82 FR 24377 - Proposed Changes to the Methodology Used for Estimating Fair Market Rents

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Federal Register Volume 82, Issue 101 (May 26, 2017)

Page Range		24377-24381
FR Document		2017-10907
Section 8(c)(1) of the United States Housing Act of 1937 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 (HCV) program, to determine initial renewal rents for some expiring project-based Section 8 contracts, to determine initial rents for housing assistance payment contracts in the Moderate Rehabilitation Single Room Occupancy program, and to serve as rent ceilings for rental units in both the HOME Investment Partnerships program and the Emergency Solutions Grants program. HUD also uses FMRs in the calculation of maximum award amounts for Continuum of Care grantees and in the calculation of flat rents for Public Housing units. In furtherance of that effort, HUD proposes several methodological changes in this notice and seeks public comment on the proposed changes.
Federal Register, Volume 82 Issue 101 (Friday, May 26, 2017)
[Federal Register Volume 82, Number 101 (Friday, May 26, 2017)]
[Notices]
[Pages 24377-24381]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-10907]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6021-N-01]


Proposed Changes to the Methodology Used for Estimating Fair 
Market Rents

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

ACTION: Notice of Proposed Material Changes for Estimation of Fair 
Market Rents (FMRs).

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SUMMARY: Section 8(c)(1) of the United States Housing Act of 1937 
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 (HCV) program, to determine initial renewal rents for 
some expiring project-based Section 8 contracts, to determine initial 
rents for housing assistance payment contracts in the Moderate 
Rehabilitation Single Room Occupancy program, and to serve as rent 
ceilings for rental units in both the HOME Investment Partnerships 
program and the Emergency Solutions Grants program. HUD also uses FMRs 
in the calculation of maximum award amounts for Continuum of Care 
grantees and in the calculation of flat rents for Public Housing units. 
In furtherance of that effort, HUD proposes several methodological 
changes in this notice and seeks public comment on the proposed 
changes.

DATES: Comment Due Date: June 26, 2017.

ADDRESSES: HUD invites interested persons to submit comments regarding 
the proposed changes to the calculation of the FMRs to the Regulations 
Division, Office of General Counsel, Department of Housing and Urban 
Development, 451 Seventh Street SW., Room 10276, Washington, DC 20410-
0001. Communications must refer to the above docket number and title 
and should contain the information specified in the ``Request for 
Comments'' section. There are two methods for submitting public 
comments.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451

[[Page 24378]]

7th Street SW., Room 10276, Washington, DC 20410-0500. Due to security 
measures at all federal agencies, however, submission of comments by 
mail often results in delayed delivery. To ensure timely receipt of 
comments, HUD recommends that comments submitted by mail be submitted 
at least two weeks in advance of the public comment deadline.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
http://www.regulations.gov Web site can be viewed by other commenters 
and interested members of the public. Commenters should follow 
instructions provided on that site to submit comments electronically.

    Note:  To receive consideration as public comments, comments 
must be submitted through one of the two methods specified above. 
Again, all submissions must refer to the docket number and title of 
the notice.

    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications regarding this notice submitted to HUD will 
be available for public inspection and copying between 8 a.m. and 5 
p.m. weekdays at the above address. Due to security measures at the HUD 
Headquarters building, an advance appointment to review the public 
comments must be scheduled by calling the Regulations Division at 202-
708-3055 (this is not a toll-free number). Individuals with speech or 
hearing impairments may access this number through TTY by calling the 
Federal Relay Service at 800-877-8339. Copies of all comments submitted 
are available for inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Questions on this notice may be 
addressed to Marie L. Lihn or Peter B. Kahn of the Economic and Market 
Analysis Division, Office of Economic Affairs, Office of Policy 
Development and Research, HUD Headquarters, 451 7th Street SW., Room 
8208, Washington, DC 20410; telephone number 202-402-2409 (this is not 
a toll-free number), or they may be reached at [email protected]. Persons 
with hearing or speech impairments may access HUD numbers through TTY 
by calling the Federal Relay Service at 800-877-8339 (toll-free). 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 (toll-free) or access the information on the HUD USER Web site 
https://www.huduser.gov/portal/datasets/fmr.html.
    Electronic Data Availability. This Federal Register notice will be 
available electronically from the HUD User page at https://www.huduser.gov/portal/datasets/fmr.html. Federal Register notices also 
are available electronically from https://www.federalregister.gov/, the 
U.S. Government Printing Office Web site.
    Complete documentation of the impact of these methodology changes 
and calculation of hypothetical FY 2017 FMRs \1\ with these changes are 
available at https://www.huduser.gov/portal/datasets/fmr.html. Small 
Area FMRs for all metropolitan FMR areas incorporating these material 
changes in methodology have also been calculated and are available at: 
https://www.huduser.gov/portal/datasets/fmr/smallarea/index.html. 
Changes to FMR calculations prescribed in the Small Area FMR rule (81 
FR 80567) are not incorporated into the calculation of hypothetical FY 
2017 FMRs.
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    \1\ HUD will provide a set of FY 2017 FMRs calculated with all 
the methodological changes proposed in this notice for the public to 
review. The FMRs with all the proposed changes will be referred to 
as FY 2017 hypothetical FMRs.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 8 of the United States Housing Act of 1937 (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 Fair Market Rents (FMRs) established by HUD for 
different geographic areas. In the Housing Choice Voucher (HCV) 
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. HUD also uses the FMRs to determine initial 
renewal rents for some expiring project-based Section 8 contracts, 
initial rents for housing assistance payment contracts in the Moderate 
Rehabilitation Single Room Occupancy program, rent ceilings for rental 
units in both the HOME Investment Partnerships program and the 
Emergency Solution Grants program, calculation of maximum award amounts 
for Continuum of Care grantees, and calculation of flat rents in Public 
Housing units. In general, the FMR for an area is the amount that would 
be needed to pay the gross rent (shelter rent plus utility costs) of 
privately owned, decent, and safe rental housing of a modest (non-
luxury) nature with suitable amenities and is set at the 40th 
percentile of the distribution of gross rents for recent movers. HUD's 
FMR calculations represent HUD's best effort to estimate the 40th 
percentile gross rents paid by recent movers into standard quality 
units in each FMR area.
    In recent years, commenters have expressed a number of concerns 
about FMRs. Some have pointed out that FMRs are a primary operating 
parameter in the HCV program and that extreme year-to-year fluctuations 
in FMRs can cause difficulties in program operations. Additionally, 
concerns have been raised that the FMRs are either not timely enough or 
not based on enough local information. HUD is proposing several changes 
to the manner in which HUD calculates FMRs in order to improve the FMR 
estimates and to address the concerns of commenters noted at the 
beginning of this paragraph.

II. Procedures for Developing FMRs

    Section 8(c)(1) of the USHA requires the Secretary of HUD to 
publish FMRs periodically, but not less frequently than annually. 
Section 8(c)(1)(B) as amended by the Housing Opportunities Through 
Modernization Act of 2016 (HOTMA) (Pub. L. 114-201, approved July 29, 
2016), requires that HUD publish for comment in the Federal Register a 
notice of proposed material changes in the methodology for estimating 
FMRs and a notice containing HUD's final decisions regarding such 
proposed substantial methodological changes and responses to public 
comments.
    On August 26, 2016, HUD announced the publication of the FY 2017 
FMRs, requested comments on the FY 2017 FMRs, and requested public 
comment on what should be considered ``material changes'' in FMR 
estimation methods for the purpose of triggering public notice and 
comment under HOTMA (81 FR 58952). Following a review of public comment 
on what should be considered ``material changes'', HUD determined that 
initially any change in FMR calculation methods should be subject to 
public comment. HUD, thus, responded to the comments in a notice 
published March 30, 2017, stating that HUD would not take a position on 
what FMR changes would be considered material and that HUD would 
initially

[[Page 24379]]

request comment on all FMR method changes (82 FR 15711). While HUD 
recognizes that year-to-year fluctuations in FMRs may cause operational 
difficulties in program operations, HUD seeks to improve the FMR 
calculation methods, using as much local information as possible while 
trying to preserve stability in the estimates. In an effort to address 
these concerns and recognizing that addressing one issue may impact 
another issue, HUD proposes several methodological changes and requests 
public comments on those changes through this notice, in compliance 
with HOTMA.

III. FMR Methodology Changes

    This section provides a brief overview of how HUD computed the FY 
2017 FMRs and three proposed changes to this methodology.
    To calculate the FY 2017 FMRs, HUD assigned each area a two-bedroom 
standard quality base rent from the 2010-2014 5-year American Community 
Survey (ACS) tabulations. Each base rent was updated with a recent 
mover adjustment factor calculated from the 1-year 2014 ACS data. The 
2014 ACS recent mover data is adjusted to be ``as of'' FY 2017 using 
local or regional Consumer Price Index (CPI)-measured changes in gross 
rents measured between 2014 and 2015 and a nationally forecasted trend 
factor measuring the expected growth in gross rents from 2015 to FY 
2017. For complete information on how HUD determines FMR areas, and on 
how HUD derives each area's FY 2017 FMR, see the online documentation 
at https://www.huduser.gov/portal/datasets/fmr.html#2017_query.
    The following is a summary of the two general changes to the 
calculation methods HUD is proposing to incorporate into the 
calculation of FY 2018 FMRs and a third change specific to the 
calculation of Small Area FMRs.
    (1) The first method change is in the manner in which HUD selects 
American Community Survey (ACS) estimates for use in the calculation of 
FMRs. Currently, HUD uses an ACS estimate if the error of the estimate 
is less than half the size of the estimate itself. HUD is proposing to 
require that each ACS estimate used in the calculation of FMRs be based 
on at least one hundred (100) survey responses. In other words, this 
notice proposes to couple the error ratio criterion with an additional 
review of the number of survey observations supporting the ACS 
estimate. If the survey data does not meet both criteria, HUD will use 
an average of the three most recent years of data.
    (2) The second method change focuses on the way that HUD calculates 
the ``recent mover factor.'' Currently, HUD calculates the ``recent 
mover factor'' based on a geographic area that is sometimes larger than 
an FMR area when the two-bedroom recent mover rents are not 
statistically reliable. HUD is proposing the use of ``all-bedroom'' 
recent mover rents as the basis for the recent mover factor when the 
two-bedroom recent mover rents are not statistically reliable (i.e., 
100 or more observations and a margin of error that is smaller than 
half of the estimate itself) before moving to a larger encompassing 
geography for the recent mover factor.
    (3) Finally, HUD is proposing to use the gross rent estimates 
calculated by ZIP Code Tabulation Areas (ZCTAs), where statistically 
reliable, to estimate Small Area FMRs (SAFMRs) directly rather than the 
``ratio'' method HUD used in FY 2017 and earlier SAFMR estimates.

1. FY 2018 FMR Proposed Changes

A. Base Year Rent Changes
    Since FY 2012, HUD has used the 5-year ACS data to determine base 
rents for most FMR areas. HUD used 2010-2014 ACS data, released in 
December 2015, in the FY 2017 FMR calculations. HUD evaluates the 
statistical validity of the ACS data before using the information in 
the calculation of FMRs. HUD proposes to update these statistical 
reliability criteria. Previously, HUD used ACS estimates for two-
bedroom unit rents within the FMR area where the margin of error of the 
estimate was less than half the size of the estimate itself (i.e., a 
margin of error of less than 50 percent). HUD now proposes to couple 
this ``margin of error'' test with an additional test based on the 
number of survey observations supporting the estimate. The Census 
Bureau does not provide HUD with an exact count of the number of 
observations supporting the ACS estimate; rather, the Census Bureau 
provides HUD with categories of the number of survey responses 
underlying the estimate, including whether the estimate is based on 
more than 100 observations. Using these categories, HUD proposes that 
ACS rent estimates must be based on at least 100 observations in order 
to be used as base rents.
    For areas in which the 5-year ACS data for two-bedroom, standard 
quality gross rents do not pass the statistical reliability tests 
(i.e., have a margin of error greater than 50 percent or fewer than 100 
observations), HUD will use an average of the base rents over the three 
most recent years (provided that there is data available for at least 
two of these years),\2\ or if such data is not available, using the 
two-bedroom rent data within the next largest geographic area, which 
for a non-metropolitan area would be the state non-metro area rent 
data.
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    \2\ Using FY 2017 as an example, the three years of ACS data in 
question are 2012, 2013 and 2014. The 2012 data are adjusted to be 
denominated in 2014 dollars using the growth in CPI-based gross 
rents measured between 2012 and 2014. Similarly, the 2013 gross rent 
data is adjusted to 2014 denominated dollars using the growth in 
CPI-based gross rents measured between 2013 and 2014.
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B. Recent Mover Factor Changes
    HUD is proposing changes to the calculation of the recent mover 
factor that include a change to the statistical reliability assessment 
of ACS recent mover data (consistent with the change for base rents) 
and a change in the data used when the number of ``two-bedroom'' 
observations within the FMR area is insufficient. The following 
describes the current process for calculating the recent mover factor, 
and the proposed revisions.
    HUD historically based FMRs on gross rent data for recent movers 
(those who have moved into their current residence in the last 24 
months). However, due to the way in which the Census Bureau constructs 
the 5-year ACS data, HUD developed a new methodology for using recent 
mover data to calculate FMRs in FY 2012. As of FY 2012, HUD assigns all 
areas a base rent, which is the two-bedroom, standard quality 5-year 
ACS gross rent estimate, and then applies a recent mover factor in 
order to calculate recent mover gross rents and publish them in 
accordance with 24 CFR 888.113. HUD calculates the recent mover factor 
as the ratio of the 1-year recent mover gross rent to the 5-year 
standard quality gross rent for the recent mover factor area. HUD does 
not allow recent mover factors to reduce the standard quality base 
rent; therefore, if the 5-year standard quality rent is larger than the 
comparable 1-year recent mover rent, the recent mover factor is set to 
1. Applying the recent mover factor to the standard quality base rent 
produces a recent mover two-bedroom gross rent for the FMR area that is 
``as of'' the most recent ACS year.
    In general, HUD has used the 1-year ACS-based two-bedroom recent 
mover gross rent estimate from the smallest geographic area 
encompassing the FMR area for which the estimate is statistically 
reliable to calculate the recent mover factor.\3\ HUD calculates

[[Page 24380]]

some areas' recent mover factors using data collected solely within the 
FMR area. However, HUD currently bases other areas' recent mover 
factors on larger geographic areas if this is necessary to obtain 
statistically reliable estimates.
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    \3\ HUD currently assesses recent mover estimates to be 
statistically reliable if the margin of error of the estimate is 
smaller than half the size of the estimate itself (i.e., less than 
50%).
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    When data from a larger geographic unit is required, data from 
progressively larger areas is considered until a statistically reliable 
result is obtained. The order of consideration depends on the type of 
area for which the recent mover factor is being calculated. For 
metropolitan FMR areas that are subareas of larger metropolitan areas, 
the order is the FMR area, the metropolitan area, the aggregated 
metropolitan parts of the state, and the entire state. Metropolitan 
areas that are not divided follow a similar progression from FMR area 
data, to data from the aggregated metropolitan parts of the state, to 
state-level data. In non-metropolitan areas, HUD bases the recent mover 
factor on data from within the FMR area, or from the aggregated non-
metropolitan parts of the state, or if that is not available, from the 
whole state.
    HUD proposes to modify the test of statistical reliability for ACS 
recent mover data in the same manner as the proposed change discussed 
under base rents. In addition, when an FMR area does not have 
statistically reliable two-bedroom data, HUD proposes that before using 
data from a larger geographic area to calculate the recent mover 
factor, HUD would first check to see if the data aggregated across 
``all-bedroom'' count units is statistically reliable for the FMR area. 
If so, HUD will use the ``all-bedroom'' data to calculate the recent 
mover factor instead of moving to the next larger geography. 
Incorporating ``all-bedroom'' rents into the recent mover factor 
calculation when statistically reliable two-bedroom data is not 
available preserves the use of local information to the greatest extent 
possible. However, where statistically reliable ``all-bedroom'' data is 
not available, HUD will continue to use data from the larger 
geographical area(s), as described above.

2. Small Area Fair Market Rents Methodology Changes

    Currently, HUD calculates Small Area FMRs \4\ using a rent ratio 
determined by dividing the median gross rent across all bedrooms for 
the Small Area ZCTAs by the similar median gross rent for the parent 
metropolitan area of the ZIP code. In order to maintain stability in 
the rent ratio, HUD averages the three most current rent ratios and 
multiplies this averaged rent ratio by the most recent two-bedroom FMR 
for the parent metropolitan area. HUD is proposing updates to the 
calculation of Small Area FMRs that are consistent with the other 
proposed methodology changes in this Notice.
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    \4\ More information regarding the history of Small Area FMRs, 
including information concerning the Small Area FMR Demonstration is 
available at: https://www.huduser.gov/portal/datasets/fmr/smallarea/index.html.
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A. Alternative to the Rent Ratio Method
    In order to use more local data, HUD is proposing to calculate 
Small Area FMRs directly from the standard quality gross rents provided 
to HUD by the Census Bureau for ZCTAs, when such data is statistically 
reliable, instead of using the current rent ratio calculation. For each 
ZCTA with statistically reliable gross rent estimates, using the 
expanded test of statistical reliability proposed elsewhere in this 
notice (i.e., estimates with margins of error ratios below 50 percent 
and based on at least 100 observations), HUD will calculate a two-
bedroom equivalent 40th percentile gross rent using either one-, two-, 
or three-bedroom gross rent data. The order preference for using the 
gross rent distribution data would be: Two-bedroom gross rents, one-
bedroom gross rents, and three-bedroom gross rents. If either the one-
bedroom or three-bedroom gross rent data is used because the two-
bedroom gross rent data is not statistically reliable, the one-bedroom 
or three-bedroom 40th percentile gross rent will be converted to a two-
bedroom equivalent rent using the bedroom ratios for the ZCTA's parent 
metropolitan area. In order to add increased stability to these Small 
Area FMR estimates, HUD will average the latest three years of gross 
rent estimates.\5\ For ZCTAs without usable gross rent data, HUD will 
continue to calculate Small Area FMRs using the rent ratio method 
currently employed.
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    \5\ For example, for (hypothetical) FY 2017 FMRs using this 
methodology, HUD would average the gross rents from 2012, 2013 and 
2014 5-Year ACS estimates. The 2012 and 2013 gross rent estimates 
would be adjusted to 2014 dollars using the metropolitan area's 
gross rent CPI adjustment factors.
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    For ZCTAs relying on the rent ratio method (i.e., in small areas 
where the standard quality median gross rent is not statistically 
reliable), HUD will continue its current practice of substituting the 
median gross rent for the county containing the ZCTA in the numerator 
of the rent ratio calculation. The denominator remains the median gross 
rent for the ZCTA's parent metropolitan area (discussed below in 
section B). HUD will continue to multiply this rent ratio by the 
current two-bedroom rent for the entire metropolitan area containing 
the small area to generate the current year two-bedroom rent for the 
small area. HUD will continue to use a rolling-average of ACS data in 
calculating the Small Area FMR rent ratios. HUD believes coupling the 
most current data with previous years' data minimizes excessive year-
to-year variability in Small Area FMR rent ratios due to sampling 
variance. Therefore, HUD will update the rent ratios each year.
B. ZCTA to Metropolitan Area Link
    HUD is also proposing to change the linkage between a ZCTA and its 
parent metropolitan area. Currently, HUD links each ZCTA to its parent 
OMB-defined Core Based Statistical Area (CBSA). Going forward, HUD 
proposes to link each ZCTA to its published FMR area; that is, each 
ZCTA will be linked to its parent HUD Metropolitan Fair Market Rent 
Area (HMFA), if it exists. If no parent HUD FMR exists, the ZCTA will 
continue to be linked to its parent CBSA. This change is being proposed 
to take advantage of the more localized recent mover factors for 
subareas of OMB-defined metropolitan areas when available.
    New, hypothetical FY 2017 Small Area FMRs incorporating all 
proposed calculation changes are available at https://www.huduser.gov/portal/datasets/fmr/smallarea/index.html.

IV. Request for Public Comments on Changes

    HUD continually strives to calculate FMRs that can serve as an 
effective program parameter while meeting the statutory requirement to 
use ``the most recent available data.'' Therefore, HUD is requesting 
specific comments on these methodological changes, noting that HUD's 
objectives are to: (1) Limit volatility in annual FMR changes by adding 
an observation count requirement of at least 100, and by averaging 
prior year rent data when the new requirements for statistical 
reliability are not met; (2) improve the use of local data in 
calculating the recent mover factor by allowing the use of ``all-
bedroom'' observations in the calculation of the recent mover factor 
before using data from a larger area; and (3) involve the use of more 
local data in the calculation of Small Area FMRs when possible, 
including by using ZCTA gross rents and making changes to the rent 
ratio calculation.
    These methodology changes are not monodirectional; for example, the

[[Page 24381]]

application of a stricter statistical significance test may lower rents 
in an area, while the use of the more local ``all-bedroom'' recent 
mover factor may increase rents in the same area.
    In addition, HUD solicits comments on the possible effects of 
changes in FMR methodology on the achievement of fair housing and other 
civil rights goals and objectives, including increasing mobility of 
low-income persons to areas of high opportunity and lower poverty, and 
whether other methodological changes might better ensure appropriate 
fair housing outcomes.
    HUD respectfully requests that comments filed in response to this 
notice remain focused on the proposed calculation changes. Hypothetical 
FY 2017 FMRs and Small Area FMRs, using these new methodology changes, 
are published at https://www.huduser.gov/portal/datasets/fmr.html and 
https://www.huduser.gov/portal/datasets/fmr/smallarea/index.html, 
respectively.

V. Environmental Impact

    This notice proposes changes in the way FMRs are calculated and 
does 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).

    Dated: May 4, 2017.
Matthew E. Ammon,
General Deputy Assistant Secretary for Policy Development and Research.
[FR Doc. 2017-10907 Filed 5-25-17; 8:45 am]
 BILLING CODE 4210-67-P
Federal Register / Vol. 82, No. 101 / Friday, May 26, 2017 / Notices 24377

Waukesha ... Village of Sussex The Honorable Gregory L. Goetz, Village Hall, N64W23760 http://www.msc.fema.gov/ June 23, 2017 .... 550490
(16–05– President, Village Board, Main Street, Sussex, lomc.
6562P). N61W24222 Oak Court, Sus- WI 53089.
sex, WI 53089.

[FR Doc. 2017–10179 Filed 5–25–17; 8:45 am] (3) Enhance the quality, utility, and DEPARTMENT OF HOUSING AND
BILLING CODE 9110–12–P clarity of the information to be URBAN DEVELOPMENT
collected; and
[Docket No. FR–6021–N–01]
(4) Minimize the burden of the
DEPARTMENT OF HOMELAND
collection of information on those who Proposed Changes to the Methodology
SECURITY
are to respond, including through the Used for Estimating Fair Market Rents
Immigration and Customs use of appropriate automated,
AGENCY: Office of the Assistant
Enforcement Bureau electronic, mechanical, or other
Secretary for Policy Development and
technological collection techniques or Research, HUD.
Agency Information Collection other forms of information technology,
Activities: Extension, Without Change, ACTION: Notice of Proposed Material
e.g., permitting electronic submission of
of an Existing Information Collection; Changes for Estimation of Fair Market
responses.
Comment Request Rents (FMRs).
Overview of This Information
AGENCY: U.S. Immigration and Customs Collection SUMMARY: Section 8(c)(1) of the United
Enforcement, Department of Homeland States Housing Act of 1937 requires the
Security. (1) Type of Information Collection: Secretary to publish FMRs periodically,
Extension, without change, of a but not less than annually, adjusted to
ACTION: 60-Day notice of information currently approved information be effective on October 1 of each year.
collection for review; Form No. I–333, collection. The primary uses of FMRs are to
Obligor Change of Address; OMB determine payment standards for the
Control No. 1653–0042. (2) Title of the Form/Collection:
Housing Choice Voucher (HCV)
Obligor Change of Address. program, to determine initial renewal
The Department of Homeland (3) Agency form number, if any, and rents for some expiring project-based
Security, U.S. Immigration and Customs the applicable component of the Section 8 contracts, to determine initial
Enforcement (USICE), is submitting the Department of Homeland Security rents for housing assistance payment
following information collection request sponsoring the collection: Form I–133; contracts in the Moderate Rehabilitation
for review and clearance in accordance U.S. Immigration and Customs Single Room Occupancy program, and
with the Paperwork Reduction Act of Enforcement. to serve as rent ceilings for rental units
1995. The information collection is in both the HOME Investment
published in the Federal Register to (4) Affected public who will be asked
Partnerships program and the
obtain comments from the public and or required to respond, as well as a brief
Emergency Solutions Grants program.
affected agencies. Comments are abstract: Primary: Individual or
HUD also uses FMRs in the calculation
encouraged and will be accepted for Households, Business or other non-
of maximum award amounts for
sixty days until July 25, 2017. profit. The data collected on this form Continuum of Care grantees and in the
is used by ICE to ensure accuracy in calculation of flat rents for Public
Written comments and suggestions
regarding items contained in this notice correspondence between ICE and the Housing units. In furtherance of that
and especially with regard to the obligor. The form serves the purpose of effort, HUD proposes several
estimated public burden and associated standardizing obligor notification of any methodological changes in this notice
response time should be directed to the changes in their address, and will and seeks public comment on the
Department of Homeland Security facilitate communication with the proposed changes.
(DHS), Scott Elmore, Forms obligor. DATES: Comment Due Date: June 26,
Management Office, U.S. Immigration (5) An estimate of the total number of 2017.
and Customs Enforcement, 801 I Street respondents and the amount of time
NW., Mailstop 5800, Washington, DC ADDRESSES: HUD invites interested
estimated for an average respondent to
20536–5800. persons to submit comments regarding
respond: 12,000 responses at 15 minutes
the proposed changes to the calculation
Written comments and suggestions (.25 hours) per response. of the FMRs to the Regulations Division,
from the public and affected agencies (6) An estimate of the total public Office of General Counsel, Department
concerning the proposed collection of burden (in hours) associated with the of Housing and Urban Development,
information should address one or more collection: 3,000 annual burden hours. 451 Seventh Street SW., Room 10276,
of the following four points:
Dated: May 23, 2017. Washington, DC 20410–0001.
(1) Evaluate whether the proposed Communications must refer to the above
collection of information is necessary Scott Elmore,
docket number and title and should
for the proper performance of the PRA Clearance Officer, Office of the Chief contain the information specified in the
functions of the agency, including Information Officer, U.S. Immigration and ‘‘Request for Comments’’ section. There
whether the information will have Customs Enforcement, Department of
are two methods for submitting public
practical utility; Homeland Security.
comments.
[FR Doc. 2017–10852 Filed 5–25–17; 8:45 am]
(2) Evaluate the accuracy of the 1. Submission of Comments by Mail.
agency’s estimate of the burden of the BILLING CODE 9111–28–P Comments may be submitted by mail to
proposed collection of information, the Regulations Division, Office of
including the validity of the General Counsel, Department of
methodology and assumptions used; Housing and Urban Development, 451

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24378 Federal Register / Vol. 82, No. 101 / Friday, May 26, 2017 / Notices

7th Street SW., Room 10276, hud.gov. Persons with hearing or speech program, calculation of maximum
Washington, DC 20410–0500. Due to impairments may access HUD numbers award amounts for Continuum of Care
security measures at all federal agencies, through TTY by calling the Federal grantees, and calculation of flat rents in
however, submission of comments by Relay Service at 800–877–8339 (toll- Public Housing units. In general, the
mail often results in delayed delivery. free). For technical information on the FMR for an area is the amount that
To ensure timely receipt of comments, methodology used to develop FMRs or would be needed to pay the gross rent
HUD recommends that comments a listing of all FMRs, please call the (shelter rent plus utility costs) of
submitted by mail be submitted at least HUD USER information line at 800– privately owned, decent, and safe rental
two weeks in advance of the public 245–2691 (toll-free) or access the housing of a modest (non-luxury) nature
comment deadline. information on the HUD USER Web site with suitable amenities and is set at the
2. Electronic Submission of https://www.huduser.gov/portal/ 40th percentile of the distribution of
Comments. Interested persons may datasets/fmr.html. gross rents for recent movers. HUD’s
submit comments electronically through Electronic Data Availability. This FMR calculations represent HUD’s best
the Federal eRulemaking Portal at Federal Register notice will be available effort to estimate the 40th percentile
http://www.regulations.gov. HUD electronically from the HUD User page gross rents paid by recent movers into
strongly encourages commenters to at https://www.huduser.gov/portal/ standard quality units in each FMR area.
submit comments electronically. datasets/fmr.html. Federal Register In recent years, commenters have
Electronic submission of comments notices also are available electronically expressed a number of concerns about
allows the commenter maximum time to from https://www.federalregister.gov/, FMRs. Some have pointed out that
prepare and submit a comment, ensures the U.S. Government Printing Office FMRs are a primary operating parameter
timely receipt by HUD, and enables Web site. in the HCV program and that extreme
HUD to make them immediately Complete documentation of the year-to-year fluctuations in FMRs can
available to the public. Comments impact of these methodology changes cause difficulties in program operations.
submitted electronically through the and calculation of hypothetical FY 2017 Additionally, concerns have been raised
http://www.regulations.gov Web site can FMRs 1 with these changes are available that the FMRs are either not timely
be viewed by other commenters and at https://www.huduser.gov/portal/ enough or not based on enough local
interested members of the public. datasets/fmr.html. Small Area FMRs for information. HUD is proposing several
Commenters should follow instructions all metropolitan FMR areas changes to the manner in which HUD
provided on that site to submit incorporating these material changes in calculates FMRs in order to improve the
comments electronically. methodology have also been calculated FMR estimates and to address the
and are available at: https:// concerns of commenters noted at the
Note: To receive consideration as public beginning of this paragraph.
comments, comments must be submitted www.huduser.gov/portal/datasets/fmr/
through one of the two methods specified smallarea/index.html. Changes to FMR II. Procedures for Developing FMRs
above. Again, all submissions must refer to calculations prescribed in the Small
the docket number and title of the notice.
Section 8(c)(1) of the USHA requires
Area FMR rule (81 FR 80567) are not the Secretary of HUD to publish FMRs
No Facsimile Comments. Facsimile incorporated into the calculation of periodically, but not less frequently
(FAX) comments are not acceptable. hypothetical FY 2017 FMRs. than annually. Section 8(c)(1)(B) as
Public Inspection of Public SUPPLEMENTARY INFORMATION: amended by the Housing Opportunities
Comments. All properly submitted Through Modernization Act of 2016
comments and communications I. Background
(HOTMA) (Pub. L. 114–201, approved
regarding this notice submitted to HUD Section 8 of the United States July 29, 2016), requires that HUD
will be available for public inspection Housing Act of 1937 (USHA) (42 U.S.C. publish for comment in the Federal
and copying between 8 a.m. and 5 p.m. 1437f) authorizes housing assistance to Register a notice of proposed material
weekdays at the above address. Due to aid lower-income families in renting changes in the methodology for
security measures at the HUD safe and decent housing. Housing estimating FMRs and a notice
Headquarters building, an advance assistance payments are limited by Fair containing HUD’s final decisions
appointment to review the public Market Rents (FMRs) established by regarding such proposed substantial
comments must be scheduled by calling HUD for different geographic areas. In methodological changes and responses
the Regulations Division at 202–708– the Housing Choice Voucher (HCV) to public comments.
3055 (this is not a toll-free number). program, the FMR is the basis for On August 26, 2016, HUD announced
Individuals with speech or hearing determining the ‘‘payment standard the publication of the FY 2017 FMRs,
impairments may access this number amount’’ used to calculate the requested comments on the FY 2017
through TTY by calling the Federal maximum monthly subsidy for an FMRs, and requested public comment
Relay Service at 800–877–8339. Copies assisted family. See 24 CFR 982.503. on what should be considered ‘‘material
of all comments submitted are available HUD also uses the FMRs to determine changes’’ in FMR estimation methods
for inspection and downloading at initial renewal rents for some expiring for the purpose of triggering public
http://www.regulations.gov. project-based Section 8 contracts, initial notice and comment under HOTMA (81
FOR FURTHER INFORMATION CONTACT: rents for housing assistance payment FR 58952). Following a review of public
Questions on this notice may be contracts in the Moderate Rehabilitation comment on what should be considered
addressed to Marie L. Lihn or Peter B. Single Room Occupancy program, rent ‘‘material changes’’, HUD determined
Kahn of the Economic and Market ceilings for rental units in both the that initially any change in FMR
Analysis Division, Office of Economic HOME Investment Partnerships program calculation methods should be subject
Affairs, Office of Policy Development and the Emergency Solution Grants to public comment. HUD, thus,
and Research, HUD Headquarters, 451 responded to the comments in a notice
1 HUD will provide a set of FY 2017 FMRs
7th Street SW., Room 8208, Washington, published March 30, 2017, stating that
calculated with all the methodological changes
DC 20410; telephone number 202–402– proposed in this notice for the public to review. The
HUD would not take a position on what
2409 (this is not a toll-free number), or FMRs with all the proposed changes will be FMR changes would be considered
they may be reached at emad-hq@ referred to as FY 2017 hypothetical FMRs. material and that HUD would initially

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Federal Register / Vol. 82, No. 101 / Friday, May 26, 2017 / Notices 24379

request comment on all FMR method (2) The second method change most recent years (provided that there is
changes (82 FR 15711). While HUD focuses on the way that HUD calculates data available for at least two of these
recognizes that year-to-year fluctuations the ‘‘recent mover factor.’’ Currently, years),2 or if such data is not available,
in FMRs may cause operational HUD calculates the ‘‘recent mover using the two-bedroom rent data within
difficulties in program operations, HUD factor’’ based on a geographic area that the next largest geographic area, which
seeks to improve the FMR calculation is sometimes larger than an FMR area for a non-metropolitan area would be
methods, using as much local when the two-bedroom recent mover the state non-metro area rent data.
information as possible while trying to rents are not statistically reliable. HUD
B. Recent Mover Factor Changes
preserve stability in the estimates. In an is proposing the use of ‘‘all-bedroom’’
effort to address these concerns and recent mover rents as the basis for the HUD is proposing changes to the
recognizing that addressing one issue recent mover factor when the two- calculation of the recent mover factor
may impact another issue, HUD bedroom recent mover rents are not that include a change to the statistical
proposes several methodological statistically reliable (i.e., 100 or more reliability assessment of ACS recent
changes and requests public comments observations and a margin of error that mover data (consistent with the change
on those changes through this notice, in is smaller than half of the estimate for base rents) and a change in the data
compliance with HOTMA. itself) before moving to a larger used when the number of ‘‘two-
encompassing geography for the recent bedroom’’ observations within the FMR
III. FMR Methodology Changes
mover factor. area is insufficient. The following
This section provides a brief overview (3) Finally, HUD is proposing to use describes the current process for
of how HUD computed the FY 2017 the gross rent estimates calculated by calculating the recent mover factor, and
FMRs and three proposed changes to ZIP Code Tabulation Areas (ZCTAs), the proposed revisions.
this methodology. where statistically reliable, to estimate HUD historically based FMRs on gross
To calculate the FY 2017 FMRs, HUD Small Area FMRs (SAFMRs) directly rent data for recent movers (those who
assigned each area a two-bedroom rather than the ‘‘ratio’’ method HUD have moved into their current residence
standard quality base rent from the used in FY 2017 and earlier SAFMR in the last 24 months). However, due to
2010–2014 5-year American Community estimates. the way in which the Census Bureau
Survey (ACS) tabulations. Each base 1. FY 2018 FMR Proposed Changes constructs the 5-year ACS data, HUD
rent was updated with a recent mover developed a new methodology for using
adjustment factor calculated from the 1- A. Base Year Rent Changes recent mover data to calculate FMRs in
year 2014 ACS data. The 2014 ACS Since FY 2012, HUD has used the 5- FY 2012. As of FY 2012, HUD assigns
recent mover data is adjusted to be ‘‘as year ACS data to determine base rents all areas a base rent, which is the two-
of’’ FY 2017 using local or regional for most FMR areas. HUD used 2010– bedroom, standard quality 5-year ACS
Consumer Price Index (CPI)-measured 2014 ACS data, released in December gross rent estimate, and then applies a
changes in gross rents measured 2015, in the FY 2017 FMR calculations. recent mover factor in order to calculate
between 2014 and 2015 and a nationally HUD evaluates the statistical validity of recent mover gross rents and publish
forecasted trend factor measuring the the ACS data before using the them in accordance with 24 CFR
expected growth in gross rents from information in the calculation of FMRs. 888.113. HUD calculates the recent
2015 to FY 2017. For complete HUD proposes to update these statistical mover factor as the ratio of the 1-year
information on how HUD determines reliability criteria. Previously, HUD recent mover gross rent to the 5-year
FMR areas, and on how HUD derives used ACS estimates for two-bedroom standard quality gross rent for the recent
each area’s FY 2017 FMR, see the online unit rents within the FMR area where mover factor area. HUD does not allow
documentation at https:// the margin of error of the estimate was recent mover factors to reduce the
www.huduser.gov/portal/datasets/ less than half the size of the estimate standard quality base rent; therefore, if
fmr.html#2017_query. itself (i.e., a margin of error of less than the 5-year standard quality rent is larger
The following is a summary of the 50 percent). HUD now proposes to than the comparable 1-year recent
two general changes to the calculation couple this ‘‘margin of error’’ test with mover rent, the recent mover factor is
methods HUD is proposing to an additional test based on the number set to 1. Applying the recent mover
incorporate into the calculation of FY of survey observations supporting the factor to the standard quality base rent
2018 FMRs and a third change specific estimate. The Census Bureau does not produces a recent mover two-bedroom
to the calculation of Small Area FMRs. provide HUD with an exact count of the gross rent for the FMR area that is ‘‘as
(1) The first method change is in the number of observations supporting the of’’ the most recent ACS year.
manner in which HUD selects American ACS estimate; rather, the Census Bureau In general, HUD has used the 1-year
Community Survey (ACS) estimates for provides HUD with categories of the ACS-based two-bedroom recent mover
use in the calculation of FMRs. number of survey responses underlying gross rent estimate from the smallest
Currently, HUD uses an ACS estimate if the estimate, including whether the geographic area encompassing the FMR
the error of the estimate is less than half estimate is based on more than 100 area for which the estimate is
the size of the estimate itself. HUD is observations. Using these categories, statistically reliable to calculate the
proposing to require that each ACS HUD proposes that ACS rent estimates recent mover factor.3 HUD calculates
estimate used in the calculation of must be based on at least 100
FMRs be based on at least one hundred observations in order to be used as base 2 Using FY 2017 as an example, the three years

(100) survey responses. In other words, of ACS data in question are 2012, 2013 and 2014.
rents. The 2012 data are adjusted to be denominated in
this notice proposes to couple the error For areas in which the 5-year ACS 2014 dollars using the growth in CPI-based gross
ratio criterion with an additional review data for two-bedroom, standard quality rents measured between 2012 and 2014. Similarly,
of the number of survey observations gross rents do not pass the statistical the 2013 gross rent data is adjusted to 2014
supporting the ACS estimate. If the reliability tests (i.e., have a margin of denominated dollars using the growth in CPI-based
gross rents measured between 2013 and 2014.
survey data does not meet both criteria, error greater than 50 percent or fewer 3 HUD currently assesses recent mover estimates
HUD will use an average of the three than 100 observations), HUD will use an to be statistically reliable if the margin of error of
most recent years of data. average of the base rents over the three Continued

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24380 Federal Register / Vol. 82, No. 101 / Friday, May 26, 2017 / Notices

some areas’ recent mover factors using bedrooms for the Small Area ZCTAs by metropolitan area (discussed below in
data collected solely within the FMR the similar median gross rent for the section B). HUD will continue to
area. However, HUD currently bases parent metropolitan area of the ZIP multiply this rent ratio by the current
other areas’ recent mover factors on code. In order to maintain stability in two-bedroom rent for the entire
larger geographic areas if this is the rent ratio, HUD averages the three metropolitan area containing the small
necessary to obtain statistically reliable most current rent ratios and multiplies area to generate the current year two-
estimates. this averaged rent ratio by the most bedroom rent for the small area. HUD
When data from a larger geographic recent two-bedroom FMR for the parent will continue to use a rolling-average of
unit is required, data from progressively metropolitan area. HUD is proposing ACS data in calculating the Small Area
larger areas is considered until a updates to the calculation of Small Area FMR rent ratios. HUD believes coupling
statistically reliable result is obtained. FMRs that are consistent with the other the most current data with previous
The order of consideration depends on proposed methodology changes in this years’ data minimizes excessive year-to-
the type of area for which the recent Notice. year variability in Small Area FMR rent
mover factor is being calculated. For ratios due to sampling variance.
metropolitan FMR areas that are A. Alternative to the Rent Ratio Method
Therefore, HUD will update the rent
subareas of larger metropolitan areas, In order to use more local data, HUD ratios each year.
the order is the FMR area, the is proposing to calculate Small Area
metropolitan area, the aggregated FMRs directly from the standard quality B. ZCTA to Metropolitan Area Link
metropolitan parts of the state, and the gross rents provided to HUD by the HUD is also proposing to change the
entire state. Metropolitan areas that are Census Bureau for ZCTAs, when such linkage between a ZCTA and its parent
not divided follow a similar progression data is statistically reliable, instead of metropolitan area. Currently, HUD links
from FMR area data, to data from the using the current rent ratio calculation. each ZCTA to its parent OMB-defined
aggregated metropolitan parts of the For each ZCTA with statistically reliable Core Based Statistical Area (CBSA).
state, to state-level data. In non- gross rent estimates, using the expanded Going forward, HUD proposes to link
metropolitan areas, HUD bases the test of statistical reliability proposed each ZCTA to its published FMR area;
recent mover factor on data from within elsewhere in this notice (i.e., estimates that is, each ZCTA will be linked to its
the FMR area, or from the aggregated with margins of error ratios below 50 parent HUD Metropolitan Fair Market
non-metropolitan parts of the state, or if percent and based on at least 100 Rent Area (HMFA), if it exists. If no
that is not available, from the whole observations), HUD will calculate a two- parent HUD FMR exists, the ZCTA will
state. bedroom equivalent 40th percentile continue to be linked to its parent
HUD proposes to modify the test of gross rent using either one-, two-, or CBSA. This change is being proposed to
statistical reliability for ACS recent three-bedroom gross rent data. The take advantage of the more localized
mover data in the same manner as the order preference for using the gross rent recent mover factors for subareas of
proposed change discussed under base distribution data would be: Two- OMB-defined metropolitan areas when
rents. In addition, when an FMR area bedroom gross rents, one-bedroom gross available.
does not have statistically reliable two- rents, and three-bedroom gross rents. If New, hypothetical FY 2017 Small
bedroom data, HUD proposes that before either the one-bedroom or three- Area FMRs incorporating all proposed
using data from a larger geographic area bedroom gross rent data is used because calculation changes are available at
to calculate the recent mover factor, the two-bedroom gross rent data is not https://www.huduser.gov/portal/
HUD would first check to see if the data statistically reliable, the one-bedroom or datasets/fmr/smallarea/index.html.
aggregated across ‘‘all-bedroom’’ count three-bedroom 40th percentile gross rent IV. Request for Public Comments on
units is statistically reliable for the FMR will be converted to a two-bedroom Changes
area. If so, HUD will use the ‘‘all- equivalent rent using the bedroom ratios
bedroom’’ data to calculate the recent for the ZCTA’s parent metropolitan area. HUD continually strives to calculate
mover factor instead of moving to the In order to add increased stability to FMRs that can serve as an effective
next larger geography. Incorporating these Small Area FMR estimates, HUD program parameter while meeting the
‘‘all-bedroom’’ rents into the recent will average the latest three years of statutory requirement to use ‘‘the most
mover factor calculation when gross rent estimates.5 For ZCTAs recent available data.’’ Therefore, HUD
statistically reliable two-bedroom data is without usable gross rent data, HUD is requesting specific comments on
not available preserves the use of local will continue to calculate Small Area these methodological changes, noting
information to the greatest extent FMRs using the rent ratio method that HUD’s objectives are to: (1) Limit
possible. However, where statistically currently employed. volatility in annual FMR changes by
reliable ‘‘all-bedroom’’ data is not For ZCTAs relying on the rent ratio adding an observation count
available, HUD will continue to use data method (i.e., in small areas where the requirement of at least 100, and by
from the larger geographical area(s), as standard quality median gross rent is averaging prior year rent data when the
described above. not statistically reliable), HUD will new requirements for statistical
continue its current practice of reliability are not met; (2) improve the
2. Small Area Fair Market Rents substituting the median gross rent for use of local data in calculating the
Methodology Changes the county containing the ZCTA in the recent mover factor by allowing the use
Currently, HUD calculates Small Area numerator of the rent ratio calculation. of ‘‘all-bedroom’’ observations in the
FMRs 4 using a rent ratio determined by The denominator remains the median calculation of the recent mover factor
dividing the median gross rent across all gross rent for the ZCTA’s parent before using data from a larger area; and
(3) involve the use of more local data in
the estimate is smaller than half the size of the 5 For example, for (hypothetical) FY 2017 FMRs the calculation of Small Area FMRs
estimate itself (i.e., less than 50%). using this methodology, HUD would average the when possible, including by using
4 More information regarding the history of Small gross rents from 2012, 2013 and 2014 5-Year ACS ZCTA gross rents and making changes
Area FMRs, including information concerning the estimates. The 2012 and 2013 gross rent estimates
Small Area FMR Demonstration is available at: would be adjusted to 2014 dollars using the to the rent ratio calculation.
https://www.huduser.gov/portal/datasets/fmr/ metropolitan area’s gross rent CPI adjustment These methodology changes are not
smallarea/index.html. factors. monodirectional; for example, the

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Document Created: 2017-05-26 02:24:11
Document Modified: 2017-05-26 02:24:11
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
Action		Notice of Proposed Material Changes for Estimation of Fair Market Rents (FMRs).
Dates		Comment Due Date: June 26, 2017.
Contact		Questions on this notice may be
FR Citation		82 FR 24377