The Department of Housing and Urban Development (HUD) published in Interim Rule in the September 8, 2015 Federal Register, titled “ Streamlining Administrative Regulations for Public Housing: Revisions to Public Housing Flat Rents.”
This interim rule amends HUD regulations implementing the Fiscal Year (FY) 2014 statutory language regarding public housing flat rents to allow PHAs to take advantage of the FY 2015 authority that provides PHAs with more flexibility is setting flat rents. The interim rule will be effective on October 8, 2015.
Background
Section 3(a)(2)(B) of the Housing Act of 1937 requires PHAs to set a flat rental amount for each public housing unit. In the 2014 Appropriations Act, this amount was statutorily set at no less than 80 percent of the applicable fair market rent (FMR) as determined by HUD. In the event that implementation of this requirement would increase a family’s rental payment by more than 35 percent in a year, the PHA must phase in the flat rent.
In the 2015 Appropriations Act, HUD may allow a PHA to establish a flat rent based on an FMR that is based on an area geographically smaller than would otherwise be used, if HUD determines that the resulting FMR more accurately reflects local market conditions. A PHA may apply to HUD for an exception allowing a flat rental amount that is lower than the amount otherwise determined under the two allowable FMRs, if HUD determines that the two FMRs do not reflect the market value of the property and the lower flat rental amount is based on a market analysis.
What the Interim Rule Changes
This interim rule provides that HUD may permit a flat rental amount based on either 80 percent of the applicable FMR, or an FMR that more accurately reflects local market conditions and is based on an area geographically smaller than the one that would otherwise be used. This second FMR would be either the Small Area FMR (SAFMR), issued for metropolitan counties, or the unadjusted rents, for counties not covered by an SAFMR, or any other fair market rental determination. If neither a SAFMR nor an unadjusted rent has been determined for an area, PHAs must set flat rents based on the applicable FMR for the larger area.
The interim rule also provides that the PHA may submit to HUD a request for an exception to use a flat rental amount that is lower than the amount allowed under the two FMRs. This request must include a market analysis and a demonstration that the proposed lower flat rental amount is based on a market analysis of the applicable market and is reasonable in comparison to other comparable unassisted units.
PHAs may opt to continue to implement flat rents equal to not less than 80 percent of the applicable FMR.
PHAs are required to adjust flat rents downward to account for tenant-paid utilities and to revise flat rents within 90 days of HUD’s issuance of new FMRs. However, the families rent must not increase by more than 35 percent in a single year as a result of these new flat rent rules.
PHAs and owners involved in the public housing program (e.g., RAD, HOPE VI), may obtain further information on this interim rule by contacting Todd Thomas, Program Analyst, Public Housing Management and Occupancy Division, Office of Public and Indian Housing, Department of Housing and Urban Development, 40 Marietta Street, NW, Atlanta, GA 30303. His phone number is 678-732-2056 and his email is Todd.C.Thomas@HUD.gov.