HUD has proposed a number of possible alternatives to the way it projects Fair Market Rents (FMRs) forward into the fiscal year in which they are meant to apply. The need for modification arises from changes in how the Census Bureau makes data available with the 2010 census. Comments are due by April 8, 2011.
Currently, HUD uses the average national annual growth in gross rents between decennial censuses to trend the FMRs forward 15 months from the last actual observation of rents in the Consumer Price Index to the midpoint of the coming fiscal year in which they will be used. However, because the 2010 decennial census did not include a gross rent value, HUD can no longer use this trend factor and some kind of change is necessary.
In a Federal Register Notice from March 9, HUD laid out six possible alternatives to the current national trend factor, five of which include using the Consumer Price Index (CPI) data series. A move to using CPI data would mean that instead of using a factor based on the trend in the previous decade, the trend factor would be adjusted annually to more closely reflect changing market conditions. Furthermore, the necessity for change opens up the opportunity to consider trends at the regional or even local level that would make FMRs even closer to reflecting true local rents. CPI data are available for the Census regions (Northeast, Midwest, South and West) and many metropolitan areas.
An obstacle to using the local and regional CPI data is timing. The data are released in mid-August, which does not leave enough time for HUD to publish the proposed FMRs and allow 30 days for comment and still publish the final FMRS on October 1 as they are currently required to do. The President’s proposed FY12 budget would remove the requirements that HUD publish proposed FMRs for comment snd with this notice HUD seeks feedback on which is more important, using more current data, or providing for public comments before publishing the final FMRs. Another potential issue with using monthly CPI data in the trend factor is that, except at the national level, they are not seasonally adjusted. Due to considerable monthly fluctuations in rent and utility data on a local level, HUD seeks advice on which months to select for the comparisons.
NLIHC will submit comments to HUD on the above issues and others addressed in the Federal Register notice. In general, NLIHC is supportive of the efforts to use CPI data for the FMR trend factor, and to use recent and local data so that FMRs are more closely aligned with actual market rents. While eliminating the requirement to publish proposed FMRs is acceptable, NLIHC encourages HUD to maintain the existing deadline for publishing the final FMRs or to create a new deadline. Finally, in the Federal Register notice, as one alternative HUD proposes scaling back or even eliminating trending when determining FMRs. NLIHC strongly believes that FMRs should continue to be trended forward to the midpoint of the fiscal year for which they are released.
For the full list of HUD’s proposed alternatives to the trend factor and for a more comprehensive explanation of this methodology, go to http://edocket.access.gpo.gov/2011/pdf/2011-5263.pdf