HUD’s Office of Public and Indian Housing (PIH) recently issued Notice PIH 2018-01 providing guidance on recent changes in fair market rent (FMR), payment standard, and rent reasonable requirements set forth in the Small Area FMR (SAFMR) final rule. As you know, in August of last year HUD exercised its authority to suspend SAFMRs for 23 out of the 24 designated areas that would have gone into effect on October 1, 2017. However, in late December, the U.S. District Court for the District of Colombia entered a preliminary injunction voiding that suspension, meaning that the mandatory use of SAFMRs is now in effect for all 24 areas (listed in Appendix A of the notice). PHAs must now complete the SAFMR implementation as quickly as possible—no later than April 1, 2018. The notice is meant to help with that task, allowing PHAs to better understand their options under the final rule.
- The notice primarily summarizes the changes and requirements specified in the final rule, with some examples and additional guidance provided for implementation purposes. Highlights include, but are not limited to, the following:
- he notice provides scenarios that may apply when a new payment standard schedule goes into effect, i.e., specifically when to use the old vs. the new payment standard schedule.
- HUD recommends that PHAs provide both the old and new payment standard schedules to families issued a voucher whose search term extends beyond the effective date of the new schedule.
- PHAs adopting an exception payment standard area must revise their briefing materials to make families aware of the exception payment standard and the area it covers.
- The notice provides policy possibilities that may be adopted if there is a decrease in the payment standard schedule during the term of a family’s HAP contract.
- Where the PHA chooses to reduce the payment standard for a family under HAP contract, the initial reduction cannot take place before the effective date of the family’s second regular reexam following the effective date of the decrease—meaning PHAs must conduct a reexamination of family income and composition at least annually. This is the case even if the PHAs had implemented a streamlined income determination for fixed-income families.
- Notice to families is required for any reduction in payment standard, even if choosing to do so gradually. Appendix B of the notice provides tips for strengthening written notices to such families.
- HUD recommends that any agency required to adopt SAFMRs review the SAFMRs for the fiscal year prior to mandatory adoption to estimate the effect of moving from metropolitan area FMRs (MAFMRs) to SAFMRs, and to use this to inform its policy.
- The notice provides various considerations PHAs can use to evaluate whether to “opt in” to using SAFMRs. Of course, such agencies must request approval from HUD to voluntary adopt SAFMRs.
- The notice provides examples of “grouping” by ZIP code areas for agencies adopting SAFMRs, since the percent of the SAFMR that the payment standard equals may vary between different unit sizes and from ZIP code area to ZIP code area, and PHAs have the flexibility to do so.
- The notice also offers various considerations and recommendations for whether an agency should adopt SAFMRs for its Project-Based Voucher (PBV) program, including examples.
- The vouchers of families who port will be administered according to the policies of the receiving PHA (RHA)—if the RHA is operating under SAFMRs, the family’s voucher will be administered using SAFMRs. If the RHA is not, the family’s voucher will not.
- If the use of SAFMRs has been designated for a metropolitan area or the PHA has voluntarily chosen to use SAFMRs, the SAFMRs would apply to all tenant-based vouchers, including special housing vouchers such as single room occupancy (SRO) and the homeownership option.
- MTW PHAs are exempt from the requirement to use SAFMRs if that agency has an alternative payment standards policy in its HUD-approved Annual MTW plan.
- With regard to the transition out 50th percentile rents over a three-year period, if the PHA scored the maximum number of points on the SEMAP deconcentration bonus indicator in the prior year or in two of the last three years, then upon expiration of the three-year period, the PHA may request HUD approval of payment standard amounts based on the 50th percentile rent. The request must be made to the local HUD field office during the period between the release of the revised FMRs and the effective date of those FMRs.
- For PHAs requesting a suspension of the SAFMR designation for the metro area due to an adverse housing market condition, the PHA must administer more than 50 percent of the vouchers leased in that metro area. The notice also defines what constitutes an adverse housing market condition.
In addition to developing this guidance, HUD has also established a set of FAQs specific to SAFMRs, available here. Questions may be sent to SAFMRs@hud.gov.
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