Fair Market Rent Calculation Methodology
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Fair Market Rents for metropolitan areas and non-metropolitan FMR areas are developed as follows:
2009-2013 5-year American Community Survey (ACS) estimates of 2-bedroom adjusted standard quality gross rents calculated for each FMR area are used as the new basis for FY2016 provided the estimate is statistically reliable. The test for reliability is whether the margin of error for the estimate is less than 50% of the estimate itself.
If an area does not have a reliable 2009-2013 5-year, HUD checks whether the area has had a reliable estimate in any of the past 5 years. If so, the most recent reliable estimate is updated by the change in the area's corresponding State metropolitan or non-metropolitan area from the year of the most recent reliable estimate to 2009. This update value becomes the basis for FY2016.
If an area has not had a reliable estimate in the past 5 years, the estimate State for the area's corresponding metropolitan area (if applicable) or State non-metropolitan area is used as the basis for FY2016.
- HUD calculates a recent mover adjustment factor by comparing a 2013 1-year 40th percentile recent mover 2-bedroom rent to the 2009-2013 5-year 40th percentile adjusted standard quality gross rent. If either the recent mover and non-recent mover rent estimates are not reliable, HUD uses the recent mover adjustment for a larger geography. For metropolitan areas, the order of geographies examined is: FMR Area, Entire Metropolitan Area (for Metropolitan Sub-Areas), State Metropolitan Portion, Entire State, and Entire US; for non-metropolitan areas, the order of geographies examined is: FMR Area, State Non-Metropolitan Portion, Entire State, and Entire US. The recent mover adjustment factor is floored at one.
- HUD calculates the appropriate recent mover adjustment factor between the 5-year data and the 1-year data and applies this to the 5-year base rent estimate.
- Rents are calculated as of 2014 using the relevant (regional or local) change in gross rent Consumer Price Index (CPI) from annual 2013 to annual 2014.
- All estimates are then inflated from 2014 to FY2016 using a trend factor based on the forecast of gross rent changes through FY2016.
- FY2016 FMRs are then compared to a State minimum rent, and any area whose preliminary FMR falls below this value is raised to the level of the State minimum.
The results of the Fair Market Rent Step-by-Step Process
The following are the 2013 American Community Survey 5-year 2-Bedroom Adjusted Standard Quality Gross Rent estimate and margin of error for Monroe County, AL.
Area ACS2013 5-Year 2-Bedroom Adjusted Standard Quality Gross Rent ACS2013 5-Year 2-Bedroom Adjusted Standard Quality Gross Rent Margin of Error Ratio Result Monroe County, AL $439 $51 $51 / $439=0.116 0.116 < .5 Use ACS2013 5-Year Monroe County, AL 2-Bedroom Adjusted Standard Quality Gross Rent Area ACS2013 Rent Monroe County, AL $439
A recent mover adjustment factor is applied based on the smallest area of geography which contains Monroe County, AL and has an ACS2013 1-year Adjusted Standard Quality Recent-Mover estimate with a Margin of Error Ratio that is less than .5.
Area ACS2013 1-Year 2-Bedroom Adjusted Standard Quality Recent-Mover Gross Rent ACS2013 1-Year 2-Bedroom Adjusted Standard Quality Recent-Mover Gross Rent Margin of Error Ratio Result Monroe County, AL N/A N/A N/A No ACS2013 1-Year 2-Bedroom Adjusted Standard Quality Recent-Mover Gross Rent Produced For Monroe County, AL Alabama Non-metropolitan Portion $517 $29 0.056 0.056 < .5
Use ACS2013 1-Year Non-metropolitan Portion 2-Bedroom Adjusted Standard Quality Recent-Mover Gross Rent
The smallest area of geography which contains Monroe County, AL and has an ACS2013 1-year Adjusted Standard Quality Recent-Mover estimate with a Margin of Error Ratio that is less than .5 is Alabama Non-metropolitan Portion.
- The calculation of the relevant Recent-Mover Adjustment Factor for Monroe County, AL is as follows:
ACS2013 5-Year Area ACS2013 5-Year 40th Percentile 2-Bedroom Adjusted Standard Quality Gross Rent ACS2013 1-Year 40th Percentile 2-Bedroom Adjusted Standard Quality Recent-Mover Gross Rent Alabama Non-metropolitan Portion $515 $517 Area Ratio Recent-Mover Adjustment Factor Monroe County, AL $517 / $515
1.004 ≥ 1.0 Use calculated Recent-Mover Adjustment Factor of 1.004
The calculation of the relevant CPI Update Factors for Monroe County, AL is as follows:
HUD updates the 2013 intermediate rent with the ratio of the annual 2014 local or regional CPI to the annual 2013 local or regional CPI to establish rents as of 2014.
Update Factor Type CPI Update Factor 1.0346 Region CPI
The calculation of the Trend Factor is as follows: HUD uses the forecasted change in national gross rents from 2014 to 2016. This makes Fair Market Rents "as of" FY2016. For more information on the calculation of the trend factor, please see here.
Trend Factor 1.0457
- The FY 2016 2-Bedroom Fair Market Rent for Monroe County, AL is calculated as follows:
Area ACS2013 5-Year Estimate Recent-Mover Adjustment Factor Annual 2013 to 2014 CPI Adjustment Trending 1.0457 to FY2016 FY 2016 2-Bedroom FMR Monroe County, AL $439 1.004 1.0346 1.0457 $439 * 1.004 * 1.0346 * 1.0457=$477
In keeping with HUD policy, the preliminary FY 2016 FMR is checked to ensure that is does not fall below the state minimum.
Area Preliminary FY2016 2-Bedroom FMR FY 2016 Alabama State Minimum Final FY2016 2-Bedroom FMR Monroe County, AL $477 $569 $477 ≤ $569 Use Alabama minimum of $569
Final FY2016 Rents for All Bedroom Sizes for Monroe County, AL
The following table shows the Final FY 2016 FMRs by bedroom sizes.
Click on the links in the table to see how the bedroom rents were derived.
|Final FY 2016 FMRs By Unit Bedrooms|
|Final FY 2016 FMR||$448||$451||$569||$829||$993|
The FMRs for unit sizes larger than four bedrooms are calculated 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. FMRs for single-room occupancy units are 0.75 times the zero bedroom (efficiency) FMR.