Proposed Fair Market Rents for Fiscal Year 2006 for Housing Choice Voucher, Moderate Rehabilitation Single Room Occupancy and Certain Other HUD Programs; Supplemental Notice on 50th Percentile Designation

AGENCY:

Office of the Secretary, HUD.

ACTION:

Notice.

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, to be effective on October 1 of each year. On June 2, 2005, HUD published a notice on proposed fair market rents (FMRs) for Fiscal Year (FY) 2006. In the June 2, 2005, notice, HUD advised that it would also publish a separate notice to identify any areas that may be newly eligible for 50th percentile FMRs as well as any areas that remain eligible or that are no longer eligible for 50th percentile FMRs, as provided in HUD's regulations. This notice provides this information. It identifies 24 areas eligible for 50th percentile FMRs, which consists of areas that remain eligible for 50th percentile FMRs plus areas that are newly eligible.

DATES:

Comments Due Date: September 26, 2005.

ADDRESSES:

Interested persons are invited to submit comments regarding HUD's estimates of the FMRs, as published in this notice, to the Office of the General Counsel, Rules Docket Clerk, Department of Housing and Urban Development, 451 Seventh Street, SW., Room 10276, Washington, DC 20410-0001. Communications should refer to the above docket number and title and should contain the information specified in the “Request for Comments” section. To ensure that the information is fully considered by all of the reviewers, each commenter is requested to submit two copies of its comments, one to the Rules Docket Clerk and the other to the Economic and Market Analysis Staff in the appropriate HUD field office. A copy of each communication submitted will be available for public inspection and copying during regular business hours (8 a.m. to 5 p.m. Eastern Time) at the above address.

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 on the HUD Web site at http://www.huduser.org/datasets/fmr.html. FMRs are listed at the 40th or 50th percentile in Schedule B of this notice. For informational purposes, a table of 40th percentile recent mover rents for the areas with 50th percentile FMRs will be provided on the same Web site noted above. 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 Lynn A. Rodgers, Economic and Market Analysis Division, Office of Economic Affairs, Office of Policy Development and Research, telephone (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.) Electronic Data Availability: This Federal Register notice is available electronically from the HUD news page: http://www.hudclips.org. Federal Register notices also are available electronically from the U.S. Government Printing Office Web site at http://www.gpoaccess.gov/fr/index.html.

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.

Section 8(c) of the USHA requires the Secretary of HUD to publish FMRs periodically, but not less frequently than annually. HUD's regulations implementing section 8(c), codified 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.) HUD published its notice on proposed FY2006 FMRs on June 2, 2005 (70 FR 32402), and provided a 60-day public comment period. In the June 2, 2005, notice, HUD advised that it would publish a separate notice to identify any areas that may be newly eligible for 50th percentile FMRs as well as any areas that remain eligible or no longer remain eligible for 50th percentile FMRs, as provided in HUD's regulations.

Fiftieth percentile FMRs were establish by a rule published on October 2, 2000 (65 FR 58870), that also established the eligibility criteria used to select areas that would be assigned 50th rather than the normal 40th percentile FMRs. The objective was to give PHAs a tool to assist them in de-concentrating voucher program use patterns. The preamble to the October 2, 2000, rule noted that a PHA for which 50th percentile FMRs were provided could advise HUD that its jurisdiction does not require the higher payment standards based on the 50th percentile and obtain HUD approval to continue or establish payment standards below 90 percent of the 50th percentile. (See 65 FR 58871). The three criteria for 50th percentile FMRs are:

The three FMR area eligibility criteria were:

1. FMR Area Size: the FMR area had to have at least 100 census tracts.

2. Concentration of Affordable Units: 70 percent or fewer of the tracts with at least 10 two-bedroom units had at least 30 percent of these units with gross rents at or below the 40th percentile two-bedroom FMR; and,

3. Concentration of Participants: 25 percent or more of the tenant-based rental program participants in the FMR area resided in the 5 percent of census tracts with the largest number of program participants.

The rule also specified that areas assigned 50th percentile FMRs were to be re-evaluated after three years, and that the 50th percentile rents would be rescinded unless an area has made at least a fraction of a percent progress in reducing concentration and otherwise remains eligible. (See 24 CFR 888.113.) As noted in the June 2, 2005, notice, the three-year period for the first areas determined eligible to receive the 50th percentile FMRs, following promulgation of the regulation in § 888.113, has come to a close.

II. 50th Percentile FMR Areas for FY2006

Based on its assessment, HUD has determined that only 14 of the 48 areas assigned 50th percentile FMRs in the June 2, 2005, notice shall continue to be assigned 50th percentile FMRs. Only these 14 areas met the regulatory requirements for continued eligibility. In addition to these 14 areas that continue to remain eligible for 50th percentile FMRs, HUD identified 10 areas currently assigned 40th percentile FMRs that are eligible for 50th percentile FMRs. These 24 areas are as follows (note that the acronym MSA refers to metropolitan statistical area, and HMFA refers to HUD Metro FMR area as defined in the June 2, 2005, notice):

Albuquerque, NM MSA.

Austin-Round Rock, TX MSA.

Baltimore-Towson, MD MSA.

Chicago-Naperville-Joliet, IL HMFA.

Denver-Aurora, CO MSA.

Fort Worth-Arlington, TX HMFA.

Grand Rapids-Wyoming, MI HMFA.

Hartford-West Hartford-East Hartford, CT HMFA.

Honolulu, HI MSA.

Houston-Baytown-Sugar Land, TX HMFA.

Kansas City, MO-KS HMFA.

Las Vegas-Paradise, NV MSA.

Milwaukee-Waukesha-West Allis, WI MSA.

New Haven-Meriden, CT HMFA.

Orange County, CA HMFA.

Phoenix-Mesa-Scottsdale, AZ MSA.

Providence-Fall River, RI-MA HMFA.

Richmond, VA HMFA.

Riverside-San Bernardino-Ontario, CA MSA.

Sarasota-Bradenton-Venice, FL MSA.

Tacoma, WA HMFA.

Tucson, AZ MSA.

Virginia Beach-Norfolk-Newport News, VA-NC MSA.

Washington-Arlington-Alexandria, DC-VA-MD HMFA.

The following section provides the analysis undertaken by HUD to determine 50th percentile eligibility and 50th percentile continued eligibility.

III. Procedures for Determining 50th Percentile FMRs

This section describes the procedure HUD followed in evaluating which new and currently designated areas are eligible for 50th percentile FMRs under HUD's regulations in 24 CFR part 888. Additionally, in accordance with HUD's Information Quality Guidelines (published at 67 FR 69642), certain FMR areas were deemed ineligible for 50th percentile FMRs because the information on concentration of voucher program participants needed to make the eligibility determination was of inadequate quality as described in this section. Table 1 lists the 48 FMR areas that were assigned proposed FY2006 FMRs set at the 50th percentile based on new FMR area definitions. Table 1 includes the 39 areas originally determined eligible for 50th percentile FMRs (following the October 2000 final rule that allowed 50th percentile FMRs) plus subparts of these areas that were separated from the original areas in accordance with the new Office of Management and Budget (OMB) metropolitan area definitions. Those areas marked by an asterisk (*) in Table 1 failed to meet one or more eligibility criteria as described below, including measurable deconcentration. Those areas marked by a plus sign (+) in Table 1 had insufficient information, as described below, upon which to determine concentration of voucher program participants and are deemed ineligible for 50th percentile FMRs. Only 14 of these areas met all of the eligibility criteria including information quality requirements and had measurable deconcentration.

The following subsections describe HUD's application of the eligibility criteria for 50th percentile FMRs, set forth in 24 CFR 888.113, to the proposed FY2006 50th percentile FMR areas, and explain which areas lost eligibility for the 50th percentile FMR based on each criterion. The application of HUD's Information Quality Guidelines and findings of ineligibility of FMR areas on the basis of inadequate information on concentration of participants are described in the subsection on the “concentration of participants” (Concentration of Participants) criterion. The final section identifies 10 additional proposed FY2006 FMR areas originally assigned 40th percentile FMRs that are eligible, under the regulatory criteria and information quality guidelines, for 50th percentile FMRs.

Continued Eligibility: FMR Area Size Criterion

Application of the modified new OMB metropolitan area definitions results in several peripheral counties of FY2005 50th percentile FMR areas being separated from their core areas. The separated areas become either non-metropolitan counties, parts of different metropolitan areas, or form entirely new metropolitan areas. Table 2 shows proposed FY2006 FMR areas that are ineligible to receive 50th percentile FMRs because, as a result of the new metropolitan area definitions, they each have fewer than 100 census tracts and therefore fail to meet the FMR area size criterion.

Continued Eligibility: Concentration of Affordable Units

The original 50th percentile FMR determination in 2000 measured the Concentration of Affordable Units criterion with data from the 1990 Census because 2000 Census data were not available. According to 2000 Census data, the FMR areas, shown in Table 3, and assigned proposed FY2006 50th percentile FMRs have more than 70 percent of their tracts containing 10 or more rental units where at least 30 percent of rental units rent for the 40th percentile two-bedroom FMR or less. These areas therefore fail to meet the Concentration of Affordable Units criterion and are not eligible for 50th percentile FMRs (FMR areas that are listed above as too small and also fail to meet this criterion are not listed here). In Table 3, the percentages following each FMR area name are, respectively, the 1990 Census and 2000 Census percent of tracts containing 10 or more rental units where at least 30 percent of rental units rent for the 40th percentile two-bedroom FMR or less. This number must be no greater than 70 percent for an FMR Area to qualify for 50th percentile FMRs.

Continued Eligibility: Concentration of Participants

The Concentration of Participants criterion requires that 25 percent or more of voucher program participants be located in the five percent of census tracts with the highest number of voucher participants. Otherwise, an area is not eligible for 50th percentile FMRs. The data for evaluating the Concentration of Participants criterion comes from HUD's Public Housing Information Center (PIC). All public housing authorities (PHAs) that administer Housing Choice Voucher (HCV) programs must submit, on a timely basis, family records to HUD's PIC as set forth by 24 CFR part 908 and the consolidated annual contributions contract (CACC). PIC is the Department's official system to track and account for HCV family characteristics, income, rent, and other occupancy factors. PHAs must submit their form HUD-50058 records electronically to HUD for all current HCV families. Under HUD Notice PIH 2000-13 (HA), PHAs were required to successfully submit a minimum of 85 percent of their resident records to PIC during the measurement period covered by this notice (this requirement was raised to 95 percent by HUD Notice PIH 2005-17 (HA), but this higher reporting rate requirement is not used for purposes of this notice because it does not become effective until December 31, 2005, data submissions by PHAs).

Under HUD's Information Quality Guidelines, the data used to determine eligibility for 50th percentile FMRs qualifies as “influential” and is therefore subject to a higher “level of scrutiny and pre-dissemination review” including “robustness checks” because “public access to data and methods will not occur” due to HUD's statutory duty to protect private information. HUD cannot reasonably base the eligibility decision on inadequate data.

The information used to determine which FMR areas are assigned 50th percentile FMRs is “influential” because it has “a clear and substantial impact,” namely because it can potentially affect how voucher subsidy levels will be set in up to 108 large FMR areas containing about 59 percent of voucher tenants, thereby affecting “a broad range of parties.” PHA voucher payment standards are set according to a percentage of the FMR, so the setting of 50th percentile FMRs “has a high probability” of affecting subsidy levels for tenants in the affected FMR areas. An “important” public policy is affected by the decisions rendered from the information, namely the goal of deconcentrating voucher tenants and improving their access to jobs and improved quality of life.

Under HUD's Final Information Quality Guidelines, influential information that is developed using data that cannot be released to the public under Title XIII or for “other compelling interests” is subject to “robustness checks” to address, among other things, “sources of bias or other error” and “programmatic and policy implications.” The typical reason for a low overall reporting rate in an FMR area is very low reporting rates by the largest PHAs in the FMR area (or non-reporting in the case of Moving-to-Work program PHAs that are not required to report). Unless it could be shown that underreporting is essentially random (which would be difficult and impose a major administrative burden on HUD), low reporting rates render any results derived from the data inaccurate, unreliable, and biased.

The setting of a reporting rate threshold for consideration of eligibility for 50th percentile FMRs is, therefore, justified because it constitutes a “robustness check” on “influential information” as defined in HUD's Final Information Quality Guidelines. HUD sets the overall FMR area minimum reporting rate standard at 85 percent based on the minimum requirements established for PHA reporting rates.

Of the 21 areas passing the FMR Area Size and Concentration of Affordable Units criteria, the five listed below in Table 4 have data quality issues in measuring Concentration of Participants in 2005 because of low reporting by PHAs in the FMR area.

The only area with a proposed FY2006 50th percentile FMR that met the first two eligibility criteria, had adequate data to measure Concentration of Participants, but failed to meet 25 percent concentration criterion, is the San Diego-Carlsbad-San Marcos, CA MSA.

Continued Eligibility: Deconcentration of Participants

HUD's regulations in 24 CFR 888.113 specify that areas assigned 50th percentile rents are to be reviewed at the end of three years, and that the 50th percentile rents will be rescinded if no progress has been made in deconcentrating voucher tenants. FMR Areas that failed this test are ineligible for 50th percentile FMRs for the subsequent three years. Three FMR areas with proposed FY2006 50th percentile FMRs that passed the other 50th percentile eligibility tests failed to deconcentrate voucher tenants between 2000 and 2005. They are the Bergen-Passaic, NJ HMFA, the Newark, NJ HMFA, and the Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA.

With the exception of the Bergen-Passaic, NJ HMFA, however, this conclusion is based on poor quality data. The other two areas do not have sufficient reporting rates as derived from the May 31, 2005, Delinquency Report to measure deconcentration progress. Therefore, the Newark, NJ HMFA and the Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA are ineligible for 50th percentile FMRs because neither concentration nor deconcentration progress can be measured accurately based on data provided by PHA reporting. If reporting in these FMR areas has increased sufficiently when future evaluations of deconcentration are made, and eligibility can be established with increased reporting rates, the 50th percentile FMRs could be reinstated before the end of a three-year hiatus.

Since the Bergen-Passaic, NJ HMFA has not demonstrated progress in deconcentrating voucher participants, and this measurement is made with data of adequate quality (85.7 percent reporting rate), the Bergen-Passaic, NJ HMFA is ineligible for FY2006 50th percentile FMRs. The 40th percentile Bergen-Passaic, NJ HMFA FMR is almost identical to the revised proposed New York-Bergen-Passaic-Monmouth-Ocean NY-NJ HMFA of which the originally proposed Bergen-Passaic, NJ HMFA is a part. So, as a result of losing its 50th percentile status, the Bergen-Passaic, NJ HMFA is combined into the revised proposed New York-Bergen-Passaic-Monmouth-Ocean, NY-NJ HMFA and shares the same revised proposed FY2006 FMRs with the component counties of this area as indicated in Schedule B of this notice.

Table 5 lists the areas, originally assigned 50th percentile FMRs, and also assigned proposed FY2006 50th percentile FMRs that meet all eligibility criteria, that have shown evidence of participant deconcentration, and have sufficient Reporting Rates as derived from the May 31, 2005, Delinquency Report to make an accurate assessment of participant concentration.

Newly Eligible Areas

Table 6 lists the FY2006 FMR areas not originally assigned proposed 50th percentile FMRs that meet the eligibility requirements for 50th percentile FMRs and have sufficient Reporting Rates as derived from the May 31, 2005, Delinquency Report (more than 85 percent overall for the FMR area) to evaluate the Concentration of Participants. There were no FY2006 FMR areas originally assigned proposed 40th percentile FMRs that otherwise met the eligibility requirements for 50th percentile FMRs, but were deemed ineligible by having insufficient Reporting Rates as derived from the May 31, 2005, Delinquency Report.

Revised proposed FY2006 FMRs for the areas affected by this notice are listed in Schedule B of the June 2, 2005, notice. Consistent with current regulations, PHAs must obtain the approval of their governing board to implement use of 50th percentile FMRs or payment standards based on those FMRs. Other information pertaining to the proposed FY2006 FMRs is unchanged from the June 2, 2005, notice.