[Federal Register Volume 75, Number 191 (Monday, October 4, 2010)]
[Notices]
[Pages 61254-61319]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-24465]



[[Page 61253]]

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Part II





Department of Housing and Urban Development





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Final Fair Market Rents for Fiscal Year 2011 for the Housing Choice 
Voucher Program and Moderate Rehabilitation Single Room Occupancy 
Program; Notice

Federal Register / Vol. 75 , No. 191 / Monday, October 4, 2010 / 
Notices

[[Page 61254]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5430-N-02]


Final Fair Market Rents for Fiscal Year 2011 for the Housing 
Choice Voucher Program and Moderate Rehabilitation Single Room 
Occupancy Program

AGENCY: Office of the Assistant Secretary for Policy Development and 
Research, HUD.

ACTION: Notice of Final Fair Market Rents (FMRs) for Fiscal Year (FY) 
2011.

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SUMMARY: Section 8(c)(1) of the United States Housing Act of 1937 
(USHA) requires the Secretary to publish FMRs periodically, but not 
less than annually, adjusted to be effective on October 1 of each year. 
The primary uses of FMRs are to determine payment standards for the 
Housing Choice Voucher program, to determine initial renewal rents for 
some expiring project-based Section 8 contracts, to determine initial 
rents for housing assistance payment (HAP) contracts in the Moderate 
Rehabilitation Single Room Occupancy program (Mod Rehab), and to serve 
as rent ceilings in the HOME program. Today's notice provides final FY 
2011 FMRs for all areas that reflect the estimated 40th and 50th 
percentile rent levels trended to April 1, 2011. The FY 2011 FMRs are 
based on 2000 Census data updated with more current survey data. For FY 
2011, FY 2010 FMRs are updated using 2008 American Community Survey 
(ACS) data, and Consumer Price Index (CPI) rent and utility indexes 
through the year end of 2009. HUD continues to use ACS data in 
different ways according to how many two-bedroom standard-quality and 
recent-mover sample cases are available in the FMR area or its Core-
Based Statistical Area (CBSA). As proposed in the August 4, 2010, 
notice (75 FR 46958), this notice establishes FY 2011 Small Area FMRs 
for the Housing Choice Voucher program in the Dallas, TX HUD 
Metropolitan FMR Area (HMFA). All Public Housing Authorities (PHAs) 
operating in the 8-county HMFA must use the Small Area FMRs from 
Schedule B Addendum (listed by county and ZIP code) for the voucher 
program. All other programs that use FMRs will continue to use area-
wide FMRs shown in Schedule B for Dallas, TX HMFA.

DATES: Effective Date: The FMRs published in this notice are effective 
on October 1, 2010.

FOR FURTHER INFORMATION CONTACT: For technical information on the 
methodology used to develop FMRs or a listing of all FMRs, please call 
the HUD USER information line at (800) 245-2691 or access the 
information at the following link on the HUD Web site: http://www.huduser.org/datasets/fmr.html. FMRs are listed at the 40th or 50th 
percentile in Schedule B. An asterisk before the FMR area name 
identifies a 50th percentile area. Any questions related to use of FMRs 
or voucher payment standards should be directed to the respective local 
HUD program staff. Questions on how to conduct FMR surveys or further 
methodological explanations may be addressed to Marie L. Lihn or Mark 
Stanton, Economic and Market Analysis Division, Office of Economic 
Affairs, Office of Policy Development and Research, telephone number 
(202) 708-0590. Persons with hearing or speech impairments may access 
this number through TTY by calling the toll-free Federal Information 
Relay Service at (800) 877-8339. (Other than the HUD USER information 
line and TTY numbers, telephone numbers are not toll-free.)

SUPPLEMENTARY INFORMATION:

I. Background

    Section 8 of the USHA (42 U.S.C. 1437f) authorizes housing 
assistance to aid lower-income families in renting safe and decent 
housing. Housing assistance payments are limited by FMRs established by 
HUD for different areas. In the Housing Choice Voucher program, the FMR 
is the basis for determining the ``payment standard amount'' used to 
calculate the maximum monthly subsidy for an assisted family (see 24 
CFR 982.503). In general, the FMR for an area is the amount that would 
be needed to pay the gross rent (shelter rent plus utilities) of 
privately owned, decent, and safe rental housing of a modest (non-
luxury) nature with suitable amenities. In addition, all rents 
subsidized under the Housing Choice Voucher program must meet 
reasonable rent standards. The interim rule published on October 2, 
2000 (65 FR 58870), established 50th percentile FMRs for certain areas.
    Electronic Data Availability: This Federal Register notice is 
available electronically from the HUD Web site at http://www.hudclips.org. Federal Register notices also are available 
electronically from the U.S. Government Printing Office Web site, 
http://www.gpoaccess.gov/fr/index.html. Complete documentation of the 
methodology and data used to compute each area's Final FY 2011 FMRs is 
available at http://www.huduser.org/datasets/fmr/fmrs/index.asp?data=fmr11.

II. Procedures for the Development of FMRs

    Section 8(c) of the USHA requires the Secretary of HUD to publish 
FMRs periodically, but not less frequently than annually. Section 8(c) 
states in part, as follows:

    Proposed fair market rentals for an area shall be published in 
the Federal Register with reasonable time for public comment and 
shall become effective upon the date of publication in final form in 
the Federal Register. Each fair market rental in effect under this 
subsection shall be adjusted to be effective on October 1 of each 
year to reflect changes--based on the most recent available data 
trended so the rentals will be current for the year to which they 
apply--of rents for existing or newly constructed rental dwelling 
units, as the case may be, of various sizes and types in this 
section.

The Department's regulations at 24 CFR part 888 provide that HUD will 
develop proposed FMRs, publish them for public comment, provide a 
public comment period of at least 30 days, analyze the comments, and 
publish final FMRs (See 24 CFR 888.115).
    In addition, HUD's regulations at 24 CFR 888.113 set out procedures 
for HUD to assess whether areas are eligible for FMRs at the 50th 
percentile. Areas that currently have 50th percentile FMRs are 
evaluated for progress in voucher tenant deconcentration after three 
years in the program. Continued eligibility is determined using HUD 
administrative data that show levels of voucher tenant concentration. 
The levels of voucher holder concentration must be above 25 percent and 
show a decrease in concentration since the last evaluation. At least 85 
percent of the voucher units in the area must be used to make this 
determination. For FY 2011, there were 17 areas that were designated as 
50th percentile areas. None of the current 50th percentile FMR areas 
were evaluated this year because they have not completed three years of 
program participation. As listed below, 10 areas complete their three-
year program period and will be evaluated to determine if they remain 
50th percentile FMR areas in the proposed FY 2012 FMR publication.

[[Page 61255]]



 FY 2010 50th-Percentile FMR Areas Not Slated for Eligibility Evaluation
                           Until FY 2012 FMRs
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Albuquerque, NM MSA                  North Point-Bradenton-Sarasota, FL
                                      MSA
Chicago-Naperville-Joliet, IL HMFA   Denver-Aurora, CO MSA
Hartford-West Hartford-East          Houston-Baytown-Sugar Land, TX HMFA
 Hartford, CT HMFA
Kansas City, MO-KS, HMFA             Milwaukee-Waukesha-West Allis, WI
                                      MSA
Richmond, VA HMFA                    Tacoma, WA HMFA
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    An additional seven current 50th percentile FMR areas complete 
their three-year program period and will be evaluated to determine if 
they remain 50th percentile FMR areas in the proposed FY 2013 FMR, as 
shown below.

 FY 2010 50th-Percentile FMR Areas Not Slated for Eligibility Evaluation
                           Until FY 2013 FMRs
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Baltimore-Towson, MD MSA             Fort Lauderdale, FL HMFA
Grand Rapids-Wyoming, MI HMFA        New Haven-Meriden, CT HMFA
Philadelphia-Camden-Wilmington, PA-  Washington-Arlington-Alexandria, DC-
 NJ-DE-MD MSA                         VA-MD HMFA
West Palm Beach-Boca Raton, FL HMFA
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    As noted in the publication of proposed FY 2011 FMRs, an additional 
area qualified for 50th percentile FMRs and will be eligible for review 
with the proposed FY 2014 FMRs. This area is Bergen-Passaic, NJ HMFA.

III. Proposed FY 2011 FMRs

    On August 4, 2010 (75 FR 46958), HUD published proposed FY 2011 
FMRs. As noted in the preamble to the proposed FMRs, the FMRs for FY 
2011 reflect the use of both one-year and three-year 2008 ACS data to 
update June 2007 rent estimates for each area. In addition, the FY 2011 
FMRs include all changes made to metropolitan area definitions made by 
the Office of Management and Budget (OMB) as of December 2009.
    During the comment period, which ended September 3, 2010, HUD 
received 16 public comments on the proposed FY 2011 FMRs. None of the 
comments HUD received included the data needed to support FMR changes. 
Several of these comments expressed that proposed FY 2011 FMRs are 
incorrect for their respective market areas. One commenter noted an 
inconsistency in the methodology that is corrected and discussed in the 
following methodology section. The rest of the comments received are 
discussed in more detail later in this notice.

IV. FMR Methodology

    The FY 2011 FMRs are based on current OMB metropolitan area 
definitions that were first used in the FY 2006 FMRs. The changes OMB 
made to the Metropolitan Area Definitions in December 2009 are 
incorporated. As of December 2009, there was a change in the principal 
cities of three metropolitan areas that resulted in a code change. 
These three metropolitan areas are: North Port-Bradenton-Sarasota, FL 
MSA, Crestview-Fort Walton Beach-Destin, FL MSA, and Steubenville-
Weirton, OH-WV MSA. In Alaska, there was a name change for a 
nonmetropolitan borough, from Prince of Wales-Ketchikan Census Area, AK 
to Prince of Wales-Hyder Census Area, AK; and two other Alaskan 
boroughs were divided, from Skagway-Hoonah-Angoon to Skagway and 
Hoonah-Angoon boroughs; and from Wrangell-Petersburg to Wrangell and 
Petersburg boroughs. The area definitions based on 2000 Census data 
have the advantages of providing more relevant commuting interchange 
standards, and more current measures of housing market relationships 
than those based on 1990 Census data and used prior to the FY 2006 
FMRs.
    At HUD's request, the Census Bureau prepared a special publicly 
releasable census file that permits almost exact replication of HUD's 
2000 Census Base Rent calculations, except for areas with few rental 
units. This data set is located on HUD's HUD USER Web site at http://www.huduser.org/datasets/fmr/CensusRentData/.

A. Data Sources--2000 Census and American Community Survey

    As in all post-FY 2006 FMR publications, FY 2011 FMRs start with 
base rents generated using Census 2000 long form survey data. They are 
updated with American Community Survey (ACS) data and Bureau of Labor 
Statistics Consumer Price Index (CPI) data. FY 2011 FMRs are FY 2010 
FMRs updated by replacing the CPI data used for FY 2010 FMRs with ACS 
2008 survey data and updated with CPI data through the end of 2009. 
Specifically, the FY 2010 rent (as of date: April, 2010) is deflated to 
June 2007 by dividing it by 18 months of CPI data representing June 
2007 through December 2008 inflation, and the usual 15 month trend 
factor. This June 2007 rent is the best and most recent rent estimate 
available using only ACS survey and eliminating all other update data. 
It is this rent that is updated with additional ACS data and new CPI 
data.
    In order to preserve additional information gathered by HUD through 
random digit dialing (RDD) surveys, areas surveyed after June 2008 are 
updated separately, the details of which can be found at the Web site 
listed above.

B. Updates From 2007 to 2008-2008 ACS

    ACS survey data continues to be applied to areas based on the type 
of area (CBSA, metropolitan subarea, or non-metropolitan county), the 
amount of survey data available, and the reliability of the survey 
estimates. Both one- and three-year ACS 2008 data are used to update 
June 2007 rents. HUD considered using the change in the three-year 
2005-2007 ACS to three-year 2006-2008 ACS in place of the change from 
2007 one-year ACS to 2008 one-year ACS, but the nature of the 3 year 
data mutes the effects of the more recent data, which HUD finds more 
important for achieving the objectives of the HCV program. 
Consequently, HUD calculates update factors using the change in ACS 
one-year data from 2007 to 2008. Beginning with the FY 2010 FMRs, HUD 
tests these rent changes for statistical significance \1\
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    \1\ The change is considered statistically significant if Z > 
1.645 where (see equation above) and EST<INF>1</INF> = ACS 2008 
Estimate, EST<INF>2</INF> = ACS 2007 Estimate (or ACS 2006 Estimate 
when the change from 2006-2007 = 1), SE<INF>1</INF> = Standard Error 
of Estimate 1 and SE<INF>2</INF> = Standard Error of Estimate 2.

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[GRAPHIC] [TIFF OMITTED] TN04OC10.062

before applying them to the appropriate base rent. Any state- or 
metropolitan-level change that is not statistically significant is not 
applied. That is, the updated 2008 rent is the same as the 2007 rent if 
the applicable update factor does not represent a statistically 
significant change. HUD applied this test as a measure to minimize 
fluctuations in rents due to survey error. Metropolitan level rent 
changes are used for CBSA areas and subareas that have more than 200 
standard quality cases in 2007 and 2008. All other areas are updated 
with state level rent changes. For subareas, State and CBSA change 
factors continue to be selected based on which factor brings the 
subarea rent closer to the CBSA-wide rent. Subareas which have 200 or 
more local standard quality survey observations are updated with their 
local area update factor.
    The error measurement test and ACS-based update factor is revised 
from the proposed FY 2011 FMRs, in response to a comment. The commenter 
noted that using a z-test that compared the 2008 rent to the 2007 rent 
was not logical for areas where the 2007 ACS rent was never used in the 
update, or where the z-test last year (evaluating the change from 2006 
to the 2007 ACS rent) was not statistically significant and HUD applied 
an ACS update factor of one. To correct this oversight, HUD revised the 
FMR estimation process for areas where there was no statistically 
significant difference between the 2006 and the 2007 ACS rent result, 
where the ACS update equaled one. The z-test for these areas would be 
applied to the difference in the rent and error measurement for 2006 
compared with 2008 ACS, rather than a comparison of 2007 to 2008 ACS.
    After all areas have been updated with a standard quality median 
rent change, local areas with estimates that reflect more than 200 one-
year recent mover cases are evaluated further. If the updated rent is 
outside the confidence interval of the ACS recent mover estimate, the 
updated rent is replaced with the ACS recent mover rent estimate. In 
areas without 200 or more one-year ACS recent mover observations, but 
with 200 or more three-year ACS recent mover observations, the three 
year estimate \2\ is used if it is statistically different from the 
updated 2008 rent based on the standard quality median rent change. 
This process creates a June 2008 rent.
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    \2\ The recent mover estimate from the three year data includes 
all those who moved in the most recent 24 month period. That means 
that no 2006 survey data are included in this three-year recent 
mover classification and the likelihood of having a valid (with 200 
or more cases) three-year recent mover rent is lower for these 
estimates.
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C. Updates From 2008 to 2009

    ACS 2008 data updates the June 2007 rents used in the FY 2010 FMRs 
forward by 12 months to June 2008. HUD uses six months of 2008 and 12 
months of 2009 CPI rent and utilities price index data to update the 
June 2008 rents to the end of 2009. HUD uses local CPI data for FMR 
areas with at least 75 percent of their population within Class A 
metropolitan areas covered by local CPI data. HUD uses CPI data 
aggregated to Census regions for FMR areas in Class B and C size 
metropolitan areas and nonmetropolitan areas without local CPI update 
factors.

D. Updates From 2009 to 2011

    HUD applies the national 1990 to 2000 average annual rent increase 
trend of 1.03 to end-of-2009 rents for 15 months, to derive the 
proposed FY 2011 FMRs. HUD will publish an additional Federal Register 
notice this fall requesting alternatives to the use of this long-term 
historical trend factor. HUD is considering alternatives for trend 
factors that include historical average annual trend factors based on 
shorter time periods and trends based on projections linked to other 
government forecasts.
    The area-specific data and computations used to calculate proposed 
FY 2011 FMRs and FMR area definitions can be found at http://www.huduser.org/datasets/fmr/fmrs/index.asp?data=fmr11.

E. Large Bedroom Rents

    HUD's principal FMR estimate is for two-bedroom units. This 
generally is the most common size of rental units, and therefore the 
most reliable to survey and analyze. After each decennial census, HUD 
calculates rent relationships between two-bedroom units and other unit 
sizes and uses these relationships to set FMRs for other units. This is 
done because it is much easier to update two-bedroom estimates and to 
use pre-established cost relationships with other bedroom sizes than it 
is to develop independent FMR estimates for each bedroom size. This was 
last done using 2000 Census data. A publicly releasable version of the 
data file used that permits derivations of rent ratios is available at 
http://www.huduser.org/datasets/fmr/CensusRentData/index.html. Rent 
ratio derivations are also shown in the FMR documentation system at 
http://www.huduser.org/datasets/fmr/fmrs/index.asp?data=fmr11.
    The rents for three-bedroom and larger units continue to reflect 
HUD's policy to set higher rents for these units than would result from 
using normal market rents. This adjustment is intended to increase the 
likelihood that the largest families, who have the most difficulty in 
leasing units, will be successful in finding eligible program units. 
The adjustment adds bonuses of 8.7 percent to the unadjusted three-
bedroom FMR estimates and adds 7.7 percent to the unadjusted four-
bedroom FMR estimates. The FMRs for unit sizes larger than four 
bedrooms are calculated by adding 15 percent to the four-bedroom FMR 
for each extra bedroom. For example, the FMR for a five-bedroom unit is 
1.15 times the four-bedroom FMR, and the FMR for a six-bedroom unit is 
1.30 times the four-bedroom FMR. FMRs for single-room occupancy units 
are 0.75 times the zero-bedroom (efficiency) FMR.
    A further adjustment was made using 2000 Census data in 
establishing rent ratios for areas with local bedroom-size intervals 
above or below what are considered to be reasonable ranges or where 
sample sizes are inadequate to accurately measure bedroom rent 
differentials. HUD's experience has shown that highly unusual bedroom 
ratios typically reflect inadequate sample sizes or peculiar local 
circumstances that HUD would not want to utilize in setting FMRs (e.g., 
large numbers of luxury efficiency apartments that rent for more than 
typical one-bedroom units). Bedroom interval ranges were established 
based on an analysis of the range of such intervals for all areas with 
large enough samples to permit accurate bedroom ratio determinations. 
These ranges are: efficiency FMRs are constrained to fall between 0.65 
and 0.83 of the two-bedroom FMR; one-bedroom FMRs must be between 0.76 
and 0.90 of the two-bedroom FMR; three-bedroom FMRs must be between 
1.10 and 1.34 of the two-bedroom FMR; and four-bedroom FMRs must be 
between 1.14 and 1.63 of the two-bedroom FMR. Bedroom rents for a given 
FMR area were then adjusted if the differentials between bedroom-size 
FMRs were inconsistent with normally observed patterns (i.e., 
efficiency rents were not allowed to be higher than one-bedroom rents 
and four-bedroom rents were not allowed to be lower than three-bedroom 
rents).
    For low-population, nonmetropolitan counties with small census 
recent-mover rent samples, HUD uses census-defined county group data in 
determining rents for each bedroom size. This adjustment was made to 
protect against unrealistically high or

[[Page 61257]]

low FMRs due to insufficient sample sizes. The areas covered by this 
estimation method had less than the HUD standard of 200 two-bedroom 
census-tabulated observations.

V. Public Comments

    A total of 16 public comments were received on the proposed FY 2011 
FMRs. Seven of the comments filed concerned the 4.1 percent decline in 
FMRs for the Pittsburgh, PA HUD Metro FMR Area. According to the 
commenters, within the city there are high vacancy rates, high 
abandonment and condemnation rates and high percentages of substandard 
housing in the older, denser communities. A 2004 study of the city 
determined that 70 percent to 90 percent of the housing stock is 
considered below average in certain districts of the city, which is a 
major factor in the affordability of the City's housing market. The 
market for voucher holders is further constrained by refusal by 
landlords to accept vouchers and the changing nature of neighborhoods 
of choice. As a solution to this problem, it was suggested HUD 
institute a hold-harmless policy for FMRs; that is the FY 2011 FMRs 
should not be allowed to decline, but should be left at the higher 
level from FY 2010, at a minimum. It was also suggested that the FMR 
area be split into smaller areas to produce more accurate results. HUD 
will not institute a hold-harmless for Pittsburgh or any other FMR 
area. The FY 2011 FMR for the Pittsburgh, PA HUD Metro FMR Area is 
calculated using the most recent data available, based on local surveys 
from both the ACS and CPI. If smaller areas will help Public Housing 
Agencies (PHAs) operating the Housing Choice Voucher program within the 
city manage the program, these PHAs should consider applying for 
participation in HUD's small area FMR demonstration project. 
Information on the structure of the demonstration project and 
instructions for application will be announced in early 2011 by 
publication of a Federal Register notice.
    A commenter in the Washington-Arlington-Alexandria, DC-VA-MD HUD 
Metro FMR Area also requested a hold harmless policy be instituted to 
prevent declines in FMRs. Even under the small area FMR demonstration 
project, FMRs will be allowed to decline from year to year. Small area 
FMRs used in the demonstration project will continue to include a rent 
floor (based on the state minimum as is currently in place); however, 
the methodology for calculating the current year metropolitan area rent 
has not been proposed to be changed from the current methodology.
    There were several comments filed addressing the small area FMR 
demonstration project and much confusion about HUD's failure to respond 
to the comments filed with respect to the May 18, 2010 Federal Register 
notice (75 FR 27808). Comments on small area FMRs were received from 
the Montgomery County Housing Authority of Norristown, PA; the Public 
Housing Authorities Directors Association, and, in part, the National 
Association of Home Builders. Internally, all of the comments to the 
small area FMR demonstration project notice have been discussed and a 
notice with this discussion and decisions and further details on the 
program will be published in early 2011. Including a general discussion 
of the comments filed in response to the May 18, 2010 notice in this 
notice finalizing FY 2011 FMRs is likely to exacerbate the confusion. 
For this reason, the small area FMR methodology section is not included 
in this Notice, though it is unchanged from the proposed FY 2011 FMR 
publication for the Dallas, TX HUD Metro FMR Area, and may be accessed 
at http://www.huduser.org/portal/datasets/fmr/fmr2011p/Preamble_FY2011P_FMRs.pdf. One commenter noticed that the Small Area FMRs for 
Dallas did not incorporate the 10 dollar rounding protocol identified 
in the methodology and posted in the Web site. This has been corrected 
in this publication, so that the published Small Area FMRs that will be 
used for the voucher program in Dallas, TX HMFA beginning on October 1, 
2010 show a 10 dollar rounding protocol instead of an earlier proposed 
25 dollar protocol. These Small Area FMRs are provided in the Schedule 
B Addendum, which lists the FMRs by county and ZIP code. All PHAs 
operating in the Dallas must use these Small Area FMRs for the Housing 
Choice Voucher program. The area-wide FMRs for the Dallas, TX HMFA, 
listed in Schedule B, continue to be used for all other programs.
    Another commenter questioned how the demonstration project could be 
considered voluntary, when it is not so for Dallas. While all other 
participation in the demonstration project will be voluntary and will 
not begin until early 2011 after discussion of all comments and further 
description of the program, the Dallas demonstration project and its 
timing reflects a court settlement between HUD and the Inclusive 
Communities Project, Inc. and the timing cannot be changed, nor can 
other aspects of the program. Therefore, the demonstration project 
being conducted in the Dallas, TX HUD Metropolitan FMR Area may differ 
in other ways (other than the start date) from what is decided for 
voluntary participants of the demonstration project.
    The National Association of Housing and Redevelopment Officials 
(NAHRO) discusses eight issues in its comments to the FY 2011 FMRs, 
although most are reiterations of positions that NARO has expressed 
consistently since the publication of the FY 2006 FMRs. Foremost among 
those concerns is the use by HUD of metropolitan area definitions based 
on 2000 Census data as opposed to the area definitions from FY 2005 
FMRs based on 1990 data. HUD modified the metropolitan area definitions 
based on rent and income relationships comparing old (FY 2005) FMR 
areas to new FMR areas, but NAHRO specifically opposes the inclusion of 
formerly nonmetropolitan counties into metropolitan areas. Under HUD's 
current methodology for calculating FMRs and median family income 
estimates, these non-metropolitan subareas would be given their own FMR 
and designated a HUD Metro FMR Area (HMFA) if either their rent or 
income was more than five percent different from the rent or income of 
the new area and there is sufficient Census data available to provide 
statistically reliable rent and income estimates. For the former 
nonmetropolitan counties that did not have enough data to make this 
comparison, HUD determined it could not dilute the FMR for the 
metropolitan area. Overall, HUD does not agree with the premise of the 
argument, that metropolitan FMR areas have been diluted by the change 
in the area definitions. Furthermore, NAHRO's argument does not allow 
for the growth and change of metropolitan areas over time. Moreover, 
unlike in past years where FMR base-year data was updated every 10 
years with the decennial census, FMRs are updated with ACS data 
annually, and can be rebenchmarked using ACS data if enough recent 
mover observations exist for the area. ACS data is aggregated using the 
new area definitions. The fewer changes HUD has to these definitions, 
the more transparent the FMR calculation process, since it is not 
dependent on special tabulation of data.
    The request by NAHRO to re-institute the 10 regional surveys of 
metropolitan and nonmetropolitan areas used for the Annual Adjustment 
Factors (AAFs) and the FMRs is also being denied. These 20 factors were 
based on longitudinal surveys from around FY 1996 to FY 2005. HUD 
determined, through analysis of 2000 Census data, that these

[[Page 61258]]

20 surveys did not improve estimates of rent changes, so HUD reverted 
to using CPI rent and utility surveys for the 4 Census regions. The CPI 
data provided better results while saving the Department the cost of 
the 20 surveys. Based on the analysis of the 2000 Census data, HUD 
concluded there was a valid statistical reason for the elimination of 
the 20 regional surveys. The regional AAFs are also based on the same 
data (CPI for rent and utilities--aggregated to the 4 Census Regions) 
that is used for the local AAFs.
    NAHRO request that HUD publish the utility component of FMRs. HUD 
cannot do this because, as discussed in the methodology and emphasized 
here, HUD establishes FMRs based on gross rent data from the census. 
HUD does not collect utility data to update the FMRs. The base FMR and 
the ACS updates are generated using data collected on a gross rent 
basis. Only the CPI update is split between rent and utilities and this 
split, as discussed in the methodology, uses the percentage of those 
who pay for heat (again not utility data) to determine the percentage 
of utilities in the gross rent to apply the CPI utility index. HUD does 
not collect utility data and therefore cannot provide it.
    Several of NAHRO's issues concern the adjustment for housing 
quality standards and suggestions for improvement of this determination 
for the FMRs. HUD is also concerned with adjustments for housing 
quality standards and will continue to evaluate this issue. At this 
time, however, no changes will be made.
    NAHRO requests changes to the re-qualification process for 50th 
percentile FMRs including an automatic extension for areas that lose 
50th percentile status and an unspecified change in the criteria used 
to evaluate the program. The automatic extension goes against the 
intent of the program, which is only available to a select number of 
areas, and any changes would require a rulemaking process. At this 
point HUD is focusing its efforts to expand opportunities to voucher 
holders through small area FMRs rather than changes to the 50th 
percentile FMR program.
    The request for data to determine the median rent method (which HUD 
would not have to provide if the 2000 Census metropolitan area 
definitions were not modified since this data would be available 
through the Census Bureau's American Factfinder) has been available 
internally for some time. This is now posted on our Web site at http://www.huduser.org/portal/datasets/fmr.html.
    NAHRO also comments on random digit dialing surveys (RDDs), in 
terms of the limited time to conduct them and the current methodology. 
HUD will accept RDDs conducted by areas and make revisions at any time 
during the fiscal year. Currently, HUD is conducting several RDDs and 
plans a revised Final FY2011 FMR notice following the completion of the 
surveys and processing of the data. Additionally, HUD is investigating 
ways of revising its survey methodology to include other less expensive 
ways to collect rent data, under a contract that will begin early next 
year. HUD's current survey methodology collects recent mover rents to 
determine if adjustments to FMRs are needed. The recent mover period 
has ranged from as little as 6 months to 24 months depending on the 
economic climate of the survey area. The fifteen-month designation for 
recent mover rents is the definition used in the decennial census. 
Under the ACS, however, the recent mover rent is a 24-month period and 
this is what is used most often in current RDD surveys. The current 
random digit dialing methodology collects enough recent-mover rents in 
an area to provide a statistically significant rent, which is generally 
200 cases, though the results of the survey are compared to the current 
FMR to determine if a statistically significant difference exists. If 
so, the RDD survey result replaces the current FMR. Rents for stayers 
are also collected for purposes of comparison and further validity 
tests of the survey data.
    A comment from Minot, ND states that this area continues to 
struggle with a very tight rental market, despite the increased FMRs 
provided from a RDD survey conducted by HUD last year. Rents continue 
to increase at a rapid rate. Another informal comment from Williams 
County, ND also shows significant rental increases. The causes of these 
increases are somewhat the same, and are attributed to increased jobs 
in oil and gas exploration, although in Minot, the Air Force base is 
also expanding, with estimated growth in personnel of 900 to 1,000. 
Small and rapidly changing markets, such as these, for which the ACS 
provides less timely data do require rent surveys, but it may be 
worthwhile for Minot to partner with Williams and other counties in the 
area to conduct a joint survey. Local agencies can conduct surveys at 
substantially less cost than HUD. Under HUD's current procedures, the 
timing of Minot's survey is crucial. Surveys are too expensive, even if 
conducted by small agencies, to be administered annually. The full 
extent of the expansion of the Air Force base cannot be measured until 
at least 6 months after it has occurred, and then the survey must limit 
the definition of recent movers as those moved in the past 6 months. 
HUD will contact Minot and Williams County to determine how and when to 
proceed with collecting updated rent information.
    The Oklahoma City Housing Authority commented that the proposed 
increase in FMRs for the Oklahoma City, OK MSA is appropriate.
    A comment filed by the National Association of Home Builders (NAHB) 
requested that HUD institute a floor to prevent any FY 2011 FMRs from 
declining by more than five percent, or else conduct RDD surveys of 
these areas. HUD considers it an inappropriate use of scarce resources 
to survey all areas that have FMR declines of more than 5 percent. In 
order to be effective, FMRs must follow the market, both up and down, 
in accordance with the most recent data available. HUD has attempted to 
mitigate the impact of annual changes, with the implementation of 
statistical significance testing for changes measured in annual ACS 
data, but HUD is committed to allowing changing market conditions to be 
reflected in the FMRs.

VI. Manufactured Home Space Surveys

    The FMR used to establish payment standard amounts for the rental 
of manufactured home spaces in the Housing Choice Voucher program is 40 
percent of the FMR for a two-bedroom unit. HUD will consider 
modification of the manufactured home space FMRs where public comments 
present statistically valid survey data showing the 40th percentile 
manufactured home space rent (including the cost of utilities) for the 
entire FMR area. For FY 2011, HUD received no comments or data 
concerning manufactured home space rents.
    All approved exceptions to these rents that were in effect in FY 
2010 were updated to FY 2011 using the same data used to estimate the 
Housing Choice Voucher program FMRs if the respective FMR area's 
definition remained the same. If the result of this computation was 
higher than 40 percent of the re-benchmarked two-bedroom rent, the 
exception remains and is listed in Schedule D. The FMR area definitions 
used for the rental of manufactured home spaces are the same as the 
area definitions used for the other FMRs. Areas with definitional 
changes that previously had exceptions to their manufactured housing 
space rental FMRs are requested to submit new

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surveys to justify higher-than-standard space rental FMRs if they 
believe higher space rental allowances are needed.

VII. HUD Rental Housing Survey Guides

    For the supporting data, HUD recommends the use of professionally 
conducted RDD telephone surveys to test the accuracy of FMRs for areas 
where there is a sufficient number of Section 8 units to justify the 
survey cost of approximately $35,000. Areas with 2,000 or more program 
units usually meet this cost criterion, and areas with fewer units may 
meet it if actual rents for two-bedroom units are significantly 
different from the FMRs proposed by HUD. In addition, HUD has developed 
a version of the RDD survey methodology for smaller, nonmetropolitan 
PHAs. This methodology is designed to be simple enough to be done by 
the PHA itself, rather than by professional survey organizations, at a 
cost of $5,000 or less.
    PHAs in nonmetropolitan areas may, in certain circumstances, 
conduct surveys of groups of counties. HUD must approve all county-
grouped surveys in advance. PHAs are cautioned that the resulting FMRs 
will not be identical for the counties surveyed. Each individual FMR 
area will have a separate FMR based on the relationship of rents in 
that area to the combined rents in the cluster of FMR areas. In 
addition, PHAs are advised that counties where FMRs are based on the 
combined rents in the cluster of FMR areas will not have their FMRs 
revised unless the grouped survey results show a revised FMR above the 
combined rent level.
    PHAs that plan to use the RDD survey technique should obtain a copy 
of the appropriate survey guide. Larger PHAs should request HUD's 
survey guide entitled ``Random Digit Dialing Surveys; A Guide to Assist 
Larger Public Housing Agencies in Preparing Fair Market Rent 
Comments.'' Smaller PHAs should obtain the guide entitled ``Rental 
Housing Surveys: A Guide to Assist Smaller Public Housing Agencies in 
Preparing Fair Market Rent Comments.'' These guides, in Microsoft Word 
format, are available from HUD USER at HUD's Web site at the following 
address: http://www.huduser.org/datasets/fmr.html.
    Other survey methodologies are acceptable in providing data to 
support comments, if the survey methodology can provide statistically 
reliable, unbiased estimates of the gross rent. Survey samples should 
preferably be randomly drawn from a complete list of rental units for 
the FMR area. If this is not feasible, the selected sample must be 
drawn to be statistically representative of the entire rental housing 
stock of the FMR area. Surveys must include units at all rent levels 
and be representative by structure type (including single-family, 
duplex, and other small rental properties), age of housing unit, and 
geographic location. The decennial census should be used as a means of 
verifying if a sample is representative of the FMR area's rental 
housing stock.
    Most surveys of FMR areas cover only one- and two-bedroom units. If 
the survey is statistically acceptable, HUD will estimate FMRs for 
other bedroom sizes using ratios based on the decennial census. A PHA 
or contractor that cannot obtain the recommended number of sample 
responses after reasonable efforts should consult with HUD before 
abandoning its survey; in such situations, HUD may find it appropriate 
to relax normal sample size requirements.
    HUD will consider increasing manufactured home space FMRs where 
public comment demonstrates that 40 percent of the two-bedroom FMR is 
not adequate. In order to be accepted as a basis for revising the 
manufactured home space FMRs, comments must include a pad rental survey 
of the mobile home parks in the area, identify the utilities included 
in each park's rental fee, and provide a copy of the applicable public 
housing authority's utility schedule.

VIII. Environmental Impact

    This Notice involves the establishment of fair market rent 
schedules, which do not constitute a development decision affecting the 
physical condition of specific project areas or building sites. 
Accordingly, under 24 CFR 50.19(c)(6), this Notice is categorically 
excluded from environmental review under the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321).
    Accordingly, the Fair Market Rent Schedules, which will not be 
codified in 24 CFR part 888, are amended as follows:

    Dated: September 24, 2010.
Raphael W. Bostic,
Assistant Secretary for Policy Development and Research.

Fair Market Rents for the Housing Choice Voucher Program

Schedules B and D--General Explanatory Notes

1. Geographic Coverage

    a. Metropolitan Areas--FMRs are market-wide rent estimates that are 
intended to provide housing opportunities throughout the geographic 
area in which rental-housing units are in direct competition. The FY 
2011 FMRs reflect a change in metropolitan area definitions. HUD is 
using the metropolitan Core Based Statistical Areas (CBSA), which are 
made up of one or more counties, as defined by the OMB, with some 
modifications. HUD is generally assigning separate FMRs to the 
component counties of CBSA Micropolitan Areas.
    b. Modifications to OMB Definitions--Following OMB guidance, the 
estimation procedure for the FY 2011 FMRs incorporates the current OMB 
definitions of metropolitan areas based on the CBSA standards as 
implemented with 2000 Census data, but makes adjustments to the 
definitions to separate subparts of these areas where FMRs or median 
incomes would otherwise change significantly if the new area 
definitions were used without modification. In CBSAs where sub-areas 
are established, it is HUD's view that the geographic extent of the 
housing markets are not yet the same as the geographic extent of the 
CBSAs, but may become so in the future as the social and economic 
integration of the CBSA component areas increases. Modifications to 
metropolitan CBSA definitions are made according to a formula as 
described below.
    Metropolitan area CBSAs (referred to as Metropolitan Statistical 
Areas or MSAs) may be modified to allow for sub-area FMRs within MSAs 
based on the boundaries of old FMR areas (OFAs) within the boundaries 
of new MSAs. (OFAs are the FMR areas defined for the FY2005 FMRs. 
Collectively, they include 1999 definition MSAs/PMSAs, metropolitan 
counties deleted from 1999 definition MSAs/PMSAs by HUD for FMR 
purposes, and counties and county parts outside of 1999 definition 
MSAs/PMSAs referred to as nonmetropolitan counties.) Sub-areas of MSAs 
are assigned their own FMRs when the sub-area 2000 Census Base Rent 
differs by at least 5 percent from the MSA 2000 Census Base Rent (i.e., 
by at most 95 percent or at least 105 percent), or when the 2000 Census 
Median Family Income for the sub-area differs by at least 5 percent 
from the MSA 2000 Census Median Family Income. MSA sub-areas, and the 
remaining portions of MSAs after sub-areas have been determined, are 
referred to as HUD Metro FMR Areas (HMFAs) to distinguish these areas 
from OMB's official definition of MSAs.
    The specific counties and New England towns and cities within each

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state in MSAs and HMFAs are listed in Schedule B.

2. Bedroom Size Adjustments

    Schedule B shows the FMRs for zero-bedroom through four-bedroom 
units. The FMRs for unit sizes larger than four bedrooms are calculated 
by adding 15 percent to the four-bedroom FMR for each extra bedroom. 
For example, the FMR for a five-bedroom unit is 1.15 times the four-
bedroom FMR, and the FMR for a six-bedroom unit is 1.30 times the four-
bedroom FMR. FMRs for single-room-occupancy (SRO) units are 0.75 times 
the zero-bedroom FMR.

3. Arrangement of FMR Areas and Identification of Constituent Parts

    a. The FMR areas in Schedule B are listed alphabetically by 
metropolitan FMR area and by nonmetropolitan county within each state. 
The exception rents for manufactured home spaces FMRs are listed 
alphabetically in Schedule D.
    b. The constituent counties (and New England towns and cities) 
included in each metropolitan FMR area are listed immediately following 
the listings of the FMR dollar amounts. All constituent parts of a 
metropolitan FMR area that are in more than one state can be identified 
by consulting the listings for each applicable state.
    c. Two nonmetropolitan counties are listed alphabetically on each 
line of the nonmetropolitan county listings.
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[FR Doc. 2010-24465 Filed 9-28-10; 11:15 am]
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