With Emergency Solutions Grant and Continuum of Care funds, can we use our local Public Housing Authority's (PHA) fair market rent rates?
The Fair Market Rent (FMR) requirements for the ESG and CoC Programs differ from each other. We have described each program's requirements separately below.
With regard to using PHA FMRs for the ESG program, no, ESG recipients cannot use their local PHA's fair market rent rates. Under 24 CFR § 576.106(d) of the ESG Interim Rule, rental assistance cannot be provided unless the rent does not exceed the Fair Market Rent (FMR) established by HUD, as provided under 24 CFR § 888, and complies with HUD's standard of rent reasonableness, as established under 24 CFR § 982.507. Rents must meet BOTH requirements in order for ESG rental assistance to be provided. Additionally, to use ESG funds for rental assistance, the total rent (not only the ESG-funded portion) must be below FMR established by HUD.
Note that if the tenant pays separately for utilities, the gross rent for the purpose of comparing with the FMR is the sum of the rent paid to the owner plus any fees required for occupancy under the lease (other than late fees and pet fees), plus the monthly allowance for utilities established by the public housing authority for the area in which the housing is located. For purposes of calculating rent to compare with the FMR, utilities include electricity, gas, water and sewer, and trash removal services but not telephone, cable or satellite television service, or internet service. HUD has received many comments and questions about the FMR requirement and is carefully considering the issue, and potential alternatives to provide recipients and subrecipients with more flexibility in order to assist eligible program participants.
For more information on ESG Rent Requirements please see HUD's Guide to ESG Rent Reasonableness and Fair Market Rent: https://www.hudexchange.info/resources/documents/ESG-Rent-Reasonableness-and-FMR.pdf
If you are assisting the program participant with rapid rehousing rental assistance, the program participant may execute a lease for a unit with a contract rent that exceeds the fair market rent level if the contract rent is determined to be reasonable according to the rent reasonableness standard for the area. HUD will only provide rental assistance for a unit if the rent is reasonable (578.51(e)-(g)). The recipient may use grant funds to the pay the difference between the FMR and the reasonable rent in this case as long as the recipient is able to meet the number of participants served in the grant agreement. HUD approval is not required to use CoC Program rental assistance funds to lease a unit over FMR. The recipient could also use other funds to lease a unit over FMR. However, the program participant cannot pay more than the rent calculation determined by Section 578.77(c). Alternatively, the household's contribution toward rent may be applied to the difference between FMR and rent reasonableness as long as the CoC's written rapid rehousing rent standards allow for it. The rent standards set by the CoC must be applied consistently across all PH:RRH households served.