Changes to Fair Market Rents for 2025: Impacts on Affordable Housing Programs

On August 14, 2024, the U.S. Department of Housing and Urban Development, or HUD for short, announced the new rent prices that will be considered fair for the fiscal year 2025. This change will start on October 1, 2024.

The "fair market rents" (FMRs) are important because they are used to decide how much rent should be for Housing Choice Vouchers. These vouchers are a form of help given to families with low incomes, which allows them to live in safe and decent homes.

Check out: What is Federal Rental Assistance?
 

Impact on Housing Programs

The FMRs also affect two major housing programs: the low-income housing tax credit program (LIHTC) and the tax-exempt private activity bond (TEB) program. These programs are meant to make housing affordable for people with not a lot of income. 

The FMRs decide not only who can live in houses under these programs but also how much rent they need to pay, especially in places where housing costs a lot. 

A lot of the people living in LIHTC and TEB apartments also use Housing Choice Vouchers. Additionally, FMRs help to set the higher rents for another program called HOME.

Starting with these new changes in 2025, there will be 41 more city areas where rents will be set for smaller specific areas, like a zip code, instead of for an entire county. This method, known as "small area FMRs," is supposed to make it easier for people with vouchers to move to better areas.

Now, looking into the numbers, the rents had increased a lot by over 10% in the last two years (2023 and 2024), but the increase for 2025 is smaller, around 4% on average. 

While last year almost every area saw rent prices go up, this time about 20% of areas will actually see a decrease. Even with the overall smaller increase, there are a few areas where rents are going up a lot, by 20% or more.
 

City vs. Rural Rent Dynamics

When we split up the places by cities and rural areas, the rents in cities are still growing faster. In metro areas, the average increase is about 5.2%, but in non-metro areas, it's only about 3.2%. 

If we look at big cities, Houston's rent is going up a lot by more than 12%, while Los Angeles is closer to the average, going up just over 3%. On the other hand, New York City is seeing rents going down by 6.25%.
 

Adjusting Income Limits for Affordable Housing

The fair market rents also play a role in figuring out the maximum income a family can have to qualify for affordable housing programs. HUD looks at the rents and the average incomes in an area—if the rent is too high compared to the income, the limits are adjusted. 

There's a formula to determine this: they take the two-bedroom FMR, multiply by 85%, divide by 35%, and then multiply by 12. If the number from this formula is greater than 50% of the median income for the area, HUD will increase the income limit for eligibility.

For instance, if the fair rent for a two-bedroom apartment is $1,750, then using the formula, HUD would set the income limit at $51,000, assuming half the median income in that area is $50,000. However, HUD has certain limits on how much this number can go up each year.

For the areas where the rent-to-income ratio was high in 2024, the fair market rents went up by about 5.58% going into 2025. But just because the FMRs increased doesn't mean the income limits will go up by the same percentage since there are caps on increases.
 

State-by-State FMR Changes

States with the biggest average increase in FMRs saw some changes, with Tennessee being a consistent top performer in both 2024 and 2025. However, traditionally high-growth states, such as California, Florida, and Texas, didn't make it to the top 10 this time around for the year 2025. 

Tennessee finds itself again among the states with the largest increases, but states typically known for their rapid growth, like California, Florida, and Texas, did not crack the top 10 list in 2025.

-

Find programs that help with rent by signing up here