What You Need to Know About Affordable Housing Rents for 2025
- Author: Aubrey Sipes
- Posted: 2025-01-06
On August 14, 2024, the U.S. Department of Housing and Urban Development (HUD) announced the new affordable housing rent prices for the year 2025, starting from October 1, 2024.
These prices, known as Fair Market Rents (FMRs), help determine how much rent should cost for different types of housing assistance programs. These programs aim to help families with lower incomes find good, safe places to live.
Check out: What is Federal Rental Assistance?
FMRs are crucial for several reasons. They help set rent prices for the Housing Choice Voucher program, which supports low-income families in renting homes.
They also influence two important housing programs: the Low-Income Housing Tax Credit (LIHTC) and the residential rental tax-exempt private activity bond (TEB) programs.
These programs use FMRs to figure out who qualifies for affordable housing and how much they should pay in rent, especially in areas where housing costs are high. Many people living in LIHTC and TEB rental homes also use Housing Choice Vouchers to help with rent, making FMRs an essential part of the puzzle.
Starting in 2025, 41 new metropolitan areas will need to start using "small area FMRs." Unlike the usual method that sets rent standards by county, these rents will be decided based on zip codes. This change is designed to give people more freedom to move to better neighborhoods.
Rent Changes by the Numbers
After seeing rent increases of more than 10% in both 2023 and 2024, the rise in FMRs for 2025 is more moderate, averaging around 4%.
While nearly all areas saw rent increases previously, about 20% of areas will actually see a decrease in 2025. Even with this overall modest hike, some areas will still experience significant increases.
The pattern of urban areas seeing faster rent growth continues into 2025, with metropolitan FMRs increasing by an average of 5.2%, compared to 3.2% in non-metropolitan areas.
Among the country's largest cities, Houston leads with a rent increase of over 12%. Los Angeles sees a more average rise of just over 3%, while New York City goes against the grain with a 6.25% drop in FMRs.
How Rent Affects Income Limits
FMRs play a key role in determining income limits for affordable housing programs. In places where rent eats up a large chunk of the median income, HUD adjusts income limits to ensure people can still qualify for affordable housing.
For instance, if a two-bedroom's FMR calculation suggests that rent should constitute a significant portion of the median income, HUD will raise the income limit for that area, subject to certain restrictions.
This means, despite overall caps, areas with high rent costs might see their income limits for affordable housing qualification adjusted upward.
This adjustment directly affects those who qualify for affordable housing. Between 2024 and 2025, areas already subject to these adjustments saw an average FMR increase of 5.58%. However, due to the caps in place, not all areas will see their income limits rise at this rate.
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