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Fair Market Rents

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Introductory

Overview

Prepared By:

Program Parameters and Research Division

Office of Economic Affairs

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Overview

Fair Market Rents (FMR)

    • What are FMRs?
    • Statutory and Regulatory Matters
    • How are FMRs Used?
    • Timelines
    • The Methodology

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Resources, Next Steps, & Questions

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What are FMRs?

  • FMRs = Gross Rent
    • Cost of the Shelter plus utilities (regardless who pays)
    • Utilities
      • All major utilities except telephone, cable or satellite television, and Internet services
    • Contract rent
      • The rental payment agreed to in a lease - could be Shelter Rent, Gross Rent, or somewhere in between

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  • FMRs are calculated across the country for:
    • OMB Defined Metro Areas and some “HUD Metro FMR Areas - HMFAs”
    • Non-Metropolitan Counties
    • October 1 Effective date

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Metropolitan Areas

  • OMB defined metropolitan areas based on Core-Based Statistical Areas
  • HUD Exceptions to OMB Metropolitan Areas
    • New England: Before 2000, metro areas were based on towns; To prevent large changes in FMRs, HUD maintains the town-based metro area definitions
    • HUD Metro FMR Areas were created where the county added to a metropolitan area that had its own rent or income limit would have a difference of more than five percent
    • New county additions since the FY 2006 FMRs have not been added to a metropolitan area where they have their own usable data

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Statutory and Regulatory Matters

  • Statute: 42 USC 1437f
    • “Most recent data available”
    • Requests for Re-evaluation
      • New FMRs placed on hold during re-evaluation period

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  • Regulations: 24 CFR 888.113
    • Calculated at the 40th percentile
    • Data sources to include local area surveys
    • Rules for required Small Area FMR use

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How are FMRs used?

  • HUD uses FMRs primarily to help determine the following:
    • Payment standard amounts for the Section 8 Housing Choice Voucher program (Between 90 percent and 110 percent of the FMR)

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    • Public Housing Flat Rents (Must be at 80% of FMR or more)

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    • Renewal Funding Inflation Factor Calculations (Annual FMR Change)

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    • Initial renewal rents for some expiring project-based Section 8 contracts.

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    • Initial rents for housing assistance payment (HAP) contracts in the Moderate Rehabilitation Single Room Occupancy program (Mod Rehab).

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    • Rent ceilings in both the HOME rental assistance program and the Emergency Solution Grants program.

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    • Calculation of Grant Amounts and establishes maximum rents to Continuum of Care Grantees

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FMR Timelines

  • FY 2024 FMR Timeline:

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Effective 10/1/2023

Federal Register Notice publication NLT 8/31/23

Calculations Complete NLT 08/2023

FMRs Calculated in

04-08/2023

2021 ACS Public Data Released: 9/2022 1-Year Data, 12/2022 5-Year Data

2022 CPI Data Available

01/2023

HUD’s Special Tabulation (HUD’s Geography and Standard Quality Rents) of ACS Data 1Q/23

Notice of Proposed

FMR Methodology

Changes [Must be published with 30-day comment period ending no later than early July]

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FMR Methodology

  • FMRs are based on Standard Quality (SQ), Recent Mover (RM) Rents

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  • Most areas begin with a new benchmark
    • A standard quality rent from the 5-Year ACS (Puerto Rico uses the Puerto Rico Community Survey)
    • US Virgin Islands, Pacific Islands (American Samoa, Guam, Northern Marianas) based on Decennial Census data

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  • Recent Mover Adjustment
    • Relationship between 5-Year SQ and 1-Year RM Rents
    • Find smallest area with statistically valid 1-YR RM data
    • First examine single-year RMs, then two-year RMs
    • Cannot be less than 1
    • Multiply new benchmark rent (from 5-year SQ data) by Recent Mover Factor, so FMR is based on 1-year data for virtually all metropolitan areas.

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FMR Methodology (cont’d)

  • Inflation Adjustment
    • CPI measured 1-year change in gross rents for CPI metro areas and 4 Census Regions
    • Private rent measured 1-year change in gross rents for metro areas where available and 4 Census Regions
    • Take weighted average of the two such that the national weighted average change matches that of the national ACS recent mover rent

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  • Trend Factor
    • HUD forecast of expected growth in gross rents for CPI Metro areas and 4 Census Regions

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FMR Calculations

ACS Based Measure of Gross Rents Paid by Recent Movers

(5-year and 1-year)

2021

Gross Rent Inflation Adjustment

Private Rent Data & BLS CPI Based

2021 to 2022

HUD Forecasted Expected Growth in Gross Rents Trend Factor

2022 to FY 2024

FY 2024

Fair Market Rent

Local Estimates

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Available metro areas covered by at least 3 Private Data Sources and BLS Metro Area and Census Region

BLS Metro Area and Census Region

X

X

=

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Small Area FMRs

  • Small Area FMRs set by Zip Codes within Metropolitan Areas

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    • Provide tenants greater Mobility Options to move to “Opportunity Neighborhoods”

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      • Jobs, Transportation, Good Schools

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    • Multiple Payment Standards in a Metro Area

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    • Reduce undue subsidy in lower-rent areas

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  • Required in administering the Housing Choice Voucher Program in 24 Metropolitan Areas

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Resources

  • Fair Market Rents
    • http://www.huduser.org/portal/datasets/fmr.html
      • Query Tool Tab: Online Documentation System providing step by step details of FMR Calculations
      • Documents Tab: Official versions of Federal Register Notices, FMR Schedules, and other information
      • Data Tab: Electronic Versions of FMR Data

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  • FMR Surveys
    • https://www.huduser.gov/portal/datasets/fmr.html#fmrsurvey

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  • Historical Data
    • https://www.huduser.gov/portal/datasets/fmr.html#history

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  • OMB Bulletin – Metropolitan Area Definitions
    • https://www.whitehouse.gov/omb/bulletins/

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Questions / Concerns

  • Contact the staff of the Program Parameters and Research Division at:
    • pprd@hud.gov

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