HUD Suspends Mandatory Small Area FMR Implementation

HUD has suspended the obligation of public housing agencies (PHAs) in 23 metropolitan areas to implement Small Area Fair Market Rents (SAFMRs). The office of Public and Indian Housing (PIH) sent letters to those PHAs on August 11 postponing implementation from October 1, 2017, as required by the final rule issued on November 16, 2016 (see Memo, 11/21/16), to October 1, 2019. The letter justifies the suspension by citing the recent release of interim findings from a seven-PHA SAFMR demonstration, as well as objections raised by PHA industry groups.

In addition to mandating SAFMRs for PHAs in metropolitan areas that meet certain factors, the final SAFMR rule also allows any PHA to voluntarily use SAFMRs. Voluntary use of SAFMRs is not affected by the suspension.

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 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 in high poverty areas. 

The letter claims that the final SAFMR rule allows HUD to suspend mandatory use of SAFMRs. The rule, at 24 CFR 888.113(c)(4), requires HUD to issue a “notice” that “makes a documented determination that such action is warranted.” Aside from a presidentially declared disaster or a sudden influx of displaced households needing permanent housing, the final rule includes as an action allowing suspension, “Other events as determined by the Secretary.”

The “event” offered as a reason for the postponement is the receipt of interim findings from a seven-PHA demonstration of SAFMR use (see separate report in the Research section of this Memo). HUD’s letter states that the interim report suggests further analysis of the benefits and costs of SAFMRs is needed, particularly regarding the impact of cost burdens on households and the availability of units. Final findings are expected in July, 2018. Even though the proposed mandatory use of SAFMRs by PHAs in metropolitan areas meeting specified criteria were subject to extensive review and comment starting in June, 2015, before a final rule was issued on January 17, 2017, HUD has now abruptly halted implementation without public input in order to wait for the July 2018 release of the demonstration’s final analysis. This, despite the study being already underway when the final rule was published. HUD states that another reason for suspending the mandatory SAFMR implementation has to do with concerns raised by “several PHA industry groups” in response to Executive Order 13777, which asked for public input regarding regulations perceived to be outdated, ineffective, or excessively burdensome (see Memo, 3/6). HUD’s letter states that “HUD has not yet completed its analysis of [all of] these public comments [regarding regulatory burden] but is aware that several PHA industry groups have concerns.” For example, on May 17, 2017, the National Association of Housing and Redevelopment Officials wrote, “This rule has the potential to impose costs on PHAs that exceed the benefits,” which therefore “argues against mandatory implementation of the Small Area FMRs.” For a discussion of costs to PHAs identified in the interim SAFMR evaluation, see a separate report in the Research section of this Memo.

If HUD had completed its review and analysis of EO 13777 letters before suspending mandatory implementation of SAFMRs, HUD might have balanced the PHA industry letters with those of advocates. For instance, the Poverty & Race Research Action Council (PRRAC) supported the SAFMR rule as a complement to the Affirmatively Furthering Fair Housing rule because it “replaced an outdated and arbitrary HUD rent-setting rule for Housing Choice Vouchers (HCVs) that had been effectively steering families to segregated areas with a more localized formula that gives HCV families access to a wider range of less segregated, lower poverty neighborhoods.” The Center on Budget and Policy Priorities’ letter urged HUD to promptly issue guidance to help PHAs effectively implement SAFMRs because they “have the potential to substantially improve the efficiency of the voucher program by tying voucher subsidies more closely to rents in particular neighborhoods.” Not anticipating opposition to SAFMRs, NLIHC’s letter responding to EO 13777 did not include SAFMRs among a list of regulations NLIHC proactively supported as essential or important, like the Affirmatively Furthering Fair Housing rule, however NLIHC views it as such.

The 23 metro areas that had been required to implement SAFMRS are: Atlanta-Sandy Springs-Marietta (GA), Bergen-Passaic (NJ), Charlotte-Gastonia-Rock Hill (NC-SC), Chicago-Joliet-Naperville (IL), Colorado Springs (CO), Fort Lauderdale-Pompano Beach-Deerfield Beach (FL), Fort Worth-Arlington (TX), Gary (IN), Hartford-West Hartford-East Hartford (CT), Jackson (MS), Jacksonville (FL), Monmouth-Ocean (NJ), North Port-Bradenton-Sarasota (FL), Palm Bay-Melbourne-Titusville (FL), Philadelphia-Camden-Wilmington (PA-NJ-DE-MD), Pittsburgh (PA), Sacramento--Arden-Arcade—Roseville (CA), San Antonio-New Braunfels (TX), San Diego-Carlsbad-San Marcos (CA), Tampa-St. Petersburg-Clearwater (FL), Urban Honolulu (HI), Washington-Arlington-Alexandria (DC-VA-MD Metro Area), and West Palm Beach-Boca Raton-Delray Beach (FL).

PHAs in a 24th metro area must still comply with the mandatory SAFMR rule, the Dallas-Plano-Irving, TX metro area, which has been using SAFMRs since 2011 as a result of a legal settlement.

HUD’s letter is at: