Out of Reach 2004
In recent years, proposed Fair Market Rents (FMRs) for the fiscal year beginning October 1 have been released in April or May with very little fanfare. This year, however, proposed Fair Market Rents (FMRs) were not released until August 6, allowing for only one month comment period. Since August 6, the 2005 FMRs have been dogged by controversy.Problems with the Proposed Fair Market Rents
Prior to the release of the proposed 2005 FMRs, most observers expected that the 2005 data would represent something of a break from the data released over the previous ten years. In those years, rent data from the 1990 Census was used as a basis for estimating most FMRs (See Appendix A for further information on how FMRs are estimated). This year, HUD was able to use 2000 Census data as the basis for estimation. (The same process occurred in 1994 when the housing data from the 1990 Census became available.) It is typical with such a “rebenchmarking” for values to shift significantly with the updated information, and since the data are more recent, this change is fairly uncontroversial.
What proved controversial this year was that HUD introduced a number of changes in the way the FMRs were calculated when the proposed FMRs were finally released.
First, in calculating the FMRs, HUD adopted new Office of Management and Budget (OMB) metropolitan area definitions. These new geographic definitions, in many instances, appeared arbitrary and unrepresentative of the housing market. For example, in the Washington, D.C. area, Bethesda, MD was considered a different market from the city of Washington, though they share a ten-mile border. At the same time, Washington was in the same FMR area as counties more than 50 miles away in West Virginia.
Second, HUD did away with the “state rural minimum.” In the past, HUD set a minimum FMR for rural counties within each state because experience suggested that rural housing markets contained many more substandard units and are more spread out than urban housing markets. In other words, the markets are so small in terms of the available, high quality rental stock and the level of rental activity and so geographically dispersed that at any given time and place a prospective renter household will have a very limited selection of units that meet its requirements and budget. The rural minimum also overcame technical problems with finding a sufficient sample of valid rental units in some low population rural counties to calculate the FMR. In this year’s proposed FMRs, the sample size problems were overcome by calculating FMRs for clusters of counties where sample sizes would otherwise have been insufficient. However, there was no attempt to address the other concerns that had initially motivated the state rural minimum.
Third, HUD changed the methods and ratios used to calculate FMRs for units other than two bedroom units. Since most apartments in the United States are one or two bedroom units, HUD normally calculates the FMR on the basis of a two bedroom unit and uses ratios derived from the Census to estimate rents for larger and smaller units. Furthermore, because experience suggested that large families had greater difficulty finding apartments, HUD adjusted the rents for larger units to reflect this difficulty. At the time of the publication of Out of Reach 2004, it is not yet clear what led to the ratio changes, but the ratios did decline and thus FMRs for larger units fell considerably in many jurisdictions across the country. In New Jersey, for example, the four bedroom FMR fell in every single county.
Fourth and finally, HUD changed the adjustments it used to control for minimum quality standards and to exclude subsidized units. Here again, the nature and implications of these changes is not yet known.
The result of the many changes was a set of proposed FMRs that varied significantly not only from those of the past few years but also from expectations.
Given the number of different methodological changes, it is impossible to know how much of the changes to FMRs were due to a more accurate reflection of actual rental conditions and how much were due to questionable changes in how FMRs were being calculated. What is clear, however, is that these changes will affect the housing stability of hundreds of thousands of tenants, and the ability to do business of landlords, developers, and housing program administrators across the country.
The Final FMRs
The initial public comment period, which ended September 7, 2004, resulted in nearly 400 comments in opposition to the proposed FMRs. As a partial response to the comments, HUD reverted to the old FMR area definitions in publishing its final FMRs in October. As a result, the final FMRs are less controversial and much more consistent with last year’s FMRs than those initially proposed.
Still, the final FMRs generated at least 65 public comments seeking amendments. Housing authorities, political representatives, and advocates remain concerned about the way the FMRs have been adjusted for bedroom size, the adjustments made for subsidized and substandard units, and the abolition of the rural minimum. Moreover, many call into question the validity of the random digit dialing surveys (RDDs) conducted in some areas to verify local rent levels after the release of the proposed FMRs in August. In many cases, these RDDs were conducted for the wrong FMR area definitions and were adjusted in various ways using Census and other data that brought their results into question.
It is expected that HUD will release yet again revised FMRs in some areas in 2005 based on the comments and on RDDs it continues to field.
Reflecting the Controversy in Out of Reach
The analysis and data in this report use the final FMRs as of October 1, 2004 as HUD’s best estimate of the local cost of decent rental housing. In most instances, the FMRs are uncontroversial and the Housing Wages developed from them are an excellent measure of what an individual or a family needs to earn to afford a decent rental unit.
Recognizing that controversy remains, however, areas where NLIHC knows the FMR continues to be subject to debate are indicated by a footnote in the data. For reference purposes, below is a list of the 66 FMR areas where either an RDD was conducted, or public comments disputing the final FMRs were submitted to HUD, or both. In addition, public comments disputed the FMRs generally in: Connecticut, Vermont, New Jersey, Illinois, and Puerto Rico. Alternative FMRs generated by HUD or provided in local comments are also reported here. Researchers and local advocates may choose to use these values if they appear more representative of actual housing costs than HUD’s final FMRs.
Local organizations and advocates submitted the comments used to generate the list on the next page. This data is provided by NLIHC for information purposes only and does not reflect in any way on the quality or the validity of the comments. A more thorough description of the 2005 FMR controversy, with NLIHC’s position and many of the public comments submitted to HUD by local organizations, can be found at www.nlihc.org/2005fmrs/index.htm.
FMR Area Definition Public Comment Seeking Revised FMR August RDD FY2005 2BR FMR Current Housing Wage Alternative 2 BR FMR Alternative Housing Wage Source of Alternative FMR Allegany, MD Yes No $439.00 $8.44 NA NA Atlantic-Cape May, NJ Yes No $845.00 $16.25 NA NA Baltimore, MD Yes Yes $847.00 $16.29 $915.00 $17.60 HUD:FMR Without RDD Bennington, VT Yes No $659.00 $12.67 NA NA Bergen-Passaic area, NJ Yes No $1,132.00 $21.77 NA NA Boston, MA Yes Yes $1,266.00 $24.35 $1,442.00 $27.73 HUD: FMR Without RDD Bridgeport, MSA, CT Yes No $925.00 $17.79 NA NA Burlington, MSA, VT Yes No $810.00 $15.58 NA NA Caledonia County, VT Yes No $557.00 $10.71 NA NA Chicago, IL Yes Yes $906.00 $17.42 $979.00 $18.83 HUD: FMRWithout RDD Cleveland-Lorain-Elyria, OH Yes Yes $703.00 $13.52 $703.00 $13.52 HUD: FMR Without RDD Craighead County, AR Yes No $489.00 $9.40 NA NA Danbury, MSA, CT Yes No $1,109.00 $21.33 NA NA Detroit, MI No Yes $805.00 $15.48 $848.00 $16.31 HUD: FMRWithout RDD Dutchess County, NY No Yes $942.00 $18.12 $901.00 $17.33 HUD: FMR Without RDD Essex County, VT Yes No $600.00 $11.54 NA NA Fitchburg-Leonminster, PMSA Yes No $784.00 $15.08 $960.00 $18.46 Public Comments Fort Worth-Arlington, TX No Yes $732.00 $14.08 $799.00 $15.37 HUD: FMR Without RDD Franklin County, VT (Non-metro Portion) Yes No $792.00 $15.23 NA NA Gadsden County, FL Yes No $677.00 $13.02 NA NA Garrett County, MD Yes No $452.00 $8.69 NA NA Grand Isle County, VT (Non-Metro Portion) Yes No $792.00 $15.23 NA NA Hartford, MSA, CT Yes No $873.00 $16.79 NA NA Hawaii County, HI Yes No $691.00 $13.29 $791.76 $15.23 PublicComments Hudson County, NJ Yes No $1,100.00 $21.15 NA NA Indianapolis, IN No Yes $655.00 $12.60 $655.00 $12.60 HUD:FMR Without RDD Jim Hogg County, TX Yes No $382.00 $7.35 NA NA Kansas City, MO-KS No Yes $691.00 $13.29 $741.00 $14.25 HUD: FMR Without RDD Kent County, DE Yes No $616.00 $11.85 $654.00 $12.58 PublicComments Los Angeles-Long Beach, CA No Yes $1,124.00 $21.62 $1,011.00 $19.44 HUD: FMR Without RDD Middlesex-Somerset-Hunterdon area, NJ Yes No $1,210.00 $23.27 NA NA Monmouth-Ocean area, NJ Yes No $1,057.00 $20.33 $0.00 Nassau-Suffolk, NY Yes Yes $1,225.00 $23.56 $1,225.00 $23.56 HUD: FMR Without RDD New Bedford PMSA, MA Yes No $677.00 $13.02 NA NA New Haven-Meriden, MSA, CT Yes No $903.00 $17.37 NA NA New London-Norwich, MSA, CT Yes No $744.00 $14.31 NA NA Newark MSA, NJ Yes No $1,020.00 $19.62 NA NA Newburgh, NY-PA No Yes $954.00 $18.35 $913.00 $17.56 HUD:FMR Without RDD Oakland, CA No Yes $1,342.00 $25.81 $1,342.00 $25.81 HUD: FMR Without RDD Olmsted County, MN Yes No $745.00 $14.33 NA NA Orange County, CA No Yes $1,317.00 $25.33 $1,403.00 $26.98 HUD: FMR Without RDD Polk County, NC Yes No $504.00 $9.69 NA NA Portland-Vancouver, OR-WA Yes Yes $717.00 $13.79 $717.00 $13.79 HUD: FMR Without RDD Providence-Fall River-Warwick, RI-MA No Yes $845.00 $16.25 $663.00 $12.75 HUD: FMR Without RDD Raleigh--Durham--Chapel Hill, NC MSA Yes No $779.00 $14.98 NA NA Rutherford County, NC Yes No $492.00 $9.46 NA NA Rutland County, VT Yes No $621.00 $11.94 NA NA Sacramento, CA No Yes $971.00 $18.67 $971.00 $18.67 HUD:FMR Without RDD San Antonio, TX No Yes $716.00 $13.77 $716.00 $13.77 HUD:FMR Without RDD San Francisco, CA Yes Yes $1,539.00 $29.60 $1,792.00 $34.46 HUD: FMR Without RDD San Jose, CA Yes Yes $1,313.00 $25.25 $1,748.00 $33.62 HUD: FMR Without RDD Seattle-Bellevue-Everett, WA No Yes $834.00 $16.04 $943.00 $18.13 HUD: FMR Without RDD Stamford-Norwalk, PMSA, CT Yes No $1,437.00 $27.63 NA NA Stevens County, MN Yes No $488.00 $9.38 NA NA Sussex County, DE Yes No $572.00 $11.00 $607.00 $11.67 Public Comments Tippecanoe County, IN Yes No $661.00 $12.71 NA NA Trenton area, NJ Yes No $997.00 $19.17 NA NA Tulare County, CA Yes No $605.00 $11.63 NA NA Ventura, CA No Yes $1,382.00 $26.58 $1,257.00 $24.17 HUD: FMR Without RDD Vineland-Millville-Bridgeton area, NJ Yes No $814.00 $15.65 NA NA Washington County, VT Yes No $656.00 $12.62 NA NA Washington, DC-VA-MD-WV No Yes $1,187.00 $22.83 $1,250.00 $24.04 HUD: FMR Without RDD Waterbury MSA, CT Yes No $755.00 $14.52 NA NA Westchester County, NY Yes Yes $1,259.00 $24.21 $1,174.00 $22.58 HUD: FMR Without RDD Windham County, VT Yes No $727.00 $13.98 NA NA Windsor County, VT Yes No $659.00 $12.67 NA NA
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