As a follow-up to last week’s story on the impact of the Housing Opportunity through Modernization Act (HOTMA) on property economics, this week we highlight one of the benefits at the administrative level. HOTMA modified the rent reasonableness determination process to be more streamlined for property owners and contract administrators, typically local housing authorities or HUD. The rent reasonableness determination process is part of the Housing Choice Voucher (HCV) program for multifamily properties to ensure that voucher contract rents are reasonable compared to rents for similar, unassisted units in the local market. The rent for the assisted unit should generally fall within a reasonable range of rents for comparable units, considering factors including unit size, amenities, location and market conditions.  

Rent reasonableness determinations are conducted at initial lease-up and during any subsequent rent increases or lease renewals. Contract administrators may also periodically review rents for assisted units to ensure ongoing compliance requirements. This process helps to ensure that taxpayer funds are used efficiently and maximize the effectiveness of housing assistance funds. 

HOTMA provisions have helped to streamline the rent reasonableness determination process to reduce administrative burdens and simplify procedures. The process is more efficient and less time-consuming. A key effective provision of the act is the flexibility in the determination methods, including the use of Small Area Fair Market Rents (SAFMRs). In addition, contract administrators can now use third-party data sources, including commercially available rental market data or market surveys, to establish market rents for comparable units. This flexibility allowed contract administrators to supplement their own data and ensure that rent reasonableness determinations were based on comprehensive and current market information. HOTMA’s authorization to use alternative methods for determining rent reasonableness, including SAFMRs and third-party data sources and market surveys, allows contract administrators to tailor their procedures to local market conditions and administrative capabilities.