What is fair market rent?
Fair Market Rent (FMR) is a term used, particularly in the United States, to describe a rent estimate that is determined to be fair and reasonable for a specific area. It's often used in housing assistance programs, such as the Section 8 Housing Choice Voucher program administered by the U.S. Department of Housing and Urban Development (HUD).
Key aspects of Fair Market Rent include:
- Calculation: FMR is typically calculated annually by HUD (https://www.huduser.gov/portal/datasets/fmr.html). The calculation takes into account various factors, including the rents of moderately-priced rental units in the area, the local rental market conditions, and the sizes and types of units. HUD often uses data from the U.S. Census Bureau and other sources to make these determinations.
- Purpose: The primary purpose of establishing FMR is to ensure that individuals and families who receive housing assistance can find adequate housing in a range of areas, without being limited to lower-rent, and potentially lower-quality, neighborhoods.
- Variability: FMR varies by geographic location and is set for different types of housing units (e.g., one-bedroom, two-bedroom units, etc.). This variation reflects the differences in rental markets across different regions and cities.
- Housing Assistance Programs: In the context of Section 8 and other voucher programs, FMR is used to determine the amount of housing assistance a family will receive. The assistance is designed to cover the gap between a portion of the family's income (typically 30%) and the FMR.
- Impact on Tenants and Landlords: For tenants receiving housing assistance, FMR helps to broaden their housing options. For landlords, understanding FMR can be important when deciding to participate in housing assistance programs, as it affects the rent they can charge for their units.
- Adjustments and Exceptions: In some areas, HUD may set FMRs at a level higher than the 40th percentile of rents to expand housing choices, often referred to as "exception rents". These adjustments are made in housing markets where standard FMRs would be too low to provide adequate housing choices.
Fair Market Rent is an important concept in affordable housing policies, aiming to balance affordability for low-income tenants with fair compensation for landlords.