HUD Issues Final FY2014 Fair Market Rents
HUD recently published final fair market rents (FMRs) for HUD fiscal year (FY) 2014. In general, the FMR for an area is an amount that would be needed to pay the rent and utilities of a privately owned, decent, and safe rental housing unit of a modest nature with suitable amenities. HUD is required to publish the FMRs at least annually to be effective on Oct. 1 of each year. FMRs are used to determine payment standards for the Housing Choice Voucher program, initial renewal rents for some expiring project-based Section 8 contracts, initial rent for housing assistance payment contracts in the Moderate Rehabilitation Single Room Occupancy program, and rent ceilings in the HOME rental assistance program. In addition, the FMRs influence income and rent limits for the Low-Income Housing Tax Credit (LIHTC) program, tax-exempt bond (TEB) programs, and other affordable housing programs.
FMRs are calculated using standard quality base rents, derived from the American Community Survey (ACS) five-year gross rents and a recent mover factor that is applied to the standard quality base rents. For the recent FMRs, HUD used the 2007-2011 five-year ACS data to update the base rents set in FY 2013, which used the 2006-2010 five-year ACS data.
For LIHTC sites, the changes are of most direct relevance to income limits for properties located in High Housing Cost (HHC) areas where HUD uses the FMRs to calculate income and rent limits. HHC areas with increases in FMRs are likely to see increases in the HUD-published Multifamily Tax Subsidy Project (MTSP) income limits; those with decreases in FMRs are likely to see decreases in the HUD-published MTSP income limits. For existing LIHTC projects, income limits will not decrease because of the hold harmless policy under Internal Revenue Code Section 142; new LIHTC units, however, may have lower rent and income limits.
For more information, you can refer to FMR Documentation on HUD's Web site.