HUD Proposes Fair Market Rents for 2012
On Aug. 19, HUD published proposed fair market rents (FMRs) for fiscal year (FY) 2012. FMRs are used to determine payment standard amounts for several programs, including the Housing Choice Voucher program. They also affect the calculation of rent limits for the low-income housing tax credit program.
According to the figures, HUD has proposed lower FY 2012 FMRs for most of the country. Proposed FMRs for approximately 70 percent of counties would be lower than for FY 2011; FMRs in approximately 30 percent of counties would increase under the proposal over 2011 levels; and approximately 1 percent of counties would have no change in FMRs.
The five areas with the largest proposed decreases in FMRs are all located in Alaska. The proposed FMR decreases in these areas ranged from 34 to 48 percent and would result in rents that are between $394 and $559 lower than those in FY 2011.
Outside of Alaska, the largest decreases were:
St. James Parish, La., with a proposed 34 percent decrease in FMR;
Hinsdale County, Colo., with a proposed 29 percent decrease; and
Modoc County, Calif., with a proposed 29 percent decrease.
Conversely, looking at areas with the largest rent increases, three of the five counties with the largest proposed increases in FMRs are in Texas:
The proposed FY 2012 FMR for Concho County represents a 64 percent increase for two-bedroom units;
Bailey County's FMR would increase by 47 percent; and
The proposed FMR for Brewster County represents a 37 percent increase.
What This Means for LIHTC Sites
The FY 2012 FMRs are likely to affect tax credit and tax-exempt bond income and rent limits at properties in Metro High Cost Housing areas because those are areas where HUD used 2011 FMRs to calculate credit and bond income limits.
There are 19 Metro High Cost Housing areas. HUD has proposed increasing FY 2012 FMRs in six of the Metro High Cost Housing areas. Those six counties are San Francisco, Orange, and Riverside counties in California; Honolulu County in Hawaii; Hudson County in New Jersey; and New York County in New York. If the proposed FMRs are adopted, properties in these areas would probably see similar increases in their LIHTC and bond income and rent limits.
The remaining 13 Metro High Cost Housing counties are spread throughout Arizona, California, Florida, and Puerto Rico. HUD has proposed decreases for the FY 2012 FMRs in those 13 areas. If the proposed FMRs are adopted, income limits in these areas won't see an increase from HUD using its FMR calculation. But income limits at properties in these areas could increase if the area median incomes increase.
If the areas' median incomes fall, however, the new lower income limits would apply only to new developments in those areas, because HUD has a “hold harmless” policy that prevents income limits from decreasing at existing properties.