PART 888—SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM—FAIR MARKET RENTS AND CONTRACT RENT ANNUAL ADJUSTMENT FACTORS Authority: 42 U.S.C. 1437f and 3535d. Source: 50 FR 38796, Sept. 25, 1985, unless otherwise noted. Editorial Note: For revisions and amendments affecting Schedules A, B, C, and D, issued under part 888, but not carried in the Code of Federal Regulations, see the List of CFR Sections Affected, in the Finding Aids section of the printed volume and at www.govinfo.gov. Subpart A—Fair Market Rents § 888.111 Fair market rents for existing housing: Applicability. (a) The fair market rents (FMRs) for existing housing are determined by HUD and are used in the Section 8 Housing Choice Voucher program (HCV program) (part 982 of this title), Section 8 project-based assistance programs and other programs requiring their use. In the HCV program, the FMRs are used to determine payment standard schedules. In the Section 8 project-based assistance programs, the FMRs are used to determine the maximum initial rent (at the beginning of the term of a housing assistance payments contract). (b) Fair market rent means the rent, including the cost of utilities (except telephone), as established by HUD, pursuant to this subpart, for units of varying sizes (by number of bedrooms), that must be paid in the market area to rent privately owned, existing, decent, safe and sanitary rental housing of modest (non-luxury) nature with suitable amenities. [64 FR 56911, Oct. 21, 1999, as amended at 81 FR 80580, Nov. 16, 2017] § 888.113 Fair market rents for existing housing: Methodology. (a) Basis for setting fair market rents. (b) Setting FMRs at the 40th percentile rent. (c) Setting Small Area FMRs. Federal Register Federal Register (i) The number of vouchers under lease in the metropolitan FMR area; (ii) The percentage of the standard quality rental stock, within the metropolitan FMR area is in small areas (ZIP codes) where the Small Area FMR is more than 110 percent of the metropolitan FMR area; (iii) The percentage of voucher families living in concentrated low income areas; (iv) The percentage of voucher families living in concentrated low income areas relative to the percentage of all renters within these areas over the entire metropolitan area; and (v) The vacancy rate for the metropolitan area. (2) For purposes of determining applicability of Small Area FMRs to a metropolitan area, the term “concentrated low-income areas” means: (i) Those census tracts in the metropolitan FMR area with a poverty rate of 25 percent or more; or (ii) Any tract in the metropolitan FMR area where at least 50 percent of the households earn less than 60 percent of the area median income and are designated by HUD as Qualified Census Tracts in accordance with section 42 of the Internal Revenue Code (26 U.S.C. 42). (3) If a metropolitan area meets the criteria of paragraph (c)(1) of this section, Small Area FMRs will apply to the metropolitan area and all PHAs administering HCV programs in that area will be required to use Small Area FMRs. A PHA administering an HCV program in either a metropolitan area not subject to the application of Small Area FMRs or in a non-metropolitan area for which HUD publishes Small Area FMRs may choose to use Small Area FMRs after notification to HUD. A PHA that exercises this option in one metropolitan area or non-metropolitan county is not required to exercise this option in other metropolitan areas or non-metropolitan counties. (4) HUD will designate Small Area FMR areas at the beginning of a Federal fiscal year, such designations will be permanent, and will make new area designations every 5 years thereafter as new data becomes available. HUD may suspend a Small Area FMR designation from a metropolitan area, or may temporarily exempt a PHA in a Small Area FMR metropolitan area from use of the Small Area FMRs, when HUD by notice makes a documented determination that such action is warranted. Actions that may serve as the basis of a suspension of Small Area FMRs are: (i) A Presidentially declared disaster area that results in the loss of a substantial number of housing units; (ii) A sudden influx of displaced households needing permanent housing; or (iii) Other events as determined by the Secretary. (5) Small Area FMRs only apply to tenant-based assistance under the HCV program. However, a PHA may elect to apply Small Area FMRs to project-based voucher (PBV) units at 24 CFR part 983 as provided in paragraph (h) of this section. (d) FMR areas. (1) Generally, FMR areas are metropolitan areas and nonmetropolitan counties. With several exceptions, the most current Office of Management and Budget (OMB) metropolitan area definitions of Metropolitan Statistical Areas (MSAs) are used because of their generally close correspondence with housing market area definitions. HUD may make exceptions to OMB definitions if the MSAs encompass areas that are larger than housing market areas. The counties deleted from the HUD-defined FMR areas in those cases are established as separate metropolitan county FMR areas. FMRs are established for all areas in the United States, the District of Columbia, and the Insular Areas of the United States. (2) Small Area FMR areas are the U.S. Postal Service ZIP code areas within a designated metropolitan area. (e) Data sources. (i) The most recent American Community Survey conducted by the U.S. Census Bureau, which provides statistically reliable rent data. (ii) Locally collected survey data acquired through Address-Based Mail surveys or Random Digit Dialing (RDD) telephone survey data, based on a sampling procedure that uses computers to select statistically random samples of rental housing. (iii) Statistically valid information, as determined by HUD, presented to HUD during the public comment and review period. (2) Base-year recent mover adjusted FMRs are updated and trended to the midpoint of the program year they are to be effective using Consumer Price Index (CPI) data for rents and for utilities. (f) Unit size adjustments. (2) The FMR for single room occupancy housing is 75 percent of the FMR for a zero bedroom unit. (g) Manufactured home space rental. (h) Small Area FMRs and project-based vouchers. (1) Where the proposal or project selection date under 24 CFR 983.51(g) was on or before the effective dates of either or both the Small Area FMR designation/implementation and the PHA administrative policy, the PHA and owner may mutually agree to apply the Small Area FMR. The application of the Small Area FMRs must be prospective and consistent with the PHA Administrative Plan. The owner and PHA may not subsequently choose to revert back to the use of the metropolitan-wide or county-wide FMRs for the PBV project. If the rent to owner will increase as a result of the mutual agreement to apply the Small Area FMRs to the PBV project, the rent increase shall not be effective until the next annual anniversary of the HAP contract in accordance with 24 CFR 983.302(b). (2) Where the proposal or project selection date under 24 CFR 983.51(g) was after the effective dates of both the Small Area FMR designation/implementation and the PHA administrative policy, the Small Area FMRs shall apply to the PBV project if the PHA Administrative Plan provides that Small Area FMRs are used for all future PBV projects. If the PHA chooses to implement this administrative policy, the Small Area FMRs must apply to all future PBV projects located within the same metropolitan area or non-metropolitan county where the Small Area FMRs are in effect for the PHA's HCV program. An owner and the PHA may not subsequently choose to apply the metropolitan area or county FMR to the project, regardless of whether the PHA subsequently changes its Administrative Plan to revert to the use of metropolitan-wide or county-wide FMR for future PBV projects. (3) For purposes of this section, the term “effective date of the Small Area FMR designation” means: (i) The date that HUD designated a metropolitan area as a Small Area FMR area; or (ii) The date that the PHA notified HUD it will use Small Area FMRs for its HCV program, as applicable. (4) For purposes of this section, the term “effective date” when used in reference to the PHA administrative policy means the effective date of the policy in the PHA Administrative Plan that has been formally adopted by the PHA Board of Commissioners or other authorized PHA officials in accordance with 24 CFR 982.54(a). (i) Transition of metropolitan areas previously subject to 50th percentile FMRs. (i) A 50th percentile FMR area that is designated for Small Area FMRs in accordance with paragraph (c) of this section will transition to the Small Area FMRs upon the effective date of the Small Area FMR designation; (ii) A 50th percentile metropolitan FMR area not designated as a Small Area FMRs in accordance with paragraph (c) of this section, will remain a 50th percentile FMR until the expiration of the three-year period, at which time the metropolitan area will revert to the standard FMR based on the 40th percentile rent for the metropolitan area. (2) A PHA with jurisdiction in a 50th percentile FMR area that reverts to the standard 40th percentile FMR may request HUD approval of payment standard amounts based on the 50th percentile rent in accordance with 24 CFR 982.503(g). (3) HUD will calculate the 50th percentile rents for certain metropolitan areas for this purpose. As is the case for determining 40th percentile rent, the 50th percentile rent is drawn from the distribution of rents of all units that are occupied by recent movers and adjustments are made to exclude public housing units, newly built units and substandard units. [81 FR 80580, Nov. 16, 2016, as amended at 89 FR 38291, May 7, 2024; 90 FR 56687, Dec. 8, 2025] § 888.115 Fair market rents for existing housing: Manner of publication. (a) Publication of FMRs. Federal Register, Federal Register e.g. Federal Register (b) Changes in methodology. Federal Register Federal Register [81 FR 80581, Nov. 16, 2016] Subpart B—Contract Rent Annual Adjustment Factors § 888.201 Purpose. Automatic Annual Adjustment Factors are used to adjust rents under the Section 8 Housing Assistance Payments Program. [44 FR 75383, Dec. 20, 1979] § 888.202 Manner of publication. Adjustment Factors will be published in the Federal Register [42 FR 60508, Nov. 25, 1977, as amended at 44 FR 75383, Dec. 20, 1979; 47 FR 4252, Jan. 29, 1982] § 888.203 Use of contract rent automatic annual adjustment factors. (a) To compute an adjustment to a Contract Rent, find the schedule of Automatic Annual Adjustment Factors for the appropriate Census Region or Standard Metropolitan Statistical Area— (1) If the Contract Rent includes all utilities, use the factor shown on the basic schedule for the rent bracket within which the particular Contract Rent falls and for the applicable size of unit (by number of bedrooms). (2) If the Contract Rent does not include all utilities but does include the highest cost utility, use the appropriate factor shown on the basic schedule. (3) If the Contract Rent does not include any utilities or includes some utilities but not the highest cost utility, use the Annual Adjustment Factor for Contract Rent (Excluding Utilities). (b) The adjusted monthly amount of the Contract Rent of a dwelling unit shall be determined by multiplying the Contract Rent in effect on the anniversary date of the contract by the applicable Automatic Annual Adjustment Factor (see paragraph (a) of this section) and rounding the result as follows: (1) If the result contains a fractional dollar amount ranging from $0.01 to $0.49, round to the next lower whole dollar amount; (2) If the result contains a fractional dollar amount ranging from $0.50 to $0.99, round to the next higher whole dollar amount. [42 FR 60508, Nov. 25, 1977, as amended at 44 FR 21769, Apr. 12, 1979; 47 FR 4252, Jan. 29, 1982; 59 FR 38564, July 29, 1994] § 888.204 Revision to the automatic annual adjustment factors. If the application of the Annual Adjustment Factors results in rents that are substantially lower than rents charged for comparable units not receiving assistance under the U.S. Housing Act of 1937, in the area for which the factor was published or a portion thereof, and it is shown to HUD that the costs of operating comparable rental housing have increased at a substantially greater rate than the Adjustment Factors, the HUD Field Office will consider establishing separate or revised Automatic Annual Adjustment Factors for that particular area. Any request for revision of the factors must be accompanied by an identification of the area, its boundaries and evidence that the area constitutes the largest contiguous area in which substantially the same rent levels prevail. The HUD Field Office will publish appropriate notice of the establishment of any such revised Automatic Annual Adjustment Factors. These factors will remain in effect until superseded by the subsequent publication of Automatic Annual Adjustment Factors pursuant to § 888.202. [44 FR 21769, Apr. 12, 1979] Subpart C—Retroactive Housing Assistance Payments for New Construction, Substantial Rehabilitation, State Finance Agencies, Section 515 Farmers Home Administration, Section 202 Elderly or Handicapped, and Special Allocations Projects Source: 56 FR 20084, May 1, 1991, unless otherwise noted. § 888.301 Purpose and scope. (a) Purpose. (b) Applicability. (c) Eligible project owners. (1) The use of a comparability study by HUD (or the Contract Administrator), which was conducted as an independent limitation on the amount of rent adjustment that would have resulted from use of the applicable AAF, resulted in the reduction of the maximum monthly Contract Rents for units covered by a Housing Assistance Payments (HAP) contract or resulted in less than the maximum increase for those units than would otherwise be permitted by the AAF; or (2) The HAP contract required a project owner to request annual rent adjustments, and the project owner certifies that a request was not made because of an anticipated reduction of the maximum monthly Contract Rents resulting from a comparability study. § 888.305 Amount of the retroactive Housing Assistance Payments. (a) Recalculating the total rent adjustment. (b) Calculating the retroactive payment. (c) Occupancy rates. (2) When requesting retroactive payment, a project owner must, if the information is available, submit documentation of occupancy rates, on either an annual or monthly basis, for the same time period. The average occupancy rate will be based on these records. If records are unavailable for the full time period, HUD (or the Contract Administrator) will establish an average occupancy rate, to be used for the entire period, from the occupancy rate for the three years immediately preceding May 31, 1991. (d) Revised AAFs. (e) Special adjustments. (f) AAFs less than 1.0. (g) Debt service. (2) The monthly debt service set forth in the original mortgage documents for a project will be used to compute the debt service portion of the contract rent. The debt service will be compared to the spread of unit sizes included in the original HAP contract, and the amount used in the calculation will be based on the percentage of total rent potential of the various unit types. (3) If, in some cases, HUD or the Contract Administrator cannot determine the debt service for a project, the project owner will be asked to provide documentation of the debt service. The project owner will be notified by the HUD Field Office or the Contract Administrator of the need for documentation of the debt service, and allowed 30 days to respond, or for such longer period as approved by HUD or the Contract Administrator on a case-by-case basis. Where the debt service is not available to HUD or the Contract Administrator and the owner is unable to provide the necessary information, retroactive payments cannot be made. (h) Applicable AAF. (Approved by the Office of Management and Budget under control number 2502-0042) § 888.310 Notice of eligibility requirements for retroactive payments. (a) Notice of eligibility requirements. (b) Request for payment. (2) Owners whose HAP contract requires a request to be made for annual rent adjustments must certify that a request was not made because of an anticipated reduction in the Contract Rents as a result of a comparability study. The certification must contain the year or years upon which the request for payment is based and a statement of the basis for the belief that rents would have been reduced. (3) Retroactive payments will be made to owners over a three-year period as funds are appropriated for that purpose. When funds are available for payment, HUD will publish a Federal Register (c) Request for one-time contract rent determination. (d) Transfer of ownership since October 1, 1979. (Approved by the Office of Management and Budget under control number 2502-0042) § 888.315 Restrictions on retroactive payments. (a) Restrictions on distribution of surplus cash. (b) Replacement reserve. (c) Physical condition of HUD-insured or State-financed projects. § 888.320 One-time Contract Rent determination. (a) Determining the amount of the new Contract Rent. (1) The Contract Rent currently approved by HUD (or the Contract Administrator); or (2) An amount equal to the applicable AAF multipled by the Contract Rent minus debt service, calculated for each year from October 1, 1979, to May 31, 1991. (b) Currently approved rent. (c) Effective date of new Contract Rent. (Approved by the Office of Management and Budget under control number 2505-0042) Subpart D—Retroactive Housing Assistance Payments for Moderate Rehabilitation Projects Source: 56 FR 20085, May 1, 1991, unless otherwise noted. § 888.401 Purpose and scope. (a) Purpose. (b) Applicability. (c) Eligible project owners. (1) The use of a comparability study by the Public Housing Agency (PHA) as contract administrator, which was conducted as an independent limitation on the amount of rent adjustment that would have resulted from use of the applicable AAF, resulted in the reduction of the maximum monthly Contract Rents for units covered by a Housing Assistance Payments (HAP) contract or resulted in less than the maximum increase for those units than would otherwise be permitted by the AAF; or (2) The project owner certifies that a request for an annual rent adjustment was not made because of an anticipated reduction of the maximum monthly Contract Rents resulting from a comparability study. § 888.405 Amount of the retroactive Housing Assistance Payments. (a) Recalculating the total rent adjustment. (b) Calculating the retroactive payment. (c) Occupancy rate. (2) When requesting a retroactive payment, a project owner must, if the information is available, submit documentation of occupancy rates, on either an annual or monthly basis, for the same time period. The average occupancy rate will be based on these records. If records are unavailable for the full time period, the PHA will establish an average occupancy rate, to be used for the entire period, from the occupancy rate for the three years immediately preceding May 31, 1991. (d) Revised AAFs. (e) Special adjustments. (f) AAFs less than 1.0. (Approved by the Office of Management and Budget under control number 2502-0042) § 888.410 Notice of eligibility requirements for retroactive payments. (a) Notice of eligibility requirements. (b) Request for payment. (2) Owners claiming eligibility under § 888.401(c)(2) must certify that a request was not made because of an anticipated reduction in the Contract Rents as a result of a comparability study. The certification must contain the year or years upon which the request for payment is based and a statement of the basis for the belief that rents would have been reduced. (3) Retroactive payments will be made to owners over a three-year period as funds are appropriated for that purpose. When funds are available for payment, HUD will publish a Federal Register (c) Request for one-time contract rent determination. (d) Transfer of ownership since October 1, 1979. (Approved by the Office of Management and Budget under control number 2502-0042) § 888.415 Restrictions on retroactive payments. (a) Restrictions. (b) Review of initial rents. (c) Physical condition of projects. § 888.420 One-time Contract Rent determination. (a) Determining the amount of the new Contract Rent. (1) The Contract Rent currently approved by the PHA; or (2) An amount equal to the Contract Rent as adjusted to May 31, 1991 under § 888.405(a). (b) Currently approved rent. (c) Effective date of new Contract Rent. (Approved by the Office of Management and Budget under control number 2502-0042)