Definition
Fair Market Rent (FMR) is the amount of money that a given property would command if it were available for lease in the open market. This figure represents an estimate of the median rent amount, including both shelter rent and utilities (such as heating and lighting). Fair Market Rent is most commonly used in the context of rental housing assistance programs, such as the United States Department of Housing and Urban Development (HUD) Section 8 Housing program.
FMR is calculated based on a survey of rent prices within a specific geographic area and typically aims to reflect what a reasonably conservative tenant capable of rent payment would be required to pay for a moderately-priced unit in that area.
Examples
Example 1
An urban one-bedroom apartment has an annual Fair Market Rent of $1,200 per month. Accordingly, rental assistance provided under the Section 8 program would base subsidies off this FMR, ensuring landlords receive appropriate compensation while aiding low-income tenants.
Example 2
The rural county FMR for a two-bedroom house is set at $850 per month, inclusive of utilities. A voucher recipient in this area is required to contribute 30% of their income towards this FMR, with the government covering the remaining amount through their housing choice voucher.
Frequently Asked Questions
What factors influence Fair Market Rent?
Key factors include local rental market data, regional cost of living, historical rental rates, and utility expenses. It reflects what’s considered standard for various unit types within a specific area.
How is Fair Market Rent determined?
HUD uses data from rental surveys, the Bureau of Labor Statistics’ Consumer Price Index, and other local economic indicators to set FMR figures for different regions and property types comprehensively.
Why is Fair Market Rent important?
Fair Market Rent is essential for establishing baselines for rental assistance programs and ensuring fair compensation in lease agreements, serving as a reference point for both landlords and tenants while fostering more predictability and fairness in the rental market.
How often is Fair Market Rent updated?
FMR figures are typically updated annually by housing authorities or the corresponding local government agencies to keep pace with changing market conditions and economic realities.
Can Fair Market Rent be appealed?
Rents set under HUD’s FMR figures can be reviewed and appealed if it can be shown that the stated FMR does not accurately reflect the local market prices as experienced by real properties of comparable size and condition.
Related Terms
- Contract Rent: The actual rent agreed upon between parties in a lease, which can deviate from FMR due to negotiations, market conditions, or unique property features.
- Economic Rent: The price paid for the use of land or other natural resources, which plays into overall rental market calculations.
- Rent Control: Local government-imposed limitations on the amount landlords can charge for rental properties, aiming to ensure affordability and prevent excessive rent increases.
- Section 8 Housing: A federal housing subsidy program, officially known as the Housing Choice Voucher Program, that determines eligible rent and customer contributions based on FMR.
Online Resources
- U.S. Department of Housing and Urban Development (HUD)
- Fair Market Rents Documentation System (FMRS)
- National Low Income Housing Coalition (NLIHC)
References
- U.S. Department of Housing and Urban Development. “Fair Market Rent Documentation System.” Retrieved from huduser.gov.
- National Low Income Housing Coalition. “Out of Reach Report.” Retrieved from nlihc.org.
Suggested Books for Further Studies
- Evicted: Poverty and Profit in the American City by Matthew Desmond
- Affordable Housing: Designing an American Asset by Ko Wang, Marvin Wolverton
- The Affordable Housing Reader edited by J. Rosie Tighe and Elizabeth J. Mueller
