HUD Announces 2-Year Suspension of Small Area Fair Market Rents

Filed in Codes and Standards, Multifamily by on August 11, 2017 6 Comments

In a move that should be beneficial to multifamily builders, HUD has announced a two-year-suspension in the use of Small Area Fair Market Rents (FMRs) as a guideline for public housing agencies (PHAs) in determining their subsidy payment standards in the Housing Choice Voucher program.

NAHB applauds HUD’s decision to delay implementation of this controversial program. NAHB has repeatedly raised concern about the potential voucher program cost increases and negative impacts on families and properties in less affluent areas.

The Small Area FMR rule took effect on Jan. 17. It required certain PHAs to use Small Area FMRs based on data from ZIP codes rather than the Fair Market Rents based on data from an entire metropolitan area. This mandate has been pushed back from beginning on Oct 1, 2017 until Oct. 1, 2019.

HUD informed the PHAs that it is exercising its authority to suspend implementation of the Small Area FMR designation for 23 of the 24 metropolitan areas. The designation remains in effect for PHAs administering Housing Choice Vouchers in the Dallas-Plano-Irving, Texas metro division, effective Oct. 1. Small Area FMRs have been used in this metro region since 2011 as a result of a legal settlement.

It is important to note that only the mandatory implementation of Small Area FMRs is impacted by the suspension. All other provisions of the final rule remain in effect, including the option to hold families under contract harmless.

Further, HUD’s action does not prevent any PHA operating in the covered metropolitan areas from voluntarily implementing the use of Small Area FMRs prior to Oct. 1, 2019, should they wish to do so.

HUD’s decision was based on:

  • A review of interim findings from the Small Area FMR demonstration program;
  • HUD’s review of the public comments in response to the Reducing Regulatory Burden Federal Register Notice; and
  • Necessary guidance and technical assistance has not been provided to affected PHAs.

NAHB’s most recent public comments in response to HUD’s Regulatory Burden Notice cautioned that “HUD’s assertion that the system would cause households to move into ZIP codes with higher subsidies without increasing the average cost of a subsidy seems improbable. Instead, it is likely that the cost will increase, causing fewer households to receive assistance.

“Households unable to move out of ZIP codes where subsidies decline would also suffer. Additionally, reduced housing demand in these ZIP codes would likely lead to disinvestment, often in inner city neighborhoods where more, rather than less, investment in housing is needed.”

NAHB’s Senior Officers personally reiterated these concerns during their June 14 meeting with HUD Secretary Ben Carson.

NAHB will also carefully review HUD’s report on the Small Area FMR demonstration program when it is released later this month. For more information, contact Michelle Kitchen at 800-368-5242 x8352.

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