FAQs about Fair Market Rent Reevaluations
On Aug. 30 the U.S. Department of Housing and Urban Development (HUD) published fair market rents (FMRs) for fiscal year (FY) 2020 in Federal Register Vol 84 No. 169. While HUD continuously strives to provide the most accurate FMRs, it is constrained by the data that is available. Occasionally, a user will believe that the FMRs calculated by HUD do not accurately reflect the rents for the area. When this happens, there is a process whereby certain users can request a reevaluation from HUD. For HUD to perform a reevaluation, HUD needs data more current than what was used in the original calculation of the FMRs. These data are commonly acquired via a local survey. For FY 2019 FMRs, 12 areas requested a reevaluation from HUD.
Not just anyone can request a reevaluation and the reevaluation process is much more involved than simply telling HUD you disagree with the calculation. This discussion covers some frequently asked questions about reevaluations.
Who can request a reevaluation?
While any interested party can request a reevaluation, for a reevaluation to be granted by HUD, the request must be made by the local public housing agency (PHA). In an area with multiple PHAs, a collection of PHAs that when combined represent at least half of voucher tenants in the area must agree the reevaluation is necessary. For example, in FY 2019 HUD received a request for reevaluation for Lenawee County, Mich. However, the request was not made by the housing agency that administers vouchers for the area and as a result, HUD could not grant the reevaluation request.
Who performs the reevaluation?
Unfortunately, HUD does not have sufficient budget to conduct the surveys necessary to perform reevaluations, therefore the interested party is required to gather sufficient data and incur the costs associated with gathering the data. In the Federal Register, HUD states, “PHAs may continue to fund such surveys independently, as specified below, using ongoing administrative fees or their administrative fee reserve if they so choose.” However, HUD later cautions, “The only viable avenue for reimbursement of surveys is the Housing Choice Voucher program administrative fee set aside account; however, reimbursement of FMR surveys is not an explicitly authorized category for reimbursement.”
The Federal Register states that “questions on how to conduct FMR surveys may be addressed to Marie L. Lihn or Peter B. Kahn of the Program Parameters and Research Division, Office of Economic Affairs, Office.”
How is the reevaluation performed?
For HUD to perform a reevaluation, the requesting party must collect data that is more recent than that data used by HUD in establishing the FMRs. Therefore, if a party requested a reevaluation of the 2020 FMRS, they must provide HUD with data that is more recent than the 2017 American Community Survey (ACS) data. The Federal Register states the data must contain the following information, “HUD requires data on gross rents paid in the FMR area for standard quality rental housing units. The data delivered must be sufficient for HUD to calculate a 40th and 50th percentile two-bedroom rent.” Should this type of data not be available, HUD states that requestors may gather this information using the survey guidance available in the documents, “Revised Area Survey Procedures” and “Principles for Conducting Area Rent Surveys.” HUD has also provided a sample survey instrument to assist with conducting the local survey.
In the Federal Register HUD provides more detail about how to obtain the data, appropriate sample sizes and other information. HUD also shares the following helpful advice: “A PHA or contractor that cannot obtain the recommended number of sample responses after reasonable efforts should consult with HUD before abandoning its survey; in such situations, HUD may find it appropriate to relax normal sample size requirements, but in no case will fewer than 100 eligible cases be considered.”
Every year there are a few areas that request reevaluations but end up failing to submit the required information. For example, for FY 2019 and FY2018, two areas and five areas, respectively, requested reevaluation but did not submit the additional data necessary for reevaluation and subsequently were required to use the initial FMRs published by HUD for their area.
What is the timeline of reevaluation?
- First, an area must submit a reevaluation request prior to the close of the comment period outlined in the Federal Register (Generally September 30).
- On or around October 2 HUD will post on its FMR web page a list of the areas that have requested a reevaluation. By law, new FMRs do not become effective when a reevaluation is requested. Therefore, those areas requesting a reevaluation of the FY 2020 FMRs continue to use FY 2019 FMRs until the reevaluation is complete.
- The requesting parties then have until January 10 to submit valid data to HUD.
- On January 13 HUD will post a list of areas that requested a reevaluation but did not submit the required data. In these areas, the FY 2020 FMRs become effective immediately.
- HUD will then review the submitted data and post updated FMRs for the reevaluated areas. The reevaluated FMRs become effective 30 days after they are posted.
Note all dates above are applicable to 2020, the dates generally remain the same, but might change due to the timing of weekends and holidays.
How long is the reevaluation good for?
HUD has a statutory mandate to use the most current data when calculating FMRs. HUD will use the data submitted by the requesting party until the data submitted is no longer more current than the ACS HUD uses for determining FMRs.
The reevaluation data is assigned a date based on the average date of the responses used to create the data. For example, if data submitted for a FY 2020 reevaluation was collected from September to December 2019 – HUD would assign an average response date based on the responses collected in that window. If the average response date was Nov. 1, 2019 then HUD would rely on this data until it has more recent ACS data than Nov. 1, 2019.
Typically, this means that local surveys are used for two to three years. For example, the FY 2020 FMRS use the ACS 2017 data, which is collected throughout 2017 and is given a mid-year 2017 date. Therefore, assuming the data used for a reevaluation of 2020 FMRs was collected in late 2019, the data could be used for 2020 FMRs, 2021 FMRs and 2022 FMRs before the data would be considered stale because the default 2022 FMR calculation would be using 2019 ACS data. This, however, does not mean the FMRs would be flat from 2020 to 2022; the data would be trended each year. First, the local survey data is adjusted to reflect annual dollars in the collection year (e.g. from Nov. 1 to 2019 in our earlier example). The annual data is then trended to the following applicable years using the local forecast calculation that HUD adopted for FY 2020 FMRs.
What if I don’t control the vouchers or have enough money to calculate a reevaluation?
The Federal Register contains this helpful information: “HUD encourages a PHA or other interested party that believes the FMR in their area is incorrect to file a comment even if they do not have the resources to provide market-wide rental data. In these instances, HUD will use the comments, should survey funding be restored, when determining the areas HUD will select for HUD-funded local area rent surveys.”