In the June 16, 2016, Federal Register, HUD published a proposed rule titled, “Establishing a More Effective Fair Market Rent System; Using Small Area Fair Market Rents in Housing Choice Voucher Program Instead of the Current 50th Percentile FMRs.”
HUD is proposing the use of Small Area Fair Market Rents (Small Area FMRs) in the administration of the Housing Choice Voucher (HCV) program for certain metropolitan areas. These rents will be used in place of the current 50th percentile rent in order to address high levels of voucher concentration. HUD believes that Small Area FMRs will give HCV residents a more effective opportunity to move into areas of higher opportunity and lower poverty. This would be accomplished by providing the voucher holders with enough subsidy to make such areas accessible and the reduce the number of voucher families in areas of high poverty concentration.
HUD proposes to use several criteria in determining which metropolitan areas would best be served by application of Small Area FMRs. These criteria include a threshold number of vouchers within a metropolitan area, the concentration of current HCV tenants in low-income areas, and the percentage of renter occupied units in the metropolitan area with gross rents above the payment standard basic range. HUD’s goal with the proposed rule is to provide HCV tenants with a greater ability to move into areas where jobs, transportation, and educational opportunities exist.
Comments on the proposed rule are due no later than August 15, 2016.
Purpose of the Proposed Rule
The subsidy for the HCV program is currently determined by a formula that considers rent prices across an entire metropolitan area. However, rents can vary widely within a metropolitan area depending upon the size of the metropolitan area and the neighborhood within the metropolitan area within which a person resides. Experience with the 50th percentile method of rent determination shows that the majority of HCV tenants use their vouchers in neighborhoods with low rents but generally high poverty levels. The goal of this proposed rule is to increase the share of households that choose to use their vouchers in low poverty high opportunity areas.
In order to accomplish this, the rule proposes to determine rents on the basis of ZIP codes. Based on early evidence from PHAs using Small Area FMRs in certain metropolitan areas, HUD believes that Small Area FMRs are more effective in helping families move to areas of higher opportunity and lower poverty.
The proposed rule provides that Small Area FMRs will be set for metropolitan areas with at least 2,500 HCVs under lease; at least 20% of the standard quality rental stock, within the metropolitan area, is in small areas (ZIP codes) where the Small Area FMR is more than 110% of the metropolitan FMR; and the measure of the percentage of voucher holders living in concentrated low-income areas relative to all renters within these areas over the entire metropolitan area exceeds 155%.
HUD is especially interested in receiving comments based on certain elements of the proposed rule, including:
- Should HUD provide for Project-Based Vouchers that are in the pipeline to continue using metropolitan FMRs even if the area is designated as a Small Area FMR area?
- What additional policies or requirements should the final rule include that would mitigate the impact of significant and abrupt decreases in the FMRs for certain ZIP code areas on families currently under HAP contract in those impacted areas?
The move to expand the use of Small Area FMRs is a significant policy shift for HUD. It is important that PHAs and property owners with voucher residents review the proposed rule and provide comments to HUD by the noted deadline.