent for 

outstanding HAP contracts under the 

project-based certificate program. 

Moderate Rehabilitation Program. 

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 pre-adjustment 

contract rent. 

III. 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, 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 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, 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 (24 CFR Part 886, Subpart A) 

and Property Disposition Program (24 

CFR 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 ProjectBased Certificate Program 

The following procedures are used to 

adjust contract rent for outstanding HAP 

contracts in the Section 8 PBC program: 

• 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. 

IV. 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: 

• 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. 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 held harmless at 1.0; 

the corresponding AAF in Table 2 will 

also be held harmless at 1.0. 

V. How To Find the AAF 

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. 

The applicable AAF is selected as 

follows: 

• Determine whether Table 1 or Table 

2 is applicable. In Table 1 or Table 2, 

locate the AAF for the geographic area 

where the contract unit is located. 

72170 Federal Register / Vol. 70, No. 230 / Thursday, December 1, 2005 / Notices 

• 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 included’’. If highest cost 

utility is not included, select the AAF 

from the column for ‘‘utility excluded’’. 

Accordingly, HUD publishes these 

Annual Adjustment Factors for the 

Section 8 Housing Assistance Payments 

programs as set forth in the Tables. 

Dated: November 18, 2005. 

Darlene F. Williams, 

Assistant Secretary for Policy Development 

and Research. 

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[FR Doc. 05–23506 Filed 11–30–05; 8:45 am] 

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