Fair Market Rent Calculation Methodology
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Fair Market Rents for metropolitan areas and non-metropolitan FMR areas are developed as follows:
Calculate the Base Rent: HUD uses 2016-2020 5-year American Community Survey (ACS) estimates of 2-bedroom adjusted standard quality gross rents calculated for each FMR area as the new basis for FY2023, provided the estimate is statistically reliable. For FY2023, 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 2016-2020 5-year estimate, HUD checks whether the area has had at least 2 minimally reliable estimates in the past 3 years, or estimates that meet the 50% margin of error test described above. If so, the FY2023 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, HUD uses the estimate for the area's corresponding metropolitan area (if applicable) or State non-metropolitan area as the basis for FY2023.
Calculate the Basis for Recent Mover Adjustment Factor: HUD has changed the calculation of the FY2023 Recent Mover Factor from previous years due to the unavailability of ACS2020 1-year estimates. The Census Bureau did not release standard 1-year estimates from the 2020 American Community Survey (ACS) due to the impacts of the COVID-19 pandemic on data collection. For FY2023, HUD uses a multi-pronged approach that includes private sources of rental data.
In order to calculate rents that are "as of" 2020, HUD takes the average of the recent mover factor from 1-year ACS2019 recent mover rent inflated by 2019-2020 gross rent change; and the factor from 5-year ACS2020 recent mover rent. For areas where private data is available, the 2019-2020 gross rent change uses a weighted average of private sources and the Consumer Price Index (CPI) to calculate the annual percentage change in rents plus utilities from annual 2019 to annual 2020. For areas where private data is not available, the 2019-2020 gross rent change is based only on the CPI.
Adjust for Inflation: In order to calculate rents that are "as of" 2021, for areas where private data is available, HUD calculates the relevant (regional or local) change in gross rent inflation using a weighted average of private data sources and the Consumer Price Index (CPI) from annual 2020 to annual 2021. For areas where private data is not available, HUD uses only the CPI, which is the same process used in previous years.
Calculate the Trend Factor: To further inflate rents from 2021 to FY2023, HUD uses a "trend factor" based on the forecast of CPI gross rent changes through FY2023.
Multiply the Factors: HUD multiplies the base rent by the recent mover factor, the gross rent inflation factor, and the trend factor to produce a rent that is "as of" the current fiscal year.
Compare to the State minimum: FY2023 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.
Calculate Bedroom Ratios: HUD calculates "bedroom ratios" and multiplies these by the two-bedroom rent to produce preliminary FMRs for unit sizes other than two bedrooms.
Compare to Last Year's FMR: FY2023 FMRs may not be less than 90% of FY2022 FMRs. Therefore, HUD applies "floors" based on the prior year's FMRs.
The results of the Fair Market Rent Step-by-Step Process
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Base Rent Calculation
The following are the 2020 American Community Survey 5-year 2-Bedroom Adjusted Standard Quality Gross Rent estimates and margins of error for Lamb County, TX.Area ACS2020 5-Year 2-Bedroom Adjusted Standard Quality Gross Rent ACS2020 5-Year 2-Bedroom Adjusted Standard Quality Gross Rent Margin of Error Ratio Sample Size Category Result Lamb County, TX $668 $52 $52 / $668=0.07784 1 1 < 4
Check for reliable local ACS estimates from previous years
Since 3 of the 3 ACS estimates are minimally reliable, the base rent is the average of those estimates, with each estimate first inflated to 2020 dollars (not shown).ACS2020 5-year Estimate ACS2020 5-year Error ACS2020 5-year Estimate Minimally Reliable? ACS2019 5-year Estimate ACS2019 5-year Error ACS2019 5-year Estimate Minimally Reliable? ACS2018 5-year Estimate ACS2018 5-year Error ACS2018 5-year Estimate Minimally Reliable? $668 $52 $52 / $668=0.07784 $658 $70 $70 / $658=0.10638 $626 $51 $51 / $626=0.08147 Area FY2023 Base Rent Lamb County, TX $669 Recent Mover Adjustment Factor Calculation
Since Lamb County, TX is not covered by at least 3 private data sources or does not have a local 2019 recent mover estimate, the calculation of the recent mover adjustment factor is as follows:Area ACS2019 1-Year Adjusted
Standard Quality
Recent-Mover Gross RentCPI Gross Rent % Change 2019-2020 ACS2019 Recent Mover Rent Inflated to 2020 ACS2020 5-year All Mover Rent Ratio Lamb County, TX $764 1.02916 $764 * 1.02916 =
$786$725 $786 / $725 =
1.08414Area ACS2020 5-Year Adjusted
Standard Quality
Recent-Mover Gross RentACS2020 5-year All Mover Rent Ratio Lamb County, TX $779 $725 $779 / $725 =
1.07448Inflation Adjustment Factor Calculation
Since Lamb County, TX is not covered by at least 3 private data sources, the calculation of the inflation adjustment factor is as follows: HUD updates the 2020 intermediate rent with the ratio of the annual 2021 local or regional CPI to the annual 2020 local or regional CPI to establish rents as of 2021.Update Factor Type Inflation Update Factor 1.0319 Region CPI -
Trend Factor Adjustment
The calculation of the Trend Factor is as follows: HUD forecasts the change in national gross rents from 2021 to 2023 for each CPI area and Census Region. This makes Fair Market Rents "as of" FY2023.Trend Factor Trend Factor Type Trend Factor 1.09628 Region - Combination of Factors
The FY 2023 2-Bedroom Fair Market Rent for Lamb County, TX is calculated as follows:Area Base Rent Recent-Mover Adjustment Factor Annual 2020 to 2021 Gross Rent Inflation Adjustment Trending 2021 to FY2023 FY 2023 2-Bedroom FMR Lamb County, TX $669 1.07931 1.03192 1.09628 $669 * 1.07931 * 1.03192 * 1.09628=$817 -
State Minimum Comparison
In keeping with HUD policy, the preliminary FY 2023 FMR is checked to ensure that it does not fall below the state minimum.Area Preliminary FY2023
2-Bedroom FMRFY 2023 Texas
State MinimumFinal FY2023 2-Bedroom FMR Lamb County, TX $817 $826 $817 < $826 Use Texas minimum of $826 -
Bedroom Ratios Application
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 2023 FMRs By Unit Bedrooms Efficiency One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom FY 2023 FMR $623 $628 $826 $1,110 $1,171 -
Comparison to Previous Year
The FY2023 FMRs for each bedroom size must not be below 90% of the FY2022 FMRs.Efficiency One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom FY2022 FMR $560 $575 $757 $969 $1,027 FY2022 floor $504 $518 $682 $873 $925 FY 2023 FMR $623 $628 $826 $1,110 $1,171 Use FY2022 floor for FY2023? No No No No No
| Area | Average of Recent-Mover Ratios | Final Recent-Mover Adjustment Factor |
|---|---|---|
| Lamb County, TX | (1.07448+1.08414)/2 = 1.07931 |
1.07931 ≥ 1.0 Use calculated Recent-Mover Adjustment Factor of 1.07931 |
Final FY2023 Rents for All Bedroom Sizes for Lamb County, TX
| Final FY 2023 FMRs By Unit Bedrooms | |||||
|---|---|---|---|---|---|
| Efficiency | One-Bedroom | Two-Bedroom | Three-Bedroom | Four-Bedroom | |
| Final FY 2023 FMR | $623 | $628 | $826 | $1,110 | $1,171 |
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.