Code of Federal Regulations Title 24. Housing and Urban Development § 24.888.103 Fair market rents for new construction and substantial rehabilitation:  Methodology

(1) FMRs are developed for five unit sizes (0, 1, 2, 3, and 4 or more bedrooms), as well a for five structural categories (detached, semi-detached/row homes, walk-up, 2–4 story elevator, and 5–plus story elevator buildings).

(2) FMRs may be established by financing type (for example, conventional loans, loans from the proceeds of tax-exempt obligations, loans secured by mortgages purchased under the Government National Mortgage Association Tandem Program for Section 8 projects, and direct loans under section 202 of the Housing Act of 1959 or section 515 of the Housing Act of 1949). If FMRs are being established by financing type, special note will be made in the annual publication of the FMRs.

(1) Estimates of FMRs by unit size, structural type, and market area are prepared by the HUD Field Office. Market surveys are conducted by appraisers within each market area to obtain representative samples of rents paid for comparable unsubsidized recently constructed or substantially rehabilitated dwelling units of modest design with suitable amenities. Adjustments are made for differences between the rental comparables and a hypothetical unit, such as adjustments for unit area, number of baths, utilities, services, and age of structure.

(2) Adjusted FMRs are trended ahead two years to allow time for anticipated changes in rent levels during the processing and construction phases of project development. The list of adjusted, trended unit rent is arrayed in ascending order. The FMRs for each combination of structural type and bedroom count are selected based upon the 75th percentile level of the array of sample rental comparables for that type of unit surveyed for each market area. Schedules of FMRs are then prepared that reflect a progression from bedroom size to bedroom size, and from one structural type to another that is both logical and reasonably consistent. Alternatively, in those instances where a sufficient number of market rental comparables are not available, FMRs may be developed by an interpolation procedure, which is more fully discussed in the Department's handbooks on the New Construction and Substantial Rehabilitation programs.

(1) FMRs for dwelling units designed for the elderly or handicapped are those for appropriate size units, not to exceed 2 bedrooms for the elderly, multiplied by 1.05;

(2) Congregate housing dwelling unit FMRs are the same as for non-congregate units;

(3) Single room occupancy dwelling unit FMRs (applicable only for Substantial Rehabilitation projects) are 75 percent of those for zero-bedroom units of the same structural type;

(4) FMRs for living units in a group home developed with a direct loan under section 202 of the Housing Act of 1959 are those for zero-bedroom or one one-bedroom units of the walk-up structural type (or, if the group home contains an elevator, of the elevator 2–4 story structural type). Each living unit in a group home is composed of a bedroom plus a proportionate part of common living space ordinarily included in a living unit. One-bedroom FMRs may be applied only when the bedroom space plus the proportionate part of the common space totals at least 450 square feet;

(5) Manufactured home (unit and space) FMRs shall be 95 percent of the rents for detached units of the appropriate bedroom size (except that where a manufactured home FMR is specified on the schedule for an area, the amount on the schedule shall be the FMR);

(6) FMRs for manufactured home spaces in newly constructed or substantially rehabilitated manufactured home parks shall be determined by multiplying the FMR for spaces published for the Existing Housing Program by 1.25.