HUD Seeks Comments about Suspension of Small Area FMR Rule

HUD published a notice in the Federal Register on December 12, 2017 offering the public an opportunity to comment on its surprise August 11, 2017 two-year suspension of the requirement that public housing agencies (PHAs) in 23 metropolitan areas use Small Area Fair Market Rents (Small Area FMRs or SAFMRs) by January 1, 2018 (see Memo, 8/21). HUD has asserted that it was not required to post the suspension for public comment, but in response to requests from advocates, HUD is now soliciting comments for a period of 30 days. HUD states that it will review the comments and consider whether changes to the suspension are necessary.

Small Area FMRs reflect rents for U.S. Postal ZIP codes, while traditional fair market rents (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 that have higher rents and relatively lower subsidies in neighborhoods that have lower rents and higher concentrations of voucher holders. The primary goal of SAFMRs is to help households use vouchers in areas of higher opportunity and lower poverty, thus reducing voucher concentrations high poverty areas. 

After one-and-a-half years of public input (see Memo, 6/8/15, 7/6/15, 6/20/16, and 8/22/16)  regarding the use of Small Area FMRs, HUD’s Office of Public and Indian Housing (PIH) published a final rule on November 16, 2016 (see Memo, 11/21/16). Then, without public notice, PIH sent a letter on August 11, 2017 to PHAs in 23 metropolitan areas that were scheduled to use SAFMRs by January 1, 2018. The letter stated that HUD was postponing implementation of the requirement until October 1, 2019, which would mean PHAs in those 23 metro areas would not have to use Small Area FMRs until January 2020. The letter justified the suspension by noting the mid-August release of interim findings from a seven-PHA SAFMR demonstration assessment. PIH also said it was responding to objections raised by industry groups in May, 2017, well after the final rule went into effect. Another excuse offered by PIH was that it had not had sufficient time to provide guidance and technical assistance to those PHAs, even though use of Small Area FMRs had been in the works for years, and HUD had a year between publication of the final rule and the beginning of the fiscal year when the PHAs would have to start using SAFMRs.

The December 12, 2017 Federal Register notice reiterates HUD’s August justification for the suspension, citing the final rule at 24 CFR 888.113(c)(4). The rule states that HUD may suspend mandatory use of Small Area FMRs “when HUD by notice makes a documented determination that such action is warranted.” According to the regulation, actions that may serve as the basis for a suspension are a presidentially declared disaster that results in the loss of a substantial number of housing units, a sudden influx of displaced households needing permanent housing, or other events as determined by the Secretary (emphases added).

The Federal Register notice and the August letter cite the mid-August 2017 interim assessment report of a seven-PHA demonstration of SAFMR use as an “event” (see Memo, 8/21). PIH claims it “has concerns that the mandatory use of Small Area FMRs, without sufficient preparation and mitigation of potential unintended consequences, could put some PHAs at risk of causing an adverse rental housing market condition.” In the preamble to the November 2016 final rule, however, HUD stated that it had considered and rejected comments urging HUD to postpone implementation of the rule until the seven-PHA demonstration was complete and fully analyzed. Final findings about the demonstration are expected in July, 2018.

While there were a number of findings in the interim report, NLIHC and other advocates interpret the interim report’s key findings to indicate SAFMRs generally achieved their goals. For instance, there was an increase in the number of rental homes in high-rent ZIP codes renting below the applicable FMR, making the homes potentially available to voucher households. The percentage of voucher households living in high-rent ZIP codes increased from 17% in 2010 (pre-SAFMRs) to 20% in 2015. The percentage of new voucher households who moved into high-rent ZIP codes increased from 14% in 2010 to 17% in 2015, and the percentage of existing voucher households moving to high-rent ZIP codes increased from 18% to 28%.

In response to the suspension, five civil rights organizations representing three plaintiffs sued HUD (see Memo, 10/30). The organizations argue in their legal complaint that the suspension of the SAFMR rule is unlawful because HUD failed to follow Administrative Procedure Act (APA) rules requiring public comment and failed to provide sufficient justification for the suspension according to the Small Area FMR rule. The lawsuit also alleges that HUD’s action violates its duty under the Fair Housing Act of 1968 to spend federal funds in a way that affirmatively furthers fair housing, rather than increasing racial segregation and concentrated poverty. The plaintiffs seek a court order requiring HUD to implement the new SAFMR rule on January 1, 2018 as previously scheduled.

Comments are due January 11, 2018. NLIHC urges advocates to submit comments. A sample comment letter is at