82 FR 50888 - Notice of Certain Operating Cost Adjustment Factors for 2018

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Federal Register Volume 82, Issue 211 (November 2, 2017)

This notice establishes operating cost adjustment factors (OCAFs) for project-based rental assistance contracts issued under Section 8 of the United States Housing Act of 1937 and renewed under the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA) with an anniversary date on or after February 11, 2018. OCAFs are annual factors used primarily to adjust the rents for contracts renewed under section 515 or section 524 of MAHRA. OCAFs are distinct from, and do not apply to the same properties as Annual Adjustment Factors (AAFs). AAFs are used to adjust contract rents for units assisted in certain Section 8 housing assistance payment programs during the initial (i.e., pre-renewal) term of the HAP contract and for all units in the Project-Based Certificate program.

[Federal Register Volume 82, Number 211 (Thursday, November 2, 2017)]
[Notices]
[Pages 50888-50890]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-23901]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6044-N-01]


Notice of Certain Operating Cost Adjustment Factors for 2018

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Notice.

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SUMMARY: This notice establishes operating cost adjustment factors 
(OCAFs) for project-based rental assistance contracts issued under 
Section 8 of the United States Housing Act of 1937 and renewed under 
the Multifamily Assisted Housing Reform and Affordability Act of 1997 
(MAHRA) with an anniversary date on or after February 11, 2018. OCAFs 
are annual factors used primarily to adjust the rents for contracts 
renewed under section 515 or section 524 of MAHRA. OCAFs are distinct 
from, and do not apply to the same properties as Annual Adjustment 
Factors (AAFs). AAFs are used to adjust contract rents for units 
assisted in certain Section 8 housing assistance payment programs 
during the initial (i.e., pre-renewal) term of the HAP contract and for 
all units in the Project-Based Certificate program.

DATES: Applicable: February 11, 2018.

FOR FURTHER INFORMATION CONTACT: Carisa L. Janis, Program Analyst, 
Office of Asset Management and Portfolio Oversight, Department of 
Housing and Urban Development, 451 7th Street SW., Washington, DC 
20410; telephone number 202-402-2487 (this is not a toll-free number). 
Hearing- or speech-impaired individuals may access this number through 
TTY by calling the toll-free Federal Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. OCAFs

    Section 514(e)(2) and section 524(c)(1) of MAHRA (42 U.S.C. 1437f 
note) require HUD to establish guidelines for the development of OCAFs 
for rent

[[Page 50889]]

adjustments. Sections 524(a)(4)(C)(i), 524(b)(1)(A), and 524(b)(3)(A) 
of MAHRA, all of which prescribe the use of the OCAF in the calculation 
of renewal rents, contain similar language. HUD has therefore used a 
single methodology for establishing OCAFs, which varies from State to 
State.
    MAHRA gives HUD broad discretion in setting OCAFs, referring, for 
example, in sections 524(a)(4)(C)(i), 524(b)(1)(A), 524(b)(3)(A) and 
524(c)(1) simply to ``an operating cost adjustment factor established 
by the Secretary.'' The sole limitation to this grant of authority is a 
specific requirement in each of the foregoing provisions that 
application of an OCAF ``shall not result in a negative adjustment.'' 
Contract rents are adjusted by applying the OCAF to that portion of the 
rent attributable to operating expenses exclusive of debt service.
    The OCAFs provided in this notice are applicable to eligible 
projects having a contract anniversary date of February 11, 2018 or 
after and were calculated using the same method as those published in 
HUD's 2017 OCAF notice originally published on October 5, 2016 (81 FR 
69073) and amended and republished on December 27, 2016 (81 FR 95162). 
Specifically, OCAFs are calculated as the sum of weighted average cost 
changes for wages, employee benefits, property taxes, insurance, 
supplies and equipment, fuel oil, electricity, natural gas, and water/
sewer/trash using publicly available indices. The weights used in the 
OCAF calculations for each of the nine cost component groupings are set 
using current percentages attributable to each of the nine expense 
categories. These weights are calculated in the same manner as in the 
December 27, 2016, notice. Average expense proportions were calculated 
using three years of audited Annual Financial Statements from projects 
covered by OCAFs. The expenditure percentages for these nine categories 
have been found to be very stable over time, but using three years of 
data increases their stability. The nine cost component weights were 
calculated at the state level, which is the lowest level of 
geographical aggregation with enough projects to permit statistical 
analysis. These data were not available for the Western Pacific 
Islands, so data for Hawaii were used as the best available indicator 
of OCAFs for these areas.
    The best current price data sources for the nine cost categories 
were used in calculating annual change factors. State-level data for 
fuel oil, electricity, and natural gas from Department of Energy 
surveys are relatively current and continue to be used. Data on changes 
in employee benefits, insurance, property taxes, and water/sewer/trash 
costs are only available at the national level. The data sources for 
the nine cost indicators selected used were as follows:
     Labor Costs: First quarter, 2017 Bureau of Labor 
Statistics (BLS) ECI, Private Industry Wages and Salaries, All Workers 
(Series ID CIU2020000000000I) at the national level and Private 
Industry Benefits, All Workers (Series ID CIU2030000000000I) at the 
national level.
     Property Taxes: Census Quarterly Summary of State and 
Local Government Tax Revenue--Table 1 http://www2.census.gov/govs/qtax/20162017/q1t1.xls http://www2.census.gov/govs/qtax/2017/q1t1.xls. 12-
month property taxes are computed as the total of four quarters of tax 
receipts for the period from April through March. Total 12-month taxes 
are then divided by the number of occupied housing units to arrive at 
average 12-month tax per housing unit. The number of occupied housing 
units is taken from the estimates program at the Bureau of the Census. 
http://www.census.gov/housing/hvs/data/histtab8.xls.
     Goods, Supplies, Equipment: May 2016 to May 2017 Bureau of 
Labor Statistics (BLS) Consumer Price Index, All Items Less Food, 
Energy and Shelter (Series ID CUUR0000SA0L12E) at the national level.
     Insurance: May 2016 to May 2017 Bureau of Labor Statistic 
(BLS) Consumer Price Index, Tenants and Household Insurance Index 
(Series ID CUUR0000SEHD) at the national level.
     Fuel Oil: October 2016-March 2017 U.S. Weekly Heating Oil 
and Propane Prices report. Average weekly residential heating oil 
prices in cents per gallon excluding taxes for the period from October 
5, 2016 through March 28, 2017 are compared to the average from October 
13, 2015 through March 30, 2016. For the States with insufficient fuel 
oil consumption to have separate estimates, the relevant regional 
Petroleum Administration for Defense Districts (PADD) change between 
these two periods is used; if there is no regional PADD estimate, the 
U.S. change between these two periods is used. http://www.eia.gov/dnav/pet/pet_pri_wfr_a_EPD2F_prs_dpgal_w.htm.
     Electricity: Energy Information Agency, February 2017 
``Electric Power Monthly'' report, Table 5.6.B. http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_06_b.
     Natural Gas: Energy Information Agency, Natural Gas, 
Residential Energy Price, 2016-2017 annual prices in dollars per 1,000 
cubic feet at the state level. Due to EIA data quality standards 
several states were missing data for one or two months in 2016; in 
these cases, data for these missing months were estimated using data 
from the surrounding months in 2016 and the relationship between that 
same month and the surrounding months in 2015. http://www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PRS_DMcf_a.htm.
     Water and Sewer: May 2016 to May 2017 Consumer Price 
Index, All Urban Consumers, Water and Sewer and Trash Collection 
Services (Series ID CUUR0000SEHG) at the national level.
    The sum of the nine cost component percentage weights equals 100 
percent of operating costs for purposes of OCAF calculations. To 
calculate the OCAFs, state-level cost component weights developed from 
AFS data are multiplied by the selected inflation factors. For 
instance, if wages in Virginia comprised 50 percent of total operating 
cost expenses and increased by 4 percent from 2017 to 2018 the wage 
increase component of the Virginia OCAF for 2018 would be 2.0 percent 
(50% * 4%). This 2.0 percent would then be added to the increases for 
the other eight expense categories to calculate the 2018 OCAF for 
Virginia. For states where the OCAF is less than 0 percent, the OCAF is 
floored at 0 percent. The OCAFs for 2018 are included as an Appendix to 
this Notice.

II. MAHRA OCAF Procedures

    Sections 514 and 515 of MAHRA, as amended, created the Mark-to-
Market program to reduce the cost of federal housing assistance, to 
enhance HUD's administration of such assistance, and to ensure the 
continued affordability of units in certain multifamily housing 
projects. Section 524 of MAHRA authorizes renewal of Section 8 project-
based assistance contracts for projects without restructuring plans 
under the Mark-to-Market program, including projects that are not 
eligible for a restructuring plan and those for which the owner does 
not request such a plan. Renewals must be at rents not exceeding 
comparable market rents except for certain projects. As an example, for 
Section 8 Moderate Rehabilitation projects, other than single room 
occupancy projects (SROs) under the McKinney-Vento Homeless Assistance 
Act (42 U.S.C. 11301 et seq.), that are eligible for renewal under 
section 524(b)(3) of MAHRA, the renewal rents are required to be set at 
the lesser of: (1) The existing rents under the expiring contract, as 
adjusted by the OCAF; (2) fair market rents (less any amounts allowed 
for tenant-purchased utilities); or (3) comparable market rents for the 
market area.

[[Page 50890]]

III. Findings and Certifications

Environmental Impact

    This notice sets forth rate determinations and related external 
administrative requirements and procedures that do not constitute a 
development decision affecting the physical condition of specific 
project areas or building sites. Accordingly, under 24 CFR 50.19(c)(6), 
this notice is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Paperwork Reduction Act

    This notice does not impact the information collection requirements 
already submitted to the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). In 
accordance with the Paperwork Reduction Act, an agency may not conduct 
or sponsor, and a person is not required to respond to, a collection of 
information unless the collection displays a currently valid OMB 
control number.

Catalog of Federal Domestic Assistance Number

    The Catalog of Federal Domestic Assistance Number for this program 
is 14.195.

    Dated: October 27, 2017.
Dana T. Wade,
General Deputy, Assistant Secretary for Housing.

APPENDIX

Operating Cost Adjustment Factors for 2018

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                            State                              OCAF  (%)
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Alabama......................................................        2.3
Alaska.......................................................        2.9
Arizona......................................................        2.0
Arkansas.....................................................        2.2
California...................................................        2.4
Colorado.....................................................        1.9
Connecticut..................................................        2.2
Delaware.....................................................        2.1
District of Columbia.........................................        2.0
Florida......................................................        2.1
Georgia......................................................        2.2
Hawaii.......................................................        0.9
Idaho........................................................        2.4
Illinois.....................................................        2.2
Indiana......................................................        2.1
Iowa.........................................................        2.5
Kansas.......................................................        2.4
Kentucky.....................................................        2.1
Louisiana....................................................        2.1
Maine........................................................        1.6
Maryland.....................................................        2.3
Massachusetts................................................        1.9
Michigan.....................................................        2.2
Minnesota....................................................        2.2
Mississippi..................................................        2.0
Missouri.....................................................        1.8
Montana......................................................        1.9
Nebraska.....................................................        2.2
Nevada.......................................................        1.8
New Hampshire................................................        2.0
New Jersey...................................................        2.4
New Mexico...................................................        1.7
New York.....................................................        2.0
North Carolina...............................................        2.1
North Dakota.................................................        2.5
Ohio.........................................................        1.9
Oklahoma.....................................................        2.1
Oregon.......................................................        2.3
Pacific Islands..............................................        0.9
Pennsylvania.................................................        2.1
Puerto Rico..................................................        2.0
Rhode Island.................................................        1.9
South Carolina...............................................        2.3
South Dakota.................................................        2.4
Tennessee....................................................        2.2
Texas........................................................        2.2
Utah.........................................................        2.2
Vermont......................................................        2.2
Virgin Islands...............................................        2.0
Virginia.....................................................        2.1
Washington...................................................        2.3
West Virginia................................................        2.8
Wisconsin....................................................        2.3
Wyoming......................................................        2.1
U.S..........................................................        2.2
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[FR Doc. 2017-23901 Filed 11-1-17; 8:45 am]
 BILLING CODE 4210-67-P