Proposed FY 2011 Fair Market Rent Documentation System

The Proposed FY 2011 Newark, NJ HUD Metro FMR Area FMRs for All Bedroom Sizes

The following table shows the Proposed FY 2011 FMRs by unit bedrooms.

Proposed FY 2011 FMRs By Unit Bedrooms
  Efficiency One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom
Proposed FY 2011 FMR $883 $1,079 $1,233 $1,476 $1,632
Final FY 2010 FMR $916 $1,119 $1,279 $1,531 $1,693
Percentage Change -3.6% -3.6% -3.6% -3.6% -3.6%

The remainder of this page provides complete documentation of the development of the Proposed FY 2011 Fair Market Rents (FMRs) for Newark, NJ HUD Metro FMR Area. This page provides a summary and details of how the Proposed FY 2011 FMRs were developed and updated starting with the formation of the FY 2011 FMR Areas from the metropolitan Core-Based Statistical Areas (CBSAs) as established by the Office of Management and Budget and incorporating newly available 2008 one and three year American Community Survey (ACS) Data. FY 2011 FMRs include information from local Random Digit Dialing (RDD) surveys conducted through 2009. Aspects of the derivation of Proposed FY 2011 rents exclusive to FY 2011 are made explicit in the following text. Aspects unchanged from FY 2010 can be reviewed by clicking on the associated link.

The following defines a summary of the steps taken to generate the Proposed FY 2011 FMR:

Newark, NJ HUD Metro FMR Area Proposed FY 2011 FMR Calculation Summary
Process Step Step Result
1. Begin with Final FY 2010 2 Bedroom FMR $1,279
2. Remove Trending and CPI Updates from Final FY 2010 2 Bedroom FMR $1,140
3. Determine Update Factor through 2008 1.0364
4. Apply Update Factor (#2 x #3) $1,181
5. Evaluate ACS Survey Result and Determine 2008 Rent $1,121
6a. Calculate Update Factors to 2009 and
6b. Trend Factor to April 1, 2011
1.06
1.0376
7. Apply Update Factor to 2009 and Trend to Get Proposed FY 2011 2BR FMR
(#5 x #6a x #6b)
$1,233

FY 2011 FMR Area Geography

FY 2011 FMR Areas Follow FY 2010 Area Definitions with Modifications

FY 2011 FMR areas continue to use the revised Office of Management and Budget (OMB) area definitions that were first issued in 2003 along with HUD defined Metropolitan areas (HMFAs) as described in the FY 2009 FMR documentation which can be found at (Newark, NJ HUD Metro FMR Area FY 2010 FMR Documentation system). FY 2011 areas reflect changes made to metropolitan areas by OMB through December 1, 2009 as published in OMB bulletin 10-02.

Newark, NJ HUD Metro FMR Area is made up of the following:

Essex County, NJ ; Morris County, NJ ; Sussex County, NJ ; and Union County, NJ .

Newark, NJ HUD Metro FMR Area FMR Area Derivation (RECAP)

The Newark, NJ HUD Metro FMR Area is a HUD-defined metropolitan FMR area that is part of the New York-Northern New Jersey-Long Island, NY-NJ-PA MSA. Newark, NJ HUD Metro FMR Area is considered its own FMR area because Newark, NJ HUD Metro FMR Area has a 2000 Census 40th Percentile Base Rent ($792) that differs from the 2000 Census 40th Percentile Base Rent for New York-Northern New Jersey-Long Island, NY-NJ-PA MSA ($847) by at least 5.0 percent.

1 - ($792 / $847) = 1 - 0.935 = 6.5 percent >= 5.0 percent.

In addition, the Newark, NJ HUD Metro FMR Area also qualifies as a separate HUD-defined metropolitan FMR area that is part of the New York-Northern New Jersey-Long Island, NY-NJ-PA MSA because the Newark, NJ HUD Metro FMR Area has a 2000 Median Family Income ($68,026) that differs from the 2000 Census Median Family Income for New York-Northern New Jersey-Long Island, NY-NJ-PA MSA ($58,934) by at least 5.0 percent.

($68,026 / $58,934) - 1 = 1.154 - 1 = 15.4 percent >= 5.0 percent.


Proposed FY 2011 FMRs

HUD continues its use of ACS data in FY 2011, by building upon the FY 2010 Final FMRs (Newark, NJ HUD Metro FMR Area FY 2010 FMR Documentation system). As in FY 2010, HUD uses 2008 ACS data in four different ways according to how many two-bedroom standard quality and recent mover sample cases are available in the FMR area or its Core-Based Statistical Area (CBSA). ACS-1 through ACS-4 areas are described in detail here.

In most cases, Proposed FY 2011 FMRs are based on changes in rents measured by differences in ACS data collected in either 2006 or 2007 and 2008 and updated CPI rent and utility inflation indexes. Depending on the size of the ACS survey sample, State or Local ACS data is used to update a June 2007-calculated gross rent from the Final FY 2010 FMRs (Newark, NJ HUD Metro FMR Area FY 2010 FMR Documentation system) to June 2008. In some cases, as described below, the 2008 ACS Survey result is used instead of the updated value. The ACS updated 2008 rent is then adjusted with CPI inflation factors that measure changes from mid-2008 though year end 2009 and 1.25 years of trending to arrive at Proposed FY 2011 FMRs. RDD survey results are applied where available and appropriate.

Newark, NJ HUD Metro FMR Area is an ACS-4 area.

ACS-4 areas are FMR Areas that have at least 200 sample cases of two-bedroom recent mover rents where the recent mover estimate is statistically different from the standard quality updated rent. ACS-4 areas may be entire MSAs, subareas assigned CBSA base rents, other subareas, or large nonmetropolitan counties. By definition, these areas are a subset of ACS-1 areas.

In ACS-4 FMR areas, the local 2008 ACS recent mover rent becomes a new base rent for 2008 if the updated 2008 ACS-generated rent is outside its 90 percent confidence interval and the recent mover rent is greater than the local standard quality rent. This means the 2008 ACS is used to replace the updated 2008 base rent with a 2008 local ACS base rent. If the statistical criteria are met and the standard quality rent is higher than the recent mover rent, the standard quality rent estimate is used.


Generating a June, 2007 Rent from FY 2010 Final FMRs

In order to apply changes in ACS surveys to FMRs (ACS data are assumed to be as of June of their respective survey years), FY 2010 FMRs are first deflated to mid-2007 values by removing the CPI inflation and trend factors used to update mid-2007 values to April, 2010 inherent in the Final FY 2010 FMRs.(Newark, NJ HUD Metro FMR Area FY 2010 FMR Documentation system.)

Rent2007=
Final FY 2010 Rent

(CPI Change2007).5 * (CPI Change2008) * (Trend)

Rent2007=
$1,279

(1.0460).5 * (1.0570) * (1.0376)

Rent2007=
$1,279

(1.0227) * (1.0570) * (1.0376)

Rent2007=
$1,279

(1.0810) * (1.0376)

Rent2007=
$1,279

1.1217

Rent2007 = $1,140

The Updated Rent using 2008 ACS Data

As stated earlier, Newark, NJ HUD Metro FMR Area is an ACS-4 area. Newark, NJ HUD Metro FMR Area is large enough to have a 2008 ACS survey that contains at least 200 Recent Mover cases. Therefore, HUD compares the 2007 to 2008 updated rent using the change in Standard Quality Rents from the 2007 to the 2008 ACS for the Newark, NJ HUD Metro FMR Area to the 2008 ACS Recent Mover survey result. If the 2008 updated rent using the standard quality update factor is outside the confidence interval of the recent mover rent and the recent mover rent is larger than the local standard quality rent, then the 2008 intermediate rent is set at the 2008 ACS recent mover survey result. If the 2008 recent mover rent is smaller than the 2008 standard quality rent for Newark, NJ HUD Metro FMR Area then the 2008 intermediate rent is set at the 2008 ACS standard quality survey result. Otherwise, the 2008 intermediate rent is set using the standard quality update factor calculated for Newark, NJ HUD Metro FMR Area.

The 2007 to 2008 standard quality update factor for Newark, NJ HUD Metro FMR Area is 1.0364. The 2007 to 2008 updated rent for comparison is $1,140 x 1.0364 = $1,181.

The 2008 ACS Recent Mover survey result for Newark, NJ HUD Metro FMR Area is $1,121 with a survey error of ±$55.

The following table summarizes the decision criteria for using the 2008 ACS survey rent result for Newark, NJ HUD Metro FMR Area:

2008 Local ACS Survey Rent for Newark, NJ HUD Metro FMR Area
Rent2007 Local SQ Update Factor SQ Updated 2008 Rent 2008 ACS Survey Local Recent Mover Rent 2008 ACS Survey Confidence Interval Is SQ-updated Local Rent outside confidence Interval of RM Rent? ACS Survey Local Standard Quality Rent 2008 Basis 2008 Intermediate Rent
$1,140 1.0364 $1,181 $1,121 $1,066-$1,176 YES - survey estimate is statistically significant and is Lower than updated rent $1,056 - Recent Mover Rent Higher 2008 ACS Survey Local Recent Mover Result $1,121

This yields an effective change factor for Newark, NJ HUD Metro FMR Area of $1121 / $1,140 = 0.9833

NOTE: The update factor shown in the calculation above may not match exactly the 2008 update factor shown throughout the demonstration due to the rounding of Fair Market Rents to whole dollar amounts


The 2008-to-2011 Update Factors

HUD updates the 2008 intermediate rent (as of June 2008) with the appropriate CPI change (local or regional) to establish rents as of December 2009. HUD then applies additional trending or results of Random Digit Dialing (RDD) surveys to update rents to April, 2011, the mid-point of FY 2011.

The Newark, NJ HUD Metro FMR Area has the following 2008-to-2011 Update Factor:

Update Factors used between June 2008 and April 2011
Year Update Factor Type
6/2008 to 2009 1.0600 Local CPI Factor
2009 to 2011 1.0376 Trend Factor
3% for 1.25 Years
=1.031.25

Proposed FY 2011 2-Bedroom FMR

The Proposed FY 2011 2-Bedroom FMR is simply the product of the 2007 Rent from deflated from final FY 2010 FMRs, the 2008 update factor and the 2008-to-2011 Update Factors for Newark, NJ HUD Metro FMR Area as determined above:

Newark, NJ HUD Metro FMR Area Proposed FY 2011 FMR

= $1,140 * 0.9833 * 1.0600 * 1.0376

= $1,121 * 1.0600 * 1.0376

= $1,188 * 1.0376

= $1,233


The Proposed FY 2011 Rents for All Bedroom Sizes

The following table shows the Proposed FY 2011 FMRs by unit bedrooms. The FMRs for units with different numbers of bedrooms are computed from the ratio of the 2005 Revised Final FMRs (based on 2000 Decennial Census Data) for the different unit sizes to the 2005 2-Bedroom Revised Final FMRs. These Rent Ratios are applied to the Proposed FY 2011 2-Bedroom FMR to determine the Proposed FY 2011 FMRs for the different size units.

Click on the links in the table to see how the bedroom rents were derived.

Proposed FY 2011 FMRs By Unit Bedrooms
  Efficiency One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom
Proposed FY 2011 FMR $883 $1,079 $1,233 $1,476 $1,632

The FMRs for unit sizes larger than four bedrooms are calculated by adding 15 percent to the four bedroom FMR, for each extra bedroom. For example, the FMR for a five bedroom unit is 1.15 times the four bedroom FMR, and the FMR for a six bedroom unit is 1.30 times the four bedroom FMR. FMRs for single-room occupancy units are 0.75 times the zero bedroom (efficiency) FMR.



Other HUD Metro FMR Areas in the Same MSA


Related Proposed FY 2011 FMR Areas


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