HUD is requesting public comment on recently proposed methodological changes to Fair Market Rents (FMRs). Please submit comments to us regarding the attached Federal Register notice by Wednesday, July 3, 2019.
Please also note that NAHMA is still accepting comments on HUD’s proposed immigration verification rule until Friday, June 28, 2019. More info on the proposed rule is available here. To date, NAHMA has received feedback from only a few members on this rule, which impacts the entire industry.
HUD proposes methodological changes to Fair Market Rents (FMRs)
An area’s Fair Market Rent is the amount that would be needed to pay rent plus utility costs of privately owned, non-luxury, decent, and safe rental housing. HUD’s FMR calculations are used to determine maximum monthly subsidy amounts in the Housing Choice Voucher (HCV) program; initial renewal rents for some expiring project-based Section 8 contracts; initial rents for housing assistance payment (HAP) contracts in the Mod Rehab program; rent ceilings for the HOME program; flat rent levels in Public Housing units; and homeless grant programs.
In recent years, the most prevalent comments concerns FMRs are that FMRs need to incorporate more local and more timely data. In response to the accuracy and timeliness concerns, HUD has proposed two changes in how FMRs are estimated and seeks public comment on the proposed changes.
Proposed changes to the FMR calculation
- Trends Factors
Commenters on prior year’s FMRs have remarked that FMRs are not timely enough or based enough on local information and that this may cause operational difficulties in the program operations for the HCV program. The multi-disciplinary team HUD tasked examined multiple models and model structures for forecasting shelter rent and utility components of gross rent at the local level.
As a result of the recommendations provided by the research team, HUD is proposing to use metropolitan and regional Gross Rent Index forecasts to calculate and apply more locally-based trend factors to address concerns of FMR accuracy. To ensure transparency in this process, HUD will include the model specification used to calculate local trend factors for each area and in the online Fair Market Rent Documentation System.
- Using Neighboring Zip Codes in Place of County-Based Small Area FMRs
In calculating Small Area Fair Market Rents (SAFMRs), HUD attempts to use Zip Code level estimates where possible. In cases where Zip Code level estimates are not available or are not reliable, HUD’s current practice is to assign a SAFMR based on the gross rents estimate for the county; however, county SAFMRs may not be a an accurate proxy for neighborhood-level rents and run counter to the purpose of Small Area FMRs, which is to differentiate rents within a metropolitan area.
To address this, HUD is proposing an additional step. I a ZIP CODE does not have reliable rent data, HUD will then check to see if the area is bordered by a ZIP Code that themselves have reliable rent data. If at least half of the Zip Code’s “neighbors” have such data, a weighted average of those estimates will be used as the basis for the SAFMR rather than a county proxy.
To assist in evaluating this proposed change, HUD is publishing a file with actual FY2019 SAFMRs and hypothetical FY 2019 SAFMRS for ZIP Codes affected by the County-level calculation change (proposed local trend factor changes not included).
HUD is requesting feedback on the following:
- HUD’s proposed methodology changes are not monodirectional; for example, the use of local forecast trend factors will cause FMRs to be higher in some areas and lower in others compared to using a national forecast trend factors.
- HUD is particularly interested in receiving comments on its intended approach for evaluating the accuracy of local trend factors and is interested in potential alternative methods for assessing the best local forecast model to select.
Please send us your comments on FMR calculation methodology by Wednesday, July 3, 2019, and your comments on HUD’s proposed immigration verification rule by Friday, June 28, 2019.