Section 3.3: Unit Rents

Rents for units leased with S+C assistance must meet a "rent reasonableness" test. This section describes this standard for rents and how a reasonable rent is documented.

Understanding "Reasonable Rent"

For TRA, SRA, PRA, and SRO components, S+C program operators must determine whether the rent being charged for an assisted unit is both:

  • reasonable in relation to rents being charged for comparable unassisted units with similar features and amenities; and
  • not more than rents currently being charged by the same owner for comparable unassisted units. [See Section 582.305(b)]

A sample form showing a suggested rent reasonableness certification and checklist to document a rent reasonableness determination is included in Appendix D. You are not required to use this form, but some form of documentation must be kept in project files for the full period S+C assistance is provided.

While S+C regulations do not specify how often a rent reasonableness survey should be performed, an annual review would be appropriate. Also, in order to keep the administrative burden to a minimum, a rent reasonableness determination does not have to be made on a unit by unit basis but may be performed for all units within a certain geographic area.

The rent for a S+C assisted unit may not exceed the reasonable rent for that area. But while the rents for SRA, TRA, or PRA units may be set at the reasonable rent level even if it is higher than the HUD Fair Market Rent limits, the rent allowed under the SRO component may not exceed the HUD FMR limit for that area even if the reasonable rent is found to be higher.

Keep in mind that leasing SRA, TRA, and PRA units at rents higher than the FMR may cause problems down the line since the original Shelter Plus Care grant amounts are calculated by multiplying the number of units to be assisted by the FMR, not the "reasonable rent." Administrative costs, damage payments and rent increases can only be covered if the total grant amount exceeds the actual costs of serving the number of people proposed to be served in the S+C application.

Notes

For the SRO component, HUD's Fair Market Rent is the maximum rent allowed. However, the FMR may be adjusted for "high-cost" areas. [882.805(d)].

Ask your local PHA to conduct the rent reasonableness review since they likely have the needed expertise.