Fair Market Rent Calculation Methodology
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Fair Market Rents for metropolitan areas and non-metropolitan FMR areas are developed as follows:
2012-2016 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 FY2019 provided the estimate is statistically reliable. For FY2019, the test for reliability is whether the margin of error for the estimate is less than 50% of the estimate itself and whether the ACS estimate is based on at least 100 survey cases. HUD does not receive the exact number of survey cases, but rather a categorical variable known as the count indicator indicating a range of cases. An estimate based on at least 100 cases corresponds to a count indicator of 4 or higher.
If an area does not have a reliable 2012-2016 5-year, HUD checks whether the area has had at least minimally reliable estimate in any of the past 3 years, or estimates that meet the 50% margin of error test described above. If so, the FY2019 base rent is the average of the inflated ACS estimates.
If an area has not had a minimally reliable estimate in the past 3 years, the estimate State for the area's corresponding metropolitan area (if applicable) or State non-metropolitan area is used as the basis for FY2019.
HUD calculates a recent mover adjustment factor by comparing a 2016 1-year 40th percentile recent mover 2-bedrooom rent to the 2012-2016 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 2017 using the relevant (regional or local) change in gross rent Consumer Price Index (CPI) from annual 2016 to annual 2017.
All estimates are then inflated from 2017 to FY2019 using a trend factor based on the forecast of gross rent changes through FY2019.
FY2019 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.
FY2019 FMRs may not be less than 90% of FY2018 FMRs.
The results of the Fair Market Rent Step-by-Step Process
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The following are the 2016 American Community Survey 5-year 2-Bedroom Adjusted Standard Quality Gross Rent estimate and margin of error for Kalamazoo-Portage, MI MSA.
Since the ACS2016 Margin of Error Ratio is less than .5, the ACS2016 Kalamazoo-Portage, MI MSA value is used for the estimate of 2-Bedroom Adjusted Standard Quality Gross Rent:Area ACS2016 5-Year 2-Bedroom Adjusted Standard Quality Gross Rent ACS2016 5-Year 2-Bedroom Adjusted Standard Quality Gross Rent Margin of Error Ratio Sample Size Category Result Kalamazoo-Portage, MI MSA $717 $14 $14 / $717=0.02 6 0.02 < .5
6 ≥ 4
Use ACS2016 5-Year Kalamazoo-Portage, MI MSA 2-Bedroom Adjusted Standard Quality Gross RentArea FY2019 Base Rent Kalamazoo-Portage, MI MSA $717 -
A recent mover adjustment factor is applied based on the smallest area of geography which contains Kalamazoo-Portage, MI MSA and has an ACS2016 1-year Adjusted Standard Quality Recent-Mover estimate with a Margin of Error Ratio that is less than .5.
Area ACS2016 1-Year Adjusted Standard Quality Recent-Mover Gross Rent ACS2016 1-Year Adjusted Standard Quality Recent-Mover Gross Rent Margin of Error Ratio Sample Size Category Result Kalamazoo-Portage, MI MSA – 2 Bedroom $747 $42 0.056 3 3 < 4
Do Not Use ACS2016 1-Year Kalamazoo-Portage, MI MSA 2-Bedroom Adjusted Standard Quality Recent-Mover Gross RentKalamazoo-Portage, MI MSA – All Bedroom $698 $36 0.052 6 0.052 < .5
6 ≥ 4
Use ACS2016 1-Year Kalamazoo-Portage, MI MSA All Bedroom Adjusted Standard Quality Recent-Mover Gross RentThe smallest area of geography which contains Kalamazoo-Portage, MI MSA and has an ACS2016 1-year Adjusted Standard Quality Recent-Mover estimate with a Margin of Error Ratio that is less than .5 and with a sufficient number of sample cases is Kalamazoo-Portage, MI MSA.
- The calculation of the relevant Recent-Mover Adjustment Factor for Kalamazoo-Portage, MI MSA is as follows:
ACS2016 5-Year Area ACS2016 5-Year 40th Percentile Adjusted Standard Quality Gross Rent ACS2016 1-Year 40th Percentile Adjusted Standard Quality Recent-Mover Gross Rent Kalamazoo-Portage, MI MSA – All Bedroom $685 $698 Area Ratio Recent-Mover Adjustment Factor Kalamazoo-Portage, MI MSA $698 / $685
=1.0191.019 ≥ 1.0 Use calculated Recent-Mover Adjustment Factor of 1.019 -
The calculation of the relevant CPI Update Factors for Kalamazoo-Portage, MI MSA is as follows:
HUD updates the 2016 intermediate rent with the ratio of the annual 2017 local or regional CPI to the annual 2016 local or regional CPI to establish rents as of 2017.
Update Factor Type CPI Update Factor 1.0293 Region CPI -
The calculation of the Trend Factor is as follows: HUD forecasts the change in national gross rents from 2017 to 2019. This makes Fair Market Rents "as of" FY2019.
National Trend Factor 1.0572 - The FY 2019 2-Bedroom Fair Market Rent for Kalamazoo-Portage, MI MSA is calculated as follows:
Area ACS2016 5-Year Estimate Recent-Mover Adjustment Factor Annual 2016 to 2017 CPI Adjustment Trending 1.0572 to FY2019 FY 2019 2-Bedroom FMR Kalamazoo-Portage, MI MSA $717 1.019 1.0293 1.0572 $717 * 1.019 * 1.0293 * 1.0572=$795 -
In keeping with HUD policy, the preliminary FY 2019 FMR is checked to ensure that is does not fall below the state minimum.
Area Preliminary FY2019 2-Bedroom FMR FY 2019 Michigan State Minimum Final FY2019 2-Bedroom FMR Kalamazoo-Portage, MI MSA $795 $700 $795 ≥ $700 Use Kalamazoo-Portage, MI MSA FMR of $795 -
Bedroom ratios are applied to calculate FMRs for unit sizes other than two bedrooms.
Click on the links in the table to see how the bedroom ratios are calculated.
FY 2019 FMRs By Unit Bedrooms Efficiency One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom FY 2019 FMR $539 $644 $795 $1,085 $1,182 -
The FY2019 FMR must not be below 90% of the FY2018 FMR.
Efficiency One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom FY2018 FMR $540 $659 $810 $1,106 $1,229 FY2018 floor $486 $593 $729 $995 $1,106 FY 2019 FMR $539 $644 $795 $1,085 $1,182 Use FY2018 floor for FY2019? No No No No No
Final FY2019 Rents for All Bedroom Sizes for Kalamazoo-Portage, MI MSA
The following table shows the Final FY 2019 FMRs by bedroom sizes.
| Final FY 2019 FMRs By Unit Bedrooms | |||||
|---|---|---|---|---|---|
| Efficiency | One-Bedroom | Two-Bedroom | Three-Bedroom | Four-Bedroom | |
| Final FY 2019 FMR | $539 | $644 | $795 | $1,085 | $1,182 |
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.