Changes in Small Area Fair Market Rents

Published by Thomas Stagg on Thursday, January 18, 2018 - 12:00am

Small area fair market rent (SAFMR) were required to be implemented in 23 areas beginning Jan. 1. In addition, SAFMRs were already being used in Dallas, Texas, bringing to 24 the number of areas required to use SAFMRS. 

Historically, FMRs were calculated based on the entire metropolitan area.  For example, San Diego-Carlsbad, Calif. metropolitan statistical area (MSA) had one FMR that would be used for the entire area.  SAFMRs are calculated on a zip code basis, with each zip code having its own FMR.  San Diego-Carlsbad, Calif. MSA has 169 zip codes.

So what might the impact of SAFMRs be?

Changes in SAFMR in Designated Areas

Area Wide vs. SAFMR

To first quantify the change in switching from an area wide FMR to a zip code based FMR, Novogradac & Company looked at the difference between what the FMR would have been in the area compared to the SAFMR.  A negative amount means that the SAFMR is less than the old area wide FMR.

This table summarizes changes to designated areas:

 

Blog Chart Novogradac SAFMRs Version 1-01
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For comparison, this table from a Jan. 18, 2017 post in this space, summarizes the changes in 2017: 

 

Blog Chart Novogradac SAFMRs 2017
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Note, in the notice of Final Rule concerning the SAFMR’s HUD stated the following:

“Finally, in order to ensure that a suitable amount of units remain available during the transition to Small Area FMRs, this final rule limits the annual decrease in Small Area FMRs to no more than 10 percent of the area’s FMR in the prior fiscal year. That is, the current FMR may be no less than 90 percent of the area’s FMR in the previous fiscal year.”

Similar to last year, the SAFMR data published on HUD’s website does not appear to apply this 90 percent floor.  None of the calculations Novogradac conducted were adjusted to account for this floor.

The following breakdown presents more detailed information about each of the designated SAFMR areas: 

 

Blog Chart Novogradac SAFMRs Version 1-02
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2017 SAFMR vs. 2018 SAFMR

To help quantify the year over year change in SAFMR Novogradac looked at the difference between the 2017 SAFMR and the 2018 SAFMR.  Note, there were a few zip codes added during 2017.  Because 2017 SAFMR data is not available for these areas, this analysis excluded the 10 counties.

 Summary of changes to designated areas 2017 SAFMR vs 2018 SAFMR

 

Blog Chart Summary of Changes to Designated Areas 2017 SAFMR vs. 2018 SAFMR
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Here is more detailed analysis of each impacted area.

 

Blog Chart Novogradac SAFMRs Version 1-04
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Analysis

When compared to the area wide FMR, the SAFMRs have more counties with decrease (57 percent) than increase.  However, it is interesting to note, that although a greater number of areas have a decrease, the average change for 2018 is a net increase in the FMR. 

On a year over year basis the SAFMRs are showing a general trend upwards with 89 percent of areas having a higher SAFMR 2018 when compared with 2017. 

For a unit-level examination of the SAMR change, see the report from New York University, "How Do Small Area Fair Market Rents Affect the Location and Number of Units Affordable to Voucher Holders?"