A notice announcing the FY13 Proposed Fair Market Rents (FMRs) was posted in the Federal Register on August 3. FMRs are used as the basis for determining payment standards in the Housing Choice Voucher (HCV) program, and appropriate rents for project-based programs.
In 2011, HUD transitioned to using American Community Survey (ACS) data as the baseline for calculating FMRs instead of using 2000 decennial Census data. The FY12 FMRs were based on the 2005-2009 five-year ACS data, and the FY13 FMRs are based on the 2006-2010 five-year ACS data.
This year HUD revised its approach to developing rent ratios to calculate FMRs for non-two-bedroom units. HUD calculates FMR estimates for two-bedroom units, since units of this size are the most common on the market and the most reliable for survey purposes. HUD then uses rent ratios to determine the FMRs for zero-, one-, three- and four-bedroom units. For FY13, new rent ratios were established based upon the 2006-2010 five-year ACS data. In past years, the rent ratios were based upon 2000 decennial Census data.
Since FMR estimates are based on the 2006-2010 five-year data set, the estimates are updated from 2010 through the end of 2011 using the Consumer Price Index (CPI). Then, they are updated using a trend factor to reflect 2013 rent values. When developing a trend factor in past years, a 3% factor was applied to rents for a period representing 15 months. HUD developed a new trend factor for FY13 reflecting the annualized change in median gross rents measured between the one-year 2005 ACS and the one-year 2010 ACS. This method results in a trend factor of 4.1% over the 15-month period between 2012 and the middle of 2013.
Each year, FMRs are set at the 50th percentile in selected areas where voucher tenants are concentrated in high-poverty areas. With FMRs set at the 50th percentile, rather than the 40th percentile, tenants have a broader range of housing options. This year, seven areas completed three years of program participation and were re-evaluated for eligibility. As a result, five areas will keep the 50th percentile FMR status: Baltimore-Towson, MD; New Haven, CT; West Palm Beach, FL; Fort Lauderdale, FL; and Philadelphia, PA. The Washington, D.C. area was not able to deconcentrate residents, so is not eligible for the program until FY16. The Grand Rapids, MI area is no longer eligible because the concentration of Housing Choice Voucher tenants was reduced. The Richmond, VA area re-entered the program, bringing the total number of 50th percentile FMR areas to twenty for FY13.
Finally, while the Dallas, TX HMFA has the only public housing agency currently participating in the Small Area Fair Market Rent (SAFMRs) program, HUD plans to announce additional participants in the final FY13 FMR notice.
If the proposed FMRs are implemented, most FMRs will be higher in FY13 than they were in FY12. FMRs increased in 2,295 FMR areas, with an average increase of $56. The FMRs declined in 270 areas, with an average decline of $34. There is no proposed change in seven areas.
Comments on the proposed FMRS are due back to HUD by September 4, 2012.
The notice for the proposed FY13 FMRs, the county level data file and the Individual Area Proposed FY13 FMR Documentation are available here.