Notice2025-10040
Section 8 Housing Assistance Payments Program-Fiscal Year (FY) 2025 Inflation Factors for Public Housing Agency (PHA) Renewal Funding
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Published
June 3, 2025
Issuing agencies
Housing and Urban Development Department
Abstract
This notice establishes Renewal Funding Inflation Factors (RFIFs) to adjust Fiscal Year (FY) 2025 renewal funding for the Housing Choice Voucher (HCV) Program of each public housing agency (PHA), as required by the Full-Year Continuing Appropriations and Extensions Act, 2025. The notice apportions the expected percent change in national Per Unit Cost (PUC) for the HCV program, 4.71 percent, to each PHA based on the change in Fair Market Rents (FMRs) for their operating area to produce the FY 2025 RFIFs. HUD has refined its FY 2025 methodology to adopt a national PUC forecast by changing the gross rent component in a manner that empirically weights projected recent mover rents as measured by the FMR with an independent forecast of all-mover rents as measured by the Consumer Price Index (CPI).
Full Text
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<title>Federal Register, Volume 90 Issue 105 (Tuesday, June 3, 2025)</title>
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[Federal Register Volume 90, Number 105 (Tuesday, June 3, 2025)]
[Notices]
[Pages 23540-23541]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-10040]
[[Page 23540]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-6526-N-01]
Section 8 Housing Assistance Payments Program-Fiscal Year (FY)
2025 Inflation Factors for Public Housing Agency (PHA) 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) 2025 renewal funding for the Housing
Choice Voucher (HCV) Program of each public housing agency (PHA), as
required by the Full-Year Continuing Appropriations and Extensions Act,
2025. The notice apportions the expected percent change in national Per
Unit Cost (PUC) for the HCV program, 4.71 percent, to each PHA based on
the change in Fair Market Rents (FMRs) for their operating area to
produce the FY 2025 RFIFs. HUD has refined its FY 2025 methodology to
adopt a national PUC forecast by changing the gross rent component in a
manner that empirically weights projected recent mover rents as
measured by the FMR with an independent forecast of all-mover rents as
measured by the Consumer Price Index (CPI).
DATES: Applicability Date: June 3, 2025.
FOR FURTHER INFORMATION CONTACT: Miguel A. Fontanez, Director, Housing
Voucher Financial Division, Office of Public Housing and Voucher
Programs, Office of Public and Indian Housing, Room 4222, U.S.
Department of Housing and Urban Development, 451 Seventh Street SW,
Washington, DC 20410; telephone (202) 422-0278 (this is not a toll-free
number). Adam Bibler, Program Parameters and Research Division, Office
of Policy Development and Research, Room 8208, U.S. Department of
Housing and Urban Development, 451 Seventh Street SW, Washington, DC
20410; telephone (202) 402-6057 (this is not a toll-free number), for
technical information regarding the development of the schedules for
specific areas or the methods used for calculating the inflation
factors. 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:
I. Background
The Full-Year Continuing Appropriations and Extensions Act, 2025,
generally, appropriates amounts ``under the authority and conditions
provided in applicable appropriations Acts for fiscal year 2024.'' This
includes the 2024 Consolidated Appropriations Act, which provided
``renewal funding for each public housing agency (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, by notice published in the Federal Register.'' This
notice announces the FY 2025 inflation factors and describes the
methodology for calculating them. Tables in PDF and Microsoft Excel
formats showing Renewal Funding Inflation Factors (RFIFs) by HUD Fair
Market Rent Area are available electronically from the HUD data
information page at: <a href="https://www.huduser.gov/portal/datasets/rfif/rfif.html">https://www.huduser.gov/portal/datasets/rfif/rfif.html</a>.
II. Methodology
RFIFs are used to adjust the allocation of Housing Choice Voucher
(HCV) renewal 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 Per Unit Cost (PUC). HUD then calculates individual area
inflation factors, which are based on the annual changes in the two-
bedroom Fair Market Rent (FMR) for each area. Finally, HUD adjusts the
individual area inflation factors to be consistent with the national
inflation factor.\1\
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\1\ See 42 U.S.C. 1437f(dd).
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Since FY 2017, HUD's method of projecting the national average PUC
has been based on independent 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
Budget. The forecast for gross rent is itself based on forecasts of the
Consumer Price Index (CPI) Rent of Primary Residence Index and the CPI
Fuels and Utilities Index. Forecasted values of gross rent series were
then applied to the relevant FY national average two-bedroom FMR to
produce a CY value. Finally, a ``notional'' PUC is then calculated as
the difference between gross rent value and 30 percent of tenant income
(the standard for tenant rent contribution in the voucher program). 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.
In FY 2024 FMR calculation,\2\ HUD permanently began to supplement
the use of the CPI in part with rates of rental inflation as captured
by private sector rent data. This was done as the FMR is required by
regulation to reflect rents paid by ``recent movers'' and to better
capture the divergence between recent mover rents and overall rents as
seen in the years following the COVID-19 economic recession. ``Recent
movers'' are generally renter households that moved to their present
residences within the past one or two years, depending on data
availability. For purposes of forecasting Per Unit Costs however, the
gross rent component should represent all types of tenants in the
Housing Choice Voucher program including new admissions and recent
movers, as well as those staying in place. To better reflect the
composition of tenants in the Housing Choice Voucher program, HUD
developed two independent methods of projecting the national average
PUC to reflect both recent movers and all-mover rents. In the first
approach, HUD develops a gross rent inflation factor using a weighted
average of the established CY FMR projection and independent CY CPI
gross rent index forecast methodology where the weights were determined
empirically in a manner that best predicts the historical average
voucher tenant gross rents. Under the second approach, HUD takes a
weighted average of the CY FMR projection and independent CY CPI gross
rent index forecast, where the weights are based on the historical
composition of new admissions and recent movers based on HUD
administrative data. Because each novel approach was based on
independent assumptions and limitations, HUD elected to take the
average of both approaches to estimate a CY 2024 PUC.
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\2\ See 24 CFR 888.113. Regulations citing FMRs are based on
40th percentile rents drawn from distribution of recent movers.
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For FY 2025, HUD is electing to permanently adopt the first
approach, whereby HUD determines the FMR and CPI weights empirically in
a manner that best predicts the historical average voucher tenant gross
rents. This approach is consistent with HUDs process of calculating FMR
gross rent inflation factors based on CPI and private sector rent data.
Furthermore, HUD's analysis of more than 20 years of historical voucher
PUC, FMR, and CPI
[[Page 23541]]
rent data found that this weighted method does the best job of
predicting actual voucher rents, which suggests that it will be the
most accurate and cost-effective method for program-wide and PHA-level
budgeting. By considering the time series of actual rents, these
weights are likely capturing important dynamics of the real-world
dynamics of the voucher program. There is also evidence to suggest that
even non-movers in the voucher program may experience higher rates of
rent inflation, such as existing tenants having rents exceeding payment
standards or landlords pricing units based on FMR regardless of unit
turnover. While recent market trends have suggested a convergence in
recent mover and all mover rents, HUD expects this methodology to most
appropriately capture any sudden rental market dynamics between the two
data measures should they arise.
For FY 2025, HUD develops a gross rent inflation factor using a
weighted average of the established CY FMR projection and independent
CY CPI gross rent index forecast methodology, where the FMR is weighted
at approximately 56 percent and the CPI gross rent inflation index
measure is weighted at approximately 44 percent. HUD determined the
weights empirically in a manner that best predicts the historical
average voucher tenant gross rents.\3\ The change between the
forecasted CY 2025 notional PUC and the CY 2024 notional PUC is the
expected national change in PUC, or 4.71 percent.
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\3\ Specifically, HUD attempted to predict each year's tenant
gross rent using a weighted average of FMR and CPI change, then
compared the predicted gross rent to the actual historical gross
rent. HUD then generated an error measure as the difference between
the predicted and actual rent. HUD then solved for the weights that
minimize the root mean squared error of the predicted and actual
rents.
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HUD's forecasts of the Consumer Price Index (CPI) Rent of Primary
Residence Index, CPI Fuels and Utilities Index and HUD tenant incomes
remain consistent with the Economic Assumptions of the Administration's
FY 2026 Budget. For more information on HUD's forecast methodology, see
82 FR 26710 (June 8, 2017).
The inflation factor for an individual geographic area is based on
the annualized change in the area's FMR between FY 2024 and FY 2025.
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 2024 to CY 2025, 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, 2024.
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 in the
FY 2025 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: <a href="http://www.huduser.org/portal/datasets/rfif/FY2025/FY2025_RFIF_FMR_AREA_REPORT.pdf">http://www.huduser.org/portal/datasets/rfif/FY2025/FY2025_RFIF_FMR_AREA_REPORT.pdf</a>. 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 <a href="https://www.huduser.gov/portal/datasets/rfif/rfif.html">https://www.huduser.gov/portal/datasets/rfif/rfif.html</a>.
Note that, as described earlier, the actual renewal funding inflation
factor applied to agency funding will be the voucher-weighted average
of the FMR area factors when the PHA operates in multiple areas.
V. Environmental Impact
This notice involves a statutorily required establishment of a rate
or cost determination which does 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).
John Gibbs,
Principal Deputy Assistant Secretary for Policy Development and
Research.
[FR Doc. 2025-10040 Filed 6-2-25; 8:45 am]
BILLING CODE 4210-67-P
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