HUD’s Office of Policy Development and Research has published an Interim Report of the Small Area Fair Market Rent (SAFMR) Demonstration. The demonstration aims to assess how payment standards based on smaller geographic areas affect factors like PHA administrative costs, rents and tenant contributions, and voucher-holder’s access to higher-opportunity areas. Results from Phase 1 of the demonstration present mixed findings from the five PHA test sites, which include the Chattanooga Housing Authority (TN), the Housing Authority of Cook County (IL), the Housing Authority of the City of Laredo (TX), the Housing Authority of the City of Long Beach (CA), and the Town of Mamaroneck Housing Authority (NY).
SAFMRs May Increase Access to Opportunity ZIP Codes
While SAFMRs increased the pool of units potentially available to HCV holders in high-rent ZIP codes and reduced the pool of units in low-rent ZIP codes, this unit shift is highly varied across test sites. For example, the net loss of units with rents below the applicable FMR exceeded 10 percent in Long Beach, while Mamaroneck experienced no change.
For SAFMR PHAs as a whole, the gain in units with rents below the applicable FMR in high rent ZIP codes did not offset the decrease in the number of units in the low-rent and moderate-rent ZIP codes, resulting in a net unit loss of over 22,000 units (3.4 percent) that may otherwise be affordable to voucher holders.
SAFMRs Increase Voucher Holders Moving to and Living in High-Rent, High-Opportunity Areas
Following the implementation of SAFMRs, existing voucher holders are 3 percent more likely to live in high-rent ZIP codes than they were prior to the demonstration. New voucher holders were also 3 percent more likely to move to high-rent ZIP codes. Among existing households that moved to new ZIP codes, the portion moving to high-rent ZIP codes increased from 18 percent in 2010 to 28 percent in 2015.
SAFMRs Reduced Average Per-Unit Payment Standards and HAP Costs, But Increased Tenant Contributions
Between 2010 and 2015, the average payment standard for voucher holders decreased by 11 percent for SAFMR PHAs, while only decreasing 2 percent in comparison PHAs. Similarly, SAFMR PHA HAP costs decreased an average of 13 percent over the same time period, compared to about 5 percent at comparison PHAs. Tenant contributions to rent increased by 16 percent in SAFMR PHAs. These increases were especially high in low-rent ZIP codes (22 percent increase), which may indicate that some voucher holders chose not to move as payment standards fell.
The interim findings suggest implementation of SAFMRs are increasing access to units in high-opportunity areas and decreasing access in lower-opportunity areas. The report concedes, however, that this effect may be influenced by a variety of other factors, including the PHAs’ ability to execute the demonstration, the responses of landlords and voucher holders to changes in payment standards, and voucher holders’ current circumstances.
The report’s mixed findings have prompted HUD to suspend mandatory SAFMR implementation for 23 of the 24 metropolitan areas previously selected in the SAFMR Final Rule until October 1, 2019. In a letter to PHA Executive Directors (Letter A 8-11-2017), HUD cited public comments to the SAFMR Final Rule that cautioned potential regulatory and administrative burdens to PHAs as a key reason for the suspension. In our comments to the SAFMR Proposed Rule, CLPHA encouraged HUD to enable PHAs with the flexibility to find and develop units in high-opportunity areas by setting FMRs at the 50th percentile for all PHAs, instead of the current 40th percentile. We are pleased that HUD has decided to observe the full SAFMR evaluation before requiring PHAs to adhere to new standard.
Small Area FMR implementation continues to be mandatory for the Dallas-Plano-Irving TX metropolitan because of its involvement in a 2011 legal settlement, however, PHAs in other metropolitan areas are still allowed to voluntarily apply the SAFMR. Phase 2 of data collection for the SAFMR demonstration has begun and will continue through the end of 2017, and HUD anticipates a full demonstration evaluation to be published in mid-2018.