Scale in Housing Policy: A Case Study of the Potential of Small Area Fair Market Rents

Matthew Palm
University of Melbourne

The U.S. Department of Housing and Urban Development (HUD) caps subsidies for Section 8 housing vouchers using limits known as the Fair Market Rents (FMRs). HUD recently implemented Small Area Fair Market Rents (SAFMRs), based on ZIP Codelevel rents, to improve options for voucher recipients in high-opportunity areas. I use a proprietary dataset of for-rent listings to test the ways in which SAFMRs would change the number of listings below FMR across five California HUD metropolitan FMR areas—Oakland-Fremont, Sacramento--Roseville--Arden-Arcade, San Diego-Carlsbad, San Francisco, and San Jose-Sunnyvale, Santa Clara. I examine local housing authorities’ concerns regarding the SAFMRs. I find the SAFMRs will increase the number of listings below FMR in high-opportunity neighborhoods across each area studied except San Francisco. I confirm Oakland housing authorities’ concerns that the SAFMRs would reduce the number of units below FMR in areas with rapidly rising rents. I find that Sacramento and San Diego may benefit most from the SAFMRs among those studied. These findings validate HUD’s criteria for identifying areas in which to implement the SAFMRs, as Sacramento and San Diego are also the only two areas among the case studies in this article that HUD initially approved for SAFMRs implementation. The SAFMRs highlight the importance of geographic scale in housing policy implementation.