Rent Reasonableness is ensuring that a unit that is supported by grant funds is not more expensive than a similar unit that is not supported by grant funds. When leasing and rental assistance funds are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents be charged for comparable units, taking into account the location, size, type, and age of unit, as well as any amenities, housing services, maintenance, and utilities provided by the owner.
Looking for definitions of the common CoC and ESG Program terms referenced throughout the Virtual Binders?
Virtual Binders Glossary
You cannot pay more than what is reasonable, even if the Fair Market Rent (FMR) is higher. If the reasonable rent is higher than the FMR and you are using CoC rental assistance funds, you can pay more than the FMR, up to the reasonable rent. If you are using CoC leasing funds, you cannot exceed the FMR even if the reasonable rent is higher.
How do you determine rent reasonableness?
Comparable rents can be checked by using a market study of rents charged for units of different sizes in different locations or by reviewing advertisements for comparable rent units. Advertisements can be found on “For Rent” signs in windows, in real estate or property management listings, bulletin boards and websites* such as:
*Please note that these websites serve as an example and are not endorsed by HUD
How do I document rent reasonableness?
- In several ways, however using HUD's Rent Reasonableness Checklist is the easiest
- Documentation (e.g., unit rent/description, evidence that the units share the same features, etc.) must be maintained in the client/unit file
- Also, acceptable: written verification signed by the property owner or management on letterhead affirming that the rent for the unit assisted with CoC Program funds is comparable to current rents charged for similar units managed by the same owner
What other documentation should be in place to determine reasonableness?
Recipients and subrecipients must establish their own written policies and procedures for documenting comparable rents to establish transparency and consistency across all projects. Written policies and procedures should include:
- A methodology for documenting comparable rents
- Case file checklists and forms
- Standards for certifying comparable rents as reasonable
- Staffing assignments
- Strategies for addressing special circumstances
- Determination must be supported by documentation in the case file
Comparable rents vary over time with market changes, so it is important to ensure that the comparison you are using is up-to-date and appropriate for each prospective unit.