HUD and FMR Guidelines
As a property owner, many times we have clients that don’t fully understand references to either HUD and/or FMR. Who is HUD? What does FMR stand for? Why & how is FMR used? Why does it matter?
Lets attempt to unpack this together and get a very basic understanding!
First, HUD is the federal government agency formally known as the ‘U.S. Department of Housing and Urban Development’. This government agency was formed in 1965 and became active in the US housing market starting in 1966.
HUD maintains federal oversight of housing across the United States. While it serves many roles, HUD’s core focus is creating strong, sustainable, quality affordable homes and inclusive communities for all persons.
One of the best known laws from HUD was the 1968 passage of the Fair Housing Act to ban discrimination in housing. This critical law is still followed today.
As part of HUD’s quest in helping families and persons of modest means obtain safe and affordable housing in the private market, it implemented programs to provide subsidized housing rental payments to the landlords/owners of privately owned housing properties. Housing Choice, Voucher Program or Section 8 are fairly universal names as we discuss this topic today.
This very valuable social program essentially ‘levels the playing field’ by affording families and persons the ability to decide where to live by providing them the opportunity for housing they would have not otherwise been able to financially afford. Better, safer neighborhoods with access to better public school systems and public transportation. In the overall broader vision, it is a chance to break the poverty cycle and prosper.
As part of administering this program, HUD annually reviews copious amounts of data to determine what rental rates should be in a given market. As one would imagine, HUD has access to incredible amounts of information. While the agency’s analysis is certainly not perfect, payment guidelines are created for what ‘Fair Market Rents’ or “FMR’ should be in any given market once this huge amount of data is compiled at the local level.
This annual FMR determination highlights what the local market dictates based upon the unit size: 1 bedroom, 2 bedrooms, etc. While these final guidelines have many uses, their most basic purpose is to determine what the ‘fair rent’ should be in a neighborhood based upon the actual unit size being leased.
Many landlords will use this information not only for subsidized housing purposes but also for open market leasing activities to make sure they are providing affordable rents that conform to the FMR established by this detailed data analysis.
Everyone wins when safe, clean and affordable housing is provided to a given community. Landlords can and should be great community partners. Don’t you agree?