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Understanding the New Small Area FMR

Published by Thomas Stagg on Thursday, February 2, 2017

Journal cover February 2017   Download PDF

The U.S. Department of Housing and Urban Development (HUD) released Nov. 16, 2016, a final rule implementing small area fair market rents (SAFMRs). In the notice, HUD wrote, “The use of Small Area FMRs is expected to give HCV [Housing Choice Voucher] tenants access to areas of high opportunity and lower poverty areas by providing a subsidy that is adequate to cover rents in those areas, thereby reducing the number of voucher families that reside in areas of high poverty concentration.”


The fair market rent (FMR) is used as a guideline by public housing authorities (PHAs) when determining the maximum voucher payment (known as the payment standard) in the HCV program. A PHA has some leeway in determining the HCV payment standard, but typically, the HCV payment standard must be within a range of 90 percent to 110 percent of the FMR without HUD approval.

Historically, area-wide FMRs have been determined based on Section 8 program’s FMR area definitions which consist of the following three types of areas:

  1. Metropolitan area (i.e., a metropolitan statistical area [MSA]): These are large metropolitan areas made up of one or more counties. For example, the Denver-Aurora-Lakewood, Colo., MSA would have one FMR for all 10 counties located in the MSA.
  2. Parts of some metropolitan areas (i.e., a HUD metro fair market rent areas [HMFA]): These are MSAs that have been divided into smaller areas by HUD. For example the San Antonio-New Braunfels, Texas, MSA has been divided into four HMFAs containing one to five counties each.
  3. Non-metropolitan counties.

New Guidance

Under the new guidance, HUD will begin publishing FMRs on a ZIP-code basis known as SAFMRs. PHAs in designated areas will be required to use the SAFMR when determining the HCV payment standard. 

HUD has a series of selection criteria used in determining which areas are required to use the SAFMR that includes:

  • number of HCVs under lease, 
  • vacancy rate of an area,
  • number of units in a ZIP code where the SAFMR is more than 110 percent of the area-wide FMR, and
  • percentage of voucher holders living in concentrated low-income areas relative to all renters within these areas over the entire metropolitan area 

In addition, PHAs not located in the designated area can choose to use the SAFMR when administering the HCV program. All other programs that use FMRs would continue to use area-wide FMRs unless the PHA specifically elects to use SAFMRs.

The following areas will be required to implement the SAFMR for the HCV program starting in Fiscal Year (FY) 2018:

  • Atlanta-Sandy Springs-Marietta, Ga. HUD Metro FMR Area
  • Bergen-Passaic, N.J. HUD Metro FMR Area
  • Charlotte-Gastonia-Rock Hill, N.C.-SC HUD Metro FMR Area
  • Chicago-Joliet-Naperville, Ill. HUD Metro FMR Area
  • Colorado Springs, Colo. HUD Metro FMR Area
  • Dallas-Plano-Irving, Texas Metro Division
  • Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla. Metro Division
  • Fort Worth-Arlington, Texas HUD Metro FMR Area
  • Gary, Ind. HUD Metro FMR Area
  • Hartford-West Hartford-East Hartford, Conn. HUD Metro FMR Area
  • Jackson, Miss. HUD Metro FMR Area
  • Jacksonville, Fla. HUD Metro FMR Area
  • Monmouth-Ocean, N.J. HUD Metro FMR Area
  • North Port-Bradenton-Sarasota, Fla. MSA
  • Palm Bay-Melbourne-Titusville, Fla. MSA
  • Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA
  • Pittsburgh, Pa. HUD Metro FMR Area
  • Sacramento-Arden-Arcade-Roseville, Calif. HUD Metro FMR Area
  • San Antonio-New Braunfels, Texas HUD Metro FMR Area
  • San Diego-Carlsbad-San Marcos, Calif. MSA
  • Tampa-St. Petersburg-Clearwater, Fla. MSA
  • Urban Honolulu, Hawaii MSA
  • Washington-Arlington-Alexandria, D.C.-Va.-Md. HUD Metro FMR Area
  • West Palm Beach-Boca Raton-Delray Beach, Fla. Metro Division

HUD says these 24 areas contain approximately 368,000 HCVs, which is 18 percent of all HCVs.

Implementation Issues

SAFMRs are designed to have the HCV payment standard better match the rent for each ZIP code and make it so that HCV holders can find housing in high opportunity. Due to this, some ZIP codes will have decreases in SAFMR from the area-wide FMR and some areas will have increases. Unfortunately, this means that some HCV holders will see decreases in their payment standard if they choose to stay in the unit/ZIP code in which they reside.

HUD has some protection in place for tenants that have decreases in SAFMR. First, if the SAFMR decreases, the PHA is not required to implement the new payment standard on existing tenants until the second regular re-examination following the effective date of the decrease in the payment standard. Second, HUD will limit the decrease in SAFMR to no more than 10 percent from the previous year’s amount. Also, as mentioned earlier, a PHA can establish an HCV payment standard up to 110 percent of the SAFMR without HUD approval. In addition, PHAs are allowed to set a different payment standard for disabled tenants as a reasonable accommodation of their disability. Finally, HUD may approve exception payments standard, including a payment standard exception for an entire ZIP code.

Impact to Project Based Vouchers

As mentioned earlier, only HCVs in designated SAFMR areas are required to use the new SAFMRs. All project-based voucher (PBV) projects are exempt from this requirement, even those located in a SAFMR area. However, PHAs that are using SAFMR for its HCV program can use SAFMR for all new PBV projects. In addition, the PHA can use SAFMR on current PBV projects if the owner and the PHA mutually agree to the change. The final rules do not specifically state this, but it would appear that for existing projects, you may have some developments managed by the same PHA using SAFMR and some using area-wide FMRs. This determination would likely be made on if the SAFMR was higher than the area-wide FMR. However, once a PBV project chooses to use the SAFMR, it is prohibited from reverting back to the area-wide FMR.

Impact to LIHTC Properties

Low-income housing tax credit (LIHTC) properties may be impacted if they are located in an area that will use SAFMR when setting HCV payment standards. LIHTC properties are allowed to collect the entire HCV payment standard, even if this exceeds LIHTC maximum rents. Therefore, properties in areas where the SAFMR is greater than the previous area-wide FMR will be able to collect additional rent. In areas where the HCV payment standard has decreased the LIHTC properties will collect less rent from the HCV holders. It is important to note that if the HCV payment standard were reduced to less than applicable LIHTC rent, the owner would likely not be able to collect the LIHTC rent. The HCV payment to owners is made up of two parts, the tenant paid portion and the housing assistance payment. The tenant paid portion is typically required to be 30 percent of the tenant’s adjusted income, however, in some cases the tenant can pay up to 40 percent of its income towards a unit if the rent on the unit is greater than the HCV payment standard. Therefore, if the HCV payment standard plus the additional 10 percent of the tenant’s adjusted income is less than the LIHTC rent, the owner would not be able to collect the entire LIHTC rent from HCV holders. 

FMR Change Maps

We have mapped the changes from the 2017 area wide FMR to the hypothetical 2017 SAFMR. A decrease means that the SAFMR is less than the area wide FMR.

San Diego

San Diego would have increases in HCV payment standards in the downtown core area as well as the northern part of the county along the coast. The HCV payment standard decreases for the majority of the inland areas.


Northern Atlanta would have increases in the HCV payment standards. The southern urban areas of Atlanta primarily have decreases. The less densely populated zip codes to the south and east mostly have increases. 

Washington-Arlington-Alexandria, D.C.-Va.-Md. HMFA

Excluding the east side of the city, downtown Washington, D.C., primarily has increases in the HCV payment standards. The southeast side of the city will have large decreases in the HCV payment standards. The outer surrounding communities also largely have decreases in the HCV payment standards.

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