UrbanSim Innovation Impacting Access to Affordable Housing
UrbanSim is pleased to announce that it has impacted the methods used by the U.S. Department of Housing and Urban Development for setting Fair Market Rents that affect over 2 million households in the U.S. receiving Section 8 housing vouchers.
Today’s volatile housing market is causing a crisis of affordability, particularly impacting low income households who depend on housing vouchers to make it possible to access rental housing at a manageable fraction of their household income. But for many low income households, the disconnect between the behind actual market rents compared to the Fair Market Rents set by the U.S. government is just too large. This is causing many low-income households who are eligible for housing assistance to find it increasingly difficult to secure housing in the private market. They may also be forced to pay a larger share of their income towards rent, leaving them with less money for other essential needs like food, healthcare, and transportation. This can lead to increased financial hardship and even eviction.
Who decides rental assistance amounts? The Department of Housing and Urban Development (HUD) Fair Market Rents (FMRs) are used to determine the maximum amount of rental assistance that low-income households can receive from various federal housing programs, such as the Section 8 Housing Choice Voucher program. FMRs are also used by private market participants, such as developers and investors, to gauge market conditions and potential returns on investment.
How does the Federal Government set rental assistance? HUD FMRs are calculated annually for each local housing market based on a methodology that takes into account the median rent for standard-quality rental units in the area. HUD surveys landlords and property managers to gather data on rents for different unit types and neighborhoods, and then calculates the 40th percentile rent for each area, which represents the FMR. In other words, HUD FMRs represent the cost of rent for modest-quality apartments in a particular area.
Data lags cause problems in rapidly changing markets. It's important for HUD FMRs to be up-to-date and accurately reflect the local rental market conditions. If FMRs are set too low, it may result in low-income families having difficulty finding affordable housing. Landlords may also be disincentivized to participate in federal housing programs if the FMRs don't cover their costs or provide adequate returns on investment. This can lead to a shortage of affordable housing and further exacerbate homelessness and housing insecurity.
UrbanSim Innovation Impacts HUD’s FMR Methodology
UrbanSim was selected by HUD to undertake a study to make recommendations to improve HUD’s methods for setting Fair Market Rents. UrbanSim enlisted the help of the UC Berkeley Terner Center to facilitate a peer review panel of experts to provide feedback and review of the methods and data analysis UrbanSim produced. The study was completed in 2022 but just released by HUD in May, 2023.
In HUD’s foreword they acknowledged that this research informed a change in the methodology used to calculate Fair Market Rents (FMRs) that was adopted for FY 2023. The research project encouraged HUD to leverage more data sources, including private-sector rent data, to more closely monitor rapidly changing rent conditions and make more accurate predictions for FMRs. This change in methodology has the potential to improve the effectiveness of federal housing assistance programs by ensuring that FMRs accurately reflect local market conditions, making it easier for low-income families to find affordable housing. UrbanSim's work highlights the importance of leveraging cutting-edge technology and data analysis to tackle complex policy challenges and create positive social impact.
Dive into the details by following this link to the report. The key takeaway is that by using technology and more real time data monitoring, we can start to reduce housing insecurity among the most vulnerable households - a worthy goal!.
