This section provides a brief overview of how HUD computes the FY 2020 FMRs. HUD is making no changes to the estimation methodology for FMRs as used by HUD for the FY 2018 FMRs. The only difference is the use of more recent data. For complete information on how HUD determines FMR areas, and on how HUD derives each area's FMRs, see the online documentation at https://www.huduser.gov/portal/datasets/fmr.html#2019_query
In conjunction with the use of 2016 American Community Survey (ACS) data, HUD has implemented the following geography changes: Effective May 1, 2016, Garfield County, Oklahoma became the metropolitan area of Enid, OK metropolitan statistical area (MSA). In addition, HUD changed from
two separate county-based HUD Metro FMR Areas (HMFA) (Kalawao County, HI HMFA and Maui County, HI HMFA) to a two county MSA, the KahuluiWailuku-Lahaina, HI MSA due to extremely limited data available for Kalawao County, HI.
A. Base Year Rents
For FY 2020 FMRs, HUD uses the U.S. Census Bureau's 5-year ACS data collected between 2012 and 2016 (released in December 2017) as the base rents for the FMR calculations. In order to improve the statistical reliability of the ACS data used in the FMR calculations, HUD pairs a "margin of error" test 2
with an additional test based on the number of survey observations supporting the estimate, beginning with the FY 2018 FMRs and continuing with the FY 2020 FMRs. The Census Bureau does not provide HUD with an exact count of the number of observations supporting the ACS estimate; rather, the Census Bureau provides HUD with categories of the number of survey responses underlying the estimate, including whether the estimate is based on more than 100 observations. Using these categories, HUD requires that, in addition to the "margin of error" test, ACS rent estimates must be based on at least 100 observations in order to be used as base rents.
For areas in which the 5-year ACS data for two-bedroom, standard quality gross rents do not pass the statistical reliability tests (i.e., have a margin of error ratio greater than 50 percent or fewer than 100 observations), HUD will use an average of the base rents over the three most recent years (provided that there is data available for at least two of these years),3
or if such data is not available, using the two-bedroom rent data within the next largest geographic area, which for a non-metropolitan area would be the state non-metro area rent data.
Since FY 2012, HUD has updated base rents each year based on new 5-year data, for which HUD used 2005-2009 ACS data. HUD is also updating base rents for Puerto Rico FMRs using data collected through the Puerto Rico Community Surveys (PRCS) between 2012 and 2016. HUD first updated the Puerto Rico base rents in FY 2014 based on 2007-2011 PRCS data collected through the ACS program.
HUD historically based FMRs on gross rents for recent movers (those who have moved into their current residence in the last 24 months) measured directly from decennial census long form survey responses. However, due to the way the 5-year ACS data are constructed, HUD developed a new method for calculating recent-mover FMRs in FY 2012, which HUD continues to use in FY 2020: HUD assigns all areas a base rent, which is the two-bedroom standard quality 5- year gross rent estimate from the ACS; then, because HUD's regulations mandate that FMRs must be published as recent mover gross rents, HUD applies a recent mover factor to the base rents assigned from the 5-year ACS data.4
The calculation of the recent mover factor is described below.
B. Recent Mover Factor
Following the assignment of the standard quality two-bedroom rent described above, HUD applies a recent mover factor to these rents. HUD calculates the recent mover factor as the change between the 5-year 2012-2016 standard quality two-bedroom gross rent and the 1-year 2016 recent mover gross rent for the recent mover factor area. HUD does not allow recent mover factors to lower the standard quality base rent; therefore, if the 5-year standard quality rent is larger than the comparable 1-year recent mover rent, the recent mover factor is set to 1. The calculation of the recent mover
factor for FY 2020 continues with the modifications first applied to the FY 2018 FMRs. Similar to the statistical reliability requirements for base rents, for a recent mover gross rent estimate to be considered statistically reliable, the estimate must have a margin of error ratio that is less than 50 percent, and the estimate must be based on 100 or more observations.
When an FMR area does not have statistically reliable two-bedroom recent mover data, the "all-bedroom"5
1-year recent mover ACS data for the FMR area is tested for statistical reliability. An "all-bedroom" recent mover factor from the FMR area will be used, if statistically reliable, before substituting a two-bedroom recent mover factor from the next larger geography. Incorporating "all-bedroom" rents into the recent mover factor calculation when statistically reliable two-bedroom data is not available preserves the use of local information to the greatest extent possible.
However, where statistically reliable "all-bedroom" data is not available, HUD will continue to base FMR areas' recent mover factors on larger geographic areas, following the same procedures used historically: HUD tests data from differently sized geographic areas from small to large, and bases the
recent mover factor on the first statistically reliable recent mover rent estimate in the geographic hierarchy listed below.
- For metropolitan areas that are subareas of larger metropolitan areas, the order is the FMR area, metropolitan area, aggregated metropolitan parts of the state, and state.
- For metropolitan areas that are not divided, the order is the FMR area, aggregated metropolitan parts of the state, and the state.
- In non-metropolitan areas, the order is the FMR area, aggregated nonmetropolitan parts of the state, and the state.
The process for calculating each area's recent mover factor is detailed in the FY 2020 FMR documentation system available at: https://www.huduser.gov/portal/datasets/fmr.html#2019_query
Applying the recent mover factor to the standard quality base rent produces an "as of" 2016 recent mover two-bedroom gross rent for the FMR area.
C. Other Rent Survey Data
HUD calculated base rents for the insular areas using the 2010 decennial census of American Samoa, Guam, the Northern Mariana Islands, and the Virgin Islands beginning with the FY 2016 FMRs.6 This 2010 base year data is updated through 2016 for the FY 2020 FMRs using national ACS data.
HUD does not use ACS data to establish the base rent or recent mover factor for 10 areas where the FY 2018 FMR was adjusted based on the following survey data:
- Survey data from 2016 is used to adjust the FMR for Portland, ME.
- Survey data from 2017 is used to adjust the FMRs for Santa Rosa, CA; Seattle-Bellevue, WA HMFA; Hood River County, OR; Wasco County, OR; Hawaii County, HI; Jonesboro, AR HMFA; Urban Honolulu, HI MSA; and Santa Maria-Santa Barbara, CA MSA.
- Survey data from 2018 is used to adjust the FMR for Santa CruzWatsonville, CA MSA.
For larger metropolitan areas that have valid ACS one-year recent mover data, survey data may not be any older than the midpoint of the calendar year for the ACS one-year data. Since the ACS one-year data used for the FY 2020 FMRs is from 2016, larger areas may not use survey data collected before June 30, 2016, for the FY 2020 FMRs. Smaller areas without 1-year ACS data, may continue to use local survey data until the mid-point of the 5-year ACS data is more recent than the local survey.7
D. Updates From 2016 to 2017 and Forecast to FY 2020
HUD updates the ACS-based "as of" 2016 rent through the end of 2017 using the annual change in gross rents measured through the Consumer Price Index (CPI) from 2016 to 2017 (CPI update factor). As in previous years, HUD uses local CPI data coupled with Consumer Expenditure Survey data for
FMR areas with at least 75 percent of their population within Class A metropolitan areas covered by local CPI data. In FMR areas that do not meet this criterion, including Class B and C size metropolitan areas and nonmetropolitan areas, HUD uses CPI data aggregated at the Census region level.
Additionally, HUD is using CPI data collected locally in Puerto Rico as the basis for CPI adjustments from 2016 to 2017 for all Puerto Rico FMR areas. Following the application of the appropriate CPI update factor, HUD trends the gross rent estimate from 2017 to FY 2020 using a national forecast of expected growth in gross rents. This forecast produces "as of" FY 2020 FMRs.
E. Bedroom Rent Adjustments
HUD updates the bedroom ratios used in the calculation of FMRs annually. The bedroom ratios which HUD used in the calculation of FY 2020 FMRs have been updated using average data from three 5-year ACS data series (2010-2014, 2011-2015, and 2012-2016). The bedroom ratio methodology used in this update is unchanged from previous calculations using 2000 Census data. HUD only uses estimates with a margin of error ratio of less than 50 percent. If an area does not have reliable estimates in at least two of the previous three ACS releases, bedroom ratios for the area's larger parent geography are used.
HUD uses two-bedroom units for its primary calculation of FMR estimates.
This is generally the most common size of rental unit and, therefore, the most reliable to survey and analyze. After estimating two-bedroom FMRs, HUD calculates bedroom ratios for each FMR area which relate the prices of smaller and larger units to the cost of twobedroom units. To prevent illogical results in particular FMR areas, HUD establishes bedroom interval ranges which set upper and lower limits for bedroom ratios nationwide, based on an analysis of the range of such intervals for all areas with large enough samples to permit accurate bedroom ratio determinations.
In the calculation of FY 2020 FMR estimates, HUD set the bedroom interval ranges as follows: Efficiency FMRs are constrained to fall between 0.64 and 0.85 of the two-bedroom FMR; onebedroom FMRs must be between 0.76 and 0.87 of the two-bedroom FMR; three-bedroom FMRs (prior to the
adjustments described below) must be between 1.15 and 1.33 of the twobedroom FMR; and four-bedroom FMRs (again, prior to adjustment) must be between 1.26 and 1.63 of the twobedroom FMR. Given that these interval ranges partially overlap across unit bedroom counts, HUD further adjusts bedroom ratios for a given FMR area, if necessary, to ensure that higher bedroom-count units have higher rents than lower bedroom-count units within that area. The bedroom ratios for Puerto Rico follow these constraints. HUD also further adjusts the rents for three-bedroom and larger units to reflect
HUD's policy to set higher rents for these units.8
This adjustment is intended to increase the likelihood that the largest families, who have the most difficulty in leasing units, will be successful in finding eligible program units. The adjustment adds 8.7 percent to the unadjusted three-bedroom FMR estimates and adds 7.7 percent to the unadjusted four-bedroom FMR estimates.
HUD derives FMRs for units with more than four bedrooms by adding 15 percent to the four-bedroom FMR for each extra bedroom. For example, the FMR for a five-bedroom unit is 1.15 times the four-bedroom FMR, and the FMR for a six-bedroom unit is 1.30 times the four-bedroom FMR. Similarly,
HUD derives FMRs for single-room occupancy units by subtracting 25 percent from the zero-bedroom FMR (i.e., they are set at 0.75 times the zerobedroom (efficiency) FMR).9
F. Limit on FMR Decreases Within the Small Area FMR final rule published on November 16, 2016, HUD amended 24 CFR 888.113 to include a limit on the amount that FMRs may annually decrease. The current year's FMRs resulting from the application of the bedroom ratios, as discussed in section (E) above, may be no less than 90 percent of the prior year's FMRs for units with the same number of bedrooms. Accordingly, if the current year's FMRs are less than 90 percent of the prior year's FMRs as calculated by the above methodology, HUD sets the current year's FMRs equal to 90 percent of the prior year's FMRs. For areas where use of Small Area FMRs in the administration of their voucher programs is required, the FY 2020 Small Area FMRs may be no less than 90 percent of the FY 2018 Small Area FMRs. For all other metropolitan areas, for which Small Area FMRs are calculated so that they may be used for other allowable purposes if desired (e.g., exception payment standards, public housing flat rents), the FY 2020 Small Area FMRs may be no less than 90 percent of the greater of the FY 2018 metropolitan area-wide FMRs or the applicable FY 2018 Small Area FMR.
G. Other Limits on FMRs
All FMRs are subject to a state or national minimum. HUD calculates a population-weighted median twobedroom 40th percentile rent across all non-metropolitan portions of each state, which, for the purposes of FMRs, is the state minimum rent. State-minimum rents for each FMR area are available in the FY 2020 FMR Documentation System, available at https://www.huduser.gov/portal/datasets/fmr.html#2019_query
. HUD also calculates the population-weighted median two-bedroom 40th percentile rent across all non-metropolitan portions of the country, which, for the purposes of FMRs, is the national minimum rent. For FY 2020, the national minimum rent is $700. The applicable minimum rent for a particular area is the lower of the state or national minimum. Each area's twobedroom FMR must be no less than the applicable minimum rent.
As in prior years, Small Area FMRs are subject to a maximum limit. HUD limits each two-bedroom Small Area FMR to be no more than 150 percent of the two-bedroom FMR for the metropolitan area where the ZIP code is located.
HUD's margin of error test requires that the margin of error of the ACS estimate is less than half the size of the estimate itself.
For FY 2020, the three years of ACS data in question are 2014, 2015 and 2016. The 2014 data are adjusted to be denominated in 2016 dollars using the growth in CPI-based gross rents measured between 2014 and 2016. Similarly, the 2015 gross rent data is adjusted to 2016 denominated dollars using the growth in CPI-based gross rents measured between 2015 and 2016.
HUD's regulations incorporate recent mover data into FMR calculations because the gross rents of those who most recently moved into their units likely depicts the most current market conditions observable through the ACS. Rents paid by renters renewing existing leases may not reflect the most current market conditions, in part because these renters may have clauses within their leases that predetermine the annual increases in rents paid (i.e., rent escalator clauses).
"All-bedroom" refers to estimates aggregated together regardless of the number of bedrooms in the dwelling unit.
The ACS is not conducted in the Pacific Islands (Guam, Northern Marianas and American Samoa) or the US Virgin Islands. As part of the 2010 Decennial Census, the Census Bureau conducted "long-form" sample surveys for these areas. The results gathered by this long form survey have been incorporated into the FY 2020 FMRs.
The 2013-2017 5-Year ACS data and the 2017 1-Year ACS data will be used to calculate the FY 2020 FMRs. We did discontinue the use of survey in Kauai and Maui counties in HI and in VallejoFairfield, CA even though these surveys did not meet the age requirements because the dataprovided did not meet our current tighter statistical standards enacted for the FY 2018 FMRs. In all cases the FMRs for FY 2020 would have been lower than for FY 2018 and in some cases, much lower.
As mentioned above, HUD applies the interval ranges for the three-bedroom and four-bedroom FMR ratios prior to making these adjustments. In other words, the adjusted three- and four-bedroom FMRs can exceed the interval ranges, but the unadjusted FMRs cannot.
As established in the interim rules implementing the provisions of the Quality Housing and Work Responsibility Act of 1998 (Title V of the FY 1999 HUD Appropriations Act; Pub. L. 105-276). In 24 CFR 982.604.