Yesterday HUD posted Notice PIH 2015-13, "Changes to Flat Rent Requirements — FY 2015 Appropriations Act." The nine-page notice follows Tuesday’s publication of the interim rule on "Streamlining Administrative Regulations for Public Housing: Revisions to Public Housing Flat Rents." In addition to providing supplemental guidance and clarification on the interim rule, yesterday's notice replaces Notice PIH 2014-12.
As we previously reported, the interim rule provides PHAs with two alternatives to the current requirement for setting flat rents at 80 percent of the applicable fair market rent (FMR). First, PHAs may establish flat rents based on 80 percent of an FMR representing a smaller geographic area. This second FMR would be either the small area FMR (SAFMR), issued for metropolitan counties, or the unadjusted rents, for counties not covered by an SAFMR. Yesterday's notice explains the term “unadjusted rents” as follows:
The unadjusted rent is the FMR estimated directly from the American Community Survey (ACS) source data that HUD uses to calculate FMRs before HUD applies its state non-metropolitan minimum rent policy.
HUD will publish the unadjusted rents annually on its website. If neither a SAFMR nor an unadjusted rent has been determined for an area, PHAs must set flat rents based on the applicable FMR for the larger area.
Alternatively, PHAs may request an exception from HUD for a flat rent amount that is lower than either of the two FMRs. Such requests must include a market analysis and a demonstration that the lower flat rent is reasonable in comparison to similar unassisted units. The new notice clarifies that while HUD does not prescribe a particular formula for determining the market analysis, PHAs must compare the public housing unit to unassisted units in the area using the nine factors considered in rent reasonableness determinations for the voucher program:
- Location, quality, size, unit type, age of the unit, and
- Amenities, housing services, maintenance, and utilities the PHA will provide under the lease
PHAs utilizing exception flat rents must conduct a new market analysis, and obtain HUD approval, annually. PHAs that submit an exception request prior to the publishing of final fiscal year (FY) 2016 FMRs (likely in October 2015) will not be required to submit another exception request until HUD publishes final FY 2017 FMRs (likely in October 2016). Proposed FMRs for FY 2016 were posted last week on the Office of Policy Development and Research (PD&R) FMR page.
The new notice also contains the following reminder regarding "over-income" families:
As flat rents are fully implemented, the higher rent levels will ensure that families with higher incomes pay an appropriate market-based rent. It is an important policy goal to provide scarce public resources to those most in need of deeply affordable housing. PHAs are therefore reminded that they have the discretion, in accordance with federal law and regulations (24 CFR 960.261; FR-4824-F-02), to establish occupancy policies that include the eviction of public housing tenants who are above the income limits for eligibility to participate in public housing programs. HUD encourages PHAs to provide a balance between the important goals of supporting the sustained self-sufficiency of families with the ever increasing demand for affordable housing units among families on their waiting lists.
The notice includes previously-issued HUD guidance on flat rents and utility allowances, rent increase phase-in requirements, and annual rent options.
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