Rental Housing: HUD Can Improve Its Process for Estimating Fair Market Rents

In response to GAO's recommendation to fully document its FMR (Fair Market Rent)estimation method by following all of its data quality guidelines, particularly those pertaining to the transparency and reproducibility of its methodology, HUD recently developed a system that provides detailed FMR calculations for every FMR area as well as accompanying narrative. The FMR Documentation System makes use of publicly releasable versions of Title XIII protected data to describe each FMR area, show the benchmarking and updating calculation for each local FMR estimate, as well as to describe the decision rules used to compute each FMR. The system currently provides information for both the revised final FY 2005 FMRs and the proposed FY 2006 FMRs for all FMR areas. HUD intends to update the system with all calculations and accompanying narrative for all subsequent FMRs.

Although HUD did not use ACS data to update fiscal year 2006 FMRs, citing that the data were unavailable for inclusion in the 2006 FMRs, the agency now routinely uses data from the ACS to update FMRs. HUD first used ACS data to update fiscal year 2008 FMRs and more recently the agency used them to update fiscal year 2009 FMRs.

HUD officials were planning to discontinue using the Random Digital Dialing (RDD)surveys as a mechanism for assessing the accuracy of Fair Market Rents (FMRs), after HUD starts using the American Community Survey (ACS) data to estimate FMRs. Although HUD officials were concerned about the costs of the RDD surveys, HUD did not have an alternative mechanism to assess the accuracy of FMRs. After considering DOD's Basic Allowance for Housing (BAH) as an alternative rent estimation option, HUD officials decided that it was not a suitable alternative to the RDD surveys because of the differences in the methodologies used to estimate BAHs and FMRs are too great. HUD decided to continue to rely on the RDD surveys as the best way to provide post-American Community Survey (ACS) updates to FMR estimates that are identified as potentially inaccurate by public comment, field economists, and/or program administrators. On December 21, 2007, HUD requested comments on its proposal to use the RDD surveys to estimate FY 2009 FMRs for areas not covered by the ACS annual reports and in areas where FMRs are believed to be incorrect.