Rental Options Could Double for Seattle Voucher Holders, Thanks to Higher Ceiling
- Seattle voucher recipients could see double the rentals available to them because of an upcoming increase in the value of their vouchers.
- Under the revised Fair Market Rent for 2-bedroom units – now $1,878 – 45 percent of 2-bedroom listings are below the HUD ceiling for the Seattle area.
- Local housing authorities can conduct their own surveys to better align the value of vouchers with current rental prices. This process led to revisions in eight areas for 2018, including Seattle.
In a couple weeks, the number of rental units available to housing voucher holders in the Seattle metro area could more than double because of a boost in the value of the area’s Housing Choice Vouchers. Those values will significantly increase as part of recently announced revisions to rent maximums from the U.S. Department of Housing and Urban Development (HUD).
Last September, HUD announced its 2018 Fair Market Rents (FMR), which determine the maximum value of Section 8 vouchers for the upcoming year. In the Seattle-Bellevue HUD Metro Area, only 20 percent of the 2-bedroom rental listings posted on Zillow so far this year were advertised for less than that the 2-bedroom Fair Market Rent (FMR) of $1,544. Under the recently revised FMR for 2-bedroom units – $1,878 – 45 percent of 2-bedroom listings are below the Fair Market Rent.[i] By this measure, the revised FMR are a much more accurate reflection of the Seattle-area market, which could be great news for voucher recipients if they’re able to secure leases amidst a hotly competitive rental market.
Vouchers are typically worth the difference between 30 percent of a household’s income and the rent price—up to the Fair Market Rent ceiling. Units must be priced near or below the FMR to be rented with a voucher, so the efficacy of vouchers depends greatly on an adequate supply of rental units at or below the FMR.
Unfortunately, without additional federal funding for Housing Choice Vouchers (already underfunded), the actual benefits of higher FMRs may be muted, and in practice voucher holders may not be able to afford as many homes as the higher FMR suggests. Public housing authorities with thin budgets have some flexibility to adjust voucher payments, generally between 90 percent and 110 percent of the FMR. Given the magnitude of the 2018 FMR revision, vouchers will still likely become somewhat more valuable – even if the payment formula is adjusted downward so voucher payments don’t increase dollar-for-dollar alongside the FMR.
Importantly, because federal funding won’t necessarily offset higher rent payments, housing agencies may resort to issuing fewer new vouchers from a waitlist, tap into tenuous rainy day funds and/or start targeting more renters with marginally higher incomes for future assistance.
Our earlier analysis on the initial 2018 FMRs showed HUD was planning to decrease voucher funding in Seattle despite our forecasts showing rents will rise significantly.
Under the original 2018 rent ceiling, low-income households in the Seattle-Bellevue HUD Metro FMR Area that rely on vouchers would have seen the value of their assistance fall roughly 1.1 percent, or $17 per month. The typical rental value in the Seattle metro[ii] is expected to climb by about 5 percent, or $110 per month in 2018.
A voucher with diminishing value can be devastating given the years-long waits some voucher holders experience – waits that can be followed by a scramble for homes when the value of vouchers doesn’t reflect the realities of local rental markets.
HUD’s intention in setting fair market rents is to ensure they are high enough to cover the rent on at least 40 percent of an area’s rental units. This is an imperfect process, in part because FMRs for a given area are based on American Community Survey data that can lag actual market conditions by years – a flaw HUD acknowledges.
However, if resources are available, local housing authorities can conduct their own surveys with hopes of better aligning FMRs to current rental prices. This process led to FMR revisions in eight areas for 2018, including Seattle, and resulted in a local figure that not only makes more units theoretically available to voucher holders, but also slightly surpasses that 40 percent target. As rents rise throughout the year, it’s likely the share of units available will drop somewhat, falling back toward the 40 percent target.
The fact that local survey data led to a revision of Seattle’s FMR highlights how additional resources can help better calibrate FMRs – thereby giving voucher holders a greater chance of acquiring stable and sufficient housing. In the future, HUD could incorporate data from entities that aggregate rental listing information in their preliminary calculations — often timelier and more granular data that could help HUD better account for areas where rents are rising quickly.
We acknowledge online platforms like Zillow do not capture the entire universe of available rentals, because some are advertised offline, on other platforms and by word-of-mouth. To our knowledge, there is no comprehensive national database of rental listings, online or otherwise, and Zillow Group Rentals is the nation’s largest online rental network. So regardless of the exact share of units advertised elsewhere, the increase in voucher-suitable listings on Zillow clearly points to a significant increase in options for households reliant on housing assistance.
This post has been updated from its original version to reflect the fact that without additional funding, some agencies may have a difficult time actually meeting the higher FMR ceiling.
[i] HUD’s Seattle-Bellevue, WA Metro FMR Area includes King and Snohomish Counties. The Seattle Metro area that Zillow uses to forecast rental values also includes Pierce County in addition to King and Snohomish Counties. We do not forecast rental values for the combined King and Snohomish Counties only. The weighted average of the FMR reduction for the Seattle metro (King, Snohomish, and Pierce counties), would have been a FMR reduction of .9% or $12 in 2018.
[ii] We used listings for two-bedroom rentals and the 2018 two-bedroom Fair Market Rent. HUD calculates FMRs for other home sizes using the two-bedroom as a baseline. We looked at Zillow listing data for all two-bedroom rentals advertised Since January 1, 2018. If a property was listed multiple times, the most recent listing price was used.