Small Area Fair Market Rents Would Increase Housing Opportunities for Voucher Holders in DC Metro Area

An analysis conducted by Jae Sik Jeon featured in Shelterforce shows that the implementation of Small Area Fair Market Rents (FMRs) in the Washington, DC metropolitan area would increase the supply of housing available to Housing Choice Voucher (voucher) holders and improve their access to neighborhoods of opportunity. HUD issued a final rule that required Small Area FMRs be implemented in 24 metropolitan areas for 2018, but suspended its rule in August (see Memo, 8/21). The article concludes that HUD’s final rule should be implemented.

Voucher holders contribute 30% of their household income to rent and utilities, while the voucher covers the remaining housing costs up to a payment standard based on HUD’s FMR. Traditional FMRs are typically set at the metropolitan area or non-metropolitan county level. As a result, rental housing in higher priced neighborhoods is more likely to cost more than the voucher payment standard. Small Area FMRs are set for ZIP codes to better reflect local market conditions and neighborhood differences within metropolitan areas. The payment standard is higher in high-rent neighborhoods and lower in low-rent neighborhoods.

The article’s author found that a switch from FMRs to Small Area FMRs in the DC metropolitan region would increase the supply of housing affordable to voucher holders by 13,000 units. Small Area FMRs would also increase the share of this supply in low-poverty neighborhoods from 36% to 45%.

One potential challenge is that Small Area FMRs could increase the cost of serving voucher holders, if many move to higher-rent neighborhoods. Some savings, however, could come from lower rent payments in low-rent neighborhoods. NLIHC has long advocated for more resources for the Housing Choice Voucher program and other housing programs that serve the nation’s lowest income renters. Another potential challenge is that current voucher holders in low-rent neighborhoods could experience housing cost burdens if they remain in their current home and their landlords don’t accept a lower payment standard. Voucher recipients would have to cover the difference between the new payment standard and the current rent (in addition to their 30% of income contribution). NLIHC and other advocates urged HUD to include in the final rule an exemption for existing voucher holders from any payment standard reduction as a result of the transition to Small Area FMRs. The suspended rule, however, gave housing authorities a voluntary option to exempt existing voucher holders remaining in their current home from lower payment standards.

It should be noted that the DC housing authority currently adjusts the maximum rent by neighborhood for its voucher program with a maximum voucher payment standard set at 175% of HUD’s FMR. The article examines the potential impact of Small Area FMRs if they were implemented throughout the entire Washington, DC metropolitan area (as compared to a single metropolitan-level FMR).

Newly-Suspended HUD Rule Would Have Expanded Access to Neighborhood Opportunity is available at: