CBPP Calls for HUD to Reinstate Small Area FMR Requirement

The Center on Budget and Policy Priorities (CBPP) released a critique of HUD’s suspension of the obligation that public housing agencies (PHAs) in 23 metropolitan areas begin using Small Area Fair Market Rents (SAFMRs) rather than traditional metropolitan-wide Fair Market Rents (FMRs) to set voucher payment standards (see Memo, 08/21). CBPP concluded that HUD should reinstate the requirement as soon as possible.

SAFMRs reflect rents for U.S. Postal ZIP codes, while traditional FMRs reflect a single rent standard for an entire metropolitan region. The intent of SAFMRs is to provide voucher payment standards that are better aligned 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. A goal of SAFMRs is to help households use vouchers in areas of higher opportunity and lower poverty and to reduce voucher concentrations high poverty areas. On November 16, HUD issued a final rule requiring PHAs in 24 metropolitan areas to use SAFMRs in 2018 to set payment standards (see Memo, 11/21/16). HUD’s suspension of the rule affects 23 of the 24 areas, because PHAs in the Dallas-Plano-Irving metropolitan area must still use SAFMRs as a part of a legal settlement.

HUD based its suspension decision on an interim evaluation of SAFMRs released on August 15. HUD concluded that further analysis of SAFMRs’ costs and benefits were needed. HUD expressed specific concerns over potential housing cost burdens among participating families and the availability of units, as well as the regulatory burden placed on PHAs.

CBPP’s critique highlights that the evaluation’s findings support moving forward with SAFMRs rather than suspending their mandatory implementation. The evaluation examined the outcomes of SAFMR implementation at seven PHAs (see Memo, 08/21). The evaluation compared outcomes at these seven PHAs to those at a comparison group of PHAs still using metropolitan-wide FMRs. The evaluation found an increase in the share of families that moved to high-opportunity neighborhoods after SAFMRs were implemented, while the share of families moving to such neighborhoods did not change at the comparison PHAs with metropolitan-wide FMRs. The average voucher cost also declined to a greater extent for the seven PHAs after SAFMR implementation than for the comparison PHAs.

Administrative costs of SAFMR implementation appeared to be modest. CBPP concluded the supplemental administrative funds provided to the PHAs, combined with regular administrative funding, were sufficient to implement SAFMRs in most cases. CBPP recommends HUD use its discretion to target supplemental administrative funds to SAFMR agencies.

The adverse outcomes identified in the evaluation were higher-than-average increases in tenant rent contributions by voucher holders in low-rent neighborhoods after SAFMR implementation and a loss of units with rents below the FMRs. Higher tenant contributions in low-rent ZIP codes could partially be the result of landlords’ refusal to lower rents to the new SAFMR payment standards. HUD’s final rule, however, reduces this risk by allowing PHAs to exempt families remaining in the same unit from payment standard reductions. The rule also gives PHAs flexibility in setting payment standards up to 110% of the SAFMR, which could mitigate against higher tenant contributions. The loss of units renting below the FMR, meanwhile, can be mitigated by the metropolitan-wide application of SAMFRs. The evaluation was of seven individual PHAs with SAFMRs, not of metropolitan-wide implementation of SAFMRs. Metropolitan-wide coverage could reduce the risk that SAFMRs lead to fewer total units affordable to voucher holders, because more high-rent neighborhoods may be included.

Trump Administration Blocks Housing Voucher Policy that Would Expand Opportunity and Reduce Costs is available at: http://bit.ly/2wO7wWs

Additional commentary is available at: http://bit.ly/2xr5gpL