On April 20, HUD released the final rules establishing the Small Area Fair Market Rent (SAFMR) Demonstration Project (FR–5413–N–02) and a request for applications to participate. Applications are due June 6 and selection is expected by July 1.
Currently, the Housing Choice Voucher program uses HUD-established Fair Market Rents to determine the maximum allowable rents on units that may be leased using vouchers. Currently, FMRs are set for entire metropolitan areas. While this may assure an adequate number of units are eligible in a metropolitan area for the program to operate, it also means that few units fall below the FMR in high cost areas, while most of units in the poorer areas will be eligible. This can result in voucher holders not having adequate housing choices near work, schools or other important services. It can also lead to landlords receiving above-market rents from the program in lower income neighborhoods, making the program less efficient.
The SAFMR demonstration project will establish FMRs at the ZIP Code level in some metropolitan areas so that payment standards are more likely to reflect the rents in specific neighborhoods. This will allow HUD to test whether this increases neighborhood choice for program participants and reduces the likelihood that the program pays excessive subsidies, among other implications this change might have for the program.
NLIHC has long supported smaller FMR areas and provided comments in support of the proposed demonstration project in July 2010. Just last week, NLIHC joined other housing advocates in encouraging HUD to announce the program and invite participation (see Memo, 4/8).
The final rule responds to some of the comments made by NLIHC and others. There are several changes in the program from what was proposed in May 2010 (FR-5413-N-01). First, the SAFMRs will only be implemented in jurisdictions in which housing authorities have volunteered for the program.
Second, advocates encouraged HUD to wait until the 5-year American Community Survey (ACS) data were released rather than starting with Census 2000 data that would have to be revised later. HUD was unable to get the special tabulations it needed from the Census Bureau in time to use 5-year ACS data, and therefore allows demonstration participants to opt-out if they wish when those newer data are introduced into the SAFMR determinations.
The third important change is that HUD has instituted a 10% floor on annual declines in the rent standards, responding to the concern that it would take some time for markets to adjust and moving directly to the new SAFMRs would unnecessarily restrict the number of eligible units.
HUD also maintained the cap on the SAFMR level at 150% of the FMR. NLIHC had expressed concern that this cap might put a somewhat arbitrary restriction on housing choice. HUD notes in response that this only affects 170 of the more than 17,000 metropolitan ZIP Codes nationwide.
To view the SAFMR final notice and request for participation, see http://www.huduser.org/portal/datasets/fmr.html
To view NLIHC’s comments on the proposed program see http://nlihc.org/sites/default/files/FMR-Comments-7-12-10.pdf
If you wish to discuss this program and how to evaluate its potential in your region, please contact Danilo Pelletiere, NLIHC’s Research Director and Chief Economist email@example.com.