On Friday, HUD announced, through letters to PHAs, that the Department would be making the implementation of Small Area Fair Market Rents (FMRs) completely voluntary for PHAs in 23 of the 24 metropolitan areas which were originally required to use Small Area FMRs. Small Area FMRs are FMRs calculated by zip code instead of a wider metropolitan area.

NAHRO is pleased that HUD listened to NAHRO’s concerns and made implementation of Small Area FMRs voluntary. HUD has only suspended the mandatory imposition of Small Area FMRs. PHAs may still choose to voluntarily apply them, if it is the appropriate action for their program participants and community. NAHRO understands that for some communities, the use of Small Area FMRs is appropriate, and NAHRO continues to work to ensure that those areas that wish to implement Small Area FMRs may do so on a voluntary basis. All other aspects of the Small Area FMR rule remain in place. The suspension will last until October 1, 2019 (for a 2020 implementation), unless the Small Area FMR rule is changed. The Small Area FMR mandatory implementation remains in effect for the Dallas-Plano-Irving, TX Metro Division.

NAHRO opposes the mandatory imposition of Small Area FMRs for a variety of reasons. One of NAHRO’s primary concerns is the adverse impacts Small Area FMRs may have on future tenants in some markets as certain neighborhoods would receive subsidy cuts. NAHRO does not believe that a policy that has the potential to have deleterious effect on the lives of thousands of program participants should be mandatorily implemented without further empirical evidence of the effects of the change across a variety of markets over a longer time period. NAHRO is also concerned about problems helping program participants move to areas with higher Small Area FMRs without additional funding for services to help with the transition (e.g., mobility counseling) and problems with a quick implementation timeline, among other concerns.

In letters to PHAs, HUD articulates several reasons for suspending the imposition of mandatory FMRs. First, HUD has reviewed its interim findings from the Small Area FMR Demonstration, which was tasked with gathering empirical evidence of the efficacy of Small Area FMRs and found that “further analysis of the benefits and costs of Small Area FMR[s], particularly with respect to the impact on rent burdens on participating families and the availability of units” is required. Second, HUD is in the process of reviewing comments on how to reduce regulatory burdens and notes that industry groups had concerns about the timeline for implementation and notes on programmatic changes to the Housing Choice Voucher program. Third, programs that are shifting to small area FMRs need additional guidance and technical assistance, which HUD has not provided yet.

HUD sent slightly different versions of letters to PHAs impacted by this change. PHAs that are currently designated as 50th-percentile-FMR-area PHAs received letters stating how long their 50th percentile status would remain. Areas that are designated as 50th percentile FMR areas will keep those designations in accordance with current regulations until they transition to Small Area FMRs in 2020 or the Small Area FMR rule is changed.

In a letter to HUD, NAHRO previously suggested suspending the Small Area FMR designation using authority under 24 CFR § 888.113(c)(4)(iii). HUD followed NAHRO’s suggestion and suspended the mandatory imposition of Small Area FMRs using the NAHRO-suggested provision. NAHRO views this as one step in the process to continue working collaboratively with HUD to further streamline regulations so that they best serve program participants and their individual communities.

Additional Resources

  • HUD’s letter to a typical PHA that would have been required to mandatorily impose Small Area FMRs can be found here.
  • A letter to HUD stating NAHRO’s position that Small Area FMR implementation should be voluntary can be found here.

NAHRO’s Comment Letter articulating that Small Area FMRs be voluntary can be found here.

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