NLIHC Submits Comments on HUD Proposal to Use Small Area FMRs

NLIHC submitted comments on July 2 supporting HUD’s intention to amend the Fair Market Rent (FMR) regulations by replacing the 50th percentile program with Small Area FMRs (SAFMRs) in certain metropolitan areas. The goal is to help reduce the concentration of Housing Choice Voucher (HCV) residents in some neighborhoods (see Memo, 6/8). NLIHC has long urged HUD to adopt SAFMRs (see Memo, 4/22/11).

Under the current FMR system, in the lowest rent, lowest opportunity neighborhoods, nearly all of the rents qualify for HCVs, while in high-opportunity communities rents are well out of reach. Implementing a system of SAFMRs has the potential of providing HCV households with the range of housing choices and opportunities the HCV program has long promised. SAFMRs can help advance the goal of affirmatively furthering fair housing.

In addition, SAFMRs should reduce the incidence of above-market rents in the HCV program. As HUD states in the Federal Register notice, the use of metropolitan-wide 40th and 50th percentile FMRs primarily benefit landlords in low-rent submarkets by enabling them to collect subsidized rents greater than market rents. These unwarranted high subsidized rents also can cause rents to be inflated for non-subsidized rental units in the FMR area, contributing to overall rental housing unaffordability. 

NLIHC commented that fair housing considerations are important to the success of a SAFMR program. Only offering a tenant a voucher able to meet higher market rate rents in areas of higher opportunity does not mean a tenant can successfully utilize the voucher. Discriminatory behaviors by landlords can still prevent voucher households from moving to higher-opportunity communities. NLIHC urged HUD to consider means to lower the barriers to voucher utilization in higher-opportunity areas.

While NLIHC enthusiastically supports implementing SAFMRs throughout the voucher program, NLIHC is concerned about reductions in SAFMRs that might lead landlords to make up the difference by sharply increasing rents for voucher households after the required one- or two-year hold harmless period. Therefore, NLIHC recommends that HUD categorically exempt tenants from any reduction in the tenant payment standard for as long as the household remains in its existing unit if it has a Housing Assistance Payment contract on the date the SAFMR program is implemented.

Further, in order to prevent or minimize landlords from exiting the voucher program due to a drop in payment standards and subsequent rents in the wake of a change to SAFMRs, NLIHC recommends that HUD set SAFMRs no lower than 90% of the metro FMR in the first year, no lower than 80% in second year, and so on. This should give housing markets, landlords, and PHAs time to adjust.

Before requiring an area to use SAMFRs, NLIHC suggests that HUD assess whether gentrifying market pressures exist. If SAFMRs are imposed on such areas, existing tenants could be displaced as landlords exit the voucher program knowing that a tight rental market will enable landlords to replace voucher households with renters who do not need rental assistance.

NLIHC’s comment letter is at