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

Small Area Fair Market Rents would re-calculate rental subsidies in qualifying metro areas

WASHINGTON, D.C. – (RealEstateRama) — More than two million American households depend upon the Housing Choice Voucher (HCV) Program to find suitable affordable rental housing. Yet in some metropolitan areas, the choices these families have about where they live are severely limited, placing high-opportunity neighborhoods out of reach, in part because of the current method of calculating their rental assistance. Today, the U.S. Department of Housing and Urban Development (HUD) is proposing a new method to recalculate rental subsidies in a manner that would expand neighborhood options for households living in these particularly restrictive housing markets.

For the next 60 days, HUD is accepting public comment on a proposal to change the geography it uses to calculate so-called Fair Market Rents (FMRs). In these areas, HUD is proposing to transition from a metropolitan area-wide approach to setting FMRs down to the zip code level as a means to expand the options these families have to live in lower poverty neighborhoods. If instituted today, this ‘Small Area Fair Market Rent’ approach would impact 31 metropolitan areas (see list below, though the final list may change). Read HUD’s Proposed Rule.

“In some areas of the country, the Housing Choice Voucher Program offers little choice to families about where they can live, limiting opportunities for themselves and their children,” said HUD Secretary Julián Castro. “We propose to use a tested new approach that would offer these households greater choice 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, “What we propose today will offer real choice to voucher-assisted families. It’s clear that our current approach to supporting more options isn’t working in many areas. There is strong evidence that calculating rental subsidies at the zip code level is a more effective way of promoting choice in concentrated rental markets.”

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 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 is proposing to phase out the 50^thpercentile 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, HUD is proposing to 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 currently meet the Proposed Rule’s threshold of voucher concentration and potential for SAFMRs to be effective, and thus would be required to institute this new approach. (This list may change by the time of implementation):

Last year, a group of Harvard University social scientists published a study based largely on HUD data. This report sought to measure the long-term effects of moving families away from neighborhoods with deeply concentrated poverty to low-poverty environments and to gauge the impact these moves had on the overall well-being of these families. The authors found that children who moved to low-poverty neighborhoods when they were young are doing better as adults, with significantly higher earnings and a greater likelihood of having attended college. Findings from this new study, along with HUD’s own research, support the Department’s current policy direction of fostering opportunities for economic mobility while also investing in place-based strategies that revitalize distressed neighborhoods. Read more.

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Brian Sullivan
(202) 708-0685