9-14. PROCEDURE FOR MANDATORY MARKET RENT THRESHOLD

In addition to submitting the rent comparability analysis and Rent Comparability Grid (Form HUD-92273-S8) , Owners and RCS appraisers are also required to follow special procedures for all contracts, as outlined in this section.

• A. Mandatory market rent threshold. The following requirements will apply for all contracts where the Owner’s RCS concludes that the project’s gross rent for the assisted units, as derived from the RCS, exceeds 150 percent of the Small Area FMR gross rent for the property ZIP code as published annually by the Department. These requirements do not apply to studies undertaken as part of the Mark-To-Market (MTM) restructuring process or subsequent renewals of a full MTM HAP contract. All RCS submissions (other than those for the MTM process) to HUD/CA must include a distribution of RCS rents and subject project’s gross rent (as explained in Step 1, below, under Section 9-14.B).

• B. Steps for Computing Gross Rent and Comparing it to the Threshold. The RCS appraiser will follow the steps outlined below for all RCS submissions (except for those undertaken as part of the MTM process):

Step 1: Compute Subject Project’s gross renewal rent as determined by RCS. The RCS appraiser will compute the gross renewal rent for the subject project’s assisted units by multiplying the RCS rent by the number of units for each renewal type, and by calculating a monthly total gross rent. If an RCS contains multiple rent schedules (such as in a Chapter Fifteen renewal with both as-is and post-rehabilitation rents), the higher gross renewal rent amount must be used in the analysis. Include the most recent Utility Allowance in the calculation as indicated. If the Utility Allowance is being adjusted concurrently with the HAP renewal, the new Utility Allowance amount should be used. If the property is renewing the HAP under the Chapter 15 Capital Repairs program, the RCS appraiser should compare both the as-is and as-renovated rents to the SAFMR rents.

Step 2: Identify the 150 percent SAFMR Rent Threshold by Subject Project’s Zip Code. HUD publishes annually a list of SAFMR rents for each unit size within a ZIP code at https://www.huduser.gov/portal/datasets/fmr/smallarea/index.html. In those rare cases where the subject project to be evaluated lies within multiple ZIP codes either because of the scattered-site configuration of the property or simply because a ZIP code boundary happens to be separate living units within the same property due to its large size and straddling location, the gross rent estimate that is the larger of the figures for the two respective ZIP codes will apply to all assisted units within the subject project being evaluated. If HUD has not published a SAFMR for the project’s ZIP code, the FMR rents for the project’s market area shall be used instead (https://www.huduser.gov/portal/datasets/fmr.html).

Step 3: Compare Project’s gross renewal rent to 150 percent of SAFMR Gross Rent. The RCS appraiser will then compare the gross renewal rent determined under Step 1, with the SAFMR gross rent for the relevant zip code as determined under Step 2. If the project’s assisted units’ estimated/median rent does not exceed 150 percent of the SAFMR gross rent, a HUD-commissioned RCS will not be required for the purposes of mandatory market rent threshold requirements. If the gross renewal rent exceeds this threshold, then HUD will use the process described below to establish comparable market

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Chapter Nine – Published March 2023

rents. An example comparison of a project’s RCS gross renewal rent to 150 percent of SAFMR gross rent is as follows: