Notice2024-06798
Section 8 Housing Assistance Payments Program-Annual Adjustment Factors, Fiscal Year 2024
Primary source
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Published
April 1, 2024
Effective
April 1, 2024
Issuing agencies
Housing and Urban Development Department
Abstract
The United States Housing Act of 1937 requires that certain assistance contracts signed by owners participating in the Department's Section 8 housing assistance payment programs provide annual adjustments to monthly rentals for units covered by the contracts. For owners subject to a Reserve for Replacement deposit requirement, HUD also requires that the amount of the required deposit be adjusted each year by the AAF. This notice announces FY 2024 AAFs for adjustment of contract rents on the anniversary of those assistance contracts. The factors are based on a formula using residential rent and utility cost changes from the most recent annual Bureau of Labor Statistics (BLS) Consumer Price Index (CPI) survey and market rents from a total of six possible private sector rent data sources. AAFs were historically based on the shelter and gross rent inflation factors used in HUD's Fair Market Rent (FMR) calculation, and this notice maintains that practice by updating the AAF methodology in line with the FMR methodology changes that HUD adopted for FY 2024.
Full Text
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<title>Federal Register, Volume 89 Issue 63 (Monday, April 1, 2024)</title>
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[Federal Register Volume 89, Number 63 (Monday, April 1, 2024)]
[Notices]
[Pages 22436-22438]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-06798]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-6443-N-01]
Section 8 Housing Assistance Payments Program--Annual Adjustment
Factors, Fiscal Year 2024
AGENCY: Office of the Assistant Secretary for Policy Development and
Research, Department of Housing and Urban Development, HUD.
ACTION: Notice of fiscal year (FY) 2024 Annual Adjustment Factors
(AAFs).
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SUMMARY: The United States Housing Act of 1937 requires that certain
assistance contracts signed by owners participating in the Department's
Section 8 housing assistance payment programs provide annual
adjustments to monthly rentals for units covered by the contracts. For
owners subject to a Reserve for Replacement deposit requirement, HUD
also requires that the amount of the required deposit be adjusted each
year by the AAF. This notice announces FY 2024 AAFs for adjustment of
contract rents on the anniversary of those assistance contracts. The
factors are based on a formula using residential rent and utility cost
changes from the most recent annual Bureau of Labor Statistics (BLS)
Consumer Price Index (CPI) survey and market rents from a total of six
possible private sector rent data sources. AAFs were historically based
on the shelter and gross rent inflation factors used in HUD's Fair
Market Rent (FMR) calculation, and this notice maintains that practice
by updating the AAF methodology in line with the FMR methodology
changes that HUD adopted for FY 2024.
DATES: The FY 2024 AAFs are effective April 1, 2024.
FOR FURTHER INFORMATION CONTACT: Ryan Jones, Director, Management and
Operations Division, Office of Housing Voucher Programs, Office of
Public and Indian Housing, 202-708-1380, for questions relating to the
Moderate Rehabilitation programs (not the Single Room Occupancy
program); Norman A. Suchar, Director, Office of Special Needs
Assistance Programs, Office of Community Planning and Development, 202-
402-5015, for questions regarding the Single Room Occupancy (SRO)
Moderate Rehabilitation program; Katherine Nzive, Director, OAMPO
Program Administration Office, Office of Multifamily Housing, 202-402-
3440, for questions relating to all other Section 8 programs; and Adam
Bibler, Director, Program Parameters and Research Division, Office of
Policy Development and Research, 202-402-6057, for technical
information regarding the development of the schedules for specific
areas or the methods used for calculating the AAFs. The mailing address
for these individuals is: Department of Housing and Urban Development,
451 7th Street SW, Washington, DC 20410. HUD welcomes and is prepared
to receive calls from individuals who are deaf or hard of hearing, as
well as individuals with speech or communication disabilities. To learn
more about how to make an accessible telephone call, please visit
<a href="https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs">https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs</a>.
SUPPLEMENTARY INFORMATION: The AAFs are applied at the anniversary of
Housing Assistance Payment (HAP) contracts for which rents are to be
adjusted using the AAF for those calendar months commencing after the
AAF effective date listed in this notice. The amount that an owner is
required to deposit to the Reserve for Replacement account is also
adjusted annually by the most recently published AAF, at the HAP
contract anniversary. AAFs are distinct from, and do not apply to the
same properties as, Operating Cost Adjustment Factors (OCAFs). OCAFs
are annual factors used to adjust rents for project-based rental
assistance contracts issued under Section 8 of the United States
Housing Act of 1937 and renewed under section 515 or section 524 of the
Multifamily Assisted Housing Reform and Affordability Act of 1997
(MAHRA). HUD has published OCAFs for 2024 in the Federal Register at 87
FR 68513. The AAFs are also distinct from Renewal Funding Inflation
Factors which help determine renewal funding for public housing
agencies operating the Housing Choice Voucher program. A separate
Federal Register notice, to be published following the passage of FY
2024 HUD appropriations, will contain the 2024 Renewal Funding
Inflation Factors.
Tables showing AAFs will be available electronically from the HUD
data information page at <a href="http://www.huduser.gov/portal/datasets/aaf.html">http://www.huduser.gov/portal/datasets/aaf.html</a>.
I. Applying AAFs to Various Section 8 Programs
AAFs established by this notice 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. There are two categories of Section 8 programs that use the
AAFs:
Category 1: The Section 8 New Construction, Substantial
Rehabilitation, and Moderate Rehabilitation programs; and
Category 2: The Section 8 Loan Management Set-Aside (LMSA) and
Property Disposition (PD) programs.
Each Section 8 program category uses the AAFs differently. The
specific application of the AAFs is determined by the law, the HAP
contract, and appropriate program regulations or requirements.
AAFs are not used in the following cases:
Renewal Rents. AAFs are not used to determine renewal rents after
expiration of the original Section 8 HAP contract (either for projects
where the Section 8 HAP contract is renewed under a restructuring plan
adopted under 24 CFR part 401; or renewed without restructuring under
24 CFR part 402). In general, renewal rents are established in
accordance with the statutory provision in MAHRA, as amended, under
which the HAP is renewed. After renewal, annual rent adjustments will
be provided in accordance with MAHRA.
Budget-based Rents. AAFs are not used for budget-based rent
adjustments. For projects receiving Section 8 subsidies under the LMSA
program (24 CFR part 886, subpart A) and for
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projects receiving Section 8 subsidies under the PD program (24 CFR
part 886, subpart C), contract rents are adjusted, at HUD's option,
either by applying the AAFs or by budget-based adjustments in
accordance with 24 CFR 886.112(b) and 24 CFR 886.312(b). Budget-based
adjustments are used for most Section 8/202 projects.
Housing Choice Voucher Program. AAFs are not used to adjust rents
in the Tenant-Based or the Project-Based Voucher programs.
Reserve for Replacement. The amount that an owner is required to
deposit to the Reserve for Replacement account is adjusted annually by
the AAF at the HAP contract anniversary.
II. Adjustment Procedures
This section of the notice provides a broad description of
procedures for adjusting the contract rent. Technical details and
requirements are described in HUD notices H 2002-10 (Section 8 New
Construction and Substantial Rehabilitation, Loan Management, and
Property Disposition) and PIH 97-57 (Moderate Rehabilitation). HUD
publishes two separate AAF Tables, Table 1 and Table 2. The difference
between Table 1 and Table 2 is that each AAF in Table 2 is 0.01 less
than the corresponding AAF in Table 1. Where an AAF in Table 1 would
otherwise be less than 1.0, it is set at 1.0, as required by statute;
the corresponding AAF in Table 2 will also be set at 1.0, as required
by statute. Because of statutory and structural distinctions among the
various Section 8 programs, there are separate rent adjustment
procedures for the three program categories:
Category 1: Section 8 New Construction, Substantial Rehabilitation, and
Moderate Rehabilitation Programs
In the Section 8 New Construction and Substantial Rehabilitation
programs, the published AAF factor is applied to the pre-adjustment
contract rent. In the Section 8 Moderate Rehabilitation program (both
the regular program and the single room occupancy program), the
published AAF is applied to the pre-adjustment base rent.
For Category 1 programs, the Table 1 AAF factor is applied before
determining comparability (rent reasonableness). Comparability applies
if the pre-adjustment gross rent (pre-adjustment contract rent plus any
allowance for tenant-paid utilities) is above the published Fair Market
Rent (FMR).
If the comparable rent level (plus any initial difference) is lower
than the contract rent as adjusted by application of the Table 1 AAF,
the comparable rent level (plus any initial difference) will be the new
contract rent. However, the pre-adjustment contract rent will not be
decreased by application of comparability.
In all other cases (i.e., unless the contract rent is reduced by
comparability):
<bullet> Table 1 AAF is used for a unit occupied by a new family
since the last annual contract anniversary.
<bullet> Table 2 AAF is used for a unit occupied by the same family
as at the time of the last annual contract anniversary.
Category 2: Section 8 Loan Management Program (24 CFR Part 886, Subpart
A) and Property Disposition Program (24 CFR Part 886, Subpart C)
Category 2 programs are not currently subject to comparability.
Comparability will again apply if HUD establishes regulations for
conducting comparability studies under 42 U.S.C. 1437f(c)(2)(C).
The applicable AAF is determined as follows:
<bullet> Table 1 AAF is used for a unit occupied by a new family
since the last annual contract anniversary.
<bullet> Table 2 AAF is used for a unit occupied by the same family
as at the time of the last annual contract anniversary.
Category 3: Reserve for Replacement
The amount of the deposit to the Reserve for Replacement account
must be increased annually using the most recently published ``Regional
AAF with Highest Utility Excluded'' for the region in which the project
is located. This adjustment must be made without regard to vacancies.
III. When To Use Reduced AAFs (From AAF Table 2)
In accordance with Section 8(c)(2)(A) of the United States Housing
Act of 1937 (42 U.S.C. 1437f(c)(2)(A)), the AAF is reduced by 0.01:
In Section 8 programs, for a unit occupied by the same family at
the time of the last annual rent adjustment (and where the rent is
not reduced by application of comparability (rent reasonableness)).
The law provides that:
[F]or any unit occupied by the same family at the time of the
last annual rental adjustment, where the assistance contract
provides for the adjustment of the maximum monthly rent by applying
an annual adjustment factor and where the rent for a unit is
otherwise eligible for an adjustment based on the full amount of the
factor . . . 0.01 shall be subtracted from the amount of the annual
adjustment factor (except that the factor shall not be reduced to
less than 1.0), and the adjusted rent shall not exceed the rent for
a comparable unassisted unit of similar quality, type and age in the
market area. 42 U.S.C. 1437f(c)(2)(A).
Legislative history for this statutory provision states that ``the
rationale [for lower AAFs for non-turnover units is] that operating
costs are less if tenant turnover is less . . . .'' (see Department of
Veteran Affairs and Housing and Urban Development, and Independent
Agencies Appropriations for 1995, Hearings Before a Subcommittee of the
Committee on Appropriations 103d Cong., 2d Sess. 591 (1994)). The
Congressional Record also states the following:
Because the cost to owners of turnover-related vacancies,
maintenance, and marketing are lower for long-term stable tenants,
these tenants are typically charged less than recent movers in the
unassisted market. Since HUD pays the full amount of any rent
increases for assisted tenants in section 8 projects . . . HUD
should expect to benefit from this `tenure discount.' Turnover is
lower in assisted properties than in the unassisted market, so the
effect of the current inconsistency with market-based rent increases
is exacerbated. (140 Cong. Rec. 8659, 8693 (1994)).
IV. How To Find the AAF
AAF Table 1 and Table 2 are posted on the HUD User website at
<a href="http://www.huduser.gov/portal/datasets/aaf.html">http://www.huduser.gov/portal/datasets/aaf.html</a>. There are two numeric
columns in each AAF table. The first column is used to adjust contract
rent for rental units where the highest cost utility is included in the
contract rent, i.e., where the owner pays for the highest cost utility.
The second column is used where the highest cost utility is not
included in the contract rent, i.e., where the tenant pays for the
highest cost utility.
The applicable AAF is selected as follows:
<bullet> Determine whether Table 1 or Table 2 is applicable. In
Table 1 or Table 2, locate the AAF for the geographic area where the
contract unit is located.
<bullet> Determine whether the highest cost utility is or is not
included in contract rent for the contract unit.
<bullet> If highest cost utility is included, select the AAF from
the column for ``Highest Cost Utility Included.'' If highest cost
utility is not included, select the AAF from the column for ``Highest
Cost Utility Excluded.''
V. Methodology
AAFs are rent inflation factors. Two types of rent inflation
factors are calculated for AAFs: gross rent factors and shelter rent
factors. The gross rent factor accounts for inflation in the cost of
both the rent of the residence and the
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utilities used by the unit; the shelter rent factor accounts for the
inflation in the rent of the residence but does not reflect any change
in the cost of utilities. The gross rent inflation factor is designated
as ``Highest Cost Utility Included'' and the shelter rent inflation
factor is designated as ``Highest Cost Utility Excluded.'' In the past,
HUD has calculated AAFs based on the shelter and gross rent inflation
factors used in FMR calculations. The source data for AAFs therefore
came from the 23 local and 4 regional CPI components (rent of primary
residence and household fuels and utilities) depending on the location
of the AAF area. HUD maintains the practice of updating the AAF
methodology in line with the FMR methodology changes that HUD adopted
for FY 2024. For FY 2024, HUD augmented the CPI data described above by
including available private data sources along with the CPI data in
calculating a weighted average shelter and gross rent inflation factor.
The private measures of rent used by HUD are the RealPage average
effective rent per unit, Moody's Analytics REIS average market rent,
CoStar Group average effective rent, CoreLogic, Inc. single-family
combined 3-bedroom median rent, Apartment List Rent Estimate, and
Zillow Observed Rent Index.
In calculating the AAF from these data, HUD first takes the annual
average of each statistic, then its year-to-year change. HUD then takes
the mean of changes from all available sources for each area. Next, HUD
takes an average of this private-sector measure of rent inflation with
rent inflation as captured by the CPI for the area, where the private-
sector measure is weighted at approximately 55.8 percent and the CPI
rent inflation measure is weighted at approximately 44.2 percent. HUD
has determined these weights by comparing the national average of the
private rent changes and changes in CPI rent of primary residence to
changes in the national average of recent mover rents from the ACS from
2017 through 2021. HUD weights the private data averages and overall
CPI rent of primary residence in such a way as to minimize the root
mean squared error between the resulting average and the ACS recent
mover rents. For future AAFs, HUD will update the weights by adding the
most recent years of ACS recent mover rents, private rent data, and CPI
rent of primary residence to the analysis.
HUD uses a local measure of private rent inflation for markets that
are covered by at least three of the six available sources of private
rent data. HUD combines this local measure of rent inflation with
either the local metropolitan area CPI rent of primary residence for
the 23 areas where such data exist, or the regional CPI rent in areas
without a local index. For areas without at least three of the six
private rent data sources available, HUD uses a regional average of
private rent inflation factors alongside the regional CPI rent of
primary residence. HUD constructs the regional average by taking the
rental unit weighted average of the change in rents of each area in a
region that does have private rent data coverage. This ensures that
smaller areas that are not covered by the private sources directly
still have current rental market conditions taken into account in the
calculation of the rent inflation factor for such areas.
The results of the above calculation are the ``utility excluded''
AAF. For the ``utility included'' AAF, HUD averages the result of this
step with the year-to-year change in the CPI housing fuels and
utilities index for the area in order to make the resulting inflation
measure reflective of gross rents.
VI. Area Definitions
To make certain that they are using the correct AAFs, users should
refer to the Area Definitions Table section at <a href="http://www.huduser.gov/portal/datasets/aaf.html">http://www.huduser.gov/portal/datasets/aaf.html</a>. Furthermore, users can also search for AAF
area definitions using an online lookup tool available on HUD User at
<a href="https://www.huduser.gov/portal/datasets/aaf.html">https://www.huduser.gov/portal/datasets/aaf.html</a>. AAFs are based on the
updated metropolitan area definitions published by the Office of
Management and Budget (OMB) on September 14, 2018, and first
incorporated by the Census Bureau into the 2019 American Community
Survey (ACS) data and the corresponding FY 2022 FMRs. On July 21, 2023,
OMB published Bulletin No. 23-01, which contains revisions to
metropolitan area definitions. However, the Census Bureau has not yet
incorporated these revisions into the data available to HUD, and
therefore HUD is not using these new definitions for FY 2024.
Solomon Greene,
Principal Deputy Assistant Secretary for Policy Development and
Research.
[FR Doc. 2024-06798 Filed 3-29-24; 8:45 am]
BILLING CODE 4210-67-P
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</html>Indexed from Federal Register on April 1, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.