Date Published:
June 9th, 2017
HUD recently published two notices that CLPHA would like to bring to the attention of our members. The first notice calls for public comment on four FMR revisions, including two that are specific to small areas. If your PHA has any feedback on this notice, please send it to CLPHA ahead of the closing date for comment, which is June 26, using the contact information listed below. In the second notice, HUD has established Fiscal Year (FY) 2017 Housing Assistance Payment (HAP) Renewal Funding Inflation Factors (RFIF). The notice also outlines HUD’s three-step methodology for determining RFIFs. Please note that the revised inflation factors take effect on June 19, 2017.
Proposed Changes to the Methodology Used for Estimating Fair Market Rents
HUD released a notice for public comment that proposes four revisions to the FMR calculation methodology, two of which are specific to small areas.
- First, HUD proposes that ACS rent estimates must be based on at least 100 observations in order to be used as base rents. Currently, the base year rents use ACS data with a margin of error of less than 50 percent. HUD wants to add an additional criterion of ACS estimates with at least 100 observations.
- Second, HUD proposes that before using data from a larger geographic area to calculate the recent mover factor, HUD would first check to see if the data aggregated across “all-bedroom” count units is statistically reliable for the FMR area. HUD’s rationale is that incorporating “all-bedroom” rents into the recent mover factor calculation when statistically reliable two-bedroom data (the current measure) is not available preserves the use of local information to the greatest extent possible.
- Third, HUD proposes to calculate Small Area Fair Market Rents (SAFMRs) directly from the standard quality gross rents provided to HUD by the Census Bureau for Zip Code Tabulation Areas (ZCTAs) when such data is not statistically reliable. This method would revise current methodology of using a rent ratio calculation that divides the median gross rent across all bedrooms for the Small Area ZCTA by similar median gross rent for the parent metro area of the zip code. HUD also proposes implementing the minimum 100 observations standard mentioned previously.
- Fourth, HUD proposes to link each ZCTA to its parent HUD Metropolitan Fair Market Rent Area (HMFA), if it exists. HUD’s rational is that this change will take advantage of the more localized recent mover factors for subareas of OMB-defined metro areas, when available.
The Department is requesting comment on the possible effects of these methodological proposals. While the proposals appear to be beneficial in more accurately estimating rents, CLPHA encourages members to use the FY2017 Hypothetical Fair Market Rents Documentation Systemto estimate the impact of these methodology changes in their respective markets. HUD notes, however, that these methodology changes are not monodirectional. For example: the application of a stricter statistical significance test may lower rents in an area, while the use of the more local “all-bedroom” recent mover factor may increase rents in the same area.
The full text of the notice can be found here.
The comment period for this notice closes on June 26, 2017. Should your agency have feedback on these changes, please direct them to Research & Policy Analyst Amber-Lee Leslie by email ataleslie@clpha.org or by phone at (202) 638-1300 ext. 103
Revised FY2017 Inflation Factors for Public Housing Agency Renewal Funding
On June 8, HUD published a notice establishing Housing Assistance Payment (HAP) Renewal Funding Inflation Factors (RFIF) for Fiscal Year (FY) 2017. RFIFs are used to adjust the allocation of HCV program funds to PHAs for local changes in rents, utility costs, and tenant incomes. Notably, HUD has revised its RFIF methodology to calculate a national per unit cost (PUC) inflation factor that does not rely on historical values of PUC. See 81 FR 22296. Once published by HUD, tables for the RFIFs can be found here. The revised inflation factors take effect on June 19, 2017.
The notice also thoroughly details the three-step methodology for determining RFIFs. HUD first estimates a national inflation factor based on per unit costs and then estimates an individual area inflation factor based on annual FMR changes between fiscal years. Finally, HUD adjusts the area inflation factor to ensure that no area has a factor less than one (which safeguards against a result that decreases funding eligibility within an area). HUD subsequently applies the calculated individual area inflation factors to eligible renewal funding for each PHA based on VMS leasing and cost data for the prior calendar year.
Read the full text of the notice here.