The Department of Housing and Urban Development (HUD) has proposed a new rule governing the geography used to calculate so-called Fair Market Rents for its Housing Choice Voucher program. In some metropolitan areas, HUD said the choices that families have about where to live are severely limited, in part because of the current method of calculating their rental assistance.
In response, HUD is proposing a new method to recalculate rental subsidies in a manner that would expand neighborhood options for households living in these particularly restrictive housing markets.
For the next 60 days, HUD is accepting public comment on a proposal to change the geography it uses to calculate so-called Fair Market Rents (FMRs). In these areas, HUD is proposing to transition from a metropolitan area-wide approach to setting FMRs down to the ZIP code level as a means to expand the options these families have to live in lower poverty neighborhoods. If instituted today, this ‘Small Area Fair Market Rent’ approach would impact 31 metropolitan areas.
“In some areas of the country, the Housing Choice Voucher Program offers little choice to families about where they can live, limiting opportunities for themselves and their children,” HUD Secretary Julian Castro said in a news release. “We propose to use a tested new approach that would offer these households greater choice to move into higher opportunity neighborhoods with better housing, better schools and higher paying jobs.”
FMRs are gross rent estimates that are used to calculate the maximum subsidy HUD provides families receiving rental assistance, including the 2.2 million households assisted through the HCV program. These households generally contribute 30 percent of their adjusted monthly income toward their rent with the rental subsidy paying the rest. FMRs usually are set at the 40th percentile of all rents charged in an entire metropolitan area; although in 2000, HUD began to set this rent standard to the 50th percentile in areas where voucher families were highly concentrated.
The main objective of the 50th percentile program was to provide a broader range of housing choices that would enable voucher holders to move to areas of higher opportunity. However, research indicates that rather than incentivizing voucher holders to move to higher opportunity neighborhoods, most of the additional subsidies provided through this approach appear to benefit landlords in the form of higher rents – in effect, artificially inflating rents in some higher poverty neighborhoods.
HUD is proposing to phase out the 50th percentile program over the next three years and to calculate FMRs by ZIP codes within qualifying metropolitan areas as a mechanism to expand the choices available to these households. This Small Area Fair Market Rent approach is intended to increase voucher holders’ access to a greater number of units in low poverty areas while reducing excess subsidy from some high poverty neighborhoods.
“What we propose today will offer real choice to voucher-assisted families,” HUD Assistant Secretary for Policy Development and Research Katherine M. O’Regan said in the release. “It’s clear that our current approach to supporting more options isn’t working in many areas. There is strong evidence that calculating rental subsidies at ZIP zip code level is a more effective way of promoting choice in concentrated rental markets.”
In metropolitan areas where there is a wide variance in the rents being charged to tenants and where voucher holders are concentrated in a few high-poverty neighborhoods, HUD is proposing to calculate FMRs based upon the rents being charged by the ZIP codes within that area. This permits FMRs and the resulting payment standards to be higher in low-poverty/high-rent areas, and lower in high-poverty/low-rent areas.
The following Metropolitan Areas currently meet the Proposed Rule’s threshold of voucher concentration and potential for SAFMRs to be effective, and thus would be required to institute this new approach. (This list may change by the time of implementation):
1. Atlanta-Sandy Springs-Marietta, Ga.
2. Bergen-Passaic, N.J.
3. Charlotte-Gastonia-Rock Hill, N.C.-S.C.
4. Chicago-Joliet-Naperville, Ill.
5. Colorado Springs, Colo.
6. Dallas-Plano-Irving, Texas
7. Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla.
8. Fort Worth-Arlington, Texas
9. Gary, Ind.
10. Hartford-West Hartford-East Hartford, Conn.
11. Jackson, Miss.
12. Jacksonville, Fla.
13. Monmouth-Ocean, N.J.
14. Nassau County-Suffolk County, N.Y.
15. New York
16. North Port-Bradenton-Sarasota, Fla.
17. Oakland-Hayward-Berkeley, Calif.
18. Oxnard-Thousand Oaks-Ventura, Calif.
19. Palm Bay-Melbourne-Titusville, Fla.
20. Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.
21. Pittsburgh
22. Sacramento-Arden-Arcade-Roseville, Calif.
23. San Antonio-New Braunfels, Texas
24. San Diego-Carlsbad-San Marcos, Calif.
25. San Jose-Sunnyvale-Santa Clara, Calif.
26. Tacoma-Lakewood, Wash.
27. Tampa-St. Petersburg-Clearwater, Fla.
28. Honolulu
29. Virginia Beach-Norfolk-Newport News, Va.-N.C.
30. Washington-Arlington-Alexandria, Va.-Md.
31. West Palm Beach-Boca Raton-Delray Beach, Fla.
Read the full proposed rule here