Federal Register: August 13, 2004 (Volume 69, Number 156)
DOCID: FR Doc 04-18502
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Housing and Urban Development Department
Docket ID: [Docket No. FR-4728-N-04]
NOTICE: NOTICES
ACTION: Low income housing:
DOCUMENT ACTION: Publication of the 2005 Operating Cost Adjustment Factors (OCAFs) for Section 8 rent adjustments at contract renewal under section 524 of the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA), as amended by the Preserving Affordable Housing for Senior Citizens and Families into the 21st Century Act of 1999, and under the LowIncome Housing Preservation and Resident Homeownership Act of 1990 (LIHPRHA) Projects assisted with Section 8 Housing Assistance Payments.
SUBJECT CATEGORY:
Notice of Certain Operating Cost Adjustment Factors for 2005
EFFECTIVE DATES: February 11, 2005.
DOCUMENT SUMMARY:
This notice establishes annual factors used in calculating rent adjustments under section 524 of MAHRA as amended by the Preserving Affordable Housing for Senior Citizens and Families into the 21st Century Act of 1999, and under LIHPRHA.
SUMMARY:
Housing assistance payments (Section 8)—; Operating cost adjustment factors,
SUPPLEMENTAL INFORMATION
I. Operating Cost Adjustment Factors (OCAFs)
Section 514(e)(2) of the FY 1998 HUD Appropriations Act, requires HUD to establish guidelines for rent adjustments based on an operating cost adjustment factor (OCAF). The legislation requiring HUD to establish OCAFs for LIHPRHA projects and projects with contract renewals under section 524 of MAHRA is similar in wording and intent. HUD has therefore developed a single factor to be applied uniformly to all projects utilizing OCAFs as the method by which rents are adjusted.
Additionally, section 524 of the Act gives HUD broad discretion in setting OCAFsreferring simply to ``operating cost factors established by the Secretary.'' The sole exception to this grant of authority is a specific requirement that application of an OCAF shall not result in a negative rent adjustment. OCAFs are to be applied uniformly to all projects utilizing OCAFs as the method by which rents are adjusted upon expiration of the term of the contract. OCAFs are applied to project contract rent less debt service.
An analysis of cost data for FHAinsured projects showed that their operating expenses could be grouped into nine categories: wages, employee benefits, property taxes, insurance, supplies and equipment, fuel oil, electricity, natural gas, and water and sewer. Based on an analysis of these data, HUD derived estimates of the percentage of routine operating costs that were attributable to each of these nine expense categories. Data for projects with unusually high or low expenses due to unusual circumstances were deleted from analysis.
States are the lowest level of geographical aggregation at which there are enough projects to permit statistical analysis. Additionally, no data were available for the Western Pacific Islands. Data for Hawaii was therefore used to generate OCAFs for these areas.
The best current measures of cost changes for the nine cost
categories were selected. The only categories for which current data
are available at the state level are for fuel oil, electricity, and
natural gas. Current price change indices for the other six categories
are only available at the national level. The Department had the choice of using
[[Page 50209]]
dated statelevel data or relatively current national data. It opted to
use national data rather than data that would be two or more years
older (e.g., the most current local wage data are for 2002). The data
sources for the nine cost indicators selected were as follows:
Labor Costs3/03 to 3/04 Bureau of Labor Statistics (BLS), Employment Cost Index, Private Sector Wages and Salaries Component at the National Level.
Employment Benefit Costs3/03 to 3/04 BLS Employment Cost Index, Employee Benefits at the National Level.
Property Taxes3/03 to 3/04 BLS Consumer Price Index, All Items Index.
Goods, Supplies, Equipment3/03 to 3/04 BLS Producer Price Index, Finished Goods Less Food and Energy.
Insurance3/03 to 3/04 BLS Consumer Price Index, Tenant and Household Residential Insurance Index.
Fuel OilEnergy Information Agency, consumptionweighted 2002 to
2003 yearend annual average state prices for
ElectricityEnergy Information Agency, consumptionweighted 2002 to 2003 yearend annual average residential electric prices per Kilowatthour.
Natural GasEnergy Information Agency, consumptionweighted 2002 to 2003 yearend annual average natural gas prices.
Water and Sewer3/03 to 3/04 BLS Consumer Price Index Detailed Report.
The sum of the nine cost components equals 100 percent of operating costs for purposes of OCAF calculations. To calculate the OCAFs, the selected inflation factors are multiplied by the relevant statelevel operating cost percentages derived from the previously referenced analysis of FHA insured projects. For instance, if wages in Virginia comprised 50 percent of total operating cost expenses and wages increased by 4 percent from June 2003 to June 2004, the wage increase component of the Virginia OCAF for 2005 would be 2.0 percent (4% x 50%). This 2.0 percent would then be added to the increases for the other eight expense categories to calculate the 2005 OCAF for Virginia. These types of calculations were made for each state for each of the nine cost components, and are included as the Appendix to this notice. II. MAHRA and LIHPRHA OCAF Procedures
MAHRA (Title V of Pub. L. 10565, approved October 7, 1997; 42 U.S.C. 1437f note) as amended by the Preserving Affordable Housing for Senior Citizens and Families into the 21st Century Act of 1999, created the MarktoMarket Program to reduce the cost of federal housing assistance, enhance HUD's administration of such assistance, and ensure the continued affordability of units in certain multifamily housing projects. Section 524 of MAHRA authorizes renewal of Section 8 project based assistance contracts for projects without Restructuring Plans under the MarktoMarket Program, including renewals that are not eligible for Plans and those for which the owner does not request Plans. Renewals must be at rents not exceeding comparable market rents except for certain projects. For Section 8 Moderate Rehabilitation projects, other than single room occupancy projects (SROs) under the Stewart B. McKinney Homeless Assistance Act (McKinney Act, 42 U.S.C. 11301 et seq.), that are eligible for renewal under section 524(b)(3) of MAHRA, the renewal rents are required to be set at the lesser of: (1) The existing rents under the expiring contract, as adjusted by the OCAF; (2) fair market rents (less any amounts allowed for tenant purchased utilities); or (3) comparable market rents for the market area.
LIHPRHA (see, in particular, section 222(a)(2)(G)(i) of LIHPRHA, 12
U.S.C. 4112(a)(2)(G)(i) and the regulations at 24 CFR 248.145(a)(9)(i))
requires that future rent adjustments for LIHPRHA projects be made by
applying an annual factor to be determined by the Secretary to the
portion of project rent attributable to operating expenses for the
project and, where the owner is a priority purchaser, to the portion of project rent attributable to project oversight costs.
III. Findings and Certifications
Environmental Impact
This issuance sets forth rate determinations and related external administrative requirements and procedures that do 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). Catalog of Federal Domestic Assistance Number
The Catalog of Federal Domestic Assistance Number for this program is 14.187.
Dated: August 3, 2004.
John C. Weicher,
Assistant Secretary for HousingFederal Housing Commissioner. Operating Cost Adjustment Factors for 2005
Percent
Alabama....................................................... 2.6
Alaska........................................................ 4.1
Arizona....................................................... 2.0
Arkansas...................................................... 2.9
California.................................................... 2.7
Colorado...................................................... 3.5
Connecticut................................................... 4.3
Delaware...................................................... 2.5
Dist. of Columbia............................................. 3.3
Florida....................................................... 3.1
Georgia....................................................... 3.1
Hawaii........................................................ 3.2
Idaho......................................................... 1.9
Illinois...................................................... 3.8
Indiana....................................................... 3.0
Iowa.......................................................... 3.7
Kansas........................................................ 3.3
Kentucky...................................................... 3.2
Louisiana..................................................... 3.9
Maine......................................................... 3.6
Maryland...................................................... 2.9
Massachusetts................................................. 4.0
Michigan...................................................... 3.2
Minnesota..................................................... 3.9
Mississippi................................................... 2.8
Missouri...................................................... 2.8
Montana....................................................... 4.5
Nebraska...................................................... 3.1
Nevada........................................................ 1.9
New Hampshire................................................. 3.5
New Jersey.................................................... 3.7
New Mexico.................................................... 2.7
New York...................................................... 3.7
N. Carolina................................................... 2.4
N. Dakota..................................................... 3.6
Ohio.......................................................... 3.0
Oklahoma...................................................... 3.6
Oregon........................................................ 2.2
Pennsylvania.................................................. 2.8
Rhode Island.................................................. 3.7
S. Carolina................................................... 2.6
S. Dakota..................................................... 3.8
Tennessee..................................................... 2.6
Texas......................................................... 4.5
Utah.......................................................... 2.6
Vermont....................................................... 2.5
Virginia...................................................... 3.1
Washington.................................................... 2.4
W. Virginia................................................... 2.3
Wisconsin..................................................... 3.3
Wyoming....................................................... 3.3
Pacific Islands............................................... 3.4
Puerto Rico................................................... 2.6
Virgin Islands................................................ 2.7
U.S. Average.................................................. 3.3 [FR Doc. 0418502 Filed 81204; 8:45 am]
BILLING CODE 421027P
FOR FURTHER INFORMATION CONTACT
Regina Aleksiewicz, Housing Project Manager, Office of Housing Assistance and Grant Administration, Department of Housing and Urban Development, Office of Multifamily Housing, 451 Seventh Street, SW., Washington, DC 204108000; telephone (202) 7083000; extension 2600 (This is not a tollfree number). Hearing or speechimpaired individuals may access this number via TTY by calling the tollfree Federal Information Relay Service at 800877 8339.