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Section 8 bond holders are getting a massive boost today as the US Department of Housing and Urban Development (HUD) increased the value of fair market rent across the country. The largest increases are over 30% in places where rents have risen the most over the past year.
On September 1, HUD introduced new Fair Rents (FMRs) for 2023 – an annual update that coincides with rent fluctuations in the private sector.
For around 2.3 million households using housing choice vouchers, also known as Section 8 vouchers, this measure will increase their purchasing power when looking for a home. HUD has increased FMRs by an average of 10% nationwide, but the number is much higher in some parts of the country.
The new pricing will come into effect on October 1. Public housing authorities have up to 90 days to update their payment standards to the new figures.
But as strong as those increases are, they might not be enough. Inflation has driven two-bedroom rents up by an average of 38% year-over-year nationally, leaving many low-income borrowers with bonds unable to find affordable housing , even with the help of the government. The updated FMR levels are designed to help voucher holders keep up with the rising cost of rent.
“These new RMFs will provide voucher holders facing this challenge with easier access to affordable housing in most housing markets while expanding the range of housing options available to households,” said the Secretary of the HUD, Marcia L. Fudge, in a statement.
Currently, only 86% of voucher holders use them. According to a HUD statement, “falling vacancy rates and sharply rising rents have made it harder for low-income households to use vouchers.”
While the Fair Market rent increase should help, it remains to be seen what impact the new assessment will have.
The 25 metro areas with the largest fair market rent increases
Source: US Department of Housing and Urban Development (HUD)
Cities like Phoenix and Tampa have made headlines for steep rent increases over the past year, going well above the median wages for those areas. But even though rent prices have recently begun to decline in the Sunbelt states, they make up the bulk of the top 25 metro areas with the largest increases in FMR.
Salinas, Calif., Phoenix, and San Benito County, Calif., all received increases of more than 30% in their FMRs, while more than 820 metro areas saw double-digit gains.
Meanwhile, a handful of metropolitan areas have seen their FMR drop, including:
- Camden County, North Carolina: -10%
- Midland, TX: -7.2%
- Odessa, TX: -2%
- Oldham County, Texas: -0.4%
- San Francisco: -0.3%
How FMR is used to determine the value of housing choice vouchers
FMR pricing estimates the cost of gross rents (which includes rent and utility expenses) on the 40th percentile of rental supply in an area. Local public housing agencies (PHAs) use these price estimates to establish how much they will allocate in rent to households using vouchers.
The value of Section 8 housing vouchers is largely based on FMR, so the greater the increase in FMR, the more voucher recipients can afford to purchase housing. Voucher recipients have 60 days to find housing or they will lose their voucher benefit (although PHAs can extend this individually).
If you want to apply for a housing voucher, contact your local public housing agency, which you can locate on HUD.gov.
Metro area increases don’t solve neighborhood-level issues for renters
While increasing FMRs is a step in the right direction to ensure access to affordable housing, more needs to be done, says Diane Yentel, CEO and President of the National Low Income Housing Coalition, namely the Fair Rent Increase in Small Areas (SAFMR).
The advantage of SAFMRS is that they can more accurately assess rental prices in localized neighborhoods. In a large city, prices vary wildly from postcode to postcode; this is where a more accurate pricing instrument like SAFMRs can help voucher recipients gain easier access to affordable housing in their specific area.
“Until HUD makes more extensive use of SAFMRs, voucher holders in many of the most expensive and least vacant communities will continue to struggle to find decent, safe apartments,” Yentel says.