Fair Market Rent Calculation Methodology
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Fair Market Rents for metropolitan areas and non-metropolitan FMR areas are developed as follows:
2013-2017 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 FY2020 provided the estimate is statistically reliable. For FY2020, 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 2013-2017 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 FY2020 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 FY2020.
HUD calculates a recent mover adjustment factor by comparing a 2017 1-year 40th percentile recent mover 2-bedrooom rent to the 2013-2017 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 2018 using the relevant (regional or local) change in gross rent Consumer Price Index (CPI) from annual 2017 to annual 2018.
All estimates are then inflated from 2018 to FY2020 using a trend factor based on the forecast of gross rent changes through FY2020.
FY2020 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.
FY2020 FMRs may not be less than 90% of FY2019 FMRs.
The results of the Fair Market Rent Step-by-Step Process
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The following are the 2017 American Community Survey 5-year 2-Bedroom Adjusted Standard Quality Gross Rent estimate and margin of error for Kalamazoo-Portage, MI MSA.
Since the ACS2017 Margin of Error Ratio is less than .5, the ACS2017 Kalamazoo-Portage, MI MSA value is used for the estimate of 2-Bedroom Adjusted Standard Quality Gross Rent:Area ACS2017 5-Year 2-Bedroom Adjusted Standard Quality Gross Rent ACS2017 5-Year 2-Bedroom Adjusted Standard Quality Gross Rent Margin of Error Ratio Sample Size Category Result Kalamazoo-Portage, MI MSA $745 $13 $13 / $745=0.017 6 0.017 < .5
6 ≥ 4
Use ACS2017 5-Year Kalamazoo-Portage, MI MSA 2-Bedroom Adjusted Standard Quality Gross RentArea FY2020 Base Rent Kalamazoo-Portage, MI MSA $745 -
A recent mover adjustment factor is applied based on the smallest area of geography which contains Kalamazoo-Portage, MI MSA and has an ACS2017 1-year Adjusted Standard Quality Recent-Mover estimate with a Margin of Error Ratio that is less than .5.
Area ACS2017 1-Year Adjusted Standard Quality Recent-Mover Gross Rent ACS2017 1-Year Adjusted Standard Quality Recent-Mover Gross Rent Margin of Error Ratio Sample Size Category Result Kalamazoo-Portage, MI MSA – 2 Bedroom $791 $50 0.063 4 0.063 < .5
4 ≥ 4
Use ACS2017 1-Year Kalamazoo-Portage, MI MSA 2-Bedroom Adjusted Standard Quality Recent-Mover Gross RentThe smallest area of geography which contains Kalamazoo-Portage, MI MSA and has an ACS2017 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:
ACS2017 5-Year Area ACS2017 5-Year 40th Percentile Adjusted Standard Quality Gross Rent ACS2017 1-Year 40th Percentile Adjusted Standard Quality Recent-Mover Gross Rent Kalamazoo-Portage, MI MSA – 2 Bedroom $745 $791 Area Ratio Recent-Mover Adjustment Factor Kalamazoo-Portage, MI MSA $791 / $745
=1.0621.0617 ≥ 1.0 Use calculated Recent-Mover Adjustment Factor of 1.0617 -
The calculation of the relevant CPI Update Factors for Kalamazoo-Portage, MI MSA is as follows:
HUD updates the 2017 intermediate rent with the ratio of the annual 2018 local or regional CPI to the annual 2017 local or regional CPI to establish rents as of 2018.
Update Factor Type CPI Update Factor 1.0237 Region CPI -
The calculation of the Trend Factor is as follows: HUD forecasts the change in national gross rents from 2018 to 2020 for each CPI area and Census Region. This makes Fair Market Rents "as of" FY2020.
Trend Factor Trend Factor Type 1.0361 Region - The FY 2020 2-Bedroom Fair Market Rent for Kalamazoo-Portage, MI MSA is calculated as follows:
Area ACS2017 5-Year Estimate Recent-Mover Adjustment Factor Annual 2017 to 2018 CPI Adjustment Trending 1.0361 to FY2020 FY 2020 2-Bedroom FMR Kalamazoo-Portage, MI MSA $745 1.0617 1.0237 1.0361 $745 * 1.062 * 1.0237 * 1.0361=$839 -
In keeping with HUD policy, the preliminary FY 2020 FMR is checked to ensure that is does not fall below the state minimum.
Area Preliminary FY2020 2-Bedroom FMR FY 2020 Michigan State Minimum Final FY2020 2-Bedroom FMR Kalamazoo-Portage, MI MSA $839 $713 $839 ≥ $713 Use Kalamazoo-Portage, MI MSA FMR of $839 -
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 2020 FMRs By Unit Bedrooms Efficiency One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom FY 2020 FMR $579 $678 $839 $1,137 $1,214 -
The FY2020 FMR must not be below 90% of the FY2019 FMR.
Efficiency One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom FY2019 FMR $539 $644 $795 $1,085 $1,182 FY2019 floor $485 $580 $716 $977 $1,064 FY 2020 FMR $579 $678 $839 $1,137 $1,214 Use FY2019 floor for FY2020? No No No No No
Final FY2020 Rents for All Bedroom Sizes for Kalamazoo-Portage, MI MSA
The following table shows the Final FY 2020 FMRs by bedroom sizes.
| Final FY 2020 FMRs By Unit Bedrooms | |||||
|---|---|---|---|---|---|
| Efficiency | One-Bedroom | Two-Bedroom | Three-Bedroom | Four-Bedroom | |
| Final FY 2020 FMR | $579 | $678 | $839 | $1,137 | $1,214 |
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.