HUD released an interim evaluation of Small Area Fair Market Rents (SAFMRs) implemented by seven PHAs. Five of the PHAs were part of HUD’s SAFMR demonstration and the other two were part of a legal settlement. HUD will collect additional data, including interview responses from tenants and landlords regarding their experiences with and reactions to the use of SAFMRs.
The five demonstration PHAs are the Chattanooga Housing Authority (TN), the Housing Authority of Cook County (IL), the Housing Authority of the City of Laredo (TX), the City of Long Beach Housing Authority (CA), and the Town of Mamaroneck Housing Authority (NY). The two PHAs that are part of a legal settlement are the Housing Authority of the City of Dallas and the Housing Authority of Plano (TX), which is part of the Dallas metropolitan area. All twelve of the PHAs in the Dallas metro area have been using SAFMRs since 2011 as a result of the legal settlement, but only the City of Dallas and Plano PHAs were part of the evaluation.
The interim evaluation indicates that, generally, SAFMRs increase the number of rental homes in high-rent ZIP codes that rent below the applicable FMR, making them potentially available to Housing Choice Voucher (HCV) holders, but SAFMRs decrease the number of rental homes in low-rent ZIP codes. The general result across the seven PHAs was a 3.4% net loss of potentially available rental homes to HCV holders. However, the outcomes differed by PHA. For instance, there were increases of potentially available rental homes of 3.2% in Chattanooga and 26% in Plano. Losses ranged from 0.3% in Mamaroneck to 1.7% in Cook County and 13.5% in Long Beach.
When there are fewer rental homes in high-rent ZIP codes than in low-rent ZIP codes, there is a net loss of potentially available rental homes under SAFMRs; however, when there are more rental homes in high-rent ZIP codes, there is a net gain. NLIHC notes that this is a strong argument for modifying local zoning codes to allow for and facilitate the development of multifamily rental housing in high-rent ZIP codes.
Across the seven PHAs, the percentage of HCV holders living in high-rent ZIP codes increased from 17% in 2010 (pre-SAFMRs) to 20% in 2015. Both new and existing voucher holders were more likely to move to high-rent ZIP codes after SAFMR implementation. The percentage of new voucher holders who moved into high-rent ZIP codes increased from 14% in 2010 to 17% in 2015, and the percentage of existing voucher holders moving to high-rent ZIP codes increased from 18% to 28%.
Housing Assistance Payment (HAP) costs declined by an average of 13% between 2010 and 2015 for the seven PHAs using SAFMRs, compared to a 5% decline for a group of comparative PHAs with traditional metropolitan-wide FMRs.
Average tenant contributions, however, increased by 16% across the seven SAFMR PHAs. Most significantly, average tenant contributions for voucher holders in low-rent and moderate-rent ZIP codes increased by 22% and 18%, suggesting that some voucher holders in low-rent and moderate-rent ZIP codes face higher rent burdens as a result of landlords’ unwillingness to lower their rents in response to lower payment standards. NLIHC and other advocates identified this potential problem in their comments regarding the proposed SAFMR rule, urging that the final rule exempt existing voucher holders from any reduction in the payment standard due to the transition to SAFMRs. Increases in tenant contributions for voucher holders in high-rent ZIP codes were similar to those of voucher holders in the comparative group of PHAs with traditional FMRs, indicating that residents in high-rent ZIP codes did not have higher than normal rent increases.
The interim evaluation also provided a preliminary look at the administrative burden on PHAs of SAFMRs. The cost of modifying their automated systems to deal with multiple payment standards ranged from minor to significant. For example, the cost of new software ranged from $0 to $35,000, and additional staff time ranged from 40 to 250 hours. The other significant burden entailed analyzing and setting payment standards. The number of SAFMRs to analyze within a PHA’s jurisdiction increased significantly. In addition, HUD’s policy of delaying application of SAFMRs to existing voucher holders until their second annual certification meant PHAs used SAFMRs and metropolitan-wide FMRs simultaneously, making the transition more complex. Staff time spent on analyzing and setting payment standards ranged from 15 to 120 hours. The report deemed two other potential administrative burdens – staff training and more inspections of geographically diverse rental units – as moderate. The report determined that education and support efforts for landlords and tenants were minor burdens.
The interim evaluation offered a preliminary assessment of the impact of SAFMRs on landlords, based on secondhand reports from PHAs. PHAs’ reported that some landlords in low-rent ZIP codes left the HCV program, while others remained in the HCV program but did not lower the contract rent to the new rent payment standards. Other landlords, however, were willing to accept lower rents, which was more likely where landlord-tenant relationships were good, the landlord wanted to retain tenants or avoid vacancies, or the tenant was elderly or a person with a disability. The report suggests that voucher holders competing with unassisted low-income households in low-rent ZIP codes may be more attractive to landlords. In high-rent ZIP codes, voucher holders competing with higher-income households may be less attractive to landlords.
The final evaluation, anticipated around July, 2018, will include more detailed information on landlord behavior. HUD will collect additional data, including interviews with tenants and landlords about their experiences with and responses to SAFMRs.
Small Area Fair Market Rent Demonstration Evaluation: Interim Report is available at: http://bit.ly/2vJF3Pl