Small Area Fair Market Rents (SAFMRs)

Small Area Fair Market Rents (SAFMRs)

 

HUD publishes fair market rents for all areas of the nation. Public Housing Agencies (PHAs) use fair market rents as a guideline when determining payment standards for the Housing Choice Voucher (HCV) program. Usually, the payment standard must fall within a range of 90% to 110% of FMR. Any rents outside this range require HUD approval.

 

Fair Market Rents have historically been developed for three types of areas:

1. Metropolitan Statistical Areas (MSAs): These are large metropolitan areas made up of one or more counties;
2. HUD Metropolitan Fair Market Rent Areas (HMFAs): These are MSAs that have been divided into smaller areas by HUD; and
3. Non-Metropolitan Counties.

 

On November 16, 2016, HUD published a final rule implementing small area fair market rents (SAFMRs). This new category of fair market rents is designed to improve housing access for voucher residents. The new rule will give voucher residents access to high opportunity areas with lower poverty rates.

 

The SAFMR is developed on a ZIP-code basis and PHAs in these areas are required to use the SAFMR when determining the HCV payment standard. HUD has specific selection criteria that must be used when determining the areas that are required to use the SAFMR:

 

1. Number of HCV’s under lease;
2. Vacancy rate of an area;
3. Number of units in a ZIP code where the SAFMR is more than 110% of the area-wide FMR; and
4. Percentage of voucher holders living in concentrated low-income areas relative to all renters within these areas over the entire MSA.

 

Beginning in fiscal year 2018, 24 areas will be required to implement the SAFMR:

 

1. Atlanta-Sandy Springs-Marietta, GA HUD Metro FMR Area;
2. Bergen-Passaic, NJ HUD Metro FMR Area;
3. Charlotte-Gastonia-Rock Hill, NC-SC HUD Metro FMR Area;
4. Chicago-Joliet-Naperville, IL HUD Metro FMR Area;
5. Colorado Springs, CO HUD Metro FMR Area;
6. Dallas-Plano-Irving, TX Metro Division;
7. Lauderdale-Pompano Beach-Deerfield Beach, FL Metro Division;
8. Worth-Arlington, TX HUD Metro FMR Area;
9. Gary, IN HUD Metro FMR Area;
10. Hartford-West Hartford-East Hartford, CT HUD Metro FMR Area;
11. Jackson, MS HUD Metro FMR Area;
12. Jacksonville, FL HUD Metro FMR Area;
13. Monmouth-Ocean, NJ HUD Metro FMR Area;
14. North Port-Bradenton-Sarasota, FL MSA;
15. Palm Bay-Melbourne-Titusville, FL MSA;
16. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA;
17. Pittsburgh, PA HUD Metro FMR Area;
18. Sacramento-Arden-Arcade-Roseville, CA HUD Metro FMR Area;
19. San Antonio-New Braunfels, TX HUD Metro FMR Area;
20. San Diego-Carlsbad-San Marcos, CA MSA;
21. Tampa-St. Petersburg-Clearwater, FL MSA;
22. Urban Honolulu, HI MSA;
23. Washington-Arlington-Alexandria, DC-VA-MD HUD Metro FMR Area; and
24. West Palm Beach-Boca Raton-Delray Beach, FL Metro Division

 

These 24 areas (representing 18 states) contain 368,000 HCVs, which is 18% of all HCVs in the United States. Increased rent levels in these SAFMRs will allow vouchers to pay a higher payment standard, increasing opportunities for voucher holders.

 

Since the SAFMR will better match the rent in each ZIP-code, HCV rents in some ZIP-codes will go down. This is because the FMRs in certain ZIP-codes were raised by the overall rents in the MSA. As a result, some voucher holders will see a decrease in the payment standard. There is some relief provided by the rule however. If the SAFMR decreases, the PHA does not have to lower the payment standard until the second regular recertification following the effective date of the decrease in the payment standard. Also, the decrease is limited to no more than 10% of the prior year amount.

 

Examples of areas affected by this change include:

• San Diego – the downtown area and northern coastal areas of San Diego will have increases in payment standards, but the majority of the inland areas will have decreases;
• Atlanta – Northern Atlanta will have increases in payment standards but the southern urban areas will go down; and
• Washington/Northern VA – except for the east side of DC, most of Washington will see increases in the payment standard. Southeast DC will suffer significant decreases and the VA suburbs will also see decreases in payment standards.

 

 

Project-Based Vouchers (PBVs)

 

PBV projects are exempt from the SAFMR requirements. However, PHAs that use SAFMR can use SAFMR for new PBV projects and for existing PBV projects if the owner and PHA mutually agree. Once a PBV project elects to use SAFMR, it cannot revert back to area-wide FMRs.

 

Impact on LIHTC Properties

 

LIHTC properties are allowed to collect the full HCV payment standard, even if the payment standard exceeds the maximum allowable LIHTC rent. This could be a significant benefit in the SAFMR areas since the allowable rents for HCV residents could go up. However, as noted earlier, in some ZIP-codes, the payment standards will decrease, and when that happens, the amount collected by LIHTC projects may also go down.

 

If the payment standard goes below the allowable LIHTC rent, owners will have some decisions to make. The HCV regulations permit residents to pay up to 40% of income when they move in if the rent on the unit is greater than the payment standard. However, if this 40% of income payment still does not come up to the allowable LIHTC rent, owners will have to decide whether to take a lower rent than permitted by the tax credit regulations or decline the voucher resident. While LIHTC properties may not refuse to accept voucher residents simply on the basis of the resident having a voucher, the properties are not required to accept rents lower than the amount collected from non-voucher residents.