83 FR 24815 - Section 8 Housing Assistance Payments Program-Fiscal Year 2018 Inflation Factors for Public Housing Agency Renewal Funding

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Federal Register Volume 83, Issue 104 (May 30, 2018)

This notice establishes Renewal Funding Inflation Factors (RFIFs) to adjust Fiscal Year (FY) 2018 renewal funding for the Housing Choice Voucher (HCV) program of each public housing agency (PHA), as required by the Consolidated Appropriations Act, 2018. HUD produces the FY 2018 RFIFs by apportioning the expected percent change in national per unit cost (PUC) for the HCV program, 3.47 percent, to each PHA based on the change in Fair Market Rents (FMRs) for their operating area. HUD's FY 2018 methodology is the same as that which was used in FY 2017. However, HUD is seeking comment on potential RFIF methodology changes related to the use of ad hoc surveys conducted for purposes of reevaluating FMRs and their effect on the calculation of RFIFs.

[Federal Register Volume 83, Number 104 (Wednesday, May 30, 2018)]
[Notices]
[Pages 24815-24817]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-11587]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6099-N-01]


Section 8 Housing Assistance Payments Program--Fiscal Year 2018 
Inflation Factors for Public Housing Agency Renewal Funding

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

ACTION: Notice.

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SUMMARY: This notice establishes Renewal Funding Inflation Factors 
(RFIFs) to adjust Fiscal Year (FY) 2018 renewal funding for the Housing 
Choice Voucher (HCV) program of each public housing agency (PHA), as 
required by the Consolidated Appropriations Act, 2018. HUD produces the 
FY 2018 RFIFs by apportioning the expected percent change in national 
per unit cost (PUC) for the HCV program, 3.47 percent, to each PHA 
based on the change in Fair Market Rents (FMRs) for their operating 
area. HUD's FY 2018 methodology is the same as that which was used in 
FY 2017. However, HUD is seeking comment on potential RFIF methodology 
changes related to the use of ad hoc surveys conducted for purposes of 
reevaluating FMRs and their effect on the calculation of RFIFs.

DATES: 
    Comment Due Date: June 29, 2018.
    Applicability Date: May 30, 2018.

FOR FURTHER INFORMATION CONTACT: For technical information regarding 
the development of the schedules for specific areas or the methods used 
for calculating the inflation factors, contact: Miguel A. Fontanez, 
Director, Housing Voucher Financial Division, Office of Public Housing 
and Voucher Programs, Office of Public and Indian Housing, telephone 
number 202-402-4212; Peter B. Kahn, Director, Economic and Market 
Analysis Division, Office of Policy Development and Research, telephone 
number 202-402-2409, or Adam Bibler, Economist, Economic and Market 
Analysis Division, Office of Policy Development and Research, telephone 
number 202-402-6057. Mail for these individuals should be addressed to 
the Department of Housing and Urban Development, 451 7th Street SW, 
Washington, DC 20410. Hearing- or speech-impaired persons may contact 
the Federal Relay Service at 800-877-8339 (TTY). (Other than the 
``800'' TTY number, the above-listed telephone numbers are not toll 
free.)

SUPPLEMENTARY INFORMATION:

I. Background

    Division L, Title II of the Consolidated Appropriations Act, 2018 
requires that the HUD Secretary, for the calendar year 2018 funding 
cycle, provide renewal funding for each PHA based on validated voucher 
management system (VMS) leasing and cost data for the prior calendar 
year and by applying an inflation factor as established by the 
Secretary, published in the Federal Register. This notice announces the 
availability of the FY 2018 inflation factors and describes the 
methodology for calculating them. Tables in PDF and Microsoft Excel 
formats showing RFIFs will be available electronically from the HUD 
data information page at: https://www.huduser.gov/portal/datasets/rfif/rfif.html.

II. Methodology

    RFIFs are used to adjust the allocation of HCV program funds to 
PHAs for local changes in rents, utility costs, and tenant incomes. To 
calculate the RFIFs, HUD first forecasts a national inflation factor, 
which is the annual change in the national average PUC. HUD then 
calculates individual area inflation factors, which are based on the 
annual changes in the two-bedroom FMR for each area. Finally, HUD 
adjusts the individual area inflation factors to be consistent with the 
national inflation factor.
    HUD's forecast of the national average PUC is based on forecasts of 
gross rent and tenant income. Each forecast is produced using 
historical and forecasted macroeconomic data as independent variables, 
where the forecasts are consistent with the economic assumptions of the 
Administration's FY 2018 Budget. The forecast of gross rent is itself 
based on

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forecasts of the Consumer Price Index (CPI) Rent of Primary Residence 
Index and the CPI Fuels and Utilities Index. Forecasted values of these 
series are applied to the FY 2018 national average two-bedroom FMR to 
produce a projected calendar year (CY) 2018 gross rent value. A 
``notional'' PUC is calculated as the difference between gross rent 
value and 30 percent of average tenant income (the standard percentage 
for tenant rent contributions in the voucher program). The change 
between the CY 2017 notional PUC and the forecasted CY 2018 notional 
PUC is the expected national change in PUC, or 3.47 percent. HUD uses a 
notional PUC as opposed to the actual PUC to project costs that are 
consistent with PHAs leasing the same number and quality of units. For 
several years, growth in observed PUC was lower than this notional PUC 
as PHAs reacted to reduced overall program funding by reducing payment 
standards relative to the FMR. For more information on HUD's forecast 
methodology, see 82 FR 26710.
    The inflation factor for an individual geographic area is based on 
the annualized change in the area's FMR between FY 2017 and FY 2018. 
These changes in FMRs are then scaled such that the voucher-weighted 
average of all individual area inflation factors is equal to the 
national inflation factor, i.e., the expected annual change in national 
PUC from CY 2017 to CY 2018, and such that no area has a factor less 
than one. For PHAs operating in multiple FMR areas, HUD calculates a 
voucher-weighted average inflation factor based on the count of 
vouchers in each FMR area administered by the PHA as captured in HUD 
administrative data as of December 31, 2017.

III. The Use of Inflation Factors

    HUD subsequently applies the calculated individual area inflation 
factors to eligible renewal funding for each PHA based on VMS leasing 
and cost data for the prior calendar year.

IV. Geographic Areas and Area Definitions

    As explained above, inflation factors based on area FMR changes are 
produced for all FMR areas and applied to eligible renewal funding for 
each PHA. The tables showing the RFIFs, available electronically from 
the HUD data information page, list the inflation factors for each FMR 
area on a state-by-state basis. The inflation factors use the same OMB 
metropolitan area definitions, as revised by HUD, that are used for the 
FY 2018 FMRs. PHAs should refer to the Area Definitions Table on the 
following web page to make certain that they are referencing the 
correct inflation factors: http://www.huduser.org/portal/datasets/rfif/FY2018/FY2018_RFIF_FMR_AREA_REPORT.pdf. The Area Definitions Table 
lists areas in alphabetical order by state, and the counties associated 
with each area. In the six New England states, the listings are for 
counties or parts of counties as defined by towns or cities. HUD is 
also releasing the data in Microsoft Excel format to assist users who 
may wish to use these data in other calculations. The Excel file is 
available at https://www.huduser.gov/portal/datasets/rfif/rfif.html.

V. Request for Comment on the Use of FMRs Based on Ad Hoc Surveys for 
Renewal Funding

    As described above, HUD uses the annual change in an area's FMR in 
part to produce its inflation factor. HUD allows for the use of PHA-
sponsored local rent survey data in calculating FMRs, and the use of 
this data can produce erratic RFIFs as certain areas switch from FMRs 
based on American Community Survey (ACS) data to FMRs based on local 
rent surveys and vice versa. For example, in cases where rents are 
increasing and an area's FMR was based on the same sponsored local rent 
survey for two consecutive years, or was previously based on a (higher-
rent) local survey that was superseded by more current (lower-rent) ACS 
data, that area's RFIF will be lower relative to underlying rent growth 
in the area, leaving PHAs with the choice to either fund additional 
surveys or accept the lower RFIF. With this notice, HUD seeks comment 
on this issue, including its equitability to PHAs that have not 
sponsored local surveys, and on potential method changes to the RFIF 
calculation. Funds are not available for HUD to carry out extensive 
local rent surveys. Given this limitation, HUD seeks comment on the 
following possible ways to calculate the local rent change used in the 
calculation of RFIFs:
     Maintain the current policy of including the survey-based 
FMR change in the first calculation of RFIFs following the 
implementation of the survey and continue using the change in FMRs 
while the survey is still in effect.
     Stop incorporating local rent surveys in the calculation 
of the FMR change component of the RFIF calculation.
     As with current policy, include the survey-based FMR 
change in the first calculation of RFIFs following the implementation 
of the survey. In subsequent years, while the survey is still being 
used in the calculation of the published FMRs, use the change in 
underlying rent data collected via the ACS. By doing this, the rent 
change component of the RFIF will be based on a local measure of actual 
year-to-year rent change.
     Instead of having a large increase in the FMR in the first 
year of using local survey data, with little to no inflation for the 
next several years, spread the increase over the expected usable life 
of the survey. HUD would do this by calculating the average annual 
change between the survey-derived rent and the ACS rent over a two- or 
three-year period. Surveys conducted in January through June generally 
are used in two FMR calculations and surveys conducted in July through 
December are typically used in three FMR calculations. By using the 
annual average increase as the FMR change component of the RFIF 
calculation, PHAs in areas submitting local survey data will ultimately 
have the full increase in their survey-based FMR realized in their 
inflation factors, but the distortive impacts of implementing the 
entire change in the first year of the use of the local survey-based 
rent will also be ameliorated. This would also likely lessen the 
mismatch between the RFIF and local rent growth rates at the transition 
back from survey data to ACS data.
     Pursue another strategy recommended by commenters.
    HUD recognizes that PHAs may need additional renewal funding to 
support their HCV program when they must increase payment standards 
commensurate with increases in FMRs due to submission of locally funded 
survey data. Including the full survey-based FMR change in the RFIF 
calculation helps to achieve this need; \1\ however, use of survey-
based FMRs in the RFIF calculation skews the distribution of renewal 
funding towards those areas where surveys are conducted, all other 
factors remaining constant. Therefore, HUD is interested in comments 
from all interested parties, including those PHAs that have engaged in 
a local survey program, and those PHAs that have not supplied local 
survey data.
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    \1\ HUD notes that even when the FMR change component of the 
RFIF calculation uses a local survey, the RFIF calculated for the 
given area is not as large as the FMR change itself since no PHA may 
receive a negative RFIF. Consequently, the allocation process 
dampens both FMR increases and FMR decreases towards a central 
value.
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VI. Environmental Impact

    This notice involves a statutorily required establishment of a rate 
or cost determination which does not constitute

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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 23, 2018.
Todd Richardson,
Acting General Deputy Assistant Secretary for Policy Development and 
Research.
[FR Doc. 2018-11587 Filed 5-29-18; 8:45 am]
 BILLING CODE 4210-67-P