By: Tushar Gurjal, Senior Policy Manager

September 2, 2026 – Yesterday, HUD published a notice in the Federal Register titled “Fair Market Rents for the Housing Choice Voucher Program, Moderate Rehabilitation Single Room Occupancy Program, and Other Programs, Fiscal Year 2027.” The Fair Market Rents (FMRs) have an effective date of October 1, 2026, though housing agencies have three months to align their payment standards with the new FMRs. Comments on the new FMRs or requests for a new FMR evaluation are due by October 1, 2026.

For the fiscal year (FY) 2027 FMRs, HUD is implementing certain changes that it detailed in the FY 2026 FMR announcement. The change impacts how HUD calculates the utility portion of the gross rent inflation factors and trend factor forecasts. The Department is implementing this change because the Bureau of Labor Statistics is discontinuing the publication of the local housing and fuels and utilities Consumer Price Index.

FMR Calculation Methodology

At a high level, HUD takes the following steps to calculate FMRs. First, HUD uses base gross rent data from the 5-year American Community Survey. The Department then updates this with recent mover factor data. HUD then applies an inflation factor to bring the data up to 2025 and then applies a trending forward factor to predict the 2027 FMR level. Finally, HUD takes the 2-bedroom rates and adjusts them for other bedroom-size units. Finally, HUD adjusts the FMRs to comply with certain regulatory requirements (e.g., not allowing an FMR to drop by more than 10%). The methodology is explained in greater detail below.

Utilizing ACS Data

The FY 2027 FMRs are based on modified metropolitan statistical definitions published by the Office of Management and Budget (OMB). After HUD makes its modifications to OMB’s definitions, HUD terms these areas “HUD Metropolitan Fair Market Rent Areas” (HMFAs). The Department uses the U.S. Census Bureau’s 5-year American Community Survey (ACS) data collected between 2020 and 2024 as “base rents.” HUD then applies a “margin of error” test and a requirement that each estimate be based on more than 100 observations to be used. In instances where the 5-year ACS data for two-bedroom, standard quality gross rents do not pass one of the two previously mentioned statistical reliability tests, HUD will use an average of the 5-year ACS estimates over the three most recent years available if there is data available for at least two of those years. If data is not available, HUD uses data from the next largest geographic area (i.e., the containing metropolitan area or the State non-metropolitan portion).

HUD next applies a recent mover factor to these rents. The Department calculates the difference between the 5-year 2020-2024 standard quality two-bedroom gross rent and the 1-year 2024 recent mover gross rent for the recent mover factor area. If the recent-mover factor is less than the 5-year standard quality rent, HUD sets the recent-mover factor to 1. The Department increases the base rent by the recent mover factor. In calculating the recent mover factor, HUD applies the same previously mentioned statistical reliability checks (the “margin of error” test and ensuring there are over 100 observations).

In some instances, other survey data is used. The Department uses certain other data for territorial island areas that are not covered by ACS data like American Samoa, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands. Additionally, HUD will not use ACS data in instances where it has locally collected survey data which are more recent than the 2024 ACS.

Calculating Inflation Factors

HUD adjusts the recent mover data by applying an inflation factor (i.e., the recent mover factor being applied to the base rents produces data for 2024 which is then updated via an inflation factor to produce 2025 data). The Department calculates a gross rent inflation factor which is composed of a shelter rent inflation factor and a utility inflation factor. In calculating a shelter rent inflation factor, HUD calculates one factor using private data and another using the Consumer Price Index (CPI) rent of primary residence series. For the private data inflation factor, HUD takes the mean of the changes from all available sources for each area. In areas that are not covered by at least 3 private data sources, HUD uses the rental unit-weighted regional average of private inflation factors for the Census region in which the area is located. HUD also uses the CPI rent of primary residence for the 23 areas where the data exist or the regional CPI index in areas without a local index.

HUD also calculates a utility inflation factor. For FY 2027, HUD has changed its methodology here. It now uses a weighted average composite of four household fuel and utility components. These components are electricity, natural gas, fuel oil, and water/sewer/trash to produce a utility inflation factor. State-level data from the U.S. Energy Information Administration (EIA) is used for the electricity, natural gas, and fuel oil components. National-level data from the Bureau of Labor Statistics (BLS) is used for the water/sewer/trash collection costs. The Department adjusts these composites based on population-weighted averages for a given geographic area (i.e., if an area includes multiple states, then each state’s price for the state level data is averaged based on population data for that state over the geographic area that covers multiple states). Once each larger geographic unit is assigned utility prices, HUD calculates the year-over-year change in each of the four utility components. HUD then weights the components (using the national CPI-U relative importance weight from the household fuels and utilities series) to produce a final utility inflation factor.

HUD combines the two shelter rent inflation factors (one based on private data and one based on public CPI data) with the utility rent inflation factor to form two gross rent inflation factors. HUD then takes a weighted average of both of these gross rent factors where the private data factor is weighted at 55% and the CPI factor is weighted at 45% to create final gross rent inflation factor. The Department multiplies this final factor with the recent mover rent to create the 2025 estimate.

Trend Factor Forecasting

The Department then “trends forward” the 2025 estimate to FY 2027 using a trend factor based on local or regional forecasts of CPI gross rent data. The Department derives trend factors for certain geographic areas using three different time series models (the National Input model, the Local Input model, and the Pure Time Series model). The trend factors include a composite utility inflation factor (derived above). HUD chooses the trending model for each geographic area based on which model’s forecasting best captured actual increases in the FMR in the past.

Bedroom Rent Adjustments

The estimates calculated so far are for 2-bedroom units. HUD calculates the bedroom ratios for each FMR area which relate the prices of smaller and larger units to the cost of two-bedroom units. HUD derives these ratios from three 5-year ACS data series (2018-2022, 2019-2023, and 2020-2024). The Department only uses estimates with a margin of error less than 50% and if an area does not have reliable estimates in at least two of the previous three ACS releases, the Department switches to the encompassing larger geographic unit. The Department also sets bands for the upper and lower limits for bedroom ratios based on an analysis of the range of intervals for all areas with enough samples to permit accuracy. Finally, HUD makes certain changes to permit higher rents for three bedroom and higher bedroom count units.

Regulatory Limitations on FMRs

There are certain limitations on FMRs based on regulations. All FMRs must be at least based on the State or national non-metropolitan area median rent. Additionally, HUD imposes a limit of ten percent on the amount that FMRs may decrease from the prior year. This applies to small area FMRs also.

Small Area FMRs

The methodology for calculation of small area FMRs is unchanged. The notice discusses in greater detail the methodology for this calculation.

Finally, the notice states that housing agencies requesting FMR reevaluations must submit those reevaluations by the comment deadline. The Department will reevaluation the FMRs by January 8, 2027. Comments and reevaluation requests are due by October 1, 2026.

The full FMR notice can be found here.

The Department has posted the 2027 FMRs here.

[mo-optin-form id="NIrLFwofHp"]