HUD Proposes Changes to Methodology for Estimating Fair Market Rents

HUD published a notice in the federal register last week announcing proposed changes to the methodology for estimating Fair Market Rents (FMRs). FMRs are published, according to statute, a minimum of once per year. They are utilized for determining payments for Housing Choice Vouchers and determining renewal rents for some expiring project-based Section 8 contracts among other items.

HUD is proposing two general changes to calculation methods to be incorporated for 2018 FMRs and also one change specific to Small Area FMRs:

  • ACS: Currently, HUD uses American Community Survey (ACS) estimates if the error of the estimate is less than half the size of the estimate itself. HUD is now proposing an additional requirement, that all ACS estimates used must be based on at least 100 survey responses. If the estimate fails to meet either criteria, HUD will instead use an average of the past three years.
  • Recent Mover Factor: Currently, when two-bedroom recent mover rents are not statistically reliable, HUD will use a geographic area sometimes larger than the FMR area. HUD’s new proposal for this scenario is to instead use all-bedroom recent mover rents to determine the recent mover factor.
  • Small Area FMRs: HUD is proposing to replace the current ratio methodology for determining small area FMR gross rent estimates with Zip Code Tabulation Areas (ZCTAs) if statistically reliable data is available.

HUD is seeking public comment on these changes, due by June 26, 2017.