NLIHC submitted comments regarding HUD’s proposed rule to use Small Area Fair Market Rents (Small Area FMRs or SAFMRs) instead of 50th Percentile FMRs as a means to deconcentrate the use of Housing Choice Vouchers in certain metropolitan areas (see Memo, 6/20). NLIHC has long advocated for SAFMRs as one means to help expand affordable housing choice for voucher households because SAFMRs have the potential to increase the value of a voucher and thus improve the ability of a household to use the voucher in more neighborhoods, particularly in areas of higher opportunity.
Small Area FMRs reflect rents for U.S. Postal ZIP Codes, while traditional FMRs reflect a single rent standard for an entire metropolitan region. The goal is to provide voucher payment standards that are more in line with neighborhood-scale rental markets, resulting in relatively higher subsidies in neighborhoods with higher rents and greater opportunities and lower subsidies in neighborhoods with lower rents and higher concentrations of voucher holders. The proposed rule would use a formula to select a limited number of metropolitan areas (31 as proposed) that would be required to use SAFMRs.
While NLIHC supports changes to the voucher regulations that enable households to use vouchers in areas of higher opportunity, NLIHC notes that many voucher households may choose to stay in their current homes and neighborhoods because of important familial, social, cultural, and other ties to those neighborhoods. In addition, households with children may not want to switch schools or lose affordable, convenient child care, while elderly or disabled households may live close to doctors and essential service providers.
NLIHC expressed concerns about the potential harm to voucher households living in low-cost ZIP codes where the SAFMR is likely to be lower than the metropolitan FMR. This could result in a lower voucher payment standard, one that is below current rents to which landlords are accustomed. If a landlord does not lower the rent when the voucher payment standard declines, which is likely, residents would have to pay more for rent and may become rent-cost-burdened or severely cost-burdened. Analysis by the National Housing Law Project reveals that if current voucher households are not held harmless, 78% (435,000 households) would likely suffer the impact of reduced payment standards in the 31 areas that meet HUD’s SAFMR criteria. Consequently, NLIHC recommended that the final rule categorically exempt current voucher households from any reduction in the payment standard as a result of the transition to SAFMRs.
NLIHC is also concerned that many landlords may stop accepting vouchers where payment standards in low-rent neighborhoods decline sharply, adversely impacting households currently relying on vouchers as well as future voucher recipients. In some tight rental markets landlords may be able to obtain the rents they want without vouchers and without having to comply with voucher program requirements. This is particularly true in gentrifying areas.
In order to prevent landlords from exiting the voucher program and thereby reduce the stock available to future and current voucher households, NLIHC recommended that the final rule incrementally limit how far SAFMRs could fall below current metropolitan FMRs. NLIHC proposed that for the first year of implementation, SAFMRs be set no lower than 95% of the metropolitan FMR, no lower than 90% the second year, and so on in 5% increments.
NLIHC also wrote that the proposed rule does not account for tight rental markets. Several of the metropolitan areas on the list of 31 that would be required to comply have very low vacancy rates, little rental turnover, high and rapidly rising rents, and low growth in the rental stock. Consequently there is little or no opportunity for mobility for renters in general and for voucher households in particular. Voucher households often have to return their vouchers unused because they cannot find a place to rent. In higher opportunity neighborhoods where vacancies are scarce, voucher households encounter strong competition from those without vouchers. Therefore, NLIHC recommends that any metropolitan area with a vacancy rate of 5% or less not be required to comply with the SAFMR rule.
Advocates in these areas, particularly in New York City and Oakland, have expressed concerns that implementing SAFMRs could result in cost burdens for residents and landlords exiting the program, leading to displacement. A recent article in the New York Daily News featured concerns of elected officials and advocates in New York City. The entire New York City congressional delegation, led by Representative Nydia Velazquez and Senator Chuck Schumer, sent a letter to HUD detailing their concerns with the proposed rule. The Community Services Society, the Legal Aid Society, and the New York Housing Conference joined the congressional delegation in criticizing the proposed rule.
The Daily News article states that there is a vacancy rate of only 1.8% for “extremely affordable housing” that rents for $800 in New York City and provides examples of the potential rent burden if SAFMRs are implemented in the city. For example, in one South Bronx ZIP code voucher households’ rents would increase by $440 per month. Ellen Davidson, a staff attorney at the Legal Aid Society stated, “You’ll have over 50,000 voucher holders having to choose between paying more in rent or moving.” Ms. Davidson also noted that the time lag in determining fair market rents results in some ZIP codes being deemed high poverty neighborhoods even though they are rapidly gentrifying and rents have skyrocketed.
NLIHC also joined the Center on Budget and Policy Priorities and other groups in recommending changes to the formula requiring which metropolitan areas use SAFMRs. If the alternative formula is adopted, more metropolitan areas with significant concentrations of vouchers in ZIP codes that have racial and ethnic concentrations of poverty would be required to use SAFMRs.
The list of 31 metropolitan areas that would be required to use SAFMRs is at: http://bit.ly/1S9iyoP
NLIHC’s comment letter is at: http://bit.ly/2bGZDdd
The Daily News article is at: http://nydn.us/2bhiLOw
Representative Velazquez’s press release and the text of the New York Congressional delegation’s letter to HUD is at: http://bit.ly/2bxjIBx.
Comments submitted by others are at: http://bit.ly/2biGhWN