Proposed Fair Market Rents for the Housing Choice Voucher Program, Moderate Rehabilitation Single Room Occupancy Program and Other Programs; Fiscal Year 2016

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, 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 assistance units in the HOME Investment Partnerships program. FMRs are used in the calculation of maximum award amounts for Continuum of Care grantees and are also used in the calculation of flat rents in Public Housing units. Today's notice provides proposed FY 2016 FMRs for all areas that reflect the estimated 40th and 50th percentile rent levels trended to April 1, 2016. The FY 2016 FMRs are based on ``5-year'' data collected by the American Community Survey (ACS) from 2009 through 2013. These data are updated by one-year 2013 ACS data for areas where statistically valid one-year ACS data is available. HUD continues to use ACS data in different ways according to the statistical reliability of rent estimates. The Consumer Price Index (CPI) rent and utility indexes are used to further update the data to 2014. These values are then trended forward to FY 2016 using the annualized change in median gross rents as measured across the most recent 5 years of available 1 year ACS data. While HUD will continue to use this trend factor for the calculation of FY 2016 FMRs, the Department is considering replacing it with a forward-looking forecast for the FY 2017 FMRs. For example, HUD is evaluating the use of a model that would forecast national rent and utility CPI indices based on economic assumptions used in the formulation of the President's Budget. HUD seeks public comments on this or alternative methodologies, as well as other data sources, for trending rent levels forward. The proposed FY 2016 FMRs in this notice incorporate a change in the level of statistical reliability that is allowed for an ACS estimate to be used in the calculation of FMRs. Previously, if the error of the estimate was less than the estimate itself, HUD used the estimate. The Proposed FMRs in this notice use ACS estimates where the size of the error is limited to half of the estimate. An additional change to the proposed FY 2016 FMRs is the incorporation of the February 28, 2013, Office of Management and Budget (OMB) metropolitan area definition update based on the 2010 Decennial Census data. The 2013 ACS data are the first to use the new area definitions in the compilation of the ACS data. In a June 2, 2015 advanced notice of proposed rulemaking, HUD solicited comments on several topics related to the calculation of FMRs, including possible measures the Department is considering that would reduce the concentration of Section 8 voucher tenants. For example, HUD is evaluating alternatives to the current 50th percentile FMR program, which was implemented to mitigate excessive geographic concentration of voucher tenants. Comments were requested to determine interest in a program that is based on different measures for determining how many and which areas would receive special FMRs to encourage deconcentration, as well as on alternative FMR-based tools for promoting deconcentration, such as Small Area FMRs estimated at the ZIP code level. The Department appreciates the comments provided and is currently analyzing this input to inform the next steps in the rulemaking process. For the FY 2016 FMRs, however, the current 50th percentile FMR program is still in place with no change to existing regulations.