HUD HCV Guidebook § 3.5

PHAs may establish a payment standard amount that is higher than the basic range. This is known as an
exception payment standard. The exception payment standard may be for a designated part of the FMR area,
called an exception area or the entire FMR area.39 So long as the exception area is smaller than the
applicable FMR area, but no smaller than a census tract block group, the PHA may determine what the
requested exception area is (e.g. census tract, census tract block group, county, city, town, neighborhood, ZIP
Codes (for PHAs not in mandatory SAFMR areas or that have not opted-in to SAFMRs)).
Listed below are several options available to increase payment standards above the basic range:
       •    Exception payment standards based on SAFMRs in ZIP Codes where the SAFMR is higher than the
            applicable metropolitan or non-metropolitan county FMR;40
       •    Payment standards greater than 110 percent up to 120 percent of the applicable FMR;41
       •    Payment standards over 120 percent of the applicable FMR; and
       •    Payment standards necessary as a reasonable accommodation (see Section 6 of this chapter).

39
   24 CFR 982.503(d)
40
   Note that SAFMR exception payment standards are different from “opt-in” SAFMRs, which are discussed in the
prior section.
41
   24 982.503(a)(1)

The exception payment standard may be for all units in the exception areas, or for all units of a given bedroom
size in these areas. The exception area may be no smaller than a census tract block group.42 Any PHA with
jurisdiction in the exception areas may use the HUD-approved exception payment standards without
requesting specific HUD approval. A PHA that adopts an exception payment standard area must revise its
briefing materials to make families aware of the exception payment standard and the area that it covers. 43

3.5.1. Exception Payment Standards Based on SAFMRs in ZIP Codes Where the SAFMR is Higher Than
the Applicable Metropolitan or Non-Metropolitan County FMR
A PHA that is not in a designated SAFMR area or has not opted voluntarily to implement Small Area FMRs
under 24 CFR 888.113(c)(3) may establish exception payment standards for a ZIP code area that exceed the
basic range for the metropolitan area or county FMR as long as the amounts established by the PHA do not
exceed 110 percent of the HUD published SAFMR for the applicable ZIP code.44 PHAs that pursue this option
must notify HUD through an electronic DocuSign submission. The DocuSign form can be found in Notice PIH
2024-34, or its successor notice. If an exception area crosses one or more FMR boundaries, then the
maximum exception payment standard amount that the PHA may adopt for the exception area without HUD
approval is 110 percent of the ZIP Code area with the lowest SAFMR to ensure that all areas are within the
basic range. A PHA that adopts an exception payment standard pursuant to this authority must apply it to the
entire ZIP Code area.
For the PBV Program, if a PHA has adopted SAFMR based exception payment standards under this section,
the amount of rent to owner determined by the PHA for PBV projects in the exception area, except for certain
tax credit projects that meet the criteria of 24 CFR 983.301(c)(1),45 may not exceed the exception payment
standard minus utility allowance, rather than the normally applicable 110 percent of FMR minus utility
allowance limitation,46 and the rent reasonableness requirements continue to apply.

3.5.2 Simplified Process for Exception Payment Standards Greater than 110 percent up to 120 percent
of the Applicable FMR
All PHAs that meet at least one of the two specified criteria below may establish an exception payment
standard amount greater than 110 percent up to 120 percent of its applicable FMR47 upon notification to
HUD:
        •   Success rate - Fewer than 75 percent of the families to whom the PHA issued tenant-based
            vouchers during the most recent 12-month period for which there is success rate data available
            have become participants in the voucher program; and/or

42
   24 CFR 982.503(a)(3)(ii)
43
   24 CFR 982.301(b)(2)
44
   24 CFR 982.503(d)(2)
45
   For tax credit units that meet the criteria of 24 CFR 983.301(c)(1), including the criterion that the tax credit
rent exceeds the applicable FMR or any exception payment standard, the maximum rent is the lowest of (i) An
amount determined by the PHA in accordance with the Administrative Plan, not to exceed the tax credit rent
minus any utility allowance; (ii) The reasonable rent; or (iii) The rent requested by the owner. See also
additional rent limitations at 24 CFR 983.304-983.305.
46
   24 CFR 983.301(b) and (f)(3)(i); see also additional rent limitations at 24 CFR 983.304-983.305
47
   As a reminder, the applicable FMR is the metropolitan FMR, non-metropolitan county FMR, or SAFMR for PHAs
in designated SAFMR areas or PHAs that have “opted-in” to the SAFMR.

•   Rent burden - More than 40 percent of families with tenant-based vouchers administered by the
            agency pay more than 30 percent of adjusted income as the family share.48
PHAs must submit notification to HUD through an electronic DocuSign submission, which can be found in
Notice PIH 2024-34. In the DocuSign notification, PHAs will certify that they meet at least one of the two
required criteria. The duration in which the PHA may use the exception payment standard after proper
notification to HUD is:
        •   Until the effective date of the first newly published FMRs following 12 consecutive months of a
            sustained tenant-based success rate at 75 percent or higher, if the PHA qualified for the exception
            payment standard based on the success rate criteria above; or
        •   Until the effective date of the first newly published FMRs following 12 consecutive months of the
            PHA maintaining a rent burden where fewer than 40 percent of tenant-based voucher families are
            paying more than 30 percent of adjusted income as the family share, if the PHA qualified for the
            exception payment standard based on the rent burden criteria above.
PHAs that adopt this option may revert back to the basic range at any time without notification to HUD. PHAs
are reminded that if there are changes in the applicable FMR and the PHA’s payment standard exceeds 120
percent of the newly applicable FMR, the PHA would need to reduce its payment standard to be 120 percent
or lower than the newly applicable FMR.
The PHA may use the exception payment standard for all units, or for only units of a particular size. The
exception payment standard may be established for a designated part of the FMR area (called an “exception
area”) or for the entire FMR area.49 Exception areas typically are county, city, town, ZIP Code, or census tract.
However, so long as the exception area is no smaller than census tract block group, the PHA may select the
area for the exception area.50
PHAs that establish exception payment standards based on the SAFMR, may go up to 120 percent of the
SAFMR if the PHA meets at least one of the two specified criteria in this section.51 The PHA must submit
notification to HUD through an electronic DocuSign submission outlined in Notice PIH 2024-34, or its
successor notice. Prior to doing so, however, HUD encourages (but does not require) PHAs to first assess
whether the SAFMR exception payment standard achieves the programmatic goals of the PHA.
If a PHA that is not in a designated Small Area FMR area or has not opted voluntarily to implement SAFMRs
under 24 CFR 888.113(c)(3) has adopted an exception payment standard greater than 110 and up to 120
percent of the applicable FMR under this section, the amount of rent to owner determined by the PHA for PBV
projects in the exception area, except for certain tax credit projects that meet the criteria of 24 CFR
983.301(c)(1)52 may not exceed the exception payment standard minus utility allowance, rather than the

48
   Program regulations at 24 CFR 982.503(d)(3)(iii) also provide HUD discretion to establish additional criteria by
Notice. HUD has not opted to establish additional criteria at this time.
49
   24 CFR 982.503(d)(1)
50
   24 CFR 982.503(a)(3)(ii) and (d)(1)
51
   24 CFR 982.503(d)(2) and (3)
52
   For tax credit units that meet the criteria of 24 CFR 983.301(c)(1), including the criterion that the tax credit
rent exceeds the applicable FMR or any exception payment standard, the maximum rent is the lowest of (i) An
amount determined by the PHA in accordance with the Administrative Plan, not to exceed the tax credit rent
minus any utility allowance; (ii) The reasonable rent; or (iii) The rent requested by the owner. See also
additional rent limitations at 24 CFR 983.304-983.305.

normally applicable 110 percent of FMR minus utility allowance limitation,53 and the rent reasonableness
requirements continue to apply.
If a PHA is in a mandatory SAFMR area or has opted voluntarily to implement SAFMRs under 24 CFR
888.113(c)(3), then the exception payment standard will only apply for purposes of rent determination for PBV
projects in the exception area if the PHA has adopted a policy in its Administrative Plan to apply SAFMRs to its
PBV program and met all other requirements in accordance with 24 CFR 888.113(h)54 (See Section 2.3
above). For example, an opt-in PHA would use the exception payment standard for determining the rent to
owner of a PBV project in the exception area if that PBV project was selected after the PHA opted in to
SAFMRs and adopted a policy applying SAFMRs to all future PBV projects. When an exception payment
standard is applicable to a PBV project, the rent to owner may not exceed the exception payment standard
(rather than the normally applicable 110 percent of FMR) minus utility allowance, and the rent
reasonableness requirements continue to apply.55 However, certain tax credit projects that meet the criteria
of 24 CFR 983.301(c)(1) may set the rent to owner above the exception payment standard (not to exceed the
tax credit rent minus any utility allowance) if the tax credit rent exceeds the exception payment standard.56