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Excerpts from Federal Register Notice of Fiscal Year 2002 Proposed Fair Market RentsThursday, May 23, 2002
Part II Department of Housing and Urban Development
24 CFR Part 888
[Docket No. FR– 4741– N– 01]
Fair Market Rents for the Housing Choice Voucher Program and Moderate Rehabilitation Single Room Occupancy Program— Fiscal Year 2003; Proposed RuleSUMMARY: Section 8( c)( 1) of the United States Housing Act of 1937 requires the Secretary to publish FMRs annually to be effective on October 1 of each year. FMRs are used to determine payment standard amounts for the Housing Choice Voucher program, to determine initial renewal rents for some expiring project-based Section 8 contracts, and to determine initial rents for housing assistance payments (HAP) contracts in the Moderate Rehabilitation Single Room Occupancy program. Other programs may require use of FMRs for other purposes. Today’s notice proposes revised FMRs that reflect estimated 40th and 50th percentile rent levels trended to April 1, 2003.
SUPPLEMENTARY INFORMATION: Section 8 of the United States Housing Act of 1937 (the Act) (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 used to determine the ‘’ payment standard amount’’ used to calculate the maximum monthly subsidy for an assisted family (see § 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, safe, and sanitary rental housing of a modest (non-luxury) nature with suitable amenities.
Method Used To Develop FMRs
FMR Standard: FMRs are gross rent estimates; FMRs include shelter rent and the cost of utilities, except telephone. HUD sets FMRs to assure that a sufficient supply of rental housing is available to participants in the voucher program. To accomplish this objective, FMRs must be both high enough to permit a selection of units and neighborhoods and low enough to serve as many families as possible. The level at which FMRs are set is expressed as a percentile point within the rent distribution of standard quality rental housing units. The current definition used is the 40th percentile rent for most areas, the dollar amount below which 40 percent of the standard quality rental housing units rent. The 40th percentile rent is drawn from the distribution of rents of units that are occupied by recent movers (renter households who moved into their unit within the past 15 months). Newly built units less than two years old are excluded, and adjustments have been made to correct for the below market rents of public housing units included in the data base. (Emphasis added by NLIHC.)
The interim rule establishing 50th percentile FMRs was published on October 2, 2000 (65 FR 58870) and became effective on December 1, 2000. HUD set fair market rents for 39 areas at the 50th percentile rent (i. e., the median rent) effective January 2, 2001 (66 FR 162). HUD set the 50th percentile FMRs to give lower-income families who participate in the Housing Choice Voucher program access to a broader range of housing opportunities throughout a metropolitan area. FMRs have been increased to the 50th percentile rent in those 39 metropolitan areas based on the criteria established in the interim rule which seeks to promote residential choice, help families moves closer to areas for job growth, and deconcentrate poverty.
The interim rule provided a new paragraph (c) of § 888.113, which states:
(c) Setting FMRs at the 50th percentile rent to provide a broad range of housing opportunities throughout a metropolitan area.Schedule B of this document lists the proposed 2002 FMRs for all areas including FMRs for the 39 FMR areas where the FMR is set at the 50th percentile rent level (as specified in § 888.113 (c)), and other areas, where the FMR is set at the 40th percentile rent. An asterisk in Schedule B identifies the 39 FMR areas for which HUD has set 50th percentile FMRs. HUD has set 50th percentile FMRs for the following metropolitan FMR areas:
(1) HUD will set the FMRs at the 50th percentile rent for all unit sizes in each metropolitan FMR area that meets all of the following criteria at the time of annual publication of the FMRs:
(i) The FMR area contains at least 100 census tracts;
(ii) 70 percent or fewer of the census tracts with at least 10 two bedroom rental units are census tracts in which at least 30 percent of the two bedroom rental units have gross rents at or below the two bedroom FMR set at the 40th percentile rent; and
(iii) 25 percent or more of the tenant-based rental program participants in the FMR area reside in the 5 percent of the census tracts within the FMR area that have the largest number of program participants.
(2) If the FMRs are set at the 50th percentile rent in accordance with paragraph (c)( 1) of this section, HUD will set the FMRs at the 50th percentile rent for a total of three years.
(i) At the end of the three-year period, HUD will continue to set the FMRs at the 50th percentile rent only so long as the concentration measure for the current year is less than the concentration measure at the time the FMR area first received an FMR set at the 50th percentile rent. HUD will publish FMRs based on the 40th percentile rent for FMR areas that do not qualify for continued use of the 50th percentile rent.
(ii) For purposes of this section, the term ‘’ concentration measure’’ means the participants in the FMR area who reside in the 5 percent of the census tracts within the FMR area that have the largest number of program participants.
(iii) FMR areas that do not meet the test for continued use of FMRs set at the 50th percentile will be ineligible to use FMRs set at the 50th percentile for a period of three years.
(iv) A PHA whose jurisdiction includes one or more FMR areas that are no longer eligible to use FMRs set at the 50th percentile may be eligible for a higher payment standard under § 982.503 (f).Albuquerque, NMData Sources
Atlanta, GA
Austin-San Marcos, TX
Baton Rouge, LA
Bergen-Passaic, NJ
Buffalo-Niagara Falls, NY
Chicago, IL
Cleveland-Lorain-Elyria, OH
Dallas, TX
Denver, CO
Detroit, MI
Fort Lauderdale, FL
Fort Worth-Arlington, TX
Grand Rapids-Muskegon-Holland, MI
Houston, TX
Kansas City, MO– KS
Las Vegas, NV– AZ
Miami, FL
Minneapolis-St. Paul, MN– WI
Newark, NJ
Norfolk-Virginia Beach-Newport News, VA– NC
Oakland, CA
Oklahoma City, OK
Orange County, CA
Philadelphia, PA– NJ
Phoenix-Mesa, AZ
Richmond-Petersburg, VA
Sacramento, CA
Salt Lake City-Ogden, UT
San Antonio, TX
San Diego, CA
San Jose, CA
St. Louis, MO– IL
Tampa-St. Petersburg-Clearwater, FL
Tulsa, OK
Ventura, CA
Washington, DC– MD– VA
West Palm Beach-Boca Raton, FL
Wichita, KSHUD used the most accurate and current data available to develop the FMR estimates. The sources of survey data used for the base-year estimates are:
(1) The 1990 Census, which provides statistically reliable rent data for all FMR areas;The base-year FMRs are updated using trending factors based on Consumer Price Index (CPI) data for rents and utilities or HUD regional rent change factors developed from RDD surveys. Annual average CPI contract rent and residential utility cost data are available individually for 96 metropolitan FMR areas and for the four Census Regions. RDD regional rent change factors are developed annually for the metropolitan and nonmetropolitan parts of each of the 10 HUD regions. The utility component of RDD surveys is updated using CPI regional utility cost change factors. The RDD factors are used to update the base year estimates for all FMR areas that do not have their own local CPI survey.(2) The Bureau of the Census’ American Housing Survey (AHS), which is used to develop between-Census revisions for the largest metropolitan areas and which have accuracy comparable to the decennial Census; and
(3) Random Digit Dialing (RDD) telephone surveys of individual FMR areas, which are based on a sampling procedure that uses computers to select statistically random samples of rental housing.
State Minimum FMRs
FMRs are established at the higher of the local 40th percentile rent level or the statewide average of nonmetropolitan counties, subject to a ceiling rent cap. These State minimums have the affect of increasing FMRs for a number of nonmetropolitan areas plus a small number of metropolitan areas.
Bedroom Size Adjustments
FMRs have been calculated separately for each bedroom size category. For areas where FMRs are based on the State minimums, the rents for each bedroom size are the higher of the rent for the area or the statewide average of nonmetropolitan counties for that bedroom size. For all other FMR areas, the bedroom intervals are based on 1990 Census rent relationships for the specific area.
Exceptions have been made for some areas with local bedroom size rent intervals below an acceptable range. For those areas the intervals selected were the minimums determined after outliers had been excluded from the distribution of bedroom intervals for all metropolitan areas. Higher ratios continue to be used for three-bedroom and larger size units than would result from using the actual market relationships. This is done to assist the largest, most difficult to house families in finding program-eligible units.
The FMRs for unit sizes larger than a 4 bedroom are calculated by adding 15 percent to the 4-bedroom FMR for each extra bedroom. For example, the FMR for a 5-bedroom unit is 1.15 times the 4-bedroom FMR, and the FMR for a 6-bedroom unit is 1.30 times the 4-bedroom FMR. FMRs for single room occupancy (SRO) units are 0.75 times the 0-bedroom FMR.
Random Digit Dialing (RDD) Rent Surveys
RDD surveys are used to obtain statistically reliable FMR estimates for selected FMR areas. This telephone survey technique involves drawing random samples of renter units occupied by recent movers. RDD surveys exclude public housing units, other assisted units for which the market rent cannot be determined, units built in the past two years, seasonal units, non-cash rental units, and those owned by relatives. A HUD analysis has shown that the slight downward RDD survey bias caused by including some rental units that are in substandard condition is almost exactly offset by the slight upward bias that results from surveying only units with telephones.
Approximately 15,000– 20,000 telephone numbers need to be contacted to achieve the target survey sample level of 200 eligible recent mover responses. RDD surveys have a high degree of statistical accuracy; there is a 95 percent likelihood that the recent mover rent estimates developed using this approach are within 3 to 4 percent of the actual rent value. Virtually all of the estimates are within 5 percent of the actual value.
Today’s notice includes proposed FMR revisions based on RDD surveys conducted in early September 2001 and February/ March 2002 for the following areas:
Proposed FMR Increases Above Normal Update Factor
Baltimore, MD PMSAProposed FMR Decrease Below Normal Update Factor:
Cincinnati, OH– KY– IN PMSA
Des Moines, IA MSA
Jersey City, NJ PMSA
Norfolk-Virginia Beach-Newport News, VA– NC MSA
Orlando, FL MSA Richmond-Petersburg, VA MSA
Scranton-Wilkes-Barre-Hazelton, PA MSAMonmouth-Ocean, NJ PMSASurvey Supports Increasing FMRs by Normal Update FactorBergen-Passaic, NJ PMSASchedules B and D— General Explanatory Notes
El Paso, TX MSA
Houston, TX PMSA
Rochester, NY MSA
Seattle-Bellevue-Everett, WA PMSA
Tampa-St. Petersburg-Clearwater, FL MSA
Worcester, MA– CT MSA1. Geographic Coverage.
a. Metropolitan Areas.— FMRs are housing 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 FMRs shown in Schedule B are determined for the same areas as the Office of Management and Budget’s (OMB) most current definitions of metropolitan areas, with the exceptions discussed in paragraph b. HUD uses the OMB Metropolitan Statistical Area (MSA) and Primary Metropolitan Statistical Area (PMSA) definitions for FMR areas because they closely correspond to housing market area definitions.
b. Exceptions to OMB Definitions.— The exceptions are counties deleted from several large metropolitan areas whose revised OMB metropolitan area definitions were determined by HUD to be larger than the housing market areas. The FMRs for the following counties (shown by the metropolitan area) are calculated separately and are shown in Schedule B within their respective States under the “Metropolitan FMR Areas’’ listing:
Metropolitan Area and Counties Deleted
Chicago, ILc. Nonmetropolitan Area FMRs.— FMRs also are established for nonmetropolitan counties and for county equivalents in the United States, for nonmetropolitan parts of counties in the New England states, and for FMR areas in Puerto Rico, the Virgin Islands, and the Pacific Islands. Nonmetropolitan area FMRs are set at the higher of the local 40th percentile rent level or the statewide average of nonmetropolitan counties. (The State minimum also affects a small number of metropolitan areas whose rents would otherwise fall below the State minimum.)DeKalb, Grundy and Kendall CountiesCincinnati— Hamilton, OH– KY– INBrown County, Ohio; Gallatin, Grant and Pendleton Counties in Kentucky; and Ohio County, IndianaDallas, TXHenderson CountyFlagstaff, AZ– UTKane County, UTNew Orleans, LASt. James ParishWashington, DC– MD– VA– WVBerkeley and Jefferson Counties in West Virginia; and Clarke, Culpeper, King George and Warren Counties in Virginia2. Bedroom Size Adjustments.— Schedule B shows the FMRs for 0-bedroom through 4-bedroom units. The FMRs for unit sizes larger than 4 bedrooms are calculated by adding 15 percent to the 4-bedroom FMR for each extra bedroom. For example, the FMR for a 5-bedroom unit is 1.15 times the 4-bedroom FMR, and the FMR for a 6-bedroom unit is 1.30 times the 4-bedroom FMR. FMRs for single-room-occupancy (SRO) units are 0.75 times the 0-bedroom FMR.
This document can be found in its entirety at http://www.huduser.org/datasets/fmr/fmr2003p.pdf.
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