HUD ANNOUNCES NEW APPROACH TO EXPAND CHOICE AND OPPORTUNITY FOR SECTION 8 VOUCHER HOLDERS IN CERTAIN HOUSING MARKETS

Fair Market Rents for vouchers to be set at the zip code level in 24 metro areas

WASHINGTON – (RealEstateRama) — In some metropolitan areas of the country, families who depend upon the Housing Choice Voucher (HCV) Program have limited choices about where they can find suitable affordable rental housing.  Often, their housing choices are constrained and higher opportunity neighborhoods remain out of reach because of the current method of calculating their rental assistance.   Today, the U.S. Department of Housing and Urban Development (HUD) finalized a new method to establish the Fair Market Rents (FMRs) upon which rental subsidies are based in a manner that would expand neighborhood options for households living in these particularly challenging housing markets.

HUD is changing the geography it uses to calculate FMRs in certain areas from a metropolitan area-wide approach to the zip code level as a means to expand the options these families have to live in lower poverty neighborhoods. This ‘Small Area Fair Market Rent’ approach is required in 24 metropolitan areas (see list below).  Under HUD’s rule, Public Housing Agencies (PHAs) operating in other metropolitan areas can opt to apply this new zip code based approach.  Read HUD’s Final Rule.

“Today, we embark upon a new approach to offer more choice and greater opportunity for families struggling to find a decent place to call home,” said HUD Secretary Julián Castro. “Moving to this approach will offer these voucher-holding families more opportunities to move into higher opportunity neighborhoods with better housing, better schools and higher paying jobs.”

HUD’s Assistant Secretary for Policy Development and Research Katherine M. O’Regan added, “This new method of looking at Fair Market Rents offers real choice to voucher-assisted families. The final rule we announce today is the product of a lot of listening.  In the end, this new smaller area approach focuses on expanding housing opportunities for families, safeguarding current tenants, and ensuring housing agencies continue to have enough flexibility and discretion to address local circumstances.”

HUD considered and incorporated feedback from the significant public input and comments that it received during the development of this final rule. Read a summary of key changes between the Proposed and Final rule.

Background

Fair Market Rents (FMRs) are gross rent estimates that are used to calculate the maximum subsidy HUD provides families receiving rental assistance, including the 2.2 million households assisted through the Housing Choice Voucher (HCV) Program. These households generally contribute 30 percent of their adjusted monthly income toward their rent with the rental subsidy paying the rest. FMRs are usually set at the 40th percentile of all rents charged in an entire metropolitan area; although in 2000, HUD began to set this rent standard to the 50th percentile in areas where voucher families were highly concentrated.

The main objective of the 50th percentile program was to provide a broader range of housing choices that would enable voucher holders to move to areas of higher opportunity. However, research indicates that in many areas, rather than incentivizing voucher holders to move to higher opportunity neighborhoods, most of the additional subsidies provided through this approach appear to benefit landlords in the form of higher rents – in effect, artificially inflating rents in some higher poverty neighborhoods. HUD will phase out the 50th percentile program over the next three years and to calculate FMRs by zip codes within qualifying metropolitan areas as a mechanism to expand the choices available to these households. This Small Area Fair Market Rent approach is intended to increase voucher holders’ access to a greater number of units in low poverty areas while reducing excess subsidy from some high poverty neighborhoods.

In metropolitan areas where there is a wide variance in the rents being charged to tenants and where voucher holders are concentrated in a few high-poverty neighborhoods, beginning in Fiscal Year 2018 HUD will calculate FMRs based upon the rents being charged by the zip codes within that area. This permits FMRs and the resulting payment standards to be higher in low-poverty/high-rent areas, and lower in high-poverty/low-rent areas.

The following Metropolitan Areas meet the Final Rule’s criteria and thus are areas where HUD believes the SAFMRs will be most effective.  As a result, these areas will be required to implement this new zip code based approach to calculating the rental assistance of voucher holders starting in FY2018:

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