HUD Publishes 2018 Fair Market Rents, Adopts New FMR Methodology
HUD recently released its fair market rents (FMRs) for Fiscal Year 2018. An FMR is a gross rent estimate that includes the base rent, as well as any essential utilities that the tenant would be responsible for paying, such as gas or electric. It does not include nonessential utilities such as telephone, television, or Internet.
HUD arrives at the numbers for each area with the help of census data and through renter surveys. Every year, HUD compiles a list of the FMRs for over 2,500 metropolitan and non-metropolitan counties. FMRs are used to determine payment standards for federal rental assistance programs such as Housing Choice Vouchers under the Section 8 program. The FMRs are effective Oct. 2.
This year, HUD also adopted some changes to the methodology used to estimate FMRs. Those changes were proposed in May and will be adopted in their entirety effective Oct. 2 as well. There are two general changes to calculation methods to be incorporated for 2018 FMRs and one change specific to Small Area FMRs. HUD has used American Community Survey (ACS) estimates if the error of the estimate is less than half the size of the estimate itself. There is now 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.
In addition, 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 change for this scenario is to instead use all-bedroom recent mover rents to determine the recent mover factor.
And for Small Area FMRs, HUD has replaced the current ratio methodology for determining Small Area FMR gross rent estimates with Zip Code Tabulation Areas (ZCTAs) if statistically reliable data is available.