Daily Rules, Proposed Rules, and Notices of the Federal Government
The final FY 2013 FMRs in this notice reflect two changes in the methodology used to calculate FMRs. First, HUD has updated the bedroom ratios used to calculate 0, 1, 3 and 4 bedroom FMRs based on the two-bedroom FMR. Bedroom ratios were last updated using the decennial 2000 Census. Because the 2010 Census did not collect rents, the new bedroom ratios are constructed using 2006-2010 5 year ACS data. The methodology for calculating the bedroom ratios is very similar to the method used when the bedroom ratios were based on 2000 decennial Census long-form data. Second, a new trend factor calculation methodology has been used for the FY 2013 FMRs, which HUD stated would be implemented in its proposed FY 2012 FMR publication on August 19, 2011 (76 FR 52058). This trend factor is based on national gross rent data and will change annually.
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 concerning further methodological explanations may be addressed to Marie L. Lihn or Peter B. Kahn, 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 Relay Service at 800-877-8339. (Other than the HUD USER information line and TDD numbers, telephone numbers are not toll-free.)
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 geographic areas. In the 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). 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 HCV program must meet reasonable rent standards. HUD's regulations at 24 CFR 888.113 permit it to establish 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. Section 8(c) states, in part, as follows:
Proposed fair market rentals for an area shall be published in the
HUD's regulations at 24 CFR part 888 provide that HUD will develop proposed FMRs, publish them for public comment, provide a public comment
In addition, HUD's regulations at 24 CFR 888.113 set out procedures for HUD to assess whether areas are eligible for FMRs at the 50th percentile. Minimally qualified areas
In FY 2012 there were 21 areas using 50th-percentile FMRs. Of these 21 areas, 19 were allowed to continue as 50th percentile FMR areas. The two areas that are no longer in the 50th percentile program are Grand Rapids, MI and Washington, DC. The evaluation of Grand Rapids, MI showed that the concentration of HCV tenants fell below what is eligiblfor a 50th percentile FMR. This area may be re-evaluated next year. The Washington, DC area failed to deconcentrate which means that it is not eligible for a 50th percentile FMR program for a three-year period. PHAs in the Washington, DC area may seek payment standard protection under 24 CFR 982.503(f) from the HUD Field Office is the PHA scored the maximum number of points on the deconcentration bonus indicator in the prio year, or in two or the last three years.
Those eligible to continue are listed below:
On August 3, 2012 (77 FR 46447), HUD published proposed FY 2013 FMRs with a comment period that ended September 4, 2012. HUD has considered all public comments received and HUD provides responses to these comments later in this preamble. HUD does not specifically identify each commenter, but all comments are available for review on the Federal Government's Web site for capturing comments on proposed regulations and related documents (Regulations.gov—
This section provides a brief overview of how the FY 2013 FMRs are computed. For complete information on how FMR areas are determined, and on how each area's FMRs are derived, see the online documentation at
The FY 2013 FMRs are based on current OMB metropolitan area definitions and standards that were first used in the FY 2006 FMRs. OMB changes to the metropolitan area definitions through December 2009 are incorporated. There have been no area definition changes published by OMB since the publication of the FY 2012 FMRs; therefore, the FY 2013 area definitions are the same as those used in FY 2012. HUD anticipates that OMB will publish new area definitions in 2013. Depending on the timing of this release, HUD will incorporate the new area definitions into either the FY 2014 or FY 2015 proposed FMRs.
The U.S. Census Bureau provided special tabulations of 5-year ACS data collected between 2006 through 2010 to HUD in early to mid-2012. For FY 2013 FMRs, HUD used the 2006-2010 5-year ACS data to update the base rents set in FY 2012 using the 2005-2009 5-year ACS data.
FMRs are historically based on gross rents for recent movers (those who have moved into their current residence in the last 24 months). However, due to the way the 5-year ACS data are constructed, HUD developed a new methodology for calculating recent-mover FMRs in FY 2012. As in FY 2012, all areas are assigned as a base rent the estimated two-bedroom standard quality 5-year gross rent from the ACS.
No local area rent surveys were conducted in 2011 or 2012 by HUD or PHAs, but the surveys conducted in 2010, for Williamsport, PA and Pike County, PA supersede the 2006-2010 ACS data.
Following the assignment of the standard quality two-bedroom rent described above, HUD applies a recent mover factor to these rents. In preparation for calculating the proposed FY 2013 FMRs, the department reviewed the methodology for calculating the recent mover factor from the FY 2012 process and made several improvements. The primary change is that HUD no longer compares the standard quality gross rent to the recent mover gross rent to determine if the two statistics are significantly different.
In general, HUD uses the 1 year ACS based two-bedroom statistically reliable recent mover gross rent estimate from the smallest geographic area encompassing the FMR area to calculate the recent mover factor. Some areas' recent mover factors will be calculated using data collected just for the FMR area. Other areas' recent mover factor will be based on larger geographic areas. For metropolitan areas that are subareas of larger metropolitan areas, the order is subarea, metropolitan area, state metropolitan area, and state. Metropolitan areas that are not divided follow a similar path from FMR area, to state metropolitan areas, to state. In nonmetropolitan areas the recent mover factor is based on the FMR area, the state nonmetropolitan area, or if that is not available, on the basis of the whole state. The recent mover factor is calculated as the percentage change between the 5-year 2006-2010 two-bedroom gross rent and the 1 year 2010 recent mover two-bedroom gross rent for the recent mover factor area. Recent mover factors are not allowed to lower 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. The process for calculating each area's recent mover factor is detailed in the FY 2013 Final FMR documentation system available at:
This process produces an “as of” 2010 recent mover two-bedroom base gross rent for the FMR area.
The ACS based “as of” 2010 rent is updated through the end of 2011 using the annual change in CPI from 2010 to 2011. As in previous years, HUD uses Local CPI data for FMR areas with at least 75 percent of their population within Class A metropolitan areas covered by local CPI data. HUD uses Census region CPI data for FMR areas in Class B and C size metropolitan areas and nonmetropolitan areas without local CPI update factors. Following the application of the appropriate CPI update factor, HUD converts the “as of” 2011 CPI adjusted rents to “as of” December 2011 rents by multiplying each rent by the national December 2011 CPI divided by the national annual 2011 CPI value. HUD does this in order to apply an exact amount of the annual trend factor to place the FY 2013 FMRs as of the mid-point of the 2013 fiscal year.
On March 9, 2011 (76 FR 12985), HUD published a notice requesting public comment regarding the manner in which it calculates the trend factor used in determining FMR estimates to meet the statutory requirement that FMRs be “trended so the rentals will be current for the year to which they apply”. HUD's notice provided several proposed alternatives to the current trend factor and requested comments on the alternatives as well as suggestions of other ideas. In its publication of the proposed FY 2012 FMRs on August 19, 2011, (76 FR 52058) HUD discussed these comments and announced that a new trend factor would be used in the FY 2013 FMRs. HUD calculates the trend factor as the annualized change in median gross rents as measured between the 1 year 2005 ACS and the 1 year 2010 ACS. The median gross rent was $728 in 2005 and $855 in 2010. The overall change is 17.45 percent and the annualized change is 3.27%. Over a 15-month time period, the effective trend factor is 4.1 percent.
HUD calculates the primary FMR estimates for two-bedroom units. This is generally the most common sized rental unit and, therefore, the most reliable to survey and analyze. Formerly, after each decennial Census, HUD calculated rent relationships between two-bedroom units and other unit sizes and used them to set FMRs for other units. HUD did this because it is much easier to update two-bedroom estimates annually and to use pre-established cost relationships with other bedroom sizes than it is to develop independent FMR estimates for each bedroom size. For FY 2013 FMRs, HUD has updated the bedroom ratio adjustment factors using 2006-2010 5-year ACS data using similar methodology to what was implemented when calculating bedroom ratios using 2000 Census data to establish rent ratios. HUD again made adjustments to the bedroom ratios using 2006-2010 5-year ACS data for areas
Following the same methodology as was used when bedroom ratios were calculated using 2000 decennial Census long-form data, HUD continues to adjust the rents for three-bedroom and larger units to reflect HUD's policy to set higher rents for these units than would result from using unadjusted market rents. This adjustment is intended to increase the likelihood that the largest families, who have the most difficulty in leasing units, will be successful in finding eligible program units. The adjustment adds bonuses of 8.7 percent to the unadjusted three-bedroom FMR estimates and adds 7.7 percent to the unadjusted four-bedroom FMR estimates. The FMRs for unit sizes larger than four bedrooms are calculated by adding 15 percent to the four-bedroom FMR for each extra bedroom. For example, the FMR for a five-bedroom unit is 1.15 times the four-bedroom FMR, and the FMR for a six-bedroom unit is 1.30 times the four-bedroom FMR. FMRs for single-room occupancy units are 0.75 times the zero-bedroom (efficiency) FMR.
For low-population, nonmetropolitan counties with small or statistically insignificant 2006-2010 5-year ACS gross rents, HUD uses state non-metropolitan data to determine bedroom ratios for each bedroom size. HUD made this adjustment to protect against unrealistically high or low FMRs due to insufficient sample sizes.
The FMR used to establish payment standard amounts for the rental of manufactured home spaces in the HCV program is 40 percent of the FMR for a two-bedroom unit. HUD will consider modification of the manufactured home space FMRs where public comments present statistically valid survey data showing the 40th-percentile manufactured home space rent (including the cost of utilities) for the entire FMR area.
All approved exceptions to these rents that were in effect in FY 2012 were updated to FY 2013 using the same data used to estimate the HCV program FMRs. If the result of this computation was higher than 40 percent of the new two-bedroom rent, the exception remains and is listed in Schedule D. No additional exception requests were received in the comments to the FY 2013 FMRs. The FMR area definitions used for the rental of manufactured home spaces are the same as the area definitions used for the other FMRs.
Public housing authorities that operate in the Dallas, TX HMFA continue to manage their voucher programs using Small Area Fair Market Rents (SAFMRs). The updated SAFMRs for Dallas are listed in Schedule B Addendum.
SAFMRs are calculated using a rent ratio determined by dividing the median gross rent across all bedrooms for the small area (a ZIP code) by the similar median gross rent for the metropolitan area of the ZIP code. This rent ratio is multiplied 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. In small areas where the median gross rent is not statistically reliable, HUD substitutes the median gross rent for the county containing the ZIP code in the numerator of the rent ratio calculation. All other aspects of the methodology are consistent with the FMR methodology. The recent mover and bedroom ratio changes made to the area-wide FMRs were also made to the SAFMRs. In addition, the new trend factor is applied to the SAFMRs as well. For FY 2013 SAFMRs, HUD has implemented two changes to the rent ratio calculation methodology. First, HUD has updated the 2005-2009 5-year ACS based ZIP code median gross rent data with 2006-2010 5-year ZIP Code Tabulation Area (ZCTA) median gross rent data. The use of the more current ACS data is consistent with the update process in the FMR methodology. However, the change from ZIP code to ZCTA was a change that the Bureau of the Census made for its aggregation process; HUD has no control over the decision by Census to use ZCTA data instead of ZIP code data. Second, HUD expanded the criteria for determining the statistical reliability of the small area rent data in order to ensure that more SAFMRs are based on the data for the small area as opposed to using data from the parent county as a proxy. This change is consistent with the changes in the FMR methodology that eliminated the use of the statistical Z-test.
A total of 75 comments were received and posted on the regulations.gov site (
Several comments requested that HUD hold the FY 2013 FMRs harmless, that is they wanted the FMR to remain at the FY 2012 level, or the FY 2011 level if it would otherwise be lower. In addition to or instead of imposing hold harmless, several comments asked HUD to limit annual increases and decreases of FMRs to five percent. While HUD has been able to use such measures in limiting income limit increases and decreases, HUD is specifically precluded from incorporating these changes into the FMR methodology by the statutory language governing FMRs that requires the use of the most recent data. HUD is required to use the most recent available data and FMRs must increase or decrease based on this data. Ignoring decreases or phasing decreases or increases in over several years would not fully implement FMRs based on the most recent available data. This statutory language also applies to SAFMRs and the incorporation of new area definitions. Area definitions use the most current definitions available which were formulated using the 2000 decennial Census long-form data as their basis. The Department cannot return to area definitions based on 1990 decennial Census long-form data. Adjusted area definitions based on a combination of 2010 decennial Census and 5-year ACS data are expected in late 2013. HUD will review and incorporate these changes at that time.
Many of the comments also identified the lower rents for zero-bedroom and one-bedroom units in many areas. The development of new bedroom ratios means that some areas will have lower relationships to the two-bedroom FMR than they did in the past. Some areas with lower zero-bedroom and one-bedroom ratios had the FY 2013 FMR for these units decline, while the two-bedroom FMR increased. For the voucher program, the only relief from the decrease would be for PHAs to request exception payment standards for these smaller bedroom sizes. HUD is aware that the decreases in the zero-bedroom and one-bedroom FMRs have a disproportionate impact on homeless and elderly programs but there is no action HUD may take under current statute to provide relief for these programs. HUD also received several comments opposed to the large increases in the three-bedroom FMRs. The PHAs making these comments did not suggest that HUD revisit its national policy of including bonuses for large bedroom sized units, but were concerned with serving the same number of families while the FMRs for these bedroom sizes increased more than 10 percent. HUD cannot hold the FY 2013 FMRs harmless at the FY 2012 FMR levels for the bedroom ratio changes or incorporate caps and floors to phase in increases or decreases due to statutory limitations.
Several areas that experienced a decline in the FMR requested that HUD survey its area. HUD was unable to conduct any surveys in 2011 because the Department was studying the methodology used to conduct local area market rent surveys, and has very limited resources to conduct surveys in 2012. Therefore, HUD is choosing to focus its survey resources on areas without statistically significant one-year ACS local data. Areas considered for HUD funded surveys must also have large enough rental markets so that the new mail-based survey methodology is likely to capture significant results (please see section VIII of this notice for further information regarding the survey methodology). Based on the testing performed in 2011 and 2012, markets should typically contain at least 30,000 housing units. County groups can be assembled in non-metropolitan areas for the purposes of surveys, but these counties must have similar economic conditions and no county in a county group can have its published FMR be based on the state minimum FMR. HUD has experience conducting surveys in areas with low or no vacancy rates and this experience has shown that it is extremely difficult to capture gross rent levels that depict such tight markets. For that reason, HUD will provide emergency exception payment standards up to 135 percent of the FMR for the Section 8 voucher program in areas impacted by natural resource exploration. PHAs interested in applying for these emergency payment standards should contact their local HUD field office. Additionally, while FMRs cannot be held harmless, the HOME program does have a hold harmless provision for its rents. Other programs that use FMRs will have to pursue similar strategies such as exception payment standards or hold harmless provisions within the statutory and regulatory framework governing those programs.
In accordance with 24 CFR 888.115, HUD has reviewed the public comments that have been submitted by the due date and has determined that there are no comments with “statistically valid rental survey data that justify the requested changes.” The following are HUD's responses to all known comments received by the comment due date and a part of the notice record at
Several comments requested that FMRs not be allowed to decline from their FY 2012 level. Some of these comments asked HUD to delay implementation of FY 2013 FMRs for their area to allow local housing authorities to complete a rent survey, or until HUD completes a survey for them.
Several comments were received that stated that market rents did not decrease over the past year and so FMRs also should not decrease.
Annual revisions are now possible with the 5-year ACS data. Because of the nature of the ACS 5-year tabulations, however, 80 percent of the survey observations will remain the same from one year to the next.
Some comments provided apartment project rent data (many representing less than 30 percent of the rental market) that show that the rents for their area increased in the past year, while the FY 2013 FMRs show a decline from the FY 2012 FMRs.
Several comments were received that noted that the efficiency and one-bedroom FMRs decreased substantially despite only a modest decrease or even a modest increase in the two-bedroom FMR.
New bedroom ratios were calculated for each area using the same methodology as previously, with the exception that margin of error ratios were evaluated to select the bedroom ratio at the smallest area of encompassing geography with statistically reliable results. For example, a non-metropolitan county without many cases of efficiency rents and with a margin of error ratio of greater than one would use the state non-metro efficiency ratio instead of its own. However, most of the comments received on the decrease in the zero-bedroom and one-bedroom ratios covered areas where the bedroom ratios were based on data for their own area and all had very low margins of error.
A comment was received that suggested that only HUD surveys would provide the data necessary for an area without its own CPI area data.
The data and technology is available to determine FMRs by subsets of diverse counties.
Several comments, even pertaining to FMR areas with decreases below 5 percent, or with modest increases, pressed for higher FMRs FY 2013 FMRs. Some of these areas had very tight markets and some of these areas already used payment standards at 110 percent of the FMRs.
Several comments stated that low or no vacancy rates in areas with increased economic activity require higher FMRs so that voucher tenants can compete for housing. In these areas, there is not sufficient rental housing and generally the 2010 rental data from the ACS does not reflect this situation.
Several comments stated that decreases in FMRs would negatively affect tenants' ability to find affordable housing. The decrease in FMRs from FY 2012 to FY2013 will reduce the availability of affordable housing in the area; landlords will be able to get higher rents from tenants that are not Section 8 voucher holders and so many will opt out of the program.
Decreases in the FMR, whether by loss of a 50th percentile FMR status or by reductions in Small Area FMRs (SAFMRs) lead to poverty concentration and prevent tenants from moving to areas of opportunity.
If a current HUD Section 8 project uses rents at 110 percent of the FMR, a reduction in the FMR puts this project at risk. An FMR reduction could mean that LIHTC landlords will no longer accept Section 8 voucher tenants.
Several comments stated that their current tenants will have to pay a greater share of their income on rents, with FMR decreases.
Disabled residents already have fewer units available to them, and reducing the FMR will further reduce their options. Difficult to place residents, because of history of late payments or other options, will have fewer landlords willing to rent to them if the FMR is lower.
In areas where affordable housing construction is increasing, a reduction in the FMR will reduce the benefit of existing affordable housing projects and may prevent additional affordable housing construction.
For bedroom sizes greater than four-bedroom units, HUD provides a formula equal to 15 percent greater for each bedroom size, such that a six-bedroom unit is 1.3 times a four-bedroom unit. The difference in costs is actually ten percent.
Two nonmetropolitan areas requested higher rents based on neighboring metropolitan areas.
HUD's floor of 10 percent for the SAFMR demonstration program represents a substantial drop in rents. SAFMRs should not be used for Difficult to Develop Areas. In general, the use of ZIP codes as areas does not represent housing markets and should not be used for SAFMRs.
The public housing cutoff rent should include rents for housing serving low income residents (at 80 percent of the area median income (AMI)). HUD underestimates its public housing rent cutoff by basing it on the 75th percentile of the public housing rents; it should be at the 95th percentile, or greater. Public housing rents do not include debt service and HUD provides PHAs with assistance in covering operating expenses and capital maintenance such that public housing rents are much lower than what is required for a housing quality adjustment.
A different commenter supported the new national trend factor as appropriate in minimizing year-to-year volatility.
Many of the units built in the past two year are affordable housing units.
HUD should not increase FMRs at a time when federal agencies should be freezing or reducing costs. One comment stated that the FMR increases will result in fewer families being served. The change in the three-bedroom ratio results in a large increase in this unit size FMR.
Several comments suggest that FMR decreases, even those under five percent, will reduce the ability of tenants to find units that meet housing quality standards and will increase homelessness, as fewer units are available at the lower FMR.
A five percent change in the FMR triggers a rent reasonableness study, which is costly for cash-strapped PHAs. HUD should have instituted the same cap and floor of five percent that it instituted for Income Limits with the FY 2010 Income Limits.